The Union Cabinet chaired by PM Narendra Modi has given its approval to introduce, Banning of Unregulated Deposit Schemes Bill, 2018 and Chit Funds (Amendment) Bill, 2018, in order to protect the savings of investors.
While, the banning of Unregulated Deposit Schemes Bill, 2018 bill is aimed at tackling the menace of illicit deposit taking activities in the country, the Chit Funds (Amendment) Bill was approved in order to facilitate orderly growth of the Chit Funds sector and remove bottlenecks being faced by the Chit Funds industry, thereby enabling greater financial access of people to other financial products, said an official release.
One of the amendments is the 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 the physical presence of subscribers towards the final stages of a chit may not be forthcoming easily, the release said.
For Unregulated Deposit Schemes, the Finance Minister in the Budget Speech 2016-17 had announced that a comprehensive central legislation would be brought in to deal with the menace of illicit deposit taking schemes, as in the recent past, there have been rising instances of people in various parts of the country being defrauded by illicit deposit taking schemes. Subsequently, Finance Minister in the Budget Speech 2017-18 had announced that the draft bill to curtail the menace of illicit deposit schemes had been placed in the public domain and would be introduced shortly after its finalization.
The chit fund amendment 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.
At the same time, State governments are also proposed to be allowed to prescribe the ceiling and to increase it from time to time.