November 26, 2019
Manish Gupta speaks on The Chit Funds (Amendment) Bill, 2019
FULL TRANSCRIPT
Sir, I rise to support the Bill. Sir, at this juncture we must admit our inability to address the full complexities of the challenges that face us. As a result, half measure result. As a result existing laws are actually amended periodically and we are not facing the actual ground situation and ground realities.
Sir, peaceful amendments to existing laws is a reactive approach. It’s a kind of a gut-reaction to the situation which develops in the ground.
Sir, legislation to tackle the deep-rooted problems need more front-foot cover at all times. We are legislating for the future and to save the public interest. But we are not really focusing in this Act, this Bill, onm the situation that is pertaining regarding rural credit. We all know that there is a crisis in the fund sector and the money lenders are holding sweat for centuries. There is no mention in this particular legislation about any tools to weed out money lenders, who give money to poor people at high interest rate and thereby they are not being able to repay. Sir, the big issue here is what is to be done about the past. As one hon’ble Member has said, how do forge the path to recover old dues and return people their money.
Sir, chit funds are common in many States. We all know about Odisha, Bengal, Gujarat, Delhi, e.g., the Pearl chit fund ghotala, worth Rs 49,000 crore. A former constitutional functionaries was the legal advisor of this group. The other large ghotala was in Gujarat, which is the Oscar chit fund. Sir, it is still hanging and the investigation has not been completed.
Sir, the reason for spread out illegal chit fund companies in certain areas of the nation is also due to an ineffective regulatory system. So, there is a confusion about organised and unorganised chit funds. The organised sector should also be included in this law so that it is not left to be glossed over. The Bill says that it secures the interests of the foreman. But, it is silent on the security of the subscriber. This is a huge loophole.
Sir, Section 16 of the Act says “in the presence of two subscribers can be done through video conferencing.” Sir, we all know even today many rural areas do not have mobile or internet facility. The chit fund sector is heavily unorganised. We need to include this in this Act. Under Section 85 of the Bill, this Act will not be applicable to chit funds or enterprises started before the enactment of the Act, this should be retrofitted. I request the minister, so that they will also be enacted in the Act.
Sir, next is SEBI & RBI. We have seen in the past the informalities that are there in the working of the RBI, as far as chit funds are concerned, as far as unsecured deposits is concerned, the RBI does not include subscription to chits. The SEBI rules do not specifically mention chit funds. They have been excluded. So, there is a case here and I would like to draw the attention of the minister to amend the RBI Act and the SEBI Act.
Sir, notably the Section 87 and Section 88 of the 1982 Act refer specifically to the role of the RBI. Also Section 47 of the RBI Act empowers the RBI to inspect the books of any chit fund. The SEBI in the past faced many complaints and these matters were also brought to the notice of the RBI. But because of the informalities in that area of operation, no action was taken in the past. They are now being activated.
Sir, the Ministry of Corporate Affairs runs an investors’ programme through their websites. The websites are there to collect information of such funds for the investors. How many people in rural India can access websites? This informative issue needs to be corrected.
Sir, also the Ban on Regulated Deposits Bill has options for the Government to amend three laws: the Reserve Bank of India Act, 1984, the SEBI Act, 1992, and the Multi-state Co-operative Society Act. This shows the path forward. That’s why there are multiple agencies which are operating that needs to be empowered substantially, transparently so that they can tackle the menace of chit funds.
Sir, a point here. The West Bengal Assembly, far back in 2003, passed a draft Bill for controlling chit funds. But for almost 10-12 years, they were struggling with the Government of India to get it passed. Even in 2013 and 2014 several moves were made but nothing fructified. Then, only in 2015 the Presidential assent was obtained. So there is a delay in the interaction between the Centre and the State. At the initiative of Mamata Banerjee, Justice (Retd) Shyamal Sen Commission was set up and a Special Investigation Team was also formed to arrest the wrongdoers of the chit fund scams and a sum of Rs 500 crore was budgeted as a corpus fund, from which around 250 crores were paid to investors who lost their money. This had to be stopped as the case was handed over to the CBI for investigation.
Sir, there is a case here which I would request the minister to look at that, since this is a deep-rooted, widespread problem of the people who have lost lakhs of rupees. The central government may consider to come forward with a budgetary allocation and the 15th Finance Commission can allocate adequate resources.
Sir, the banking system of India is very poor and is not people-friendly. So the banking system needs to be improved further. For example, there are 12 bank branches per 1 lakh adults in India. This needs to be improved because otherwise we would not be able to wean away of the lives of those which have been destroyed, mostly ordinary people like pensioners, employees, workers, small businessmen, shopkeepers and farmers. That is why Sir, there is a need to have a relook at this. An insurance cover should also be provided to the chit funds and that should be included in the law. That’s why the proposed amendments do not appear to be adequate to protect less literate and less conscious investors.
Thank you.
