Budget 2014: Govt proposes new legislation to check chit fund frauds

NEW DELHI: To safeguard investors from fraudulent money pooling schemes, the government today proposed to legislative initiatives to regulate companies engaging in prize chits and money circulation schemes.

"As part of the legislative initiatives under financial sector reforms, it is proposed to bridge the regulatory gap under the Prize Chits and Money Circulation Scheme (Banning) Act, 1978," Finance Minister Arun Jaitley said while presenting Budget for 2014-15.

"This step is expected to facilitate effective regulation of companies and entities which have duped a large number of poor and vulnerable people in this country," he said.

Last year, Saradha chit fund scam robbed millions of small investors of their life savings.

The case was referred to Central Bureau of Investigation ( CBI) to fix responsibility and prosecute wrong doers.

Last month, the CBI registered the 47th case in connection with its probe in the Rs 10,000 crore Saradha chit fund scam naming Trinamool Congress' sitting Rajya Sabha MP Kunal Ghosh as one of the accused.

The Finance Minister said benefits of insurance in India have not reached a large section of the people as insurance penetration and density are very low.

He assured that the government would work towards addressing this situation in a multi-pronged manner with the support of all concerned stakeholders.

This would include suitable incentives, using banking correspondents and strengthening micro-offices opened by public sector insurance, among others.