CHIT FUNDS (AMENDMENT) BILL, 2019

About:

• The Bill seeks to amend the Chit Funds Act, 1982. The 1982 Act regulates chit funds, and prohibits a fund from being created without the prior sanction of the state government.
  
  
• Names for a chit fund: The Act specifies various names which may be used to refer to a chit fund. These include chit, chit fund, and kuri. The Bill additionally inserts ‘fraternity fund’ and ‘rotating savings and credit institution’ to this list.
  
  
• Substitution of terms: The amendment bill defines –
  • ‘gross chit amount’ as the sum of subscriptions payable by all the subscribers of a chit;
    
    
  • ‘share of discount’ as the share of the subscriber in the amount kept apart for running the chit; and
    
    
  • ‘net chit amount’ as the difference between chit amount and the amount kept apart for running the chit.
    
    
  
  
  
• Presence of subscribers through video-conferencing: The Act specifies that a chit will be drawn in the presence of at least two subscribers. The Bill seeks to allow these subscribers to join via video-conferencing.
  
  
• Foreman’s commission: Under the Act, the ‘foreman’ is responsible for managing the chit fund.
  • He is entitled to a maximum commission of 5% of the chit amount. The Bill seeks to increase the commission to 7%. 
    
    
  • The Bill allows the foreman a right to lien against the credit balance from subscribers.
    
    
  
  
  
• Aggregate amount of chits: The Bill increases the maximum amount of chit funds which may be collected to (i) 3 lakh rupees for chits conducted by individuals, and for every individual in a firm with less than four partners, and (ii) 18 lakh rupees for firms with four or more partners.
  
  
• Application of the Act: Currently, the Act does not apply to any chit where the amount is less than Rs 100. The Bill removes the limit of Rs 100, and allows the state governments to specify the base amount over which the provisions of the Act will apply.