Parliamentary panel for single regulator to monitor chit fund schemes

NEW DELHI: Against the backdrop of recent chit fund controversy in West Bengal, a Parliamentary committee on Friday slammed such schemes with demands for putting in place a single regulator to oversee their functioning or scrapping them altogether.

The Parliamentary Standing Committee on Finance closely scrutinised the functioning of such schemes which recently led to a series of suicides in West Bengal.

Senior officials from RBI, CBDT, SEBI, Corporate Affairs Ministry and Finance Ministry, who appeared before the committee, admitted poor coordination and lack of regulation to control the flourishing chit fund business in the country.

While agreeing that thousands of investors are being duped, they told the committee that the major onus lied on the states to regulate the schemes.

Accusing the Centre of giving conflicting data, a member later said while government claims that the scheme is functioning in 15 states, in reply to a question in Parliament, it has informed that chit fund business was flourishing in 17 states and six Union Territories.

Committee Chairman and BJP leader Yashwant Sinha suggested that the 1982 Act regulating the chit fund business in the country be repealed through an ordinance, sources said.

He was of the view that the chit fund business should be scrapped to protect innocent investors.

While most members, cutting across party lines supported his idea, some others said repealing the Act would not ensure that chit fund companies stop functioning.

The members were unanimous that there should be a "single law and a single regulator" to deal with such schemes, the sources said.

The meeting was called in the backdrop of the collapse of the Saradha Group that had duped lakhs of investors of their hard-earned savings totalling thousands of crores of rupees.

The Parliamentary panel has asked the Finance Ministry to submit a written reply on the operation of such investment schemes in the country and preventive actions taken by them.

A member of the panel and CPI leader Gurudas Dasgupta is understood to have attacked Finance Ministry for the Saradha fiasco terming it as complete failure of the government.

The panel has called the RBI representatives on May 24 to the discuss the issue at length. Similarly the committee would meet SEBI representatives on May 31.

Among those who attended the meeting were Department of Economic Affairs Secretary Arvind Mayaram, Secretary, Financial Services Rajiv Takru, Corporate Affairs Secretary Naved Masood, CBDT chairperson Poonam Kishore Saxena and an Executive Director of RBI.