The Chit Funds (Amendment) Bill, 2019, as passed by Lok Sabha

DR. AMAR PATNAIK (ODISHA): Sir, as I rise to speak about this topic, the first thing that comes to my mind which I also heard from the hon. Members is that there is this chit fund, then there is this 'ponzi schemes' and there are something called credit cooperative societies. They perform almost similar functions, and, unfortunately, all three are under different regulations, and there is one, which is not. There is no regulation at all. That is the 'ponzi schemes.' In the provision, in the original Chit Fund Act, I find that Section 47 talks about RBI's powers and duties. Section 73 gives only advisory role. I really don't understand why RBI should not exercise any kind of control over these chit fund companies, particularly, in the light of what has happened in the chit fund or in the NBFC sector as a whole. The word 'may' is there in all the provisions. In the entire provisions of Section 47 and Section 73, it is 'may'. 'RBI may do'; 'RBI may do'. There is no compulsion for RBI to do even a sample check. In the cooperative sector, there is similar provision. The credit cooperative sectors in many States also have similar provision. I have a feeling that an integrated approach towards this particular business has not been taken by Government and formation of a Committee which is looking at this particular Act only in isolation is not going to help. Sir, in the chit fund scams that one has talked about, two main issues were there. One, lack of regulatory control; second, investors were gullible. You have to increase -- as Ravi Prakash Vermaji said -- investors' knowledge. To protect the investors' interest, the first thing is to increase their knowledge. Nowadays you are going out for outreach of loan, loan. To distribute loans at the retail level, the banks are going for an outreach. Similar kind of exercise to educate the investors about this thing is not taking place. With the result, what is happening is that investors invest in this; they don't ask anybody. But, finally, it is the State Government which is asked to settle this crisis from out of Budget provisions which is from people, from the taxpayers' money who were actually not involved in any way in this business. It is actually unfair. Now, at the same time, in Section 8, which talks about capital adequacy of one lakh rupees, I think, there is absolutely no application of mind here because the capital adequacy norms have to be increased if you want to have some semblance of protection of investors' interest. In Section 12, there is a provision for inspection, records. In Clause 24, the appointment of an Auditor has been left completely to the chit fund company. There is absolutely no control over that. You just get certified financial statements from the chit fund company itself and then carry on the business. We know how the certificates are obtained. Talking about Clause 12, how do you regulate? We know of several chit fund companies which have not given any intimation. By the time the police have realized that they have come into play, they have already collected huge amounts of money. It is not possible to inspect them. Unless there is an intimation which is coming from people, you cannot find out if they have already started operating and have started collecting money. So, I think all the changes that have come are welcome, but I think they are very cosmetic. They have not got into the root of the problem. The harmonization and consolidation of regulatory authorities regulating the acceptance of defaulters from public, about which I have spoken, is most important. There is no whistleblower mechanism prescribed. On increasing the insurance for the deposits, the Standing Committee had said, "There should be provision for insurance coverage for the subscribers the cost of which will be borne by the chit fund company. This is a protective measure for the vast number of subscribers." The Committee, therefore, recommended that the provision may be brought in the Bill incorporating relevance of insurance coverage for the chit subscribers. But we haven't really taken care of this. So, in essence, I would say that even if it is a credit plus savings scheme, the first thing is, as some of the Members expressed, if you have to distinguish this from a ponzi scheme, you should rename the Bill and try to bring in the regulation mechanism much more stringently in which case the people who are actually going to get the benefit will not be cheated in future. Thank you, Sir.