Union Cabinet nod to amend Chit Funds Act

The Cabinet, chaired by Prime Minister Narendra Modi, has given approval to introduce the Chit Funds (Amendment) Bill, 2018 in Parliament, said an official release. This is being done to facilitate orderly growth of the chit funds sector and remove bottlenecks being faced by the industry, thereby enabling greater financial access of people to other financial products.

For the purpose, amendments would be made to the Chit Funds Act, 1982.

One of the amendments is use of the words "Fraternity Fund" for chit business in the Act to signify its inherent nature, and distinguish its working from 'Prize Chits' which are banned under a separate legislation. The bill also proposes to allow two minimum required subscribers to join through video conferencing duly recorded by the foreman, as physical presence of the subscribers towards the final stages of a chit may not be forthcoming easily, the release said. Moreover, the bill proposes to increase the ceiling of foreman's commission from a maximum of 5 per cent to 7 per cent, as the rate has remained static since the commencement of the Act while overheads and other costs have increased manifold. The bill also proposes to amend a Section of the Act to remove the ceiling of Rs 100 set in 1982 at the time of framing the Chit Funds Act, "which has lost its relevance", the release said.

State governments are proposed to be allowed to prescribe the ceiling and to increase it from time to time.