On Monday, the Parliament's Winter Session commenced alongside massive protests by JNU students concerning the fee hike. Today, the Rajya Sabha will pass the Chit Fund (Amendment) Bill on what is the 250th session of Parliament. The Bill was introduced in the Lok Sabha on August 5, and the revision was possibly triggered by the Saradha Chit Fund scam of 2013 that involved party members of the Trinamool Congress (TMC).
What is meant by 'chit fund'?
The 1982 Bill describes chit funds as a "rotating savings and credit association system" between people/financial institutions to subscribe to a particular sum of money for a specific time.
When did chit funds originate in India?
The popularity of chit funds can be traced back to the 1930s in South India (erstwhile Malabar, Madras Presidency). The method was a desirable way to acquire funds for occasions such as weddings. Over the 20th century, it became more common. Currently, it is estimated that over 10,000 registered chit funds operate in India.
How does it work?
The parties involved are subscribers (members) and an organiser (company, bank, etc). The former oversees the activities of the subscribers and are compensated every month or at the time of withdrawal. The functioning of the fund begins at a given date and is carried on for as many months as there are subscribers. Therefore, one subscriber wins the raised amount in every cycle.
What are the changes proposed in the bill?
Union Finance Minister Nirmala Sitharaman will move the bill that "seeks to achieve insertion of the words fraternity fund, Rotating Savings and Credit Institution in clause (b) of section 2 which defines chit and also in section 11, to signify its inherent nature and distinguish its working from prize chits which are banned under a separate legislation. It proposes to substitute the expressions gross chit amount, share of discount and net chit amount for the expressions chit amount, dividend and prize amount respectively in the Act to remove confusion with respect to illegal prize chits", according to NDTV.
Additionally, the ceiling of the chit amount would be increased from Rs1 lakh to Rs 3 lakh for individuals, and Rs 3 lakh to Rs18 lakh. The presence of at least two subscribers (in-person/video conference) is to be recorded by the foreman who's own commission would be raised from 5% to 7%.
The report goes on to say that it "seeks to enable the foreman to have a right to a lien against the credit balance in other non-prized chits, and to amend clause (b) of section 85, so as to confer power upon the state government to specify the amount by notification, up to which any chit fund shall be exempted under the Act."
Other major bills, the fate of which the Parliament will decide today, include the Surrogacy (Regulation) Bill, and the Jallianwala Bagh National Memorial (Amendment) Bill.
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