BENGALURU: The demonetisation of currency notes of Rs 500 and Rs 1,000 denominations and RBI restriction on cash withdrawal has dealt a body blow to the city’s chit fund business and it is on the verge of collapse. Most chit funds are not registered and are facing widespread payment defaults as customers are finding it difficult to make weekly repayment in the new currency notes.
Chit fund operators claim the monthly turnover in unregistered chit funds in the city would be around Rs 2,500 crore. “These chit funds are mostly operated by women and cater to people from lower middle and lower classes, who can’t get finance from banks or registered financial institutions. Though some amount of payment default is common, this time every chit fund operator is affected,” said a police inspector on condition of anonymity.
According to several chit fund operators from West Bengaluru area their business is run illegally and based on mutual trust. “Those who had availed loans through chit fund are now declining weekly repayments, citing long queues and non-availability of cash exchange facility in banks. It is impossible to run a chit fund without weekly payments. We are facing huge pressure,” said an operator.
“As this business is totally illegal, we can’t seek police help. Once we approach them they demand documents, which we don’t have,” he said.
Hundreds of ATMs of the city, especially those belonging to private banks, have still not been calibrated.
Several mobile phone users complain that though they are receiving text messages from the operators that they can recharge using demonetised currency, the recharge outlets are not accepting them.
