In a bid to tighten the noose around dubious Non Banking Finance Companies (NBFC) and chit fund companies, the state legislative assembly today amended Bihar Protection of Interests of Depositors (Financial Establishment) Act, 2002.
The amendment bill was tabled today in the state assembly by minister in charge Vijay Choudhary and passed after an intense debate.
"Due to loopholes of the earlier act many such companies used to escape the noose. Therefore, we decided to incorporate new provisions and bring a stronger act," said Choudhary in the legislative during his reply on the debate. "We wanted a sharper act to protect the interests of the small investors and deter dubious financial institutions," he added.
According to the provisions of the act, government will now keep a close vigil on the operations of these companies. It also gives sweeping powers to district magistrates (DM) to keep a tab on the functioning of such financial institutions in their respective districts.
NBFCs or chit fund companies in the state would now have to register themselves with the district administration within a month of the notification of this act.
They would also have to present their accounts to administration for review. New NBFCs or chit fund companies would also be required to seek permissions from DMs. Now licenses will also be required for their operations.
"DMs have also been empowered under this act to conduct raids on these companies on getting complaint of misdoing or fraud," said Choudhary, "if the complaint is found true, these companies would be fined Rs 1 lakh on every count of misdoing. Apart from this, the district administration would also have the power to forfeit their assets and reimburse the duped depositors after liquidating them."
NBFCs in the state are under scanner after the Shardha group fiasco in West Bengal. So far the state government have raid more than two dozen offices of various chit fund companies.
Choudhary commented, "In last 7-8 years we have registered cases against more than 50 such companies in the state. However, we needed a stronger legislation to deal with this menace and we hope that this new act will provide the administration enough power."
