Cabinet Approves New Bill to ban Unregulated Deposit Schemes and Chit Funds (Amendment) Bill

In a major policy initiative to protect the savings of the investors, the Union Cabinet has given its approval to introduce the following bills in the Parliament:-
1. Banning of Unregulated Deposit Schemes Bill, 2018 in parliament &
2. Chit Funds (Amendment) Bill, 2018.

1. The Banning of Unregulated Deposit Schemes Bill, 2018
The bill is aimed at tackling the menace of illicit deposit-taking activities in the country. Companies/ institutions running such schemes exploit existing regulatory gaps and lack of strict administrative measures to dupe poor and gullible people of their hard-earned savings.
2. The Chit Funds (Amendment) Bill, 2018
The Union Cabinet has given its approval to introduce the Chit Funds (Amendment) Bill, 2018 in Parliament. In order to facilitate orderly growth of the Chit Funds sector and remove bottlenecks being faced by the Chit Funds industry, thereby enabling greater financial access of people to other financial products, the following amendments to the Chit Funds Act, 1982 have been proposed:
i. Use of the words “Fraternity Fund” for chit business under Sections 2(b) and 11(1) of the Chit Funds Act, 1982, to signify its inherent nature, and distinguish its working from “Prize Chits” which are banned under a separate legislation;
ii. Increasing the ceiling of foreman’s commission from a maximum of 5% to 7%, as the rate has remained static since the commencement of the Act while overheads and other costs have increased manifold;
iii. Allowing the foreman a right to lien for the dues from subscribers, so that set-off is allowed by the Chit company for subscribers who have already drawn funds, so as to discourage default by them; and
iv. Amending Section 85 (b) of the Chit Funds Act, 1982 to remove the ceiling of one hundred rupees set in 1982 at the time of framing the Chit Funds Act, which has lost its relevance.
Source- Press Information Bureau (PIB)