The Hindu Business Line : Plea against invoking Central Chit Fund Act

THE Rs 15,000-crore organised chit fund industry in the State has asked the Government not to bring in the Central Chit Fund Act that might prove detrimental to the industry.

Expressing concern over the move to implement the Act, the office-bearers of AP Federation of Chit Funds said the chit industry was in bad shape across the country wherever the Act was in force. "On the other hand, the industry in Andhra Pradesh stands first in the country due to the non-implementation of the Act," they said.

According to them, the Act comprises some stringent norms that would come in the way of the normal functioning of chit fund companies. "Under the Act, one needs to deposit 100 per cent security at the time of registration of chit group with the Registrar of Chits (the State Act requires only 50 per cent deposit)," they said.

It barred maximum chit bidding at 40 per cent whereas there was no limit for bidding under the State Act. "If the Government was to implement the Central Act, nearly 75 per cent of chit fund companies would have to close shop as it would be very difficult for them to collect dues from defaulters. This, in turn, would lead to non-payment of prized money to the subscribers," they said.

Close to a quarter of the 1,300 registered companies are members of the Federation. There are nearly 6,000 unregistered companies that run chits across the State with an estimated business turnover of Rs 40,000 crore.

While asking the Government not to go for the Central Act, the Federation called for strengthening of the State Chit Fund Act to plug loopholes. "Establishment of special courts for early realisation of the defaulted amount and measures to keep tabs on the unregistered chit fund companies will ensure safe transactions of public money," they felt.

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