Now, a chit fund company needs to obtain a certificate of incorporation cin from. Hence to be a knowledgeable investor better first understand the act. In view of the above, it has been decided to amend the chit funds act, 1982. Chapter one introduction the strategic role of the financial system is to channel funds from surplus units to deficit units. In this act, unless the context otherwise require, aapproved bank means the state bank of india constituted under section 3 of the state bank of india act, 1955 23 of 1955, or a subsidiary bank constituted under section 3 of the state bank of india subsidiary banks act, 1959 33 of 1959, or a corresponding new bank constituted under section 3 of. Government of kerala published the chit fund rules 201204062012 notification government order nog. Such schemes can be conducted by organised financial institutions or may be unorganised schemes between friends andor relatives. Any person or company intends to carry chits business shall obtain prior sanction order p. Their was a huge uproar in media about the recent scam of saradha group and canvassing it as a chit fund company.
As per one definition, a chit fund company is the one which manages, conducts or supervises, as foremen, agent or in any other capacity, chits as defined in section 2 of the chit funds act, 1982. As far as out chits are concerned the same is governed by the indian chit act, 1982 and the chit fund karnataka rules, 1983. Chit funds as an innovative access to finance for lowincome households. In a chit fund scheme, a group of individuals come together for a predetermined time. The chits funds act,1982 statement of objects and reasons 1a. Chit funds act, 1982 in 1982, the ministry of finance enacted the chit funds act to regulate the sector. Foreman is the person who regulates the chit fund and participants to the chit fund schemes are known as subscribers. Be it enacted by parliament in the thirtythird year of the republic of india as follows. Financial intelligence unit india, ministry of finance, govt. The chit funds act, 1982 40 of 1982 19 th august, 1982 an act to provide for the regulation of chit, funds and for matters connected there with. The reserve bank, drafted a model bill to regulate the conduct of chit funds for adoption by all the state governments. Under the act, the central government can choose to notify the act in different states on different dates.
The dominant purpose of the act is to regulate the chit and control the activity of the foreman and protect the interests of the subscribers. Chit fund companies are governed by chit fund act 1982 and rbi has specifically exempted from its core provisions. I did good research and thought of sharing my knowled. Provided further that before chit funds act 1982 to register a chit under the first proviso, the foreman shall be given a reasonable opportunity of sct heard. Each month, the subscribers put in their monthly installments into the pot. An act to provide for the regulation of chit funds and for matters. There are over 10,000 registered chit fund in india. The chit fund is said to be an institution that has been handed down since ancient times.
Let us understand how the chit fund companies or the committee works and will then proceed to how the company is registered in terms of chit fund act. Chit fund companies are widely famous with their name known as committee. A chit fund company is a company that manages, conducts, or supervises a chit scheme. Chit fund is defined as per the section 2b of the chit fund act, 1982. In terms of subsection4 of section 8 of the chit funds act, 1982 central. Under a chit fund, people agree to pay a certain amount from time to time into a fund. Sukumar vs the state of tamil nadu on 27 april, 2015. Registrar of chits, central zone bangalore or asst. In exercise of the powers conferred by section 89 of the chit funds act, 1982 central act, 40 of 1982, the government of andhra pradesh, in consultation with the reserve bank of india, hereby makes the following rules.
The chit business is governed by the indian chit act, 1982. It prohibits a fund from being created without the prior sanction of the state government. Full text containing the act, chit funds act, 1982, with all the sections, schedules, short title, enactment date, and footnotes. Organised chit fund schemes are required to register with the registrar of firms, societies and chits. Definition of chit fund as per section 2 b of the chit funds act 1982, chit means a transaction whether called chit, chit fund, chitty, kuri or by any other name by or 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 or a certain quantity of. Attachment before judgment and other interlocutory orders. Chit funds in india are managed, conducted, and regulated according to chit funds act of 1982. The chit funds in india are regulated by the chit fund act, 1982. According to the definition given by chit funds act 1982, chit means a transaction whether called chit, chit fund, chitty, kuri or by any other name by or 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 or a certain quantity of grain instead by way of periodical installments over a definite period.
Under this law, registration of the chit fund business can be done only by the respective state. Chit funds are indigenous financial institutions in india that combines credit and savings in a single scheme. But do you know the reality that it will not come under chit fund act yes it will not, if one goes by the chit fund act 1982. Rao, chit funds a boon to small enterprises, small enterprise finance centre, institute for financial management and research working paper series, january 2007.
Central chit fund act chit fund companies bangalore. Tender for engagement of 4th class under outsourcing policy part1. It is regulated by provisions of chit fund act, 1982. Whew it is expedient to provide for the regulation of. I was aware of sarada chit fund scam but not completely aware of working behind the chit fund. Section 2b of the chit fund act, 1982 chit means a transaction whether called chit, chit fund, chitty, kuree or by any other name by or 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. Prohibition of transacting business other than chit business by a company. Modelling credit and savings behaviour of chit fund. Singh, ips director general state vigilance bureau haryana.
A chit fund is a type of rotating savings and agreement among different persons i. A chit fund is a kind of savings scheme practiced in india. Chit funds act 1982 defines a chit fund company as a company which conducts, manages and supervises a chit fund scheme. The chit funds act 1982 in india bare acts, banking and insurance, business and corporate, constitutional, consumer laws, criminal law, energy, environmental, family and inheritance, heritage and national importance, immigration law, labor law, the chit funds act 1982 national security, others, procedural and administration, property related, public utilities, shipping laws, tax laws. An act to provide for the regulation of chit funds and for matters connected there with. I an act to provide for the regulation of chit funds in the pstae of tamil nadu. The chit fund provides access to savings and borrowings for people with limited access to banking facilities.
The finance ministry is amending the chit funds act to insulate small savers from ponzi schemes floated by firms such as saradha and rose valley. They are governed through central legislation while state governments are. In exercise of the powers conferred by section 89 of the chit funds act, 1982 central act 40 of 1982, the lieutenantgovernor, pondicherry in consultation with the reserve bank of india, hereby makes the following rules, namely. The chit funds amendment bill, 2019 was introduced in lok sabha on august 5, 2019. Chit funds chit funds act 1982 often microfinance organizations. Before that, chit funds were not governed by any central law.
Chit funds act, 1982 bare acts law library advocatekhoj. Be it enacted by parliament in the seventieth year of the republic of india as follows. At present, there are around 30,000 registered chit fund businesses in india. The financial system comprising the set of institutions, markets and instruments facilitates capital formation and accelerates the pace of economic development. Pdf chit funds as an innovative access to finance for. Accordingly, the chit funds amendment bill, 2018, inter alia, proposes a the use of fraternity fund also for chits by amending sections 2b and 11. Section 2b of the under chit fund act 1982 defines chit as. Chit fund act1982 is a central act to provide for the regulations of the chits fund business and for the matters related thereon.
In the chit funds act, 1982 hereinafter referred to as the principal act, in section. Received the assent of the president on the 22nd june 1 961. According to section 2b of the chit funds act, 1982. Recently, while working with one of my clients, i was introduced with the concept of chit funds. Nonregistered chit fund are estimated to be 100 times the size of those registered. The 1982 act regulates chit funds, and prohibits a fund from being created without the prior sanction of the state government. An act to provide for the regulation of chit funds and for matters connected therewith.
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