00:01Look at the applause, ma'am got. It sees everything.
00:20I'm very honored to be here this morning to share the dais with all of you
00:25and also to represent what the industry is going through and what is it that we really need to grow in this industry.
00:35And Praveen Garu explained at length how Chitfan industry has been the backbone for several years to many big industrialists.
00:47But the truth is that it has led to the survival of the common man,
00:52the small and middle class people, the farmers and traders by and large.
01:01We all know that Chitfan is the oldest indigenous financial institution.
01:09They uniquely combine savings and borrowings and have become a lifeline of financial inclusion
01:16for millions who lack easy access to banks.
01:21Despite their significance, the industry faces regulatory and operational challenges that need urgent redressal.
01:31Chitfans are not just a financial tool, they are a community institution rooted in trust,
01:38serving rural households, small and medium entrepreneurs and urban residents alike.
01:46Our task today is to explore how we can safeguard this legacy while modernizing for the future.
01:55The key challenges and proposed solutions, we have a section 16 in the act.
02:05I am delving more with the act since we have all the IS officers whom we can let them know what the difficulties are and how they can help us out.
02:16I believe, sir, the act which was a 1982 act predominantly was made to serve companies which just had not even companies,
02:34maybe individuals who are running the Chitfund companies, just having one Chit that they were operating.
02:39But today, number of proprietors have turned firms, limited companies, and many companies are conducting probably more than 20 groups, 50 groups, 100 groups.
02:52And we at Mark Darcy have more than close to 6000 groups going on amidst all the four state operations that we do.
03:00Sir, it is time that we really look into the act because our country which is aspiring to become the third largest economy in the world,
03:14out beating even Japan, I think almost one day we crossed their GDP and probably every other day we are both competing there.
03:25But crossing even Germany and trying to be the third economy by 2030.
03:32And India being a bustling nation of billions of digital transactions, why only Chitfund industry is left behind, sir?
03:43So we kindly request you to look into it and help us out so that we can also be as an industry be given fair chance to survive in this digital world.
03:57So section 16 talks about in every auction two subscribers being present.
04:03These days nobody has time, they all want to operate electronically.
04:10So if this can be changed to digital participation, you know, where people can participate online auctions,
04:19it will help the subscribers and reduce the operational burden.
04:22In fact, in the last two, three auctions, nobody is there to participate at all.
04:30So how can we expect anybody to be present?
04:33So the act itself is violative for the last auction because last auction there will be only one person.
04:42So how can two people be present in the auction?
04:45So when it comes to section 20, sir, it talks about 50% fixed deposit and 50% bank guarantee,
04:55which also becomes operationally inconvenient.
04:58We would prefer probably 50% not 100%, the AP government, the AP state had 50% its security deposit until the Central Act was enacted.
05:15So if we can recall that and make it 50% fixed deposit and that too, instead of taking the,
05:23at the time of taking the price sanction from the registrar, if it can be at the time of the commencement,
05:34then it will ease on the liquidity of the chit fund companies and they would be able to make faster payments to the subscribers, sir.
05:42And when we look at the section 20, subsection 5, it talks about where a chit is terminated and the registrar has satisfied himself.
05:56The claims of all the subscribers have been fully satisfied.
06:00He shall order the release of the security furnished by the firman.
06:03The current issue is, sir, lack of clarity, delays, release of security when subscribers don't claim price amount.
06:12Very rarely we conduct, like say, maybe 25 chits.
06:17There will be one subscriber who is not able to give the security.
06:20And since the security, we cannot release the price amount.
06:24Such price amounts get transferred into number 2 account and it is there.
06:28And we only adjust that amount towards the arrears in that chit once in 6 months.
06:35And if there is any credit left after the chit is terminated, we make the payment to the subscriber.
06:41So this can be looked into by the registrars and release our fixed deposit amount once the chit is terminated.
06:51Because a subscriber who has not taken the price amount will not be giving us the no claim letter.
06:56So there is no way we can produce a no claim letter of an unpaid price subscriber.
07:03And we would like to follow the act in total in order to be 100% compliant.
07:09So balance sheet, you know, the company's act itself gives 6 months.
07:15Whereas in the chit fund rules, it says balance sheet should be filed within 3 months.
