The All India Association of Chit Funds ..

Publication:Yahoo India News

Date Of Publication:29-4-13

New Delhi, April 29 (IANS) The All India Association of Chit Funds Monday urged the government and the media not to associate  Saradha group of West Bengal with the chit fund sector, as the company was not registered as a chit fund and had business in various other sectors.

“We have verified with the office of ‘Registrars of Chit Funds’ in Kolkata that Saradha is not registered. The company had varied business interests and what is quite glaring is that they did not float any chit fund company. Yet, their failure is attributed to chit funds,” said T.S. Sivaramakrishnan, general secretary, All India Association of Chit Funds.

The association claimed that the chit fund sector was being made a “scapegoat” by the government, who are feeling the public pressure following the scam involving Saradha in West Bengal.

Sivaramakrishnan said chit fund companies, unlike Saradha, are not allowed to accept deposits or allowed to carry on any other businesses without permission of the registrar or from the state government, which as of now had not been given.

Stating that registered chit funds companies are being “irresponsibly” maligned by the media without having proper understanding of the sector, Sivaramakrishnan said this may create panic among the citizens who may have invested in the sector, and put a multi-crore-rupee industry at stake.

According to the association, there are as many as 10,000 registered chit fund companies across the country, with an annual turnover of Rs.30,000 crore.

“Chit funds are perfectly legal, governed by Chit Fund Act, 1982,” and administered by the state governments. Even the Bill and Melinda Gates Foundation have chosen this channel for their poverty alleviation programme in the country,” he said.Acknowledging that there are hundreds of fraudulent companies in the country, Sivaramakrishnan said the threat can only be countered by effective coordination between the investigative, law enforcement and regulatory authorities in the country.

The Association joint secretary Kamal Bhimani said chit funds are the “most over-regulated” sector in the country. “They are regulated at two levels; first by the Reserve Bank of India, the principal regulator, and by the state government.”

“We are not like bank. The margins on which we work and the latitudes we have is very small,” he added.

The association said that attributing the Saradha scam on the whole sector will only affect genuine chit funds that contribute to the economy.

corporate crime economic offence/ tax evasion…

Publication: The Hindu

Date Of Publication: 29-4-13

Objecting to the use of word ’Chit Fund’ in multi-crore Saradha Group financial fraud, industry body CFAI on Monday saidnone of the entities of the Kolkata-based Group was operating as a registered chit fund.

“The failure of some Multi-level Marketing (MLM) or a ponzi scheme is explained as failure of a Chit Fund company. This is totally unfair,” All India Association of Chit Funds General Secretary T S Sivaramakrishnan said.

Saradha Group have got about 160 registered activities including realty and resort but not even one activity was registered as Chit Fund in the State, he said, while addressing a press conference.

“Our grievance is on failure of some other activity, why is it branded as failure of Chit Fund?,” he added.

The association also demanded that the government come out and clear the air over Chit Funds.

There are about 10,000 Chit Funds registered in India with annual subscription of Rs 30,000 crore per annum.“We are governed by the Chit Fund Act 1982 and implementations by the respective states. This Act is notified in entire India,” he said. “The principal regulator is the Reserve Bank of India, Act is made by Central Government and rules are made by respective State Governments,” Mr. Sivaramakrishnan added.

The regulator of chit funds is the Registrar of Chits appointed by respective state governments under Section 61 of Chit Funds Act. Powers of adjudication vest in the Registrar and the state government concerned is the Appellate authority. In case of  failure of a chit fund business, the responsibility for winding up such a business also vests with the respective State Governments.

As per the law, a Chit Fund company is not allowed to accept deposit from the public and can only accept subscription amount from the members.

However, Saradha Group accepted deposits from investors and worked as Multi-Level Marketing. Meanwhile, the government has said several of its investigating wings like SEBI, RBI, IT department and Enforcement Directorate have begun crackdowns on Ponzi schemes and have initiated action against Saradha Group under various laws including the Prevention of Money Laundering Act (PMLA).

