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
00:30and what is it that we really need to grow in this industry.
00:35And Prabin Garu explained at length how Chitfan industry has been the backbone for several years
00:43to many big industrialists, but the truth is that it has led to the survival of the common man,
00:53the small and middle class people, the farmers and traders by and large.
01:01We all know that Chitfan is the oldest indigenous financial institution.
01:08They 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
01:28that need urgent redressal.
01:31Chitfans are not just a financial tool, they are a community institution rooted in trust,
01:39serving 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.
01:56The key challenges and proposed solutions.
02:01We have a section 16 in the act.
02:04I am delving more with the act since we have all the IS officers
02:10whom we can let them know what the difficulties are and how they can help us out.
02:17I believe, sir, the act which was a 1982 act predominantly was made to serve companies
02:31which just had not even companies, maybe individuals who are running the Chit fund companies
02:36just having one Chit that they were operating.
02:39But today, number of proprietors have turned firms and limited companies
02:46and many companies are conducting probably more than 20 groups, 50 groups, 100 groups.
02:52And we at Mark Darcy have more than close to 6,000 groups going on
02:57amidst all the four state operations that we do.
03:02Sir, it is time that we really look into the act
03:06because our country, which is aspiring to become the third largest economy in the world,
03:14outbeating even Japan, I think almost one day we crossed their GDP
03:21and probably every other day we are both competing there,
03:26but crossing even Germany and trying to be the third economy by 2030.
03:31And India being a bustling nation of billions of digital transactions,
03:40why only Chit fund industry is left behind, sir?
03:44So we kindly request you to look into it and help us out
03:48so that we can also be as an industry be given fair chance to survive in this digital world.
03:56So section 16 talks about in every auction two subscribers being present.
04:04These days nobody has time, they all want to operate electronically.
04:09So if this can be changed to digital participation, you know,
04:15where people can participate online auctions, it will help the subscribers
04:20and reduce the operational burden.
04:23In fact, in the last two, three auctions, nobody is there to participate at all.
04:29So how can we expect anybody to be present?
04:33So the act itself is violative for the last auction,
04:40because 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
04:52and 50% bank guarantee, which also becomes operationally inconvenient.
04:58We would prefer probably 50%, not 100%.
05:05The 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,
05:20and that too, instead of taking the, at the time of taking the price sanction from the registrar,
05:30if it can be at the time of the commencement, then it will ease on the liquidity of the chit fund companies
05:37and they would be able to make faster payments to the subscribers, sir.
05:42And when we look at the section 20, subsection 5,
05:49it talks about where a chit is terminated and the registrar has satisfied himself,
05:55that claims of all the subscribers have been fully satisfied.
06:00He shall order the release of the security furnished by the firman.
06:04The 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.
06:29And we only adjust that amount towards the arrears in that chit once in 6 months.
06:34And 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.
06:57So 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.
07:14Whereas in the chit fund rules, it says balance sheet should be filed within 3 months.
07:22Which is so unfieldy to do because the bankers themselves with whom the fixed deposits are kept, you know,
07:31they 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.
07:45We have to get that rectified. All of that has to get reflected in the, you know, in the balance sheet.
07:51So we, this year we really struggled to see if we can complete it in 3 months.
07:56Day and night our accounts team has worked in all the 4 states.
08:01But 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.
08:27A lot of manual filings are there, which we would like to go forward with digital compliance,
08:35which makes it easy, you 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.
09:11And 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.
09:27Very, very rare because the percentage is almost nil.
09:31But it can go wrong because of not able to recover rather than doing business.
09:37If anybody fails, it is because of failure to recover the dues from the defaulted subscribers.
09:44So, the most important thing is, sir, about the GST rationalization.
09:51Why 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's 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.
10:31And 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.
11:03Digital transformation, the requirement of physical submissions for regulatory approvals, I'm just insisting upon that, slows 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.
11:39I've covered about the judicial disputes, I'll skip that.
11:44Just 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 on my iPad, so I'm 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, confidence in the entire regulated industry.
12:19So, curbing unregistered operators is very, very important.
12:24Strict 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.
12:37So, we have huge opportunities ahead.
12:40Beyond 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.
13:00Promote 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, Chit funds can emerge stronger than ever.
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