These are challenging times for chit fund operators. A scam involving the Saradha group allegedly conning customers under the guise of a chit fund, has raised serious questions for the industry. With a reported 10,000 chit funds in the country handling over Rs 30,000 crore annually, chit fund proponents maintain that these funds are an important financial tool. The scam has also sparked responses from both the centre and states: the Finance Ministry, Ministry of Corporate Affairs and SEBI have all promised to act and the West Bengal Assembly has passed The West Bengal Protection of Interest of Depositors in Financial Establishments Bill, 2013, with Odisha and Haryana considering similar legislation. What is a chit fund? A chit fund is a type of saving scheme where a specified number of subscribers contribute payments in instalment over a defined period. Each subscriber is entitled to a prize amount determined by lot, auction or tender depending on the nature of the chit fund. Typically the prize amount is the entire pool of contribution minus a discount which is redistributed to subscribers as a dividend. For example, consider an auction-type chit fund with 50 subscribers contributing Rs 100 every month. The monthly pool is Rs 5,000 and this is auctioned out every month. The winning bid, say Rs 1000, would be the discount and be distributed among the subscribers. The winning bidder would then receive Rs 4,000 (Rs 5,000 – 1,000) while the rest of subscribers would receive Rs 20 (1000/50). Winners cannot enter the auction again and will be liable for the monthly subscription as the process is repeated for the duration of the scheme. The company managing the chit fund (foreman) would retain a commission from the prize amount every month. Collectively, the subscribers to a chit fund are referred to as a chit group and a chit fund company may run many such groups. What are the laws governing chit funds? Classifying them as contracts, the Supreme Court has read chit funds as being part of the Concurrent List of the Indian Constitution; hence both the centre and state can frame legislation regarding chit funds. States like Tamil Nadu, Andhra Pradesh and Kerala had enacted legislation (e.g The Kerala Chitties Act, 1975 and The Tamil Nadu Chit Funds Act, 1961) for regulating chit funds. Chit Funds Act, 1982 In 1982, the Ministry of Finance enacted the Chit Funds Act to regulate the sector. Under the Act, the central government can choose to notify the Act in different states on different dates; if the Act is notified in a state, then the state act would be repealed[i]. States are responsible for notifying rules and have the power to exempt certain chit funds from the provisions of the Act. Last year the central government, notified the Act in Arunachal Pradesh, Gujarat, Haryana, Kerala and Nagaland. Under the Act, all chit funds require previous sanction from the state government. The capital requirement for establishing chit funds is Rs 1 lakh and at least 10% of profits should be transferred to a reserve fund. The amount of discount (i.e. the bid) is capped at 40% of the total chit fund value. States may appoint a Registrar who would be responsible for regulation, inspection and dispute settlement in the sector. Any grievances over decisions made by the Registrar can be subject to appeals directed to the state government. Chit fund managers are required to deposit the entire value of the chit fund (can be done in 50% cash and 50% bank guarantee) with the Registrar for the duration of the chit cycle. Prize Chits and Money Circulation Schemes (Banning) Act, 1978 The Prize Chits and Money Circulation Schemes (Banning) Act, 1978 defines and prohibits any illegal chit fund schemes (e.g. schemes where auction winners are not liable to future payments). Again, the responsibility for enforcing the provisions of this Act lies with the state government. Reports suggest that the government is discussing amendments to this Bill in the wake of the chit fund scam. West Bengal Protection of Interest of Depositors in Financial Establishments Bill, 2013 Last month the West Bengal Assembly passed the West Bengal Protection of Interest of Depositors in Financial Establishments Bill, 2013. This was a direct response to the chit fund scam in West Bengal. While not regulating chit funds directly, the Act regulates and restricts financial establishments to curb any unscrupulous activity with regards to deposits. Chit funds are specifically included under the definition of deposits. The state government will appoint a competent authority to conduct investigations. What is the role of RBI and SEBI? The Reserve Bank of India (RBI) is the regulator for banks and other non banking financial companies (NBFCs) but does not regulate the chit fund business. While chit funds accept deposits, the term ‘deposit’ as defined under the Reserve Bank of India Act, 1934 does not include subscriptions to chits. However the RBI can provide guidance to state governments on regulatory aspects like creating rules or exempting certain chit funds. As the regulator of the securities market, SEBI regulates collective investment schemes. But the SEBI Act, 1992 specifically excludes chit funds from their definition of collective investment schemes. In the recent case with Sarada Group, the SEBI investigation discovered that Sarada were, in effect, operating a collective investment scheme without SEBI’s approval.
[i] The central act repeals the Andhra Pradesh Chit Funds Act, 1971; the Kerala Chitties Act, 1975, the Maharashtra Chit Funds Act, 1974’, the Tamil Nadu Chit Funds Act, 1961 (applicable in Chandiragh and Delhi), the Uttar Pradesh Chit Funds Act, 1975, Goa, Daman and Diu Chit Funds Act, 1973 and Pondicheery Funds Act, 1966.
