Tuesday, June 17, 2008

Sahara is too big for RBI to pull up

Sahara group has always been mired in controversy. With no clear lineage of its monumental wealth and sudden emergence into the league of rich and famous, interests spanning from Financial Services to Airline (now divested) to real estate to entertainment and broadcasting, its source of funds has always been questionable. The publicized information that it aggregated small amounts from poor workmen and hawkers on a daily collection routine certainly didn’t cut.
And then the splash wedding of its Chairman Subrata Roy's two sons -
Hardly the cashflow stream that enables its founder Subrata Roy to conduct his sons’ wedding so loud, with unabashed brazenness. Get yourself a rehash of the ostentation. Note the array of guests that lined up. A former Prime Minister (A.B.Vajpayee, despite his famous weak knee), Mulayam Singh, Amar Singh, Bal Thackeray(traveling out of Mumbai after 15 years) et al to celebrities from the world of business, sports and entertainment. If feeding thousands of guests and 140,000 beggars were not enough, the cost of transportation, Z category security and palatial housing of dignitaries (Roy put up three mock palaces) that assembled in small town lucknow should’ve cost a fortune. In fact, it gave credence to the rumors that Sahara group was a politician’s safe haven for their bribe collections and wealthy industrialists’ unaccounted wealth under cover of collections from poor people. With so much `at stake’, it brewed itself into a heady mix – something that can never fail. That should never fail. An untouchable (even by the long arm of law). So what can a poor RBI do? How far could it get?

On June 4, the RBI banned the seedy Sahara group from accepting public deposits on grounds that it was not following the prescribed norms. Yesterday, the regulator promptly changed its earlier decision following Supreme Court-mandated meetings with top Sahara executives on June 12 and June 16 and after Sahara Chairman Subrata Roy had "a meeting" (dressing down?)with RBI officials. The earlier order directing Sahara to stop accepting deposits effective end of this month have now been revised to - hold your breath - another 7 years. A new lease of life (for some of the RBI officials to peacefully retire than for invincible Sahara to sort itself out!) till 2015, leaving enough time for all those who have stashed their wealth to recoup them ;)

Sahara is a big tree; so RBI has to prop it up before it falls and shakes the earth. But not everyone get so lucky. What RBI couldn’t do with mighty Sahara, it does with other NBFCs. Here's RBI getting back with a vengeance. Message : Be big before you are in play ;-)

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