Keywords: West Bengal, Saradah Group scam, Sudipta Sen, Financial fraud, Chit Fund Association, SEBI

In 1919, Carlo Ponzi started the scheme…

Publication: Bhadas 4 Media

Date Of Publication: 02-5-13

New Delhi: In 1919, Carlo Ponzi started the scheme for which he became famous: he paid off early investors with money taken in by later investors by creating a consumer stampede with hype of phenomenal returns within a very short period of time.

Ponzi exploited the investor market by approaching people most likely to trust him — his family and friends, his Catholic priest, and some neighbors from whom he collected a total of about $1250. Ninety days later, he returned $750 in “interest”.

His ecstatic original investors unwittingly did his marketing for him — they told everyone they knew about this “bonanza,” and investments snowballed. The party did not last. Within a year, a suspicious Boston Post’s front page questioned the legitimacy of the enterprise. Investors panicked and demanded their money back. It’s a bit difficult to give it back once it’s spent! Without the false hype to induce new participants, Ponzi’s scheme folded. Most of his 40,000 investors lost everything they had invested.

Fast forward to 2013, the scene hasn’t changed much; only the operators, victims have new faces. Ponzi changed the name to MLM-Multi Level Marketing. Of course, the magnitude has undergone a sea-change, heading north. One of the most unsavory aspects of globalization and a growing economy is that this aspect of white-collar crime has gained wings. Fraudulent mass-marketers reach victims via all modes of communication—postal service, telephone, e-mail, Internet sites, television, radio, and even in person. Viable multi-level marketing fraud groups require a variety of resources to operate, including the means to target and communicate with prospective victims, obtain and launder illicit proceeds, and evade law enforcement detection and investigation. These include legitimate business services, communications tools, payment processors, fraudulent identification documents, and even counterfeit financial instruments.

As a whole, nowadays, fraudulent multi-level marketing operations are increasingly transnational, interconnected, and fluid, with groups shifting alliances according to the particular needs of a scheme. The results are unbearable, tragic. For some victims, the risks extend well beyond loss of personal savings or funds to include physical threats or risks, loss of their homes, depression, and even contemplated, attempted, or actual suicide.

Multi level marketing fraud has a substantial impact on economies and markets by undermining consumer trust and confidence in legitimate businesses. Operators of MLM fraud schemes are highly adaptive, rapidly changing their methods and techniques to reduce the risks of law
enforcement detection and investigation and to respond to consumer and business awareness of their current methods. But what all these scams, one after another, reveal is we haven’t learned any lesson from our previous outings. We make a huge hue & cry, play the blame game for a while, and very soon forget everything till the next attack! When the outrage is over ‘rape’ we blame the Police authorities who in turn fortify the roads for a few days, force shut the shops early and relax thereafter, till the next victim surfaces.

When it a financial scam, whoever pulls it, the easy way out is ‘blame it on Chit Fund’, with an attitude of who cares what is a chit fund?.

The authorities, even those hand-in-gloves with the unscrupulous, Politicians, and more importantly the media who in their pursuit to garner more TRPs/Readership and outwit competition turn their backs to the facts and hurry to find a scapegoat, which can sensationalize the whole issue for a while, till the next ‘breaking news’ . Unfortunately, more often than not, it’s is a financial scam and the scapegoat; always is ‘Chit Funds’. In the case in question the ‘Saradha Group’ it could be seen that they had varied business interests with around hundred and odd companies which were in Realty, Construction, Tours & Travels, Exports, Agro, Livestock, Foods, Multipurpose, Ad agency and of course,
presence in media with their 24 hour ‘channel 10’ and also newspapers and magazines. However, what is quite glaring is that they did not float any ‘Chit Fund’ company, yet their scam/failure is attributed to Chit Funds!

While doing it, we simply forget that

1. Chit Funds are not allowed to accept deposits from the public.

2. Chit Funds are perfectly legal, governed by the “Chit Funds Act, 1982, and administered by the State Governments

3. There is an office of ‘Registrar of Chit Funds ‘in every state who monitors their operations, rather minutely. The Kokotta

Registrar is in 3rd floor, Writers building, 1, K.S. Road.

