The Union Cabinet on Tuesday gave its nod to introduce the Chit Funds (Amendment) Bill in the parliament.
Since 2016, the Union Government was in the process of drafting a central law to protect people investing in chit fund schemes by bringing in a legislation on the same.
Jaitley had in the 2017-18 Budget announced that the government will amend the 'Multi-state cooperative Act' as there was an urgent need to protect the poor from dubious chit fund schemes, operated by unscrupulous entities.
The amendments proposed to the Chit Funds Act, 1982 include, increasing the ceiling of foreman's commission from a maximum of 5% to 7%, usage of the word "Fraternity Fund" for chit business by distinguishing it from "Prize Chits", proposal to allow the 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. Besides, the proposed bill also asks for allowing the foreman a right to lien for the dues from subscribers, so that set-off is allowed by the Chit company for subscribers who have already drawn funds, so as to discourage default by them.
The most important aspect of the proposed amendment bill includes a provision of removal of the ceiling of one hundred rupees set in 1982 at the time of framing the Chit Funds Act, which has lost its relevance.
The State Governments are proposed to be allowed to prescribe the ceiling and to increase it from time to time.
It is presumed that the proposed amendments would facilitate the orderly growth of the Chit Funds sector and remove bottlenecks being faced by the Chit Funds industry, which in turn will enable greater financial access of people to other financial products.