"The Group has also suggested to bring in insurance coverage for the subscriber money in the hands of the Chit foreman. Though some lead in this regard could have been given in the proposal, it has been omitted conveniently, for reasons best known to them," he added. He said that the organisation is planning to insist on referring the Bill to a select committee when it is tabled in the Parliament, so that it is examined in detail.
Sivaramakrishnan claims that registered number of chit firms in India is around 30,000 units, while the number of companies has not increased, the value has crossed Rs 500 billion already.
The unorganised would be nearly 100 times in terms of volume, though people might think that the numbers are simply exhoribant. The legislation should be unfriendly to the unorganised sector, and be in tune with the ongoing liberalisation programs, so that the unregistered ones can be persuaded to the registered segment.
The suggestions by the industry include improving financial literacy, to help the consumers differentiate organised and unorganised players, insurance policy for the subscribers, self regulatory authority, rating mechanism, grievances redressel cell and others.
"The amendment bill was supposed to control the undergistered sector, but it is not helpful in doing so in the current form. Investor protection is very important, financial literacy is not there,"he added.
Some of the amendments proposed include use of the words "Fraternity Fund" for chit business under various sections of the Chit Funds Act, 1982, to signify its inherent nature, and distinguish its working from "Prize Chits" which are banned under a separate legislation, according to a statement by the central government.
The Bill also said while retaining the requirement of a minimum of two subscribers for the conduct of the draw of the Chit and for the preparation of the minutes of the proceedings, the Chit Funds (Amendment) Bill, 2018 proposes to allow the two minimum required subscribers to join through video conferencing duly recorded by the foreman, as physical presence of the subscribers towards the final stages of a Chit may not be forthcoming easily.
The bill proposed to increase the ceiling of foreman's commission from a maximum of 5 per cent to 7 per cent, as the rate has remained static since the commencement of the Act, for over three decades, while overheads and other costs have increased manifold.