4. The regulations over chit funds are more stringent, even compared to deposit accepting companies. Utilisation and

appropriation of subscribers’ money is strictly prohibited, and provide for capital adequacy and other prudential norms

5. Chit Funds, as of now, are not allowed to carry on other businesses without the permission of the Registrar/State

Governments and as of date no permission has been given.

6. Chit Funds have been there from time-immemorial, even before the advent of banking.Many of the companies having been

around for more than 100 years! And have been carrying on their business in an impeccable manner.

7. Though the buzzword ‘Financial Inclusion’ is recent, Chit Funds have been doing it since inception, catering to the

un-served population in remote areas and are one of the most popular & trusted form of informal finance.

8. Even the Bill & Melinda Foundation have chosen the channel of ‘Chit Funds’ for their poverty alleviation program, in India

and are working closely with them in rural as well as urban India

The fact remains that the Chit Fund is a time-tested tool and shall always remain so. However, what we need to think is

 

1. Will passing the buck to chit funds or for that matter anybody, help stem the rot.

2. Is it fair on our part to defame any individual or institution for no fault of theirs? More so, when the culprit is of a different breed/variety.

3. Is it not more important to find out the root-cause and weed it out, lest it springs up again?

4. Is it not our moral duty, be it Administrators, Regulators, Politicians, or the ever important fourth estate, Media to rather find the actual culprit and then pass the verdict!

To counter the threat of multi-level marketing fraud effectively, investigative, law enforcement, and regulatory authorities will need to work in close coordination. Their focus should be

(1) Expansion of their capability to gather and share intelligence on all aspects of MLM, Residuary and other deposit taking institutions and their key participants; and acting thereupon to initiate remedial measures, if required.

(2)  Increase public awareness and education programs to help individuals and businesses to more readily recognize solicitations by fraudulent companies and take action to avoid or minimize losses to such schemes;

(4) Development of effective measures to more promptly identify and support victims of MLM/other ponzi schemes through public- and private-sector resources like introducing Deposit insurance, as prevention is better than cure; and

(5) Look into investor protection measures, to enhance the participation of informal finance in the National Financial Inclusion Program, as suggested by the Key Advisory Group on Chit Funds, formed by the Department of Financial Services, Ministry of Finance, Government of India, etc. etc..

For the investors, a thought to chew, ‘to err is human, greed is inherent in most of us, but should we blame others for our plight?’

Our Concern While the recent incidents are definitely scary & tragic, attributing it to chit funds, will only further aggravate the whole issue, as it may create a run even in the established in the chit fund companies, who are playing a major role in the National Economy.

While our representatives will be more than glad to offer a solution and remove shortcomings if any, our immediate request is set the records straight, i.e. stop misuse of the word ‘Chit Fund’ in such reporting. Issued in the Interest of all

T.S Sivaramakrishnan

General Secretary

All India Association of Chit Funds (Regd.)

The Tamil Nadu Chit Fund Companies..

Publication:Chennai Online

Date Of Publication:4-5-13

The Tamil Nadu Chit Fund Companies Association (TNCFCA) today appealed to the people not to confuse ‘Ponzi Schemes’, that offer unfeasible interest rates, cash prizes or gift articles for deposits, with Chit Funds which were traditional and highly regulated miscellaneous Non-Banking Financial Companies.

Registered chit funds could not accept deposits nor offer any other financial products or services, the TNCFCA said, adding, the companies that organize chits should have ‘chits’ in its name. “There are over 2,000 registered Chit Fund companies with annual turnover in the range of Rs 4000 Crores in Tamil Nadu.

However, the misconception that equates deposit schemes with chit funds is lowering subscriber’s confidence”, All India Association of Chit Funds General Secretary T S Sivaramakrishnan told reporters here. There were about 10,000 registered Chit Funds across India with an annual turnover in the range of Rs 30,000 crores. In Kerala, a chit fund was run by the State Government itself.

