Raids conducted at 18 units of chit-fund companies in Andhra Pradesh

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• Nov 16, 2022 | Dhupali Das

Searches were conducted at 18 units of the chit-fund companies to identify malpractice...

Digital Desk: Officials from the Stamps and Registration Department visited several chit fund organizations across the state on Tuesday after receiving complaints of malpractice and violations of the Reserve Bank of India (RBI) Act and the Chit Funds Act. 

Searches were conducted at 18 units of the chit-fund companies to identify malpractice and major violations on the part of the companies' foremen.

For the third time since October, chit-fund firms have been raided. It should be noted that searches were carried out on October 21 at 12 firms and on October 31 at five firms.

Following a preliminary investigation of the firms' balance sheets for 2021-22, officials found trends of fund diversion. They found that the companies had collected advance subscriptions for which the company paid 5% interest on the amount collected. According to the legislation, if the foreman is the coveted subscriber, he must provide security for repayment. However, the companies under investigation had been failing to provide security, which was against Section 31 of the Chit Funds Act.

The officials also discovered that the firms were not paying GST on late payment penalties collected from subscribers. Reportedly, all deputy registrars of chit funds in the state were asked to take the required action, including criminal action, on the identified violations and submit compliance.