07:21Which is so unfieldy to do because the bankers themselves with whom the fixed deposits are kept, you know, they don't give us the receipt information, the interest postings until it is June.
07:38So once we get the information, we have to verify all that and then there will be some wrong postings, we have to get that rectified, all of that has to get reflected in the balance sheet.
07:50So this year we really struggled to see if we can complete it in 3 months.
07:57Day and night our accounts team has worked in all the 4 states but still, you know, it took 5 months.
08:04So we are able to comply with the company's act wherein 6 months time is given.
08:09So something needs to be done about this also, sir, so that it reduces compliance stress and harmonizes regulations.
08:17And largely the other bottlenecks are still being very much manually compliant with regard to documentation.
08:28A lot of manual filings are there which we would like to go forward with digital compliance which makes it easy.
08:36You know, even the registrar would know everything online.
08:43There will be dashboards which can be seen by the registrars.
08:47Everything will be much more transparent is what I believe in.
08:50And Markdarshi Chit Fund is totally moving towards digital operations.
08:56Another bottleneck is the delayed security deposits, release of them.
09:02Sometimes even after 3 months, 6 months they are not released which tightens the financial situation of a Chit Fund Operator.
09:12And prolonged legal disputes which hampers the efficiency.
09:16One of the reasons why probably very rarely not organized Chit Funds, of course this can happen only to organized Chit Funds.
09:26Very, very, very rare because the percentage is almost nil.
09:30But it can go wrong because of not able to recover rather than doing business.
09:36If anybody fails, it is because of failure to recover the dues from the defaulted subscribers.
09:43So, the most important thing is, sir, about the GST rationalization.
09:50Why are Chit Funds being charged 18% when banks, you know, NBFCs are not charged anything on the interest earned by them?
10:01For us, the income is the commission and for banks and NBFCs it is the interest.
10:08There is no GST charged for that.
10:10But whereas we are being charged 18% which is, you know, looking at us like apples and oranges, differentiating us like apples and oranges.
10:20So, kindly, sir, we seek your intervention, we seek your help in rationalizing this and making it impartial, sir.
10:32And also, people like Mark Darcy, firms like Mark Darcy, where we are operating in different states,
10:38we have different rules every state, different fee structure, different practices which create inefficiencies and procedural hurdles.
10:47So, to develop a model Chit Fund rules for nationwide adoption to bring in consistency would be the best.
10:56These challenges affect not just businesses but the very trust of subscribers who look to Chit Funds as their safety net.
11:04Digital transformation, the requirement of physical submissions for regulatory approvals, I am just insisting upon that,
11:13slows down group commencements, reduces ease of doing businesses.
11:18Introduce secure e-filing for Chit agreements, minutes, returns and fees along with online payment facilities to reduce cycle time, improve compliance and enhance transferences.
11:32Promote online auctions and digital collections for convenience and trust.
11:38I have covered about judicial disputes, I will skip that.
11:45Just one thing is, when defaulted subscribers are going for appeals, please insist upon at least 25% remittance so that frivolous litigation can be avoided.
11:59I lost it.
12:00I lost it on my iPad so I am just looking up here.
12:03And also we need to curb unethical competition.
12:06So, proliferation of unregistered Chit Operators undermines trust, exposes subscribers to the risk of losing their savings and damages,
12:16confidence in the entire regulated industry.
12:19So, curbing unregistered operators is very, very important.
12:25Strict enforcement, penalties when people are found to be operating unregistered Chits and ringing about public awareness campaigns to protect subscribers from fly-by-night operators.
12:38So, we have huge opportunities ahead.
12:41Beyond addressing challenges, the sector is poised for growth if supported by enabling policies.
12:48Financial inclusion reach undeserved segments with simple community-based Chit groups which can be operated in rural areas and inculcate a saving culture.
13:01Promote Chit funds as a disciplined savings tool for the younger generation.
13:07As I conclude, sir, Chit funds are at a crossroads.
13:11Over-regulation and unfair competition currently impede growth and targeted reforms and modernization can unlock the sector's full potential.
13:22By embracing digital transformation, ensuring regulatory balance and curbing unregistered operators,
13:31Chit funds can emerge stronger than ever.
13:34Thank you so much.
13:35Thank you so much.
