Parliament clears chit fund legislation
Parliament put its seal of approval on Thursday on a legislation aimed at making chit funds more transparent and better regulated and tripling the amount that subscribers can invest in the financial instruments, which serve as both savings and borrowing avenues. The Chit Funds (Amendment) Bill, 2019 was passed by a voice vote by the Rajya Sabha; it was approved by the Lok Sabha earlier this month in the winter session.
The legislation stipulates monetary limits in chit funds, fixes the rate of commission of agents and fund managers and allows subscribers to join meetings for drawing chits via video conferencing. The maximum chit amount is proposed to be raised fromRs1 lakh to Rs3 lakh for those managed by individuals or less than four partners, and from Rs6 lakh to Rs18 lakh for chit-fund firms with four or more partners.
The bill removes the limit of Rs100 (which was set in 1982), and allows state governments to specify the base amount over which the provisions of the Act would apply. The maximum commission for the foreman, who is responsible for managing the chit, is proposed to be raised from 5% to 7%. The bill also introduces concepts such as fraternity fund, rotating savings and credit institution to make chit funds more respectable.