New Delhi, May 18 (KNN)  Parliamentary Standing Committee on Finance has recommended the scrapping of the Chit Fund Act, 1982, in the wake of the collapse of the Saradha Chit Fund in West Bengal.

Recently, investors of the Shardha Group lost their savings and a few committed suicides when the group got busted.

The panel said it was obvious that the Act was ineffective in controlling chit funds and therefore a new act with more teeth was required. 

Committee Chairman and BJP leader Yashwant Sinha said the ineffectiveness of the Chit Fund Act of 1982 had demonstrated its redundancy.

The panel is also likely to call representatives from the Reserve Bank of India to discuss the issue on May-24.   Similarly the committee would meet SEBI representatives on May-31.

The Parliamentary committee has demanded for a single regulator to oversee the functioning of the chit funds.

Senior officials from RBI, CBDT, SEBI, Corporate Affairs Ministry and Finance Ministry, who appeared before the committee, admitted poor coordination and lack of regulation to control the flourishing chit fund business in the country.

They also gave the onus to the states to regulate the schemes to protect thousands of investors from being cheated.

According to a media report, a member later said while government claims that the scheme is functioning in 15 states, in reply to a question in Parliament, it has informed that chit fund business was flourishing in 17 states and six Union Territories.

Yashwant Sinha suggested that the 1982 Act regulating the chit fund business in the country be repealed through an ordinance, according to a media report.

He was of the view that the chit fund business should be scrapped to protect innocent investors.

While most members, cutting across party lines supported his idea, some others said repealing the Act would not ensure that chit fund companies stop functioning.

The members were unanimous that there should be a "single law and a single regulator" to deal with such schemes, sources said.

The Parliamentary panel has asked the Finance Ministry to submit a written reply on the operation of such investment schemes in the country and preventive actions taken by them.

Department of Economic Affairs Secretary Arvind Mayaram, Secretary, Financial Services Rajiv Takru, Corporate Affairs Secretary Naved Masood, CBDT chairperson Poonam Kishore Saxena and an Executive Director of RBI were also present in the meeting. (KNN)