Note ban affects chit funds in Hyderabad

Hyderabad: Unregistered chit funds and their customers in the city have been badly hit by the ban on Rs 500 and Rs 1000 notes. Most of the transactions in unregistered chit funds are in cash. So all transactions towards deposits, collections and issuing money to the successful bidder have halted. A majority of such chit fund organisers have announced that there will be no auctions in December.

According to the records of the stamps and registrations department, there are about 1,113 registered chit funds in the private limited category in the city and nearly 2,000 chit fund firms are registered.

As per the Chit Fund Acts of the central and state governments, a chit fund company must be registered as a firm in case of less than Rs 6 lakh transactions per month. If the transaction amount exceeds Rs 6 lakh, it must be registered as a private limited company.

But there are thousands of unregistered chit funds in the city. Such outfits operate more in slums and industrial areas such as Katedan, Uppal, Mallapur, Nacharam, IDA-Bollaram, Balanagar and Jeedimetla.

Mohammad Shafiuddin, a customer of an unregistered chit fund firm from the Old City, said that he was the prized bidder for his Rs 5 lakh chit on November 5. As per the promise made by the organiser, he would get the amount of Rs 4.1 lakh after the auction by November 10.

“Whenever I ask him for the money, he is simply avoiding, saying there is a currency crisis after the note ban. The main aim behind joining the chit was to save some amount for my daughter’s marriage which was scheduled for December 7. I did not get the amount and the chit fund owner is offering cheques,” he said.

Chit funds set to fall in line

The note ban has ensured that all unregistered chit funds will be registered with the stamps and registrations department as either firms or limited companies.
J. Vijayamma, an unregistered chit fund organiser from Kondapur, said that due to demonetisation she has decided to register her chit fund soon.

“I began the chit fund business five years back with small amounts like Rs 10,000 and Rs 25,000 chits. Now, I have started chits with a value of Rs 1 lakh. The shortage of currency in circulation is becoming a headache to small chit funds. We must pay interest to the bidder in case of a delay in the payment of prized money. But our customers are not paying their dues, showing currency crisis,” she said.

K. Anjaneyulu, managing director of Kaametardha Chit Fund Pvt Ltd from Malkajgiri said that note ban will help genuine chit fund firms who have adopted the cashless system.  “The note ban will control unregistered chit funds’ menace. Now, each unregistered chit fund organiser must follow the Act,” he said.

South Zone DCP V. Satyanarayana has advised the public not to approach unregistered chit funds because it’s always a risk. “So far we have not got any complaints against unregistered chit funds from prized bidders. If we get complaints, we will take action,” he warned.