The Chit Fund (Amendment) Bill seeks to revise prescribed ceiling of aggregate chit amount
The Centre on Monday moved the Chit Fund (Amendment) Bill, 2019 for passage in the Lok Sabha to facilitate orderly growth of the chit fund sector, but this was opposed by Trinamool Congress which suggested it be "scrapped" and questioned its need as there is already an existing law.
Moving the Bill to amend the Chit Funds Act, 1982, to put in place mechanisms to ensure transparency in chit fund schemes and protect subscribers, for consideration and passage, Minister of State for Finance and Corporate Affairs Anurag Thakur said that changes are being made in the rules for beginning chit funds which achieved negative image in recent past. "If chit fund is run as per the law, it will benefit the poor."
The Bill which reduces the regulatory or compliance burden of registered chit funds industry, was approved by the Union Cabinet in July and introduced in the Lok Sabha during the Monsoon session.
Raising doubts over the investigation of Central Bureau of Investigation (CBI), Trinamool's Kalyan Banerjee asked why was the charge sheet not filed so far in chit fund cases, since the investigation is going on since 2014 after the Supreme Court's order.
"Why a single person was not interrogated or arrested from Reserve Bank of India and SEBI (Securities and Exchange Board of India) by the CBI so far in the case?"
"If I have committed any wrong, put me in jail. But do not keep it pending for election issues. I request that don't give any chance to anybody to indulge in this sort of things. Don't bring amendment," he said.
Noting that this House has passed the Banning of Unregulated Deposit Scheme Bill, 2019, Kalyan Banerjee asked: "Is there any necessity to continue the Chit Fund Act? I will suggest to scrap it as there is already enough evidence."
Stressing that only making an amendment in the Bill is not enough, Shiv Sena's Appa Barne Maval demanded that action should be taken against chit fund companies and the hard-earned money of the investors should be returned as soon as possible.
"Over 10 lakh small investors in Maharashtra have invested their money in chit fund companies and most of the money was of farmers, labourers as they were lured by these firms on the pretext of higher returns compared to nationalised banks," he said.
BJP's ally Janata Dal-United supported the Bill, with its member Alok Kumar seeking speedy action against chit fund companies as he cited data that over four lakh people across the country lost their money by investing in such firms in 2018.
Biju Janata Dal's Bhartruhari Mahtab said that "chit funds flourish through whisper campaigns, they don't need to advertise".
The Bill seeks to achieve insertion of the words "fraternity fund", "Rotating Savings and Credit Institution" in clause (b) of section 2 which defines "chit" and also in section 11, to signify its inherent nature and distinguish its working from "prize chits" which are banned under a separate legislation.
The Bill seeks to revise the prescribed ceiling of aggregate chit amount from Rs 1 lakh to Rs 3 lakh for individuals and from Rs 6 lakh to Rs 18 lakh for firms, which have not been revised since 2001. Its focus is to allow the mandatory presence of two subscribers, as required under sub-section (2) of section 16, either in person or through video conferencing duly recorded by the foreman.
The Bill also seeks to confer power upon the state government to specify the amount by notification, upto which any chit fund shall be exempted under the Act.
The Chit Funds Act, 1982, was enacted to provide for the regulation of chit funds which are indigenous business in India and have conventionally satisfied the financial needs of the low-income households. The chit is a mechanism which combines credit and savings in a scheme, in which a group of individuals come together for a predetermined duration and subscribe a certain sum of money by way of periodical instalments and each such subscriber, in his term as determined by lot or by auction or by tender or any other specified manner, gets the collected sum. In this way, people who are in need of funds and those who want to save are able to meet their requirements simultaneously.
As various stakeholders had expressed concerns regarding challenges being faced by the chit business in the past, the Central government set up a key advisory group, which submitted its recommendations relating to improvements in the institutional and legal structure to further develop the chit business in order to reduce the regulatory burden and to protect the interests of the subscribers of the chits.
The Parliamentary Standing Committee on Finance (Sixteenth Lok Sabha), in its twenty-first report on "Efficacy of Regulation of Collective Investment Schemes (CIS) Chit Funds, etc" had also recommended finalising the legislative and administrative proposals for strengthening and streamlining of the registered chit fund sector.
In its thirty-fifth Report on the action taken by the government on the recommendations contained in the twenty-first Report, the panel recommended the need to quickly firm up the legislative and administrative proposals for the chit funds sector.
The Chit Funds (Amendment) Bill, 2018 was introduced in Lok Sabha on March 12, 2018 and it was referred to the Parliamentary Standing Committee on Finance on April 27, 2018 for examination and report. The Committee submitted its report on the Bill on August 9, 2018. However, before the recommendations of the Committee could be examined, the term of the Sixteenth Lok Sabha came to an end and the Bill lapsed. After examination of the report, some of the recommendations of the Committee have been incorporated in the Chit Funds (Amendment) Bill, 2019.
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