Hyderabad: Moneylenders allegedly using chit funds to evade police crackdown

Private moneylenders in Hyderabad are allegedly using unlicensed chit fund operators to continue illegal lending activities amid intensified police action. Investors are reportedly suffering heavy losses, while operators are accused of coercion, political backing and charging exorbitant repayment amounts.

Hyderabad: With police intensifying their crackdown on private moneylenders, many lenders are now using private chit fund operators as proxies to continue their business under a different guise.

Across several areas of Hyderabad, money lending is being disguised as a chit fund activity, resulting in heavy losses for unsuspecting investors. Under this new modus operandi, profits are shared between chit fund operators and moneylenders on pre-agreed terms.

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For instance, in a Rs 1 crore chit scheme involving 20 members over 20 months, the person who takes the amount in the first month receives Rs 85 lakh after deductions for dividends payable to the remaining participants. The subscriber must then pay monthly installments until the scheme concludes.

“Many people, due to necessity, prefer to take the chit amount in the first month,” explained a person who is familiar with how these operations work.

“At that stage, chit fund operators turn to private moneylenders to arrange funds. Suppose three members opt for early payouts — each receives Rs 85 lakh but must repay about Rs 1.07 crore by the end of 20 months. This gives the moneylender a profit of around Rs 22 lakh per person.”

Since the police crackdown, chit fund operators have become highly sought after. Individuals from Telangana and even NRIs are partnering with them to run unregulated lending businesses.

Backed by musclemen and local politicians, these operators continue to function freely. “Several local leaders receive hefty monthly payments to safeguard chit fund operations and ensure cooperation from local police,” said a businessman familiar with the trade.

Most of these private chit funds operate without licenses. When subscribers default on payments, agents often resort to threats and coercion to recover dues. “They force the people to sell their vehicles or properties and clear the dues,” said a businessman in the know of chit fund functioning.