The Lok Sabha on Wednesday unanimously passed a Bill that aims at putting in place a mechanism to ensure transparency in chit fund schemes, protect subscribers and regulate the industry.
To facilitate orderly growth of the chit fund sector, Minister of State for Finance and Corporate Affairs Anurag Thakur said through the Chit Fund (Amendment) Bill, 2019 the government was making changes in the rules for starting a chit fund, which earned a negative image in the recent past.
The Minister had moved the Bill, which seeks to amend the Chit Funds Act, 1982, on Monday.
With the amendments, the prescribed ceiling of aggregate chit fund amount for individuals would be raised to Rs 3 lakh from Rs 1 lakh, and Rs 18 lakh from Rs 6 lakh for firms. Besides, words 'gross chit amount', 'share of discount' and 'net chit amount' would be substituted with 'chit amount', 'dividend' and 'prize amount', respectively, in the Act.
The amended Act would confer powers upon the state governments to specify the amount up to which any chit fund shall be exempted under the Act.
During the discussion, many amendments were proposed to remove bottlenecks and enable greater financial access to people.
Thakur had introduced the Bill during the Budget session in August and it was referred to Standing Committee. In 2018 too, the government had introduced a Bill to regulate the chit fund industry, but it lapsed.
The parliamentary panel had suggested the government to incorporate elements of insurance coverage for subscribers. It also noted that mobilising short-term funds to meet various needs had been a chronic problem, faced by the people in developing countries like India.
Chit funds are popular among low-income families, as it offers both access to funds and options to save. The need to protect investor interest highlights the crucial role chit funds play in rural economy, providing people with access to funds and investment opportunities.
The House rejected the amendments proposed by the opposition.
The Bill also introduced words like "fraternity fund", "rotating savings" and "credit institution" to make chit funds respectable, said the Minister. The proposed changes include raising the maximum commission of the manager from 5 per cent to 7 per cent of the chit amount.
The Bill also allows the foreman a right to lien against the credit balance from subscribers.
In the past few years, there have been several alleged frauds pertaining to companies, like Saradha Group and Rose Valley, as they lured investors to deposit money in lieu of abnormally high returns. But many shut their shop, leaving the poor in the lurch.
In some cases, politicians' links with the tainted companies also surfaced. Since 2016, the Reserve Bank of India (RBI) has received over 5,200 complaints related to chit fund scams.
Thakur said, the chit fund was not a deposit-making scheme but a subscription-based scheme and was legal unlike the unregulated schemes or Ponzi schemes. Regulated funds were in the purview of nine registered institutions, he aadded.
"The chit fund is legal. It is registered and then floated," he said.
Thakur said some members had said there was not much difference between "chit fund" and "cheat fund" in West Bengal, thus 'fraternity fund' and 'rotating savings and credit institution' had been added as alternate names for chit fund.
Referring to demands from members for GST exemption, he said the matter was to be decided by the GST council.
Chit funds were under the purview of state governments but the RBI had powers to monitor their functioning, the minister added.
Lawyers, judges rise above differences in quest for justice: CJI
Chief Justice of India Justice D.Y. Chandrachud on Wednesday said that he feels social media exacerbates differences between people but lawyers and judges rise above the differences in the common quest for justice.
LS polls: In a first, Congress ticket eludes Brahmin, Muslim leaders in Rajasthan
Contradicting its 'Brahmin DNA' stand, the Congress in Rajasthan has not fielded a single Brahmin candidate for any of the 25 parliamentary constituencies in the desert state.
Delhi HC gives Kejriwal no interim relief against ED arrest, custody; matter to be heard on April 3
The Delhi High Court on Wednesday refused any interim relief to Delhi Chief Minister Arvind Kejriwal, who has been arrested by the Enforcement Directorate (ED) in an excise policy case and is currently in its custody.
Villagers block road demanding road, water, Lifted after assurance at Kailashahar
In a demonstration of frustration over persistent neglect by local authorities, residents of Srinathpur village in Kailashahar staged a protest by blocking the Baburbazar-Hirachara road from Wednesday morning.
Over 200 voters join BJP leaving CPIM, Congress
In a significant political development, over two hundred voters from various opposition parties made a pivotal shift to the Bharatiya Janata Party (BJP) during a joining meeting held at the state BJP office.
SPO jawan among three held for cannabis smugling
In a significant development, the Tripura Police of Belonia police station has apprehended three individuals allegedly involved in ganja trafficking after facing criticism for delays in their arrest.
Dipak Majumder, submits nomination papers for 7th Ramnagar Assembly Constituency
Dipak Majumder, the Bharatiya Janata Party (BJP) candidate for the 7th Ramnagar assembly constituency, submitted his nomination papers amidst an overwhelming show of support from party workers and enthusiastic citizens.
Nine candidates file nominations for West Parliamentary seat
Dr. Vishal Kumar, the Returning Officer for the West Parliamentary Lok Sabha Constituency, announced on Wednesday that a total of nine nominations had been filed for the upcoming elections in the constituency.