A bill to raise the monetary limits for chit funds and higher commission for “foreman” was approved by the Lok Sabha on Wednesday (November 20).
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.
The maximum chit amount is proposed to raised from ₹1 lakh to ₹3 lakh for those managed by individuals or less than four partners, and from ₹6 lakh to ₹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% to 7%. The bill also allows the foreman a right to lien against the credit balance from subscribers. The foreman denotes the person who is responsible for handling the chit fund process.
Participating in a debate on the Chit Funds (Amendment) Bill, several BJP members lauded the government’s move, saying this will help protect the money of the economically weaker section.
Saugata Roy (TMC), however, questioned the delay in bringing the bill. He said that the bill was also introduced in the last Lok Sabha but was then forwarded to the Standing Committee on Finance.
The panel gave its recommendations in August 2018 but it has taken more than a year for the government to bring the fresh bill with amendments, he said. “We have to address the anomalies in the financial system,” he said.
Roy said two BJP members from West Bengal had wrongly referred to state Chief Minister Mamata Banerjee in the chit fund scam and her name should be expunged from the record.
Anurag Sharma (BJP) said there are over 30,000 registered chit funds in the country and the unregularised would be more than 100 times the number. He stressed that more people should be brought in the formal sector.
Meenakshi Lekhi (BJP) said there was a need for financial literacy in the country to avoid people from falling into the trap of such financial system. She said people who invest in chit funds are many a time unaware that when banking system gives an interest rate of nearly 8-9 per cent, then how can one provide an interest of nearly 30 to 40 per cent.
P P Chowdhary (BJP) said the amendments to the bill may appear small but will have long term ramifications in saving people’s money.