Lok Sabha Question No. 1111 (UNSTARRED), answered on 2019-02-08
Subject: Chit Fund Companies
Ministry: FINANCE
Asked by: LAKHAN LAL SAHU

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

## LOK SABHA

## UNSTARRED QUESTION NO.1111

TO BE ANSWERED ON Friday, February 8, 2019/Magha 19, 1940 (Saka)

## Chit Fund Companies

## †1111. SHRI LAKHAN LAL SAHU:

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 State-wise 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 and Development 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 38 cases involving 239 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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