In the recent past, there has been a renewed discussion around nutrition in India. A few months ago, the Ministry of Health and Family Welfare had released the National Health Policy, 2017.[1] It highlighted the negative impact of malnutrition on the population’s productivity, and its contribution to mortality rates in the country. In light of the long term effects of malnutrition, across generations, the NITI Aayog released the National Nutrition Strategy this week. This post presents the current status of malnutrition in India and measures proposed by this Strategy.
What is malnutrition?
Malnutrition indicates that children are either too short for their age or too thin.[2] Children whose height is below the average for their age are considered to be stunted. Similarly, children whose weight is below the average for their age are considered thin for their height or wasted. Together, the stunted and wasted children are considered to be underweight – indicating a lack of proper nutritional intake and inadequate care post childbirth.
What is the extent of malnutrition in India?
India’s performance on key malnutrition indicators is poor according to national and international studies. According to UNICEF, India was at the 10th spot among countries with the highest number of underweight children, and at the 17th spot for the highest number of stunted children in the world.[3]
Malnutrition affects chances of survival for children, increases their susceptibility to illness, reduces their ability to learn, and makes them less productive in later life.[4] It is estimated that malnutrition is a contributing factor in about one-third of all deaths of children under the age of 5.[5] Figure 1 looks at the key statistics on malnutrition for children in India.
Figure 1: Malnutrition in children under 5 years (2005-06 and 2015-16)
Sources: National Family Health Survey 3 & 4; PRS.
Over the decade between 2005 and 2015, there has been an overall reduction in the proportion of underweight children in India, mainly on account of an improvement in stunting. While the percentage of stunted children under 5 reduced from 48% in 2005-06 to 38.4% in 2015-16, there has been a rise in the percentage of children who are wasted from 19.8% to 21% during this period.[6],[7] A high increase in the incidence of wasting was noted in Punjab, Goa, Maharashtra, Karnataka, and Sikkim.[8]
The prevalence of underweight children was found to be higher in rural areas (38%) than urban areas (29%). According to WHO, infants weighing less than 2.5 Kg are 20 times more likely to die than heavier babies.2 In India, the national average weight at birth is less than 2.5 Kg for 19% of the children. The incidence of low birth-weight babies varied across different states, with Madhya Pradesh, Rajasthan and Uttar Pradesh witnessing the highest number of underweight childbirths at 23%.[9]
Further, more than half of India’s children are anaemic (58%), indicating an inadequate amount of haemoglobin in the blood. This is caused by a nutritional deficiency of iron and other essential minerals, and vitamins in the body.2
Is malnutrition witnessed only among children?
No. Among adults, 23% of women and 20% of men are considered undernourished in India. On the other hand, 21% of women and 19% of men are overweight or obese. The simultaneous occurrence of over nutrition and under-nutrition indicates that adults in India are suffering from a dual burden of malnutrition (abnormal thinness and obesity). This implies that about 56% of women and 61% of men are at normal weight for their height.
What does the National Nutrition Strategy propose?
Various government initiatives have been launched over the years which seek to improve the nutrition status in the country. These include the Integrated Child Development Services (ICDS), the National Health Mission, the Janani Suraksha Yojana, the Matritva Sahyog Yojana, the Mid-Day Meal Scheme, and the National Food Security Mission, among others. However, concerns regarding malnutrition have persisted despite improvements over the years. It is in this context that the National Nutrition Strategy has been released. Key features of the Strategy include:8
[1] National Health Policy, 2017, Ministry of Health and Family Welfare, March 16, 2017, http://mohfw.nic.in/showfile.php?lid=4275
[2] Nutrition in India, Ministry of Health and Family Welfare, 2005-06, http://rchiips.org/nfhs/nutrition_report_for_website_18sep09.pdf
[3] Unstarred Question No. 2759, Lok Sabha, Answered on March 17, 2017, http://164.100.47.190/loksabhaquestions/annex/11/AU2759.pdf
[4] Helping India Combat Persistently High Rates of Malnutrition, The World Bank, May 13, 2013, http://www.worldbank.org/en/news/feature/2013/05/13/helping-india-combat-persistently-high-rates-of-malnutrition
[5] Unstarred Question No. 4902, Lok Sabha, Answered on December 16, 2016, http://164.100.47.190/loksabhaquestions/annex/10/AU4902.pdf
[6] National Family Health Survey – 3, 2005-6, Ministry of Health and Family Welfare http://rchiips.org/nfhs/pdf/India.pdf
[7] National Family Health Survey – 4 , 2015-16, Ministry of Health and Family Welfare, http://rchiips.org/NFHS/pdf/NFHS4/India.pdf
[8] National Nutrition Strategy, 2017, NITI Aayog, September 2017, http://niti.gov.in/writereaddata/files/document_publication/Nutrition_Strategy_Booklet.pdf
[9] Rapid Survey On Children, Ministry of Women and Child Development, 2013-14, http://wcd.nic.in/sites/default/files/RSOC%20National%20Report%202013-14%20Final.pdf
