Popular Finance, the microfinance firm at the centre of a multi-crore scam in Kerala, increased profits by mortgaging the same gold twice.
Popular Finance mortgaged the gold, that was pawned at their branches, again in banks. Till the customer repaid the loan to retrieve the gold, this would be sub-mortgaged in the bank.
The police have found that a good share of the gold that was pawned at Popular Finance was re-mortgaged at bank branches.
The customers were offered two types of gold loans - for a small amount they can avail the loan at 12 per cent and for a higher amount at 18 per cent.
The money received from mortgaging gold at the bank is then transferred from the branch to the head office of Popular Finance at Vakayar in Pathanamthitta.
How it works
Consider a hypothetical situation where Popular Finance is giving Rs 2,200 for 1gm of gold. If the customer wants that much money, the interest rate is 18 per cent. But if the customer needs only Rs 1,000 per gram, then the interest is only 12 per cent. If the customer does not repay the interests within a year, then the interest would rise up to 28 per cent.
So, when a customer takes Rs 8,000 by mortgaging 1 sovereign of gold, the branch officials will take the same gold to a bank they're tied up with. This gold will be mortgaged for Rs 24,000 at the bank. This money will be wired to the Vakayar office.
When the customer turns up at the branch to retrieve the gold, he/she is asked to wait for some time. Meanwhile, the branch manager and the accountant will rush to the bank in concern.
The gold is retrieved from the bank with the customer's payment and the money from the branch.
Popular Finance managing director Thomas Daniel (Roy), and his daughters were arrested last week over the multi-crore scam.
Link to Australia
The police have also found that Roy Daniel’s brother-in-law has a firm named Popular Group in Australia. He claimed to be the Popular Group owner on social media platforms.
As part of the business in Australia, they ran a petrol pump and a post office. However, it is yet to be ascertained if this firm is linked to the fraud committed in Kerala.
How much money was swindled?
Nobody seems to have a clear understanding regarding the deposits in Popular Finance. The data from the head office and that of the branches do not match up.
It is estimated that up to Rs 2,000 crore was amassed through deposits.
Middle-class people, who have lost a lifetime of their savings, have now come forward to fight the legal battle. An elderly, bed-ridden couple are also among those who fell prey to the fraud. Roy Daniel had directly approached them and accepted the deposits. Their only means for the livelihood was the monthly interests received upon the deposits. Now, they are left knocking the doors of the employees for the interests.