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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.
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.