The registered chit funds are a worried lot these days as they fear that the recent-Saradha Group episode could hurt their business prospects.
On Monday, the representatives of the All India Association of Chit Funds claimed that the frauds committed by Kolkata-based Saradha Group were wrongly labelled as a chit fund scam.
“Saradha was not a chit fund, but more of a financial scheme. Not even one of the 160 group companies of Saradha was registered as a chit fund,” said T.S.Sivaramakrishnan, General Secretary of the All India Association of Chit Funds.
Under the Chit Fund Act, 1982, a chit fund has to be registered with the Registrar of Chits. And, the registered company should have ‘chit fund’ mentioned in its name. Also, a registered chit fund is not expected to carry out any other business, he told a press conference.
There are more than 10,000 chit fund companies registered with the Government transacting business worth over Rs 30,000 crore per annum, Sivaramakrishnan said.
Following the Saradha collapse, which has left thousands of investors in the lurch, the Centre had ordered probe by the Serious Fraud Investigation Office into functioning of certain chit fund companies that are alleged to have misused the money raised from the public.
“A chit fund does not raise any deposits, but collects subscription at regular intervals. Accepting deposits from the public towards construction cannot be considered as a chit fund,” said Kamal Bhambani, Joint Secretary of the Association, referring to Saradha Group activities. “The Government should clarify whether Saradha is a chit fund or a Ponzi scheme,” he said.
Citing a study done by the Institute of Financial Management and Research, Chennai, Sivaramakrishnan said chit funds have been a tool for achieving financial inclusion. Even the Bill & Melinda Foundation has chosen the chit fund channel for their poverty alleviation programme in India and are working with them closely in both rural and urban areas.