Abstract

Chit funds are a vital financial instrument in India, particularly for low-income households often excluded from the formal financial system. Despite their historical significance and popularity, subscribers of chit funds face persistent issues that undermine their financial security and trust. The Chit Funds Act, 1982, designed to regulate the industry, falls short in areas such as subscriber protection, transparency, timely payouts, high commissions, dispute resolution, fraud prevention, and awareness. This article, explores these issues from a subscriber-centric perspective. The article traces the historical evolution of chit funds, from traditional community savings schemes to modern commercial enterprises, highlighting regional variations and regulatory developments. It examines the pre-enactment period, the establishment of the Chit Funds Act, 1982, and its impacts. Key subscriber rights and duties under the Act are outlined to underscore the intended legislative protections. A critical analysis reveals significant gaps in the Act leading to delayed payments, non-compliance by foremen, lack of subscriber awareness, ineffective dispute resolution mechanisms, financial mismanagement, and a lack of transparency. To address these issues, the article proposes strengthening regulatory oversight, enhancing subscriber education, streamlining dispute resolution, and implementing robust legal protections. Specific amendments to the Act are suggested to expedite dispute resolution, impose penalties for non-payment, and ensure fair treatment of subscribers. Recommendations aim to improve protections, foster transparency, and enhance the overall credibility of the chit fund industry. In conclusion, the article emphasizes the need for a comprehensive approach to reform the regulatory framework, safeguard subscriber rights, and ensure the sustainability of chit funds in India. By implementing these proposed solutions, the industry can better serve the financial needs of low-income households, maintaining trust and reliability in this traditional financial system.

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