The Rajya Sabha on Thursday 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 passed by the Lok Sabha on November 20, 2019.
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.
Minister of State for Finance and Corporate Affairs, Anurag Singh Thakur, while introducing the Bill said that it seeks to amend the Chit Funds Act, 1982, which regulates chit funds, to ensure timely returns of money.
During the discussion in the house, while acknowledging the bonafide intention of the government, Congress demanded that the Bill be referred to a Select Committee for clarification. INC MP Kumar Ketkar said that citizens were forced into the menace of chit funds due to the current economic policies which do not allow fiscal growth.
"Calling chit funds fraternity fund or rotating funds will not help…understanding chit fund is not merely how to amend the bill and stop chit fund frauds but how to fix the economy, economic laws and economic policies," he said.
Supporting the Bill, SP MP Ravi Verma suggested that the chit fund transactions should be done through banking system, to enable traceability. TMC MP Manish Gupta demanded that insurance cover be provided to people if cheated by chit fund companies.
Salient Features of the Bill
The Bill recognizes chit funds under various names, including kuri, fraternity fund, rotating savings, credit institution, etc.
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.
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:
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 President for his assent.
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