Mr.Sivaramakrishnan said in the wake of volatile market conditions, chit fund proves to be the best saving/borrowing option that offers standard returns, low-cost loans, and personalized service. Chit funds are community-driven and regulated both by the Central and State Governments.

As chit funds offer personalized, hassle-free service, among others, the industry is growing at a rate of 15-20 per cent a year”, he added. He said in the wake of recent scams involving deposit schemes getting misreported as chit fund scams, it has been becoming increasingly difficult for the industry to convince people to join chits.

TNCFCA President Y S Mathivanan said the chit funds sector has produced many large companies and small AND medium enterprises in Tamil Nadu, thus contributing to the growth of the industry, entrepreneurship and employment generation.

-Agencies.

Chennai.

Chit funds are a traditional business…

Publication:

Bussiness Line

Date Of Publication:

3-5-13

Chit funds are a traditional business, strongly regulated by the State Government and Central laws and the Reserve Bank of India, clarified the Tamil Nadu Chit Fund Companies Association.

Unorganised companies

Addressing a press conference organised by it, T. S. Sivaramakrishnan, General Secretary, All India Association of Chit Funds, said the public should not confuse chit funds with the unorganised, unregulated companies that take deposits promising unrealistic rates of return or operate Ponzi schemes.

Allaying the fears of the public in the backdrop of the recent finance scams, he said the chit funds are governed by the Chit Fund Act 40/1982, apart from stringent norms set by State Governments through the Registrars of Chits.

There are over 10,000 registered chit funds in India with an annual turnover of Rs 30,000 crore. In Tamil Nadu, there are 2,000 such chit fund companies with business of Rs 4,000 crore.

Representatives of the Tamil Nadu Association clarified that registered chit funds are expected to include the term chit fund in their names and are not allowed to take deposits. It is a traditional business where the promoter only collects the subscriptions.

Source link:  http://www.thehindu.com/todays-paper/tp-national/chit-funds-are-scapegoa…

New Delhi, April 27 (IANS)…

Publication:

The New Indian Express

Date Of Publication:

27-04-13

Prime Minister Manmohan Singh Saturday said the unauthorised collection of deposits for chit funds should be curbed in the wake of the Saradha Group defrauding thousands of depositors.

Speaking to reporters at Rashtrapati Bhavan, the prime minister said: “The unauthorised collection of deposits, in exchange for the promise that exorbitant rate of return will be given, is something which has to be curbed.”

Six cases, including for non-payment of salaries to employees and for duping depositors, have been filed against arrested Saradha Group promoter Sudipta Sen, who was remanded to 14 days’ police custody by a court Thursday.

T.S Sivaramakrishnan, general secretary, All India Association of Chit Funds, has said that while the incidents concerning Saradha are “definitely scary and tragic, attributing it to chit funds, will only further aggravate the whole issue, as it may create a run even in the established in the chit fund companies, who are playing a major role in the Indian economy”.

In a statement, Sivaramakrishnan said the Saradha Group had varied business interests with around hundred and odd companies which were in realty, construction, exports etc. “However, what is quite glaring is that they did not float any ‘Chit Fund’ company, yet their scam/failure is attributed to Chit Funds!”

Source Link:http://newindianexpress.com/business/news/Unauthorised-fund-collections-…

After the lid was blown off…

Publication:

The Telegraph

Date Of Publication:

28-04-13

After the lid was blown off the Saradha Group’s Rs 1,200 crore scam in Bengal last week, all chit fund schemes are being viewed with suspicion and scepticism. However, chit fund operators elsewhere in India are making the point that all should not be tarred with the same brush. And that far from duping subscribers, bona fide chit funds actually work very well for small investors.

In fact, the All India Association of Chit Funds (AIACF) has shot off angry letters to several media houses, protesting against the loose use of the term “chit funds”, to describe residuary non-banking finance companies (RNBFCs) such as the Saradha Group that take public deposits, flouting all rules and regulations. The association, that works closely with the Union finance ministry, says fraudulent RNBFCs in Bengal are giving good chit funds a bad name.

