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State wakes up & plans to prod Delhi on chit bill

Calcutta, Jan. 25: The Trinamul Congress government has decided to write to the Centre requesting for speedy clearance of a bill the Left dispensation had passed in the Assembly to crack down on chit funds.

The West Bengal Protection of Interest of Depositors in Financial Institutions Bill, passed unanimously on December 23, 2009, proposes a life term for convicts and has been awaiting presidential sanction since January 2010.

“It’s been three years and the bill is yet to receive the President’s assent. We feel there’s a need to remind the Centre of it so that it becomes a law and its provisions can be used by the state government to curb the mushrooming of dubious chit funds,” a senior official said this evening.

According to him, the decision was taken about three weeks ago, after the government started feeling the “pressure” from the Opposition and the Centre to act on the issue.

The move is significant as the growth of chit funds has become a political hot potato for the Mamata Banerjee government. The Opposition has blamed the ruling party for the mushrooming of these entities, which promise high returns on savings or land or property at a future date.

Yesterday, former finance minister Asim Dasgupta had cautioned about an impending crisis in the state because of an unprecedented rise in mobilisation of deposits by chit funds. Dasgupta had asked the government whether it was actively pursuing the matter with the Centre.

Attempts by the Left parties to move a motion on chit funds in the Assembly were turned down last month.

The Centre, according to finance department officials, has been demanding an explanation from finance minister Amit Mitra and secretary H.K. Dwivedi on what that state has done regarding chit funds.

Mitra, according to Writers’ sources, had to travel to Delhi on a number of occasions in the past couple of months to clarify the state’s position.

Officials said a law on chit funds was “much needed”.

Errant chit funds promising high rates of interest are under the Reserve Bank of India’s scanner, while those promising assets in return are under the Securities and Exchange Board of India’s surveillance.

The Left Front government had set up an economic offences wing and co-ordinated with Sebi and RBI to take action against chit funds. The new government is yet to take any concrete step against such entities.

“Normally, the state government can act only on the basis of specific complaints. The Left government tried to enact the law to ensure comprehensive preventive action but the Trinamul government did not follow it up with the Centre in its first 19 months,” an official said.

The new law will give the state the power to act on its own, issuing a notification for initiation of action against a delinquent chit fund, attaching its property and bank accounts and urging a designated court to deal with the case.

“The court will have to complete the proceedings in a year. The provisions will allow the state to take preventive and pre-emptive measures,” a finance department official said.

He said that when the bill was passed, there were around 65 prominent chit funds in the state and now, the number had increased to 135.

“In addition to the 135, there are several thousand small entities operating across the state. Once the bill gets presidential assent, companies that are based elsewhere in the country can also be hauled up,” the official added.

Finance department estimates suggest that the annual collections by the chit fund companies would not be less than Rs 15,000 crore in Bengal.

Under the supervision of finance secretary Dwivedi, the state has prepared a list of the 135 companies and is working at the district level on a bigger and exhaustive database.

“For now, the list of 135 will be shared with the RBI and Sebi. Once the database is ready, we will share it with the Centre as well,” a Writers’ source said.