The Hindu Business Line : Why super scams

THE latest mega stamp paper scam is estimated about Rs 30, 000 crore. The magnitude apart, the spread, ingenuity, the way in which it was carried out are all baffling. But Indians have tolerance in abundance and poverty of memory. It is frightening to look at the series of super scams that surfaced the nation in the last decade alone.

The CRB, Harshad Mehta, vanishing companies and Ketan Parekh eroded the confidence of lay investors together with their wealth. The dubious finance companies, operating in the debt market segment, took away the hard-earned savings of the middle-class a few years back, and hardly one-tenth of their money is returned. The OCB investment in the portfolio sector suffered a multi-thousand crore plundering, resulting in the RBI shutting out the investment opportunity itself. The nation's largest and oldest mutual fund, UTI, suddenly brought down the wealth and dividend income of millions of its investors to unimaginably low levels.

Left with limited option, the common man is turning to such traditional savings products as bank deposits or government small savings. With the general interest rate on the downswing, the value of these savings is also constantly threatened. Why is the capital-starved country, so rich in scams, and ranked high in the list of corrupt countries?

There seems to be a systemic fault. Poor monitoring leaves the fragile system enabled to not prevent, but merely unearth the damage. The major capital market flaws are excellent case studies for this.

The often corrupt enforcement suffers also from lack of expertise to counter the system/tech-savvy scamsters. The technicalities and procedures of law are so long, that before long, everybody loses interest. And even if a conviction is achieved, recovery of money is next to impossible as most often it is stashed away in the parallel economy, if not offshore.

It is a pity that a country of strong ethical, value system and national pride is self-destructing by not putting in place effective laws and enforcement practices. Indians seem to have a limitless tolerance to the constant looting of their wealth.

The way out? Two things seem to be of top priority: One, restore in the new young generation, the pride for their nation, and inculcate in it the need for probity.

Second, the legal system, particularly, the criminal justice mechanism, needs immediate cleansing, to render quick justice. There must be a fear of the law and the enforcement mechanism in the minds of the people, in general, and scamsters, in particular.

(The author is a Chennai-based advocate and a fellow of ICAI.)

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