“What people should remember is that the RNBFCs or multi-level marketing companies in Bengal selling various high-return schemes are not chit funds in the true sense of the term,” thunders T.S. Sivaramakrishnan, general secretary, AIACF, Delhi, and proprietor of Balussery Benefit Chit Fund that operates in all metros, including Calcutta. “As bona fide chit fund companies (referred to as miscellaneous NBFCs), we are not allowed to accept deposits from the public or trade in stock, equity or other cash management options.”

What’s more, activities of chit fund companies — there are many successful ones, especially in the south — are governed by the central Chit Funds Act of 1982 and Section 45 (I) of the Reserve Bank of India Act, and administered by state governments.

So, how do conventional chits (also called chittis or kuris) run? To begin with, they are an indigenous financial system, combining both savings and credit instruments. Apparently, they existed in India even before banks came into being.

A traditional chit scheme normally has a predetermined value (chit value) and duration. A particular number of members (generally equal to the duration of the scheme) are admitted into the scheme. For instance, 50 members can take part in a 50-month scheme. Each member contributes a certain sum every month to a “pot”. The “pot” is then auctioned out every month. The highest bidder (also known as the prized subscriber) wins the “pot” for that month. The bid amount (a certain percentage of the chit value) is also called the “discount”. The prized subscriber bags the sum of money equal to the chit value less the discount (the bid amount) and a fixed fee (not more than 5 per cent) to the foreman. The discount money is then distributed among the rest of the members as dividend. Next month, the required contribution is reduced by the amount of dividend.

Apart from the southern states such as Kerala, Andhra Pradesh and Tamil Nadu, chit funds are also popular in Delhi and Maharashtra. A financial services department report states that there are more than 30,000 registered chit operators across India, “generating employment opportunities for several lakh people either directly or indirectly especially in rural areas, without taking any subsidy from the government”. The department stresses these figures “speak volumes for its (chit funds) strength in our national economy”.

Indeed, companies, public and private, dealing in traditional chit schemes are doing roaring business in India. Take the Kerala State Financial Enterprises (KSFE), set up in 1969 and wholly controlled by the state government. Out of its aggregate business turnover of Rs 18,000 crore per year, around Rs 12,000 crore come from chittis (as they are known in Kerala) alone.

With 460 branches in Kerala and 16 lakh subscribers, KSFE is perhaps the only profit-making chit business in the public sector — not only in India, but also elsewhere in the world, says P. Rajendran, managing director, KSFE, in Thrissur. “Chittis are a part and parcel of Kerala culture,” says Rajendran. “They are a potent savings and credit instrument for most Kerala families cutting across socioeconomic strata. Even businessmen use chits to create assets.”

Then there is the Hyderabad-based Margadarsi Chit fund, part of the Ramoji Rao group. It has a subscriber base of 4.5 lakhs, an annual turnover of Rs 7,500 crore, and operates in Tamil Nadu and Karnataka as well. According to A. Bhima Shankar Rao, a chit fund agent, Margadarsi has a well-governed management that follows the rules scrupulously. “Chit funds are popular because they provide easier access to larger sums of money than what banks offer,” says Shankar. “Moreover, if banks do not increase their interest rates, chits can provide interest up to 12-15 per cent and hence, people keep coming back to chits.”

Inspired by Margadarsi, Shriram Chits was set up in 1974. Starting with a capital of Rs 10 lakh, the firm has grown to 900 branches and has a turnover of Rs 4,300 crore. “We were careful not to expand too fast,” says A.V.S. Raja, vice-chairman and co-founder, Shriram Group, Chennai. “We grew through word of mouth — people were attracted to us because we had integrity.”

Balussery Benefit, with net owned funds of over Rs 2 crore and offering chit schemes ranging between Rs 30,000 and Rs 9 lakh per month, is another success story.

Big chit fund companies apart, self-help groups, particularly those run by women, in rural and semi-rural areas also engage in chits. Take the Beesis in Maharashtra. In a typical Beesi scheme, a married woman who is not a breadwinner, makes frequent contributions that not only provide her a safe outlet for savings but also helps her build household assets and fulfil consumption needs.

