How Subrata Roy Built (And Lost) His Sahara Empire

Subrata Roy's life is a living 'rags to riches' story of a man who rose from humble beginnings to head a conglomerate of chit-fund companies which dominated the non-banking financial sector in the country for nearly three decades.

While it is common knowledge that he formed Sahara on his own in 1978 and took it to the skies in the years that followed, very few know that he began his career with a tiny silver-testing laboratory close to a friend’s silver jewellery shop in Gorakhpur’s Gol Ghar area. What he would earn from each test was a sum of Rs 5 together with 5 grams of silver. There was no other source of earning for a diploma-holder from ITI.

His efforts to start a business with a bank loan did not bear fruit. And since the income from the silver lab was not enough to run the Roy household with a wife and mother, he continued to look for a job with a regular income. That search brought him managership in a Sahara India company run by a Jaggi family. Jaggi was caught in a COFEPOSA (foreign currency) case, following which the company was inherited by Roy, who took it to unfathomed heights.

There can be no dispute about his claim of providing banking facilities to a large population which had no access to banking. Yet, there can also be no denying that he also designed his schemes in a manner that reflected his passion for selling dreams to those who rarely live beyond their dreams.

What could be more appealing to a person than being promised to double or triple the investment being made by him over a relatively short period of time? Even though it would beat all financial logic for someone who understands the basics of economics or banking, the dream shown by the company lent hope to the poor and illiterate, for whom earning anything beyond what comes out of their daily drudgery is unthinkable.

A peek into different chit-fund schemes launched by Sahara clearly demonstrates how the simple villagefolk get lured to pitch in their hard-earned savings in the hope of multiplying them on a magical fast track.

What happened on the ground took things to yet another dimension. For instance, when he launched his most popular 'Golden Key' scheme way back in the late 80s and early 90s, it promised three times the multiplication of the deposit over a period of three years. By the company’s own admission at the time, the scheme was a huge draw and attracted a record number of depositors, mostly drawn from the economically weaker section in the urban towns or from the daily-wage earners in the vast rural expanse.

When it was maturity time for the depositors, they were told to plough 50% of the proceeds back into the same or another scheme of the company. As such, it was a trap from which there was no escape for the poor depositor. But as time went by and the trick got exposed, there were some protests, only to be silenced—thanks to Roy’s clout that cut across political parties as well as the bureaucracy of the day.

Eventually, the scheme was closed, though not without giving birth to another attractively designed plan with such high-sounding incentives that humble and innocent depositors would not be able to say ‘no’.

One such scheme that roped in yet another record number of depositors was a daily deposit plan of small amounts as low as Rs 10. I remember Roy himself telling me in an informal chat how the scheme had drawn as many as one crore depositors across the country. "You people might be making mockery of deposits of Rs 10 a day, but you fail to fathom its implication at the macro level," he said proudly.

“Besides the fact that this is providing a platform for the poorest of the poor to invest and make a fortune for themselves even with their minuscule savings, what you need to understand is its magnitude,” he sought to point out. What he went on to add was absolutely astounding and would give anyone goosebumps: “Just imagine, a petty deposit of Rs 10 a day by one crore people amounts to Rs 10 crore a day, which makes it Rs 300 crore a month and Rs 3,650 crore a year".

On closer scrutiny, what one discovered spoke volumes about how this scheme swelled into a money-spinner for Roy. With petty pavement shopkeepers or farm labourers as his depositors, he appointed agents who would collect the daily amount from their doorstep. The three-year scheme promised double the amount at maturity, which was too lucrative for all and sundry. However, what many depositors said was that after about 18 months or so, the practice of daily collection from one’s doorstep was discontinued. Instead, they were asked to make their daily deposit themselves at the nearest Sahara branch that would invariably not be less than a few kilometres from their homes. 

For a variety of reasons, this change in the daily collection would often lead to defaults by depositors. Once the defaults went beyond a certain point, the money deposited was liable to be forfeited under the terms of the scheme. It was found that not many defaulters were able to retrieve their money.

What happened later was even more revealing and left the depositor at the receiving end. Yet another scheme was launched in which a deposit of Rs 16,000 promised a consolidated return of Rs 1 lakh after a period of five years. Villages across several districts of the poverty-ridden ‘purvanchal’ region are still overflowing with people fishing out Rs 16,000 deposit certificates. But the company’s offices have consistently refused to honour these deposits by terming them "fake".

Evidently, the bulk of such depositors neither have the capacity nor capability to get their grievance redressed by the authorities concerned, who rarely respond to complaints against an all-powerful Sahara India.

Thanks to SEBI, which eventually intervened to take up the cause of these poor depositors, followed by serious cognizance by the Supreme Court, Roy was made to face legal consequences that also led to a two-year incarceration in Tihar jail.

However, even that did not provide ultimate succour to the much-harried, harassed and deprived depositor, who is still left wondering whether he would ever realise the dreams that he was made to buy. 

Sharat Pradhan is a Lucknow-based veteran journalist and political analyst. He has tracked Sahara Group since its early days.

The views expressed here are those of the author and do not necessarily represent the views of BQ Prime or its editorial team.