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The finance ministry on Tuesday stressed the need to regulate chit fund companies. “There is a need to regulate chit funds in some manner. How that will be done is not something I can say now, because there is no decision on it,” said Economic Affairs Secretary Arvind Mayaram.
He added the government was discussing the issue and exploring ways to regulate these companies. Last week, Sudipta Sen, promoter of Kolkata-based chit fund Saradha Group, was arrested for an alleged financial fraud in West Bengal. The group had been raising deposits from the public with a promise to double the investment within a short period.
Mayaram said state governments should improve their oversight on chit funds, since these companies were governed by state governments. “One problem that is quite evident is state governments don’t have departments to specifically focus on chit fund activity,” he said. He added that the supervision is typically assigned to a department, which already has a large number of other functions.
"Possibly there is lack of proper oversight (because of other functions). So, state government should also strengthen their
oversight" he said.
According to the All-India Association of Chit Funds, there are more than 10,000 chit fund companies registered with the government transacting business worth over Rs 30,000 crore per annum. However, the industry body refuse to admit that firms like Saradha Group are chit fund companies.
Following the Saradha scam, the centre has ordered a probe by the Serious Fraud Investigation Office into functioning of certain chit fund companies that allegedly misused money raised from public. As per current laws, chit funds are not allowed to accept deposits from public.
