Lok Sabha Question No. 3937 (UNSTARRED), answered on 2018-08-10
Subject: Chit Fund and Fake Insurance Companies
Ministry: FINANCE
Asked by: BANSHILAL MAHTO

## Government of India Ministry of Finance Department of Financial Services

## LOK SABHA UNSTARRED QUESTION NO.3937

TO BE ANSWERED ON 10 th  August 2018/ Shravana19 , 1940 (Saka)

## Chit Fund and Fake Insurance Companies

## 3937. DR. BANSHILAL MAHATO :

Will the Minister of FINANCE be pleased to state:

- (a) whether  the  Government  has  taken  into  cognizance  that  a  large  number  of  fake  insurance companies and chit fund companies are functioning in the country especially in the rural and remote areas and they abscond after tempting rural people and making them invest a large amount;
- (b) if so, the details thereof and the reaction of the Government thereto;
- (c) whether the Government has made any action plan to identify such ineligible/ fake companies in the country and check their activities;
- (d) if so, the details thereof along with the number of such fake companies identified and punished during each of the last three years and the current year, Statewise including Chhattisgarh; and
- (e)  the action taken by the Government for strict compliance of the guidelines of Insurance Regulatory and Development Authority of India by the insurance companies?

## ANSWER

## THE MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI SHIV PRATAP SHUKLA)

- (a) to (d): As per Insurance Regulatory Authority of India (IRDAI), three instances of fake insurance entities have come to its notice. The details are as given below:
1. AKPCL General Insurance Co.-Gujarat- 4 th  August 2016
2. Global Financial Group Ltd- Kerala-  3 rd  August 2017
3. Janny Group-Kolkata - West Bengal-14 th  August 2017 IRDAI has taken necessary legal action in the above cases.

As regards chit fund companies, the Ministry of Corporate Affairs (MCA) has, during the last 5 years assigned  32  cases  involving  223  companies  allegedly  engaged  in  chit  fund  /  Multi-Level  Marketing (MLM) / Ponzi activities to the Serious Fraud Investigation Office (SFIO) for investigation.

To check the activities of such ineligible / fake companies in the country, rules and regulations of Acts such  as  the  Prize  Chits  and  Money  Circulation  Schemes  (Banning)  Act,  1978  and  Chit  Funds  Act, 1982  are  applied  for  taking  suitable  action  on  all  activities  involving  acceptance  of  money  through pyramid structured schemes/money circulation schemes which are banned. Chit Funds Act, 1982 also prohibits chit fund companies from accepting deposits from the public since 2009.

Further,  the  Banning  of  Unregulated  Deposit  Schemes  Bill,  2018  has  been  introduced  in  the  Lok Sabha on 18 th  July, 2018.

- (e): As per provisions of Section 103 of the Insurance Act, 1938, action can be taken on fake / illegal companies by the Authority.

IRDAI has been carrying out a sustained campaign to create awareness about insurance and about rights  and  duties  of  policyholders  through  various  media. The  IRDAI  has  launched  an  exclusive consumer education website www.policyholder.gov.in containing information about insurance companies and other entities registered with IRDAI.

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