{"id":595,"date":"2019-12-21T05:16:43","date_gmt":"2019-12-21T05:16:43","guid":{"rendered":"http:\/\/shanthalachits.com\/investopedia\/?p=595"},"modified":"2019-12-21T05:24:19","modified_gmt":"2019-12-21T05:24:19","slug":"chit-funds-amendment-bill-2019","status":"publish","type":"post","link":"https:\/\/shanthalachits.com\/investopedia\/chit-funds-amendment-bill-2019\/","title":{"rendered":"What you need to Know about Chit Funds (Amendment) Bill, 2019?"},"content":{"rendered":"<blockquote>\n<p style=\"text-align: center;\"><span style=\"font-size: 12pt;\"><b>Landmark legislation passed for the Chit fund industry \u2013 Ushering in a new era of credibility and financial inclusion<\/b><\/span><\/p>\n<\/blockquote>\n<figure id=\"attachment_600\" class=\"thumbnail wp-caption aligncenter\" style=\"width: 710px\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-600\" src=\"http:\/\/shanthalachits.com\/investopedia\/wp-content\/uploads\/2019\/12\/What-you-need-to-Know-about-Chit-Funds-Amendment-Bill-2019.jpg\" alt=\"Chit Funds (Amendment) Bill, 2019\" width=\"700\" height=\"400\" srcset=\"https:\/\/shanthalachits.com\/investopedia\/wp-content\/uploads\/2019\/12\/What-you-need-to-Know-about-Chit-Funds-Amendment-Bill-2019.jpg 700w, https:\/\/shanthalachits.com\/investopedia\/wp-content\/uploads\/2019\/12\/What-you-need-to-Know-about-Chit-Funds-Amendment-Bill-2019-300x171.jpg 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\" \/><figcaption class=\"caption wp-caption-text\"><\/span> <span style=\"font-size: 12pt;\">Everything you need to know about Chit Funds (Amendment) Bill, 2019<\/span><\/figcaption><\/figure>\n<p>&nbsp;<\/p>\n<p><span style=\"font-size: 12pt;\"><span style=\"font-weight: 400;\">On <em>November 20, 2019<\/em>, the Indian parliament unanimously passed the <\/span><b>Chit Funds (Amendment) Bill, 2019<\/b><span style=\"font-weight: 400;\"> that is aimed at setting up a mechanism to ensure transparency in chit fund schemes, protect subscribers and regulate the industry.\u00a0<\/span><\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: 12pt;\">This is a long-awaited legislative step, which finds a wide welcome in the chit fund industry \u2013 from investors and companies alike. We at Shanthala Chits wholeheartedly welcome this move from the government.<\/span><\/p>\n<p><span style=\"font-size: 12pt;\"><span style=\"font-weight: 400;\">The important aspects of <\/span><b>Chit Funds (Amendment) Bill, 2019<\/b><span style=\"font-weight: 400;\"> are listed below:<\/span><\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-size: 12pt;\"><b>Names for a chit fund \u2013 <\/b><span style=\"font-weight: 400;\">In addition to the words \u201cchit\u201d, \u201cchit fund\u201d, and \u201cKuri\u201d,\u00a0the Bill inserts \u201cfraternity fund\u201d, \u201crotating savings\u201d and \u201ccredit institution\u201d to the list.<\/span><\/span><\/li>\n<\/ul>\n<ul>\n<li><span style=\"font-size: 12pt;\"><b>Substitution of terms \u2013<span style=\"font-weight: 400;\"> Some terms used in the chit fund terminology have been modified.<br \/>\n<\/span><\/b><\/span><span style=\"font-size: 12pt;\"><b><span style=\"font-weight: 400;\">(1) <\/span><span style=\"font-weight: 400;\">\u2018Chit amount\u2019 -&gt; \u2018Gross Chit Amount\u2019<br \/>\n(2) \u2018Dividend\u2019 -&gt; \u2018Share of Discount\u2019<br \/>\n(3) \u2018Prize amount\u2019 -&gt; \u2018Net Chit Amount\u2019<\/span><\/b><\/span><\/li>\n<\/ul>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-size: 12pt;\"><b>Presence of subscribers through video-conferencing<\/b><span style=\"font-weight: 400;\"> \u2013 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.<\/span><\/span><\/li>\n<\/ul>\n<ul>\n<li><span style=\"font-size: 12pt;\"><b>Foreman\u2019s commission<span style=\"font-weight: 400;\"> \u2013 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.<\/span><\/b><\/span><\/li>\n<\/ul>\n<ul>\n<li><span style=\"font-size: 12pt;\"><b>Aggregate amount of chits &#8211; <span style=\"font-weight: 400;\">The Bill increases the investment limits to Rupees Three Lakh (for Individuals) and Rupees 18 Lakh (for firms with four or more partners).