Recent ban on unregulated deposit schemes – You are in safe hands


 
Shanthala Chits, as a leading and trusted chit fund company has a responsibility towards its investors and the general public. We are committed to spread awareness on the industry we operate in – the chit fund industry.
 
Even though chit funds are a convenient and profitable option when compared to several other financial instruments, the common man is hesitant to put his hard-earned money in a chit fund. Why is that?
 
This is because every now and then, a scandal breaks out in some part of the country. Thousands of investors, mostly the ignorant poor, lose their money investing in unregulated money deposit schemes also known as Ponzi schemes. They stand no chance of recovering their investment. The fraudulent promoters, in most cases do not get punished for their crime & the media hypes up the scandal usually ending up in chit-fund ‘bashing’.
 
The government and financial experts have long since acknowledged the problem of insufficient regulation when it comes to the chit fund deposit business. In order to protect investors from such situations, the Government of India has taken the first step recently. The government brought in a very important ordinance in Feb 2019 – Banning of Unregulated Deposit Ordinance-2019.
 
The ordinance bans deposit takers from promoting, operating, issuing advertisements or accepting deposits in any Unregulated Deposit Scheme. ‘Unregulated Deposit Scheme’ will mean a Scheme or an arrangement under which deposits are accepted or solicited by any deposit taker by way of business and which is not a Regulated Deposit Scheme. There are adequate provisions for punishment and repayment of deposits in cases where fraudulent schemes or the promoters manage to raise deposits illegally.
 
‘Regulated Deposit Scheme’ will essentially comprise of schemes that fall under any one of the regulators such as RBI, IRDA, State government etc. It is to be noted that Chit Funds and Money Circulation Schemes are under the domain of State Governments. The finance ministry explicitly clarified that Chit fund is regulated by Chit Fund Act, 1982 and is treated as Regulated Deposit as per Schedule 1 of Banning of Unregulated Deposit Ordinance, 2019. We would like to bring to our investor’s notice that Shanthala Chits is registered under the Chit Fund Act of 1982, Government of Karnataka.
 
Previous legislations focussed on money recovery after a fraud occurs. The new law prohibits unregulated deposit schemes from taking the depositor’s money in the first place. So, this acts as a preventive cover for investors, thus protecting their capital.
 
Now that the government has stepped in and implemented some checks and measures, it the responsibility of the investor to identify the right chit funds by verifying their registration as per the Chit Fund Act. We urge investors to not just focus on ‘return on capital’ but give greater importance to ‘return of capital’. Protect your savings by putting them into the right investment products.
 
Chit funds don’t have too many procedural steps for opening accounts, and are easy to operate. But before choosing a chit fund, do not focus only on the returns they promise. As an investor, you have every right to verify their registration credentials.
 
After checking on whether they are registered, ensure you have a signed agreement between the depositor and the chit fund company. You must receive a copy of your agreement which is acknowledged by the Registrar of Chits.
 
It is a good practice to check with previous investors of the fund and get an idea of the chit fund’s track record and performance. Shanthala Chits is a trusted and respected chit fund company in Bangalore since 1996 with thousands of satisfied customers.
 
Should any interested investor seek more information or clarification of their doubts, we would be happy to help you out. Do reach out to us.
 
At Shanthala Chits, we are happy about the major step that the government has taken to bring much needed credibility and streamlining into the chit fund industry. We strongly believe in the power of the chit fund as a unique, simple and profitable financial instrument. We hope that investors get the maximum benefit out of chit fund schemes without falling prey to dubious companies.

Anuradha C

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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