The Union Cabinet has given its approval to introduce the Chit Funds (Amendment) Bill, 2018 (hereinafter referred to as “Bill”) in Parliament wherein the following amendments to the Chit Funds Act, 1982 (hereinafter referred to as “Act”) have been proposed.
Use of the word Fraternity Fund
A chit is defined under the Act as a transaction under which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money by way of periodical instalments over a definite period and that each such subscriber shall, in his turn, as determined by lot or by auction or in such other manner as may be specified in the chit agreement, be entitled to the prize amount. However, the proposed amendment mentions the use of the term “Fraternity Fund” to signify its inherent nature and distinguish its working from "Prize Chits" which are banned under The Prize Chits And Money Circulation Schemes (Banning) Act, 1978.
Joining of subscribers through video conferencing
The Act prescribes that every draw of chit shall be conducted in the presence of not less than two subscribers, and the minutes of the proceedings of every draw shall be prepared and signed by and at least two other subscribers who are present. The Bill proposes that the required subscribers may join through video conferencing.
All chit funds consist of a foreman who under the chit agreement is responsible for the conduct of the chit and discharges powers and responsibilities as per the Act. The foreman is entitled to such amount not exceeding 5% of the chit amount as may be fixed in the chit agreement, by way of commission, remuneration or for meeting the expenses of running the chit. The Bill proposes to increase the ceiling to 7%, as the rate has remained static since the commencement of the Act while overheads and other costs have increased manifold.
Applicability of the Act
As per Section 85 (2) of the Act, the provisions of the Act do not apply to any chit the amount of which, or where two or more chits were started or conducted simultaneously by the same foreman, the aggregate amount of which does not exceed INR 100. The Bill proposes that such limit may be prescribed by the State governments and may be increased from to time.