• Weak regulatory framework as the Acts do not provide punishment to unscrupulous chit-fund companies/ members
• Chit investment gets affected if after winning the chit the winner disappears
• In such cases, the foreman is forced to continue to run the chit business without the ‘defaulted’ contribution, thereby bearing the loss himself
• As a chit auction is not always supported by a collateral, unscrupulous subscribers get emboldened to act against the spirit of the chit fund, thereby causing losses
• The chances of the chit fund proceeds being used for money-laundering activities are high
• Section 12 (2) of the Central Act prohibits carrying on any other business by the chit-fund company when carrying on chit business, limiting the scope of new players
• Section 13 (3) of the Central Act fixes the aggregate chits conducted at 10 times of the net owned funds of the chit-fund company (paid-up capital + reserves – losses) for a chit-fund business. This limits the scope of growth.
• No chit-fund company is giving chits above ten lakh rupees