CPI MP and trade unionist Gurudas Dasgupta has called for further tightening of the provisions of the Chit Fund Act, 1982, and suggested amendments to check frauds in the Multi-Level Marketing Schemes (MLMS) and protect the interests of gullible depositors.
His suggestions come even as the Parliamentary Standing Committee on Finance has convened a meeting for Friday with top Ministry officials to discuss the modalities for working out stringent legislation to further regulate chit funds. He said amendments should be brought to the Securities Exchange Board of India Act, 1992, and the Prize Chits and Money Circulation Schemes (Banning) Act, 1978.
Commenting on the chit fund scam in West Bengal, Mr. Gupta regretted that only 15 State governments had so far enacted laws for protecting the interests of depositors, at the instance of the Reserve Bank of India. The existing Act on chit funds covered only prize chits and money circulation schemes but there was no specific reference to the MLMS for goods and services. Such schemes — called pyramid or ponzi — should be regulated to prevent frauds. The Chid Fund Act should be amended to cover the MLMS, he said.
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While SEBI was the regulator of chit fund firms, the RBI too had a major role in checking and monitoring the operations of such financial institutions, Mr. Gupta said.