The Tamil Nadu Chit Fund Companies Association …

Publication:

Chennai Online

Date Of Publication:

04/05-13

Chennai, May 4 : 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 organise 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 offer standard returns, low-cost loans and personalised service. Chit funds are community-driven and regulated both by the Central and State Governments.

As chit funds offer personalised, 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.

Source Link:http://news.chennaionline.com/chennai/Don-t-confuse–Ponzi–with-chit-fu…

Chit funds are a traditional business, strongly..

Publication:

Business Line

Date Of Publication:

04/05-13

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.thehindubusinessline.com/todays-paper/tp-others/tp-states/chi…

Saradha Group had neither…

Publication:

The Hindu

Date Of Publication:

05/05-13

Urging the media not to attribute the alleged multi-crore scam in Saradha Group of West Bengal to “chit funds,” the All-India Association of Chit Funds has made it clear that the Saradha Group had neither floated any chit fund nor was it registered as a chit fund company.

Addressing presspersons in Bangalore on Saturday, association general secretary T.S. Sivaramakrishnan said that “chit funds almost always become an unfortunate scapegoat whenever a financial scam is reported”.

Pointing out that chit funds are traditional business that are regulated by the Central and State governments under the Chit Funds Act 1982, Mr. Sivaramakrishnan clarified that registered chit funds are neither allowed to accept deposits from the public nor are they allowed to carry out any other business without the permission of the authorities concerned.

He also said that people should not confuse registered chit funds with the unauthorised firms that take deposits promising unrealistic rates of return or operate ponzi schemes.

Mr. Sivaramakrishnan also said that non-implementation of the existing rules has given rise to unauthorised chit funds besides for implementation of the law, there is no coordination among officials of the Union and State governments, and the Reserve Bank of India.

Stating that there are 10,000 registered and legal chit fund companies operating in the country with the annual turnover of about Rs. 30,000 crore, he urged the media to stop using the word “chit funds” when the financial irregularities are not committed by any registered chit funds under the Chit Funds Act.

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

Illegal Players harming genuine Chit fund cos

Publication:

Hansindia

Date Of Publication:

25-may-2013

 

P Madhusudhan Reddy

Experts call for stringent provisions to curb unauthorised chit funds in the country, seek single regulating body

Hyderabad: Pointing out that illegal players like Saradha group were causing damage to the reputation of genuine chit fund companies, a group of experts underlined the need for stringent provisions to curb unauthorised chit fund operators and also those who run Ponzi schemes.

They were unanimous in saying there was an inherent strength in the concept of chit fund as it would extend credit access to lakhs of people. It is the responsibility of people to protect the chit fund sector by exposing authorised players and encouraging genuine companies, the experts stated.

“None of the over 160 companies that are part of Saradha group was registered under Chit Funds Act. The failure of Saradha group is painted as the failure of chit funds sector. It’s unfortunate and totally uncalled-for,” said Ch Janardhan Reddy, past president, All India Associations of Chit Funds.

It has become a common practice among government authorities and media to show chit funds in poor light whenever a non-banking finance company collapses or dupes gullible people by promising exorbitant returns on deposits, added Reddy. He further said insurance cover should be there for chit funds so that members would get back their money in the times of crises.

Chit fund activity in the country came under the scanner of financial regulators such as SEBI when Kolkatta-based Saradha group had allegedly duped people of around `20,000 crore. But experts here stated that the group was in the business of deposit collection, not in the chit fund activity.

“Saradha group activity has nothing do to with chit funds. But the scam has damaged reputation of chit funds besides creating fear psychosis among members of chit fund companies,” said D Vishnuvardhan Raju, District Registrar, Hyderabad.

On unauthorized chit funds, he admitted that it was difficult to estimate how many unregistered chit fund companies were there. “No one comes forward and complains about those individuals or companies who operate unauthorized chit fund business,” he explained.

He advised people to make proper background check before joining as member of a chit fund company. “They should check the reputation of the company, see whether it will repay the amount in time, etc,” he said.

According to him, chit fund operators have over 25 lakh members in Andhra Pradesh and many families are benefitting through the activity. He however underscored the need for making recovery process stringent in the case of defaulters. “We should be empowered to attach salaries of those who provided surety for the member. This way, delinquencies can be controlled,” he said.

Pointing there were no stringent provisions in the Chit Funds Act to curb unauthorized operators, V Srinivas, leagal expert, underscored the need for making an amendment to the Act to incorporate such provisions so that illegal chit firms could be punished severely.

He further said government should appoint a single regulator to oversee the crucial sector. “Self regulation will also be useful as in the case of Bar Council of India,” he maintained.

What’s it?

Chit: Chit means a group of individuals come together for a pre-determined time period and contribute to a common pool at regular intervals. Every month, up until the end of the tenure of the scheme, the collected pool of money is loaned out internally through a bidding mechanism to the most deserving member. This way, people who are in need of funds and those who want to save are able to meet their requirements. Chit Fund Act, 1982 governs this activity

Prize Chit: Prize chit includes any transaction under which a person collects monies in one lump sum or in installments by way of contributions or subscriptions or by sale of units or other instruments or in any other manner or as membership fees or admission fees or service charges, and utilizes the monies so collected or any part thereof or the income accruing from investment or other use of such monies for all or any of the following purposes, namely:

(i) specified number of subscribers as determined by lot, draw or in any other manner, prizes or gifts in cash or in kind, whether or not the recipient of the prize or gift is under a liability to make any further payment in respect of such scheme or arrangement;

(ii) not won any prize or gift, the whole or part of the subscriptions, contributions or other monies collected, with or without any bonus, premium, interest or other advantage by whatever name called, on the termination of the scheme or arrangement, or on or after the expiry of the period stipulated therein, but does not include a conventional chit

Money Circulation Scheme

Money circulation scheme means any scheme, by whatever name called, for the making of quick or easy money, or for the receipt of any money or valuable thing as the consideration for a promise to pay money, on any event or contingency relative or applicable to the enrolment of members into the scheme, whether or not such money or thing is derived from the entrance money of the members of such scheme or periodical subscriptions.

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