FM proposes new legislation to check chit fund frauds

Finance minister Arun Jaitley proposed legislative measures to regulate companies engaging in prize chits and money circulation schemes. The FM underlined the need to protect the small investors.

Finance minister Arun Jaitley proposed legislative measures to regulate companies engaging in prize chits and money circulation schemes.

“As part of the legislative initiatives under financial sector reforms, it is proposed to bridge the regulatory gap under the Prize Chits and Money Circulation Scheme (Banning) Act, 1978,” Jaitley said while presenting the Union Budget on Thursday.

Jaitley underlined the need to protect the small investors.

The move, Jaitley said, would facilitate effective regulation of companies and entities, which have duped a large number of poor and vulnerable people in this country. Under the present arrangement, there are a number of gap areas, where no regulators are unambiguously in-charge.

Last year, Kolkata-based Saradha Group, which among other things had a chit fund, duped millions of small investors of their life savings.

Former finance minister P Chidambaram and minister for corporate affairs Sachin Pilot had underlined the need to regulate the chit fund industry in an effective manner.

Chidambaram also said that multiplicity of regulators have led to several gaps, ambiguity besides regulatory overlap due to lack of clarity, he said.

The Saradha Group case was referred to Central Bureau of Investigation (CBI) last month where it named Trinamool Congress’ sitting Rajya Sabha MP Kunal Ghosh as one of the accused.

The Serious Frauds Investigation Office also launched a probe in the `10,000 crore chit fund scam.