All India Association of Chit Funds General Secretary TS Sivaramakrishnan says registered chit funds are safe -
Q. How are you addressing the confusion over chit funds after the Saradha case?
A. Saradha is not a chit fund company. Explaining the failure of an MLM (multi-level marketing) or Ponzi scheme by calling it a chit fund is malicious and unethical. We are classified as a miscellaneous non-banking financial institution (NBFC) whereas Saradha is not even a residuary NBFC to the best of our knowledge.
Q. How are chit funds different from Saradha type of schemes?
A. We are governed by the Chit Fund Act of 1982. This means we have to carry the name of chit fund. Also, we cannot accept deposits and do any other business. There are restrictions on even utilisation and appropriation of funds in our hands.
Q. Are you in talks with the government for changes in regulatory framework?
A. Yes we are. Our suggestions are under consideration, as recommended by an advisory group formed by the department of financial services in the Ministry of Finance. We are persuading state and central governments to increase awareness among the public so that they know the differences between various types of NBFCs.
Q. Why should people put money in chit funds?
A. Chit funds are the only intermediaries which have both savings and borrowing features. Personalised service, especially in rural areas, and absence of stringent formalities enable us to participate in the national financial inclusion programme.