Arshad Mirza, research associate at the Small Enterprise Finance Centre in the Institute for Financial Management and Research (IFMR), Chennai, says an all-women chit fund is currently being run in a village near Shimoga, Karnataka, as part of their “randomised control trials” since 2010. “The village, which always has been very proactive about improving their lifestyle, is displaying a lot of discipline about payment,” he says.

The IFMR has been carrying out extensive surveys on chit funds under the aegis of the Bill & Melinda Gates Foundation. Even the finance ministry says in a report that this research has been an “eye-opener unravelling the inherent potential of this industry”.

However, unregistered chit funds continue to be a concern. The size of the unregistered chit fund industry is estimated to be almost 100 times that of the registered ones. As the finance ministry notes in its report, since “the growth of this unregistered sector is not in the national interest, there is an urgent need to ascertain the exact volume and take remedial measure to contain the same”.

Lawyers say there are many ways by which foremen in chit schemes can make illegal gains. “Fictitious members can be enrolled to complete the required number of subscribers in a chit series,” says Niloy Pyne, senior corporate lawyer. “If a real member is not able to offer a high discount at the auction, one of these benami members is shown to get the prize.”

But the introduction of the Chit Funds Act of 1982 in states such as Kerala last year (before this the Kerala Chittis Act, 1975, was in effect) through a Supreme Court ruling has weeded out unscrupulous players, claims Rajendran of KSFE. “Earlier, companies used to register themselves in places such as Faridabad in Haryana, where neither a state law nor the central law was in operation,” he says. “But now the law requires chit companies to register themselves in the state where they conduct the chits. Also, they need to have adequate capital and transparency to start chits. So, only companies from the organised sector can come into this field.”

According to the financial services department, the act has now been notified in all states such as Tamil Nadu, Andhra Pradesh, Karnataka, Maharashtra, Rajasthan, Uttar Pradesh, West Bengal, Delhi, Kerala and Haryana.

The Indian government too is keen to do its bit to encourage the industry’s growth. The core committee of the Key Advisory Group on chit funds under the finance ministry has made several recommendations, including those on amending the Chit Funds Act to address lacunae in the legislation, formation of grievance cells, credit rating of chit funds and so on.

AIACF sees a promising future. “Like yoga or ayurveda, the chit concept has stood the test of time and is now being revived,” says Sivaramakrishnan.

Clearly, one rotten apple called Saradha is unlikely to derail the success story of bona fide chit funds in the country.

 

Source Link:http://www.telegraphindia.com/1130428/jsp/7days/story_16836319.jsp#.UYuH…

New Delhi, April 29…

Publication:

Business Line

Date Of Publication:29-04-13

 The registered chit funds are a worried lot these days as they fear that the recent-Saradha Group episode could hurt their business prospects.

On Monday, the representatives of the All India Association of Chit Funds claimed that the frauds committed by Kolkata-based Saradha Group were wrongly labeled as a chit fund scam.

“Saradha was not a chit fund, but more of a financial scheme. Not even one of the 160 group companies of Saradha was registered as a chit fund,” said T.S.Sivaramakrishnan, General Secretary of the All India Association of Chit Funds.

Under the Chit Fund Act, 1982, a chit fund has to be registered with the Registrar of Chits. And, the registered company should have ‘chit fund’ mentioned in its name. Also, a registered chit fund is not expected to carry out any other business, he told a press conference.

There are more than 10,000 chit fund companies registered with the Government transacting business worth over Rs 30,000 crore per annum, Sivaramakrishnan said.

Following the Saradha collapse, which has left thousands of investors in the lurch, the Centre had ordered probe by the Serious Fraud Investigation Office into functioning of certain chit fund companies that are alleged to have misused the money raised from the public.

“A chit fund does not raise any deposits but collects subscription at regular intervals. Accepting deposits from the public towards construction cannot be considered as a chit fund,” said Kamal Bhambani, Joint Secretary of the Association, referring to Saradha Group activities. “The Government should clarify whether Saradha is a chit fund or a Ponzi scheme,” he said.

