In the wake of the controversy surrounding Kolkata based Saradha Group, the government could look at introducing stringent audit and corporate governance norms in chit fund companies.
Several chit funds companies lack transparency in their functioning operations. However, they may be asked to record inflow and outflow of funds in a transparent manner.
While the corporate affairs ministry along with other agencies is looking into the operations of Saradha Group and a few others, official sources said that the ministry could push for introducing new norms under which chit fund investors are provided the same protection that any other investor in the capital market gets.
“The chit fund industry would be scrutinised closely and we need to understand the regulations that guide it, but we may have to overhaul certain norms to uphold and protect consumers,” a senior government official who did not wish to be identified told Hindustan Times.
A chit fund is a kind of saving scheme for individuals. While there are thousands of chit fund companies operating in India, there is no uniform style of functioning, nor are they governed by any norms.
“This, however, may change and there has to be a basic operating fabric,” the official said.
“Chit funds need to be brought within the ambit of corporate governance. Additionally the Centre should push for transparency in and oversight of all dealings between any corporate house and any chit fund,” said Manoj Kumar, legal expert and managing partner of Hammurabi and Solomon.
The Securities and Exchange Board of India and Enforcement Directorate are also probing the fund-raising activities of Kolkata-based Saradha Group.