MPs seek changes in chit fund bill to protect investor interest2 min read . Updated: 19 Nov 2019, 12:11 AM IST
- The current bill says chit fund schemes operated by individuals can raise a maximum of ₹3 lakh, up from the existing ₹1 lakh
- Over the past few years, several frauds related to chit fund companies had surfaced
NEW DELHI : Parliamentarians on Monday sought more changes to the bill moved by the Centre to streamline operations of chit funds in India, arguing that more safeguards should be put in place to protect the interests of investors.
The Chit Funds (Amendment) Bill, 2019, tabled in August, was taken up in the Lok Sabha and discussions were expected to continue on Tuesday. The demand for more measures to protect investor interest highlights the crucial role chit funds play in India’s rural economy, providing people with access to funds and investment opportunities. Chit funds are popular among low-income families, as it offers both access to funds and options to save.
Over the past few years, several frauds related to chit fund companies had surfaced. The entities typically lured investors with abnormally high returns, and subsequently shut shop, leaving the rural poor in the lurch. In some cases, politicians were also alleged to have links with the tainted companies. Since 2016, the Reserve Bank of India (RBI) has received over 5,200 complaints related to chit fund scams.
Raghu Ram Krishna Raju of YSR Congress Party from Andhra Pradesh said that compulsory insurance protection should be there to safeguard the interests of all those who invest in chit funds. “Insurance companies take abundant precaution and vigilance to take care of their interest and, in the process, investors will also get benefited," said Raju, adding that states should not be given any leeway in setting the norms.
The current bill says chit fund schemes operated by individuals can raise a maximum of ₹3 lakh, up from the existing ₹1 lakh. For firms, with four or more partners, the Centre had proposed to raise the amount from ₹6 lakh to ₹18 lakh. “Majority of the rural economy survives on chit funds for access to funds. Raising the threshold is a welcome move, but the increase is not sufficient. I will urge the government to consider it to be raised to at least to ₹5 lakh for individuals and ₹30 lakh for firms," he added.
Kalyan Banerjee of All India Trinamool Congress said that several accused in chit fund scams are languishing in jail without trial, which should also get addressed. The bill has already incorporated suggestions from a parliamentary standing committee, which had examined an earlier version of the draft, which had lapsed days after the national polls.
The proposed changes in the bill include raising the maximum commission of the person who manages the fund from 5% to 7% of the chit amount.