Chit Funds (Amendment) Bill 2018 Notification. Bill for strengthening and streamlining of the registered Chit Fund sector
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 pre-determined duration and subscribe a certain sum of money by way of periodical instalments and each such subscriber, in his turn 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.
In past, concerns had been expressed by various stakeholders regarding challenges being faced by the chit business. Therefore, the Central Government constituted a Key Advisory Group on Chit Funds to review the existing legal, regulatory and institutional framework for Chit Funds and its efficacy and to suggest legal and regulatory initiatives required for orderly growth of the said sector. The Key Advisory Group 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 of the chit business and to protect the interest 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 to finalise the legislative and administrative proposals for strengthening and streamlining of the registered Chit Fund sector. Further, the said Committee, in its thirty-fifth Report on the Action Taken by the Government on the Recommendations contained in the twenty-first Report, had recommended the need to quickly firm up the legislative and administrative proposals for the Chit Funds sector.
Accordingly, the Chit Funds Act, 1982 has been amended by the Chit Funds (Amendment) Bill, 2018, for inter alia, proposes:
(a) the use of “fraternity fund” also for chits by amending sections 2(b) and 11;
(b) to allow the mandatory presence of two subscribers, as required under section 16(2), either in person or through video conferencing duly recorded by the foreman;
(c) that where the presence of the mandatory two subscribers was through video conferencing, the minutes of proceedings should be signed by them within two days;
(d) the increase of ceiling of foreman’s commission from five per cent. to seven per cent. under section 21;
(e) to enable the foreman to have a right to lien for the dues from subscribers, so that set-off is allowed by the chit fund for subscribers who have already drawn funds, so as to discourage default by them;
(f) to amend section 85(b), so as to confer power upon the State Government to specify the amount, by notification, up to which any chit fund shall be exempted under the said section.
The Bill seeks to achieve the above objects.
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