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Lok Sabha Passes The Chit Funds (Amendment) Bill, 2019 [Read Bill]

LIVELAW NEWS NETWORK
21 Nov 2019 4:52 AM GMT
Lok Sabha Passes The Chit Funds (Amendment) Bill, 2019 [Read Bill]
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The Lok Sabha on Wednesday passed the Chit Funds (Amendment) Bill, 2019, to facilitate the orderly growth of the chit fund sector and enable greater financial access to people. The Bill was introduced in the Lok Sabha on August 5, 2019, during the monsoon session of the Parliament, and has been passed by voice vote. Notably, the bill was introduced in the last Lok Sabha as well but...

The Lok Sabha on Wednesday passed the Chit Funds (Amendment) Bill, 2019, to facilitate the orderly growth of the chit fund sector and enable greater financial access to people. The Bill was introduced in the Lok Sabha on August 5, 2019, during the monsoon session of the Parliament, and has been passed by voice vote.

Notably, the bill was introduced in the last Lok Sabha as well but was then forwarded to the Standing Committee on Finance which gave its recommendations in August 2018.

This Bill seeks to amend the Chit Funds Act, 1982, which regulates chit funds. During the discussion in the house, Minister of State for Finance and Corporate Affairs, Anurag Singh Thakur, said that the bill had been introduced to ensure timely returns of money. During the discussion, the members of the house demanded strict action against chit fund managers who siphon money of the poor.

Under a chit fund, people agree to pay a certain amount from time to time into a fund. Periodically, one of the subscribers is chosen by drawing a chit to receive the prize amount from the fund.

The Bill recognizes chit funds under various names, including kuri, fraternity fund, rotating savings, credit institution, etc.

Salient Features of the Bill

Substitution of Terms

The Bill substitutes the words chit amount, dividend and prize amount with gross chit amount, share of discount and net chit amount, respectively.

Presence of subscribers through video-conferencing

The Bill prescribes that at least two subscribers must be present, either physically or via video-conferencing, when a chit is drawn.

Foreman's Commission

The Bill proposes to raise the maximum commission of a foreman from 5% of the chit amount to 7%. Further, the Bill allows the foreman a right to lien against the credit balance from subscribers. (A foreman is simply the manager of the chit fund)

Aggregate amount of chits

The Bill proposes to increase the maximum amount of chit funds which may be collected by:

  1. Individuals: from Rs. 1 lakh to Rs. 3 lakh; and
  2. Firms: from Rs. 6 lakh to Rs. 18 lakh.


Application of the Act

The principal Act does not apply to any chit started before it was enacted or to any chit where the amount is less than Rs 100. The Bill seeks to remove the limit of Rs 100, and allows the state governments to specify the base amount over which the provisions of the Act will apply.

The Bill will now be placed before the Rajya Sabha for consideration and passing.

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