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Pravasi chit fund flouting Central laws: Mani

THIRUVANANTHAPURAM July 10: Kerala Congress leader and former Finance Minister K M Mani has flayed the Pravasi chit fund scheme announced by the government, alleging that it violated the Central Chit Funds Act and the Foreign Exchange Management Act (FEMA).
He accused Finance Minister T M Thomas Isaac of trying to bypass the Central Act and hoodwink expatriate Malayalis to part with their money.
“The Minister seems to think that Kerala is an independent nation state where Central legislation does not apply.”
The press note said RBI regulations did not allow the Kerala Infrastructure Investment Fund Board (KIIFB) to handle the chit fund subscriptions or deposit amount.
The norms stipulate that only licenced banks could handle the money. KIIFB, not being such a bank, cannot accept funds relating to the scheme. It would be liable to pay a hefty fine for violation of FEMA regulations, he said.
Mani said the State government was trying to mislead customers by projecting the Kerala State Financial Enterprises (KSFE) as a miscellaneous bank on its website.
“Under the Central Act, KSFE has not been cleared to operate the Pravasi chit fund. Yet, it has invited applications for online registration under the scheme. This constitutes a punishable offence.”
Observing that KSFE and KIIFB had spent lakhs to promote the scheme among expatriates, Mani said it constituted misuse of power and violation of laws.
He also said subscribers would find it difficult to get their money back if it was used to fund the development of roads and other infrastructure.
Alleging that KSFE was holding back vital information on the scheme, the press note said the contract for the chit fund had no mention of the life insurance and accident insurance cover or pension announced by the government for subscribers. It also did not state that the amount paid by the members and the security would be handled by KIIFB.
Mani said the State government would require an amendment to the Chit Fund Act to operate the scheme through KIIFB.
“The government could introduce a legislation in Assembly or issue a notification for the purpose in consultation with RBI. Launching the scheme without doing either will only cause distress to expatriate Malayalis.”