THRISSUR: The demontisation process started by the Central government is expected to clean up the grey areas in the chit field. The Chits Act of 2012 was aimed at cleaning the malpractices in chit fund business. Before 2012 April, there was no agency to control money transactions of the chit fund companies. Then chit fund company owners can do other businesses with money coming to the company through the ‘kuris’.
“Several people had done business with that money in earlier days. They produced films and invested in real estate. When the business failed, the chit companies were forced to shut down, leaving the investors in the lurch,” said Davis Kannanaickal, chairman of All-Kerala Chits Foremen’s Association. KSFE MD Joshy Paul opined that the demonetisation would help bring transparency in the sector.
After 2012 April, the chit fund companies are legally bound to give money to the investors in cheques. They should also file the money transaction details to the registration department. So, the flow of black money decreased to some extend. However, the registration department sources said that violations are still taking place.
Chits company needs sanction from the registration department to start a ‘kuri’. “With one sanction, the chit company can run only one ‘kuri’. But some are running more than one with a single nod,” said the source. Though Davis acknowledges such practices, he says that the majority of the chit companies are following the norms. “There are some malpractices done by a few companies. The demonetisation process will hopefully put a stop to them,” he said. ‘’After the demonetisation started, business is dull in the field. All the EMIs are the multiples of 500 and 1,000 rupees. People are not paying EMIs due to lack money in their hand. If this trend continues, it will affect the money rolling,” said Davis.