The Union Cabinet has approved the introduction of the Chit Funds (Amendment) Bill, 2019 , in Parliament, to reduce the compliance burden of the registered chit funds in the country while also protecting the interest of the subscribers, Minister of Information and Broadcasting Prakash Javadekar said on Wednesday.
Speaking to reporters after announcing the decisions of the Union Cabinet, Mr. Javadekar said the Bill follows the Chit Funds (Amendment) Bill, 2018, which was introduced in Parliament last March, but then lapsed. The government has not released any details about the 2019 Bill as it is yet to be introduced in Parliament.
However, it is expected to be largely along the lines of the 2018 Bill, while also incorporating some of the recommendations of the Parliamentary Standing Committee.
The 2018 Bill incorporated several provisions that sought to improve the regulation of chit funds as set out in the original Chit Funds Act, 1982. Among the provisions was that a chit funds could be created only with the prior sanction of the relevant State government.
In a chit fund, a group of people agree to pay a certain amount periodically into a fund. Also periodically, one of the subscribers is chosen by drawing a ‘chit’ to be the recipient of the prize amount from the fund.
The 2018 Bill also specifies that a chit will be drawn in the presence of at least two subscribers. It also sought to increase the maximum commission of the foreman — the person who manages the chit fund — to 7% from 5%.
At present, the Chit Fund Act 1982 does not apply to chits that are smaller than ₹100. The 2018 Bill sought to remove the limit of ₹100, with the State government being allowed to set the limit over which the provisions of the Act would apply.
The Standing Committee recommended that the Bill should incorporate insurance coverage for the chit fund subscribers, the cost of which would be borne by the chit fund company.
