Karnataka - Bangalore   

Law to regulate chit funds planned

Bangalore: Seeking passage of the Chit Funds (Karnataka Amendment) Bill, 2007, Minister for Cooperation G.T. Deve Gowda assured the Legislative Council on Tuesday that the Government would bring in exclusive legislation to regulate the chit fund business.

The existing Chit Fund Act was a Central Act enacted in 1982. The amendment had become inevitable following a large number of complaints about chit funds. The purpose of the amendment was to simplify the appeal and hearing procedures in chit fund cases. The amendment would facilitate the delegation of powers to receive complaints and conduct hearings to officers subordinate to the Registrar of Societies. According to an official estimate, the overall annual turnover in the chit fund business in the State was Rs. 46 crore, he said.

M.P. Nadagouda (JD-U) said that only 10 per cent of chit fund companies in the State were registered bodies. Contrary to the Government’s estimate, the monetary transactions of these companies, agencies and groups would run into several hundred crore rupees.

Dr. Nadagouda said that there were instances where 40 persons invested Rs. 5 lakh each a month for 40 months. Bidders had to stake a huge amount in the bidding process each month, he said.

Terming the whole business risky, both for investors and the management, Marithibbe Gowda (independent) said the cooperative sector was involved in the chit fund business.

Holding officials in the Department of Cooperation responsible for over a lakh cases pending before the Government, he questioned the wisdom in delegating powers to subordinate officials who were yet to prove their mettle in discharging their primary duties.

He said that the Government should bring in a comprehensive amendment to the State Cooperative Act to set up district cooperative courts to deal with cases related to the chit fund business, which was not devoid of crime and violence.

‘Mukhyamantri’ Chandru (BJP) said the Bill was not pragmatic and could cause further delays in the delivery of justice. It would only result in the “decentralisation of corruption”.

The chit fund business was detrimental to society and the Government should ban it, he said.

Defending the Bill and the chit fund business, S.R. Patil (Congress) said the business had its own ethics. All those who operated chit funds were not frauds.

Many homemakers and working women in rural and semi-urban areas had been running the business efficiently. Chit funds were a big help to the rural poor. The Government should enact a law to regulate the business and ensure returns on the money invested, he said.

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