On the first day of Parliament’s Winter Session beginning Monday, the Centre has listed the Chit Fund (Amendment) Bill, 2019, for passage in the Lok Sabha, which seeks to regulate chit funds and prohibits the creation of a fund without the prior sanction of state governments.
The bill that was introduced in the Lower House in August during the Monsoon Session will be moved by Union finance minister Nirmala Sitharaman for passage.
The government had earlier introduced the bill last year to regulate the chit fund industry but it lapsed.
It was introduced in the Lok Sabha in March 2018 and later referred to a standing committee on finance for scrutiny. In February, the Union cabinet gave its nod to presenting the bill.
Coming in the backdrop of several chit fund scams, which have affected a large number of people who invest through such funds, the bill was mooted to put in place a mechanism to ensure transparency in chit fund schemes and protect subscribers.
The bill seeks to reduce the regulatory or compliance burden of the registered chit funds industry as well as protecting the interest of subscribers.
Sources in the government say the bill contains a substantive banning clause which bans deposit takers from promoting, operating, issuing advertisements or accepting deposits in any unregulated deposit schemes.
It also proposes to create three types of offences – running of unregulated deposit schemes, fraudulent default in regulated deposit schemes, and wrongful inducement in relation to unregulated deposit schemes, they said.
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.
It also proposes mandatory presence of two subscribers, as required under subsection (2) of section 16, either in person or through video conferencing duly recorded by the foreman; presence of the mandatory two subscribers through video conferencing, the minutes of the proceedings to be signed by them within two days of the date of the draw, and to increase the ceiling of foreman’s commission from five per cent to seven per cent under section 21.
The Chit Funds Act, 1982, was enacted to provide for the regulation of chit funds which are indigenous businesses in India and have conventionally satisfied the financial needs of the low-income households.
The Chit Fund (Amendment) Bill, 2019, is among the 43 bills pending in Parliament and 12 listed for consideration during the Winter Session, which will conclude on December 13.
