Parliament on Thursday passed a bill which provides for raising the monetary limits for chit funds to a three-fold and hiking commission for the foreman.
The Chit Funds (Amendment) Bill, 2019 was passed by voice vote in Rajya Sabha. The bill got Lok Sabha's nod on November 20.
The maximum chit amount is proposed to be raised from Rs 1 lakh to Rs 3 lakh for those managed by individuals or less than four partners, and from Rs 6 lakh to Rs 18 lakh for firms with four or more partners.
The maximum commission for foreman, who is responsible for managing the chit, is proposed to be raised from 5 per cent to 7 per cent. The bill also allows the foreman a right to lien against the credit balance from subscribers.
The bill also introduces words such as fraternity fund, rotating savings and credit institution to make chit funds more respectable.
The Chit Funds (Amendment) Bill, 2019 also introduces words such as "fraternity fund", "rotating savings" and "credit institution" to make chit funds more respectable, said Minister of State for Finance Anurag Thakur in his reply to the House on the bill.
Piloting the bill, he said that chit funds are legal and one should understand that these are different from unregulated deposit schemes or Ponzi schemes.
The bill provides for substituting terms like 'chit amount', 'dividend' and 'prize amount' with 'gross chit amount', 'share of discount' and 'net chit fund' respectively.
It further proposes to allow subscribers to join the process of drawing chits through video-conferencing.
About members' objection to this clause, Thakur told the House that all subscribers should be present at the time of draw of chit fund but if some people are busy or unable to attend those then they should have the option of the video conference.
He also told the House that the bill removes the limit of Rs 100 (which was set in 1982), and allows the state governments to specify the base amount over which the provisions of the Act would apply.
Responding to various issues raised by members during the debate, he said chit fund subscribers can opt for insurance but the government cannot make it mandatory as it would add to the cost.
He also said that the bill provides that the chit fund operator has to have secured deposit to the size of the scheme, which is a sufficient safeguard for people subscribing to the scheme.
On compensating poor people from money collected under the GST (12 per cent good and services tax on chit fund), he said that neither I nor Finance Minister Nirmala Sitaraman present in the House can do anything about it as it is in the hand of the GST Council.
He said that GST council which is represented by states (finance ministers) can take a call on the issue.
On the suggestion of Congress leader Digvijay Singh, the minister assured that the central government would soon schedule a meeting of all chief secretaries of states for expediting fraud cases pending with the state-level coordination committees.
Thakur said there is a need to create public awareness movement so that they can differentiate between registered chit fund and unregulated funds or Ponzi schemes.
He also said that if somebody says that money would be trebled or quadrupled in a short time then we should understand that it is a fraud.
Earlier participating in the debate, Digvijay Singh accused the government of not doing anything for the subscribers but rather increasing the commission of foreman.
Kumar Ketkar (DMK) said people in India have psychology of becoming rich overnight and this is reflected in the popularity of the movie "Slumdog Millionaire" or TV programme "Kaun Bangega Crorepati".
He said fraud schemes operators capitalise on this mindset amid inequality in the country, which need to be dealt with.
Manoj Jha said these "fraud scheme operators learn from us (false promises) only as we promise that Rs 15 lakh would come into account of all and two crore jobs would be created".