<\/span><\/b><\/span><\/li>\n<\/ul>\n<ul>\n<li><span style=\"font-size: 12pt;\"><b>Application of the Act \u2013<span style=\"font-weight: 400;\"> 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.<\/span><\/b><\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400; font-size: 12pt;\">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.\u00a0<\/span><\/p>\n<p><span style=\"font-size: 12pt;\"><span style=\"font-weight: 400;\">Several surveys indicate that the size of the organized chit fund industry in India can be estimated at <\/span><span style=\"font-weight: 400;\">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 na\u00efve and uninformed investors\u2019 money at risk.<\/span><\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: 12pt;\">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.<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: 12pt;\">The Government had already passed the Banning of Unregulated Deposits Act earlier. Now <em>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.<\/em> Chit funds will now get the respectability and mainstream acceptance that they rightly deserve.<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: 12pt;\">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.<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: 12pt;\">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.<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: 12pt;\">Shanthala Chits has long been a pioneer in the chit fund business. We are a <a href=\"https:\/\/shanthalachits.com\/aboutus.html\" target=\"_blank\" rel=\"noopener\">Government approved chit fund company<\/a> with a 23-year successful track record and thousands of satisfied customers. Shanthala Chits is a <a href=\"https:\/\/shanthalachits.com\/\" target=\"_blank\" rel=\"noopener\">registered chit fund<\/a> 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.<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: 12pt;\">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.<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: 12pt;\"><a href=\"https:\/\/shanthalachits.com\/\" target=\"_blank\" rel=\"noopener\">Shanthala Chits<\/a> 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!<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Landmark legislation passed for the Chit fund industry \u2013 Ushering in a new era of credibility and financial inclusion &nbsp; 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 [&hellip;]<\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[24],"tags":[27,25,26],"class_list":["post-595","post","type-post","status-publish","format-standard","hentry","category-chit-funds","tag-chit-fund-amendment-bill-2019-pros-and-cons","tag-chit-funds-amendment-bill-2019","tag-what-is-chit-fund-amendment-bill-2019"],"_links":{"self":[{"href":"https:\/\/shanthalachits.com\/investopedia\/wp-json\/wp\/v2\/posts\/595","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/shanthalachits.com\/investopedia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/shanthalachits.com\/investopedia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/shanthalachits.com\/investopedia\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/shanthalachits.com\/investopedia\/wp-json\/wp\/v2\/comments?post=595"}],"version-history":[{"count":11,"href":"https:\/\/shanthalachits.com\/investopedia\/wp-json\/wp\/v2\/posts\/595\/revisions"}],"predecessor-version":[{"id":608,"href":"https:\/\/shanthalachits.com\/investopedia\/wp-json\/wp\/v2\/posts\/595\/revisions\/608"}],"wp:attachment":[{"href":"https:\/\/shanthalachits.com\/investopedia\/wp-json\/wp\/v2\/media?parent=595"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/shanthalachits.com\/investopedia\/wp-json\/wp\/v2\/categories?post=595"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/shanthalachits.com\/investopedia\/wp-json\/wp\/v2\/tags?post=595"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}