Is chit funds legal in India?

Chit funds are legal in a majority of states and UTs in India. Chit fund companies in India are under the Chit Fund Act, 1982. Since chit funds are not financial companies, they are not regulated by the rules or guidelines of the RBI.

What is chit fund concept?

A chit fund is a type of rotating savings and credit association system practiced in Pakistan, India, Bangladesh, Sri Lanka and other Asian countries. Chit fund schemes may be organized by financial institutions, or informally among friends, relatives, or neighbours. Chit funds are often microfinance organizations.

What is Chit Funds (Amendment) Bill?

The Chit Funds (Amendment) Bill, 2019 was introduced in Lok Sabha on August 5, 2019. The Bill seeks to amend the Chit Funds Act, 1982. The 1982 Act regulates chit funds, and prohibits a fund from being created without the prior sanction of the state government. Under a chit fund, people agree to pay a certain amount from time to time into a fund.

Why are chit funds used by the poor?

NEW DELHI: Chit funds are used by the poor as a scheme acts as both a source of finance and an avenue for savings as because of deficiencies in the banking sector which have existed for years, said minister of state for finance and corporate affairs Anurag Singh Thakur as the Rajya Sabha passed the Chit funds (amendment) bill 2019.

Are chit funds regulated by RBI?

Since chit funds are not financial companies, they are not regulated by the rules or guidelines of the RBI. The Chit Fund Act was enacted to regulate and monitor the activities of chit fund companies in India and provide a uniform Act to deal with chit fund registrations, compliances, penalities etc. for chit fund companies.

What is the maximum amount of chit funds to be collected?

The Act specifies the maximum amount of chit funds which may be collected. These limits are: (i) one lakh rupees for chits conducted by individuals, and for every individual in a firm or association with less than four partners, and (ii) six lakh rupees for firms with four or more partners.