Cabinet nod to amend Chit Funds Act

Approves extra-budgetary support for urban housing scheme

21/02/2018

NEW DELHI, Feb 20: The Cabinet today approved amendments to the Chit Funds Act to facilitate orderly growth of the sector and provide more financial products to investors. The Cabinet, chaired by Prime Minister Narendra Modi, has given approval to introduce the Chit Funds (Amendment) Bill, 2018 in Parliament, said an official release.
This is being done to facilitate orderly growth of the chit funds sector and remove bottlenecks being faced by the industry, thereby enabling greater financial access of people to other financial products.
For the purpose, amendments would be made to the Chit Funds Act, 1982. One of the amendments is use of the words "Fraternity Fund" for chit business in the Act to signify its inherent nature, and distinguish its working from 'Prize Chits' which are banned under a separate legislation.
The bill also proposes to allow two minimum required subscribers to join through video conferencing duly recorded by the foreman, as physical presence of the subscribers towards the final stages of a chit may not be forthcoming easily, the release said.
Moreover, the bill proposes to increase the ceiling of foreman's commission from a maximum of 5 per cent to 7 per cent, as the rate has remained static since the commencement of the Act while overheads and other costs have increased manifold.
The bill also proposes to amend a Section of the Act to remove the ceiling of Rs 100 set in 1982 at the time of framing the Chit Funds Act, "which has lost its relevance", the release said.
State governments are proposed to be allowed to prescribe the ceiling and to increase it from time to time.
Union Cabinet also approved extra-budgetary support for government's flagship housing scheme Pradhan Mantri AwasYojana (Urban), an official source said.
Under the PMAY(U), the housing and urban affairs ministry targets construction of about 1.2 crore houses for the urban poor.
The scheme got allocation at Rs 6,505 crore for budget 2018-19 as compared to Rs 6,042.81 crore in 2017-18. However, additional budgetary resources of Rs 25,000 crore was also proposed for the scheme to be raised outside the general budget.
In urban areas, the assistance has been sanctioned for construction of over 39 lakh houses so far.

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