The Hindu Business Line : Andhra Pradesh to regulate chit funds

Chit fund companies in Andhra Pradesh will soon require a minimum paid-up capital of Rs 1 lakh to remain in business. The companies will also be required to restrict their activities to chit business and not allowed to accept investments and deposits etc.

Amendments

These are among the amendments proposed to the Andhra Pradesh Chit Funds Act, 1971 through a Bill introduced in the State Legislative Assembly by the Finance Minister, Mr K. Rosaiah, today.

The proposed amendments to the Chit Funds Act are aimed at providing more safeguards to subscribers in the chit business, the Minister said.

As the Act contains lenient penal provisions and is ineffective in regulating the mushroom growth of unauthorised chits, the Government constituted a committee of Group of Ministers to examine and make recommendations for adopting certain provisions of the Central Chit Fund Act, 1982 into the A.P. Chit Funds Act, he said.

Panel’s report

The Group of Ministers made several recommendations which have been accepted by the Government and incorporated in the new Bill, said Mr J. Ratnakara Rao, Minister for Endowments, Registration & Stamps, in the statement presented in the Assembly.

Among the other recommendations are prescribing 100 per cent security of the chit amount prescribed, investment of 10 per cent of the net annual profit in reserve fund, a ceiling of 40 per cent on discount to be allowed, imposition of higher penalties of two years imprisonment and Rs 5,000 fine etc on violators.

The Bill introduced today seeks to replace the Ordinance.

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