Citing a study done by the Institute for Financial Management and Research, Chennai, Sivaramakrishnan said chit funds have been a tool for achieving financial inclusion. Even the Bill & Melinda Foundation has chosen the chit fund channel for their poverty alleviation program in India and are working with them closely in both rural and urban areas.

Source Link:http://www.thehindubusinessline.com/industry-and-economy/banking/chit-fu…

New Delhi, April 29 (IANS)…

Date Of Publication:29-04-13

Publication:Yahoo! India

The All India Association of Chit Funds Monday urged the government and the media not to associate Saradha group of West Bengal with the chit fund sector, as the company was not registered as a chit fund and had business in various other sectors.

“We have verified with the office of ‘Registrars of Chit Funds’ in Kolkata that Saradha is not registered. The company had varied business interests and what is quite glaring is that they did not float any chit fund company. Yet, their failure is attributed to chit funds,” said T.S. Sivaramakrishnan, general secretary, All India Association of Chit Funds.

The association claimed that the chit fund sector was being made a “scapegoat” by the government, who are feeling the public pressure following the scam involving Saradha in West Bengal.

Sivaramakrishnan said chit fund companies, unlike Saradha, are not allowed to accept deposits or allowed to carry on any other businesses without permission of the registrar or from the state government, which as of now had not been given.

Stating that registered chit funds companies are being “irresponsible” maligned by the media without having proper understanding of the sector, Sivaramakrishnan said this may create panic among the citizens who may have invested in the sector, and put a multi-crore-rupee industry at stake.

According to the association, there are as many as 10,000 registered chit fund companies across the country, with an annual turnover of Rs.30,000 crore.

“Chit funds are perfectly legal, governed by Chit Fund Act, 1982,” and administered by the state governments. Even the Bill and Melinda Gates Foundation have chosen this channel for their poverty alleviation program in the country, he said.

Acknowledging that there are hundreds of fraudulent companies in the country, Sivaramakrishnan said the threat can only be countered by effective coordination between the investigative, law enforcement and regulatory authorities in the country.

The Association joint secretary Kamal Bhimani said chit funds are the “most over-regulated” sector in the country. “They are regulated at two levels; first by the Reserve Bank of India, the principal regulator, and by the state government.”

“We are not like a bank. The margins on which we work and the latitudes we have is very small,” he added.

The association said that attributing the Saradha scam on the whole sector will only affect genuine chit funds that contribute to the economy.

Source Link:

Saradha Group has about 160 registered…

Publication:

Moneylife

Date Of Publication:

29-04-13

Saradha Group has about 160 registered activities including realty and resort but not even one activity was registered as Chit Fund in the state, he said, while addressing a press conference.

“Our grievance is failure of some other activity, why is it branded as failure of Chit Fund?,” he added.

The association also demanded that the government come out and clear the air over Chit Funds.

There are about 10,000 Chit Funds registered in India with annual subscription of Rs30,000 crore per annum. “We are governed by the Chit Fund Act 1982 and implementations by the respective states. This Act is notified in entire India,” he said.

“Principle regulator is the Reserve Bank of India, Act is made by the Central Government and rules are made by respective state governments,” Sivaramakrishnan added.

The regulator of chit funds is the Registrar of Chits appointed by respective state governments under Section 61 of Chit Funds Act.

Powers of adjudication vest in the Registrar and the state government concerned is the Appellate authority. In case of failure of a chit fund business, the responsibility for winding up such a business also vests with the respective state governments.

As per the law, a Chit Fund company is not allowed to accept deposit from the public and can only accept subscription amount from the members.

However, Saradha Group accepted deposits from investors and worked as a Multi-Level Marketing company.

Meanwhile, the government has said several of its investigating wings like SEBI, RBI, I-T department and Enforcement Directorate have begun crackdowns on Ponzi schemes and have initiated action against Saradha Group under various laws including the Prevention of Money Laundering Act (PMLA).

 

Source Link:http://www.moneylife.in/article/saradha-group-has-nothing-to-do-with-chi…