It takes much effort to locate the two-storey house in a residential colony in Sector 7 of Faridabad, near Delhi. The nondescript building, covered with a layer of yellowish paint, is one of many in a lane cluttered with similar houses. What's peculiar about the building? Until recently, it was the registered office or regional office of more than 130 chit funds. What's more peculiar is that all those funds operated not in the Haryana town but far away in Kerala.
With chit funds in the news for all the wrong reasons recently, the owner of the house is reluctant to talk. The owner, who does not wish to be named, moved to Faridabad in 1998 to work in a factory. "We have nothing to do with chit funds. We had just rented out a room in the house to these funds," he says over the phone from Thrissur, Kerala. When pressed further, he says initially there were only four or five funds using his house as their address. Over time, the number of funds surged. Many funds had been using his address for more than seven years and held their meetings occasionally in the house as and when required, he says. The owner also used to receive the post that came for any of the chit funds and forward it to their operational offices in Kerala, he adds.
The house is one of several in Faridabad's residential areas that became a refuge of hundreds of chit funds based in Kerala after the southern state enacted the Kerala Chitties Act, 1975. The law tightened rules with an aim to regulate the savings and credit schemes and protect subscribers' interests. This led to an exodus of chit funds from Kerala to other states, especially to Jammu and Kashmir and Haryana, where similar laws were not promulgated at the time.
Faridabad became a hub of Kerala-based chit funds as it already had a lot of Malayalees, making it easier for the funds to find a place to set up their offices. A.V. Philip, General Secretary of the Faridabad Malayalee Association, says that people in large numbers from Kerala started migrating to Faridabad from 1970s. "It was the number one industrial town in the country. Today, there are more than 60,000 Malayalees in Faridabad."
While they set up their branch or regional offices in Faridabad for legal purposes, the funds continued to conduct their transactions in Kerala, says David Kannanaikkal, General Secretary, All Kerala Chitty Foremen Association. "This primarily is the case with small and medium-sized chit funds and is done to bypass the relatively stringent laws and regulation in Kerala," he adds. The association estimates the chit fund business in Kerala is around Rs 85,000 crore, with most of them based in Thrissur district. There is no estimate for the number of Kerala-based chit funds with offices in Faridabad. But according to the association, at last count in 2002, there were about 10,000 chit funds operating in Kerala with offices outside the state, primarily in Faridabad and Jammu.
One of the chit funds with a branch office in Faridabad is Thrissur-based Pooram Kuries. Its Chairman, Anil Kumar, says Pooram started operations in Faridabad in 1995. "Our main subscribers are in Kerala. We started operations here because there were no difficult laws regulating chit funds here." He adds that the town's local people don't invest in Kerala-based funds. Most funds do not even have any boards or name plates outside their offices. One of the few which have a board outside its office is Gokulam. The chit fund is registered with authorities and operates in several states. But its office in Faridabad, located in a prime commercial location, wears a deserted look with just one staff member.
Many locals are not even aware of the presence of these funds. Sanjay Kumar, Joint Commissioner of Police, Faridabad, says some unregistered local funds may have been operating in the town but the police have not received any complaints or information about the presence of Kerala-based funds using local addresses.
These chit funds received a setback last year when the Chit Fund Act of 1982 was extended to six states -- Haryana, Nagaland, Tripura, Arunachal Pradesh, Kerala and Gujarat. Many funds are weighing their options. The owner of the Sector 7 house has returned to Kerala and says 90 per cent of the funds operating from his residence have moved out. "I want to sell this property and to have nothing to do with chit funds," he adds.
Additional reporting by Dearton Thomas Hector