Bengal govt to bring new legislation to curb chit funds

In an effort to control the proliferation of chit funds, the West Bengal government is planning to introduce a new legislation to crackdown on such companies and ponzi schemes.

The new legislation will be an updated and stronger version of  the West Bengal Protection of Interest of Depositors in Financial Institutions Bill, passed unanimously on December 23, 2009.  

The Bill, which proposes a life term for convicts, however, is still awaiting Presidential assent since January 2010.  

“The earlier Bill was prepared in 2008. The entire base of collecting money and investing money has changed drastically since 2008. The state government is trying to recast the Bill. The new Bill will have more teeth, so that there could be a proper regulation,” West Bengal  finance secretary HK Dwivedi said.

“Right now, economic offences wing of state finance department are pursuing all the complaints. The state will go hand in hand with the Centre on the issue. Also, steps are being take to create awareness in small towns and rural areas about risk involved in the promise of high returns,” he added, while speaking at an investor awareness programme of the ministry of corporate affairs.

Later speaking on the issue, “The Centre is looking into the issue, we would also encourage state governments to take necessary action against these firms. These firms are currently misusing the loopholes in law. If state starts taking action, Centre is ready to provide all kind of assistance,” Minister of Corporate Affairs Sachn Pailot said during the event later.

Incidentally, Reserve Bank of India had earlier directed the government to take action againsst mushrooming chit funds in the state. Opposition too have been mounting pressure on Trinamool-Congress government on the issue.

Leader of Opposition Suryakanta Mishra, had recently alleged that some multi-level marketing companies siphoned off about Rs 15,000-16,000 crore from the people in the state in the past few years and have invested in real estate and media organisations.

Also, small saving collections in the state have lost the edge to high-yielding saving instruments like chit funds. According to Gautam Deb, leader of CPI(M), the small savings and post office collections in West Bengal during the April-October period were merely Rs 194 crore, against the targeted amount of Rs 8,370 crore.