Investments are safer today thanks to the travails of Sahara investors

At one point of time, Sahara was the country’s biggest employer after the Indian Railways, according to Time magazine.
At one point of time, Sahara was the country’s biggest employer after the Indian Railways, according to Time magazine.


  • Regulatory reforms in favour of investor safety were spurred by the plight of retail investors left in the lurch by Ponzi-like schemes run by Sahara Group under its charismatic founder Subrata Roy (1948-2023).

Swashbuckling, buccaneering and flamboyant, Subrata Roy, founder of the Sahara Group that bestrode the Indian business and financial sector like a colossus in the 1980s, has been described as all that and more. Robin Hood to some, he was a dream merchant to thousands more who lost their hard-earned money in his companies. Among financial-sector regulators, his name evoked exasperation, as he had defied attempts to rein him in for years. Back when Sahara burst onto the scene, India’s economy had not yet been unshackled. Like another Indian, Harshad Mehta, who exploited the grey areas in our maze of regulations, Roy managed to create a vast financial empire by walking the thin line between what was permissible and what was left vague and undefined. The lone financial-sector regulator of the pre-reform period, the Reserve Bank of India (RBI) watched almost helplessly as the residuary non-bank finance company (the term then used for the main engine of the group, Sahara India and Financial Corp) went on to garner deposits from ignorant savers, captivated by its charismatic promoter, the promise of high returns and the dramatic growth of the group.

At one point of time, it was the country’s biggest employer after the Indian Railways, according to Time magazine. Roy hobnobbed with the rich and the well-connected, all of whom vied to be seen in his company. His business empire sprawled across financial services, real estate, aviation, media and entertainment, and it seemed there was no stopping him. Until, finally, the long arm of the law eventually caught up with him, though Roy himself served only a short part of his sentence behind bars. Remarkably, despite the strictures against him and his companies, the group continued to operate and diversify, though with the opening up of the economy and rise of other business titans, it soon became an also-ran.

To the more discerning, particularly those who track the financial sector more closely, however, Roy’s legacy lies in how the antics of the group spurred into action first RBI and then our capital markets regulator, the Securities and Exchange Board of India (Sebi). The expansion and tightening of RBI’s control over non-banking finance companies (NBFCs) can be directly traced to the regulator’s inability to rein in the activities of Sahara and its politically connected promoter. Though a comprehensive amendment to the RBI Act of 1934 that gave it extensive powers over NBFCs came only in 1997, the noose had already begun to tighten around players like Peerless and Sahara well before that, thanks to complaints from disgruntled investors and possibly a whistle-blower, a rarity in those days. Both companies challenged RBI in court, and while Peerless lost and went down, Sahara managed to get a long rope as it fought first RBI and then Sebi, buying precious time for itself. Yet, if the NBFC sector is much better regulated today, it is thanks to the extensive powers accorded to RBI in the aftermath of run-ins with businesses like Roy’s. Likewise, Sebi’s powers over collective investment schemes of the kind that Sahara deployed to sell dreams to the poor, especially in the hinterland, can be traced to repeated violations by the group. No doubt thousands of investors paid an exorbitant price in the process. But if the world of investors in India is better now, even if far from perfect, it is, partly and indirectly, because of the misdeeds of Roy and his companies.

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