What you need to Know about Chit Funds (Amendment) Bill, 2019?

Landmark legislation passed for the Chit fund industry – Ushering in a new era of credibility and financial inclusion

Chit Funds (Amendment) Bill, 2019
Everything you need to know about Chit Funds (Amendment) Bill, 2019


On November 20, 2019, the Indian parliament unanimously passed the Chit Funds (Amendment) Bill, 2019 that is aimed at setting up a mechanism to ensure transparency in chit fund schemes, protect subscribers and regulate the industry. 

This is a long-awaited legislative step, which finds a wide welcome in the chit fund industry – from investors and companies alike. We at Shanthala Chits wholeheartedly welcome this move from the government.

The important aspects of Chit Funds (Amendment) Bill, 2019 are listed below:

  • Names for a chit fund – In addition to the words “chit”, “chit fund”, and “Kuri”, the Bill inserts “fraternity fund”, “rotating savings” and “credit institution” to the list.
  • Substitution of terms – Some terms used in the chit fund terminology have been modified.
    (1) ‘Chit amount’ -> ‘Gross Chit Amount’
    (2) ‘Dividend’ -> ‘Share of Discount’
    (3) ‘Prize amount’ -> ‘Net Chit Amount’
  • Presence of subscribers through video-conferencing – The Act mandates the presence of at least two subscribers when the chit is drawn. The amendment allows these subscribers to join via video-conferencing.
  • Foreman’s commission – The foreman or chit fund manager gets an enhanced commission increased from 5% to 7%. The foreman is also allowed the right to lien against the credit balance from subscribers in other non-prized chits.
  • Aggregate amount of chits – The Bill increases the investment limits to Rupees Three Lakh (for Individuals) and Rupees 18 Lakh (for firms with four or more partners).
  • Application of the Act – For chits with the base amount below Rs 100, the act was not applicable earlier. Now the state governments can decide on the base amount.


The bill will help in improving the operational convenience and efficiency of chit funds. However, the long-term objective of the amendment is to bring chit funds into the mainstream of financial instruments in the country. 

Several surveys indicate that the size of the organized chit fund industry in India can be estimated at Rs 60,000 Crore, with 45000 chit fund entities registered under various state governments. However, the size of the unregistered and unorganized chit funds operating across the country are said to be 30-40 times bigger! Thus a vast majority of the industry lacks regulatory control and financial accountability, putting the naïve and uninformed investors’ money at risk.

While tabling the amendment bill in parliament, the minister explicitly pointed out that chit funds have traditionally filled the deficiencies in the banking sector. Chit funds have reached out to rural, remote areas as well as the urban poor who lacked easy access to banking. This bill aims to protect the interests of these gullible and poor investors.

The Government had already passed the Banning of Unregulated Deposits Act earlier. Now with this new amendment to the Chit Fund Act, the Government aims to highlight the key distinction between unregulated deposits, Ponzi schemes and chit funds. Chit funds will now get the respectability and mainstream acceptance that they rightly deserve.

By streamlining this sector, we can achieve greater fund inflows and widening of the investor base. Presently there is a lot of financial strain on the economy with the after-effects of Demonetisation, GST and NPA issues in the banking sector. At this time, chit funds can fill an important gap and act as an easy, reliable lending source for small businesses.

With growing interest and acceptance of chit funds as a legitimate and attractive funding alternative, a lot of NBFCs and fin-tech service companies are likely to enter the chit fund market. This will formalize the industry and remove credibility risks.

Shanthala Chits has long been a pioneer in the chit fund business. We are a Government approved chit fund company with a 23-year successful track record and thousands of satisfied customers. Shanthala Chits is a registered chit fund under the Chit Fund Act of 1982, the Government of Karnataka. We are one of the most popular chit fund houses based out of Bengaluru, known for our prompt customer support and secure investments.

Both businesses and households can greatly benefit from choosing chit funds as a regulated, fixed income, secure investment option. They work as a monthly saving tool thus helping you to inculcate the saving habit automatically. You can choose from a variety of schemes with varying installment amounts based on the financial goal you have set for yourself. When you need to utilize your money, you can withdraw your investment in a hassle-free way with no delays or difficulties.

Shanthala Chits has always been a strong advocate for proper regulation and investor welfare. We foresee that the new legislative amendment will bring in a new era for chit funds, with multi-fold growth and huge financial inclusion of the masses. We are getting ready to welcome the New Year 2020 with great new hope. We are working hard to ensure the company sees accelerated growth and success. We assure our customers of even better services and greater rewards for reposing their faith in us. Good luck everyone!

Anuradha C

Anuradha is a freelance writer cum corporate trainer in the IT/telecom domain with over 18 years experience. She served in senior technical and management positions in Huawei and TCS for 10+ years. Then gave up the traditional corporate ladder to go solo - in order to escape horrendous city traffic and to be at her own boss!
Anuradha C

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