@ Vikas Sharma | Sr Journalist

A Bill is to be introduced in Parliament to amend the Chit Funds Act 1982 to incorporate the changes recommended by the Standing Committee on Finance. We are glad that our longstanding demand for amending the Chit Funds Act to make its provisions to be in tune with the present time where the Government is working towards enhancing the levels of ease of doing business has been met now.
These amendments will help in the effective regulation of this savings sector apart from helping the chit fund industry in their image makeover and brand building. We are grateful to the Government of India, especially our Honourable Finance Minister, Smt. Nirmala Sitaraman, for recognizing the important role of chit funds in serving the financial needs of the low and middle income group including the self- employed and small business people.
We sought changes to give effect to the recommendations of the Key Advisory Group that was formed by the Government of India. And also to do away with a few outdated provisions in the Act. Some of the changes asked for were intended to reduce paperwork for the Chit Fund Companies as well as the regulators and also to safeguard the interests of the subscribers.
We understand from the reports in the media that a majority of the recommendations of the Standing Committee have been incorporated in the Bill.
One important amendment is about mandating a Chit Fund Company to mention under its name “ A Rosca Institution” (ROtating Savings and Credit Association). This will help in distinguishing our legal and safe business from the unlawful and unregulated businesses such as ponzi schemes. The increase of aggregate limits for the total chit business that would be conducted by Individuals and Partnership Firms and the increase of Commission from 5% to 7% are other welcome moves.

We are hopeful that the other recommendations of the Standing Committee to change certain terminology in Chit Fund business have also been incorporated in the Bill. The suggestions are: (i) foreman be replaced by ‘chit promoter’ as this will help to put the onus on the promoter, (ii) ‘dividend’ used to denote the share of the subscriber in the discount at each drawing be replaced by ‘share of discount’ to reduce confusion, with the dividend declared out of profits by a Limited Company on its shares and (iii) ‘chit amount’ be replaced by ‘gross chit amount’, ‘prize amount’ be replaced by ‘ net chit amount’ to help distinguish registered chit fund companies from banned prize chit schemes. The Select Committee’s recommendation to incorporate needful provisions to bring in insurance coverage for the subscribers’ hard earned money in t hands of the chit promoters is one important provision which we hope the Govt will bring in. Recommendation on the part of the KAG to allow the chit promoter to undertake fee based activity in the Chit Company is one important provision, which was missed out by the Standing Committee, which need to be looked into.
We have also asked for cancellation of the levy of 12% GST on chit fund services. As this does not involve any change in Chit Funds Act, the Standing Committee did not touch upon this. We are pursuing the matter with the Government. The levy of GST pushes of the cost of funds to the borrower in the Chit Fund and also reduces the return on savings to the subscriber who wants to save. If the Government is unable to consider our request for total exemption of Chit Fund Services from the levy of GST, the rate of GST may at least be reduced to the minimum rate of 5% under the GST Act. This would help the low and middle income group who are the beneficiaries of the Chit Fund Services. We will be able to extend our services to more number of people which would help in financial inclusion.


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