The Union Cabinet has approved the introduction of the Chit Funds (Amendment) Bill, 2019 in Parliament. If passed and made into a law, the bill aims to substantially lower the compliance requirements on the registered legal chit funds of India.? This will be beneficial to both the organizers and the subscribers of the chit fund.
What is a chit fund?
- When a group of people all agree to deposit a certain amount of money at regular intervals in a fund, it is known as a chit fund.
- At regular intervals, anyone subscriber is selected to win the large prize amount from the fund. The winner is selected by the drawing of a chit, hence the name chit fund.
What is the Chit Funds (Amendment) Bill?
- The new Bill has included several details already included in the original Chit Funds Act, 1982 and added new provisions to improve the new bill.
- One of the original provisions was that a chit fund can only be created by the prior sanction of the state government. This provision has been retained in the new bill.
- The new bill mandates that the winning chit should be drawn in the presence of at least 2 subscribers of the chit fund.
- The bill has also increased the maximum commission for the person who manages the chit fund from 5% to 7%.
- The bill has also removed the earlier Rs 100 limit under which the law was not applied on chit funds.
What were the recommendations of the standing committee?
A Standing Committee had recommended that the new Bill should include provisions for providing insurance coverage to all chit fund subscribers. The cost of the insurance must be borne by the chit fund company.