MISCELLANEOUSCentral
Section 86 of The Chit Funds Act, 1982
- (1)Notwithstanding anything contained in this Act, no bank shall commence or carry on chit business after the commencement of this Act.
- (2)Where a chit had been started by any bank before such commencement, such chit may be continued after such commencement until it is completed, and the provisions of the chit agreement and such laws, if any, as were applicable to it immediately before the commencement of this Act shall apply to such chit. Explanation.-- For the purposes of this section "bank" means an approved bank or a co-operative bank as defined in clause (bii) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934).
Summary
- This provision completely bans banks from starting or running any new chit business once the Act comes into force.
- If a bank was already running a chit before the Act commenced, it is allowed to continue that specific chit until it is finished.
- For these pre-existing bank chits, the original chit agreement and the laws that were in place before this Act started will still apply.
- The word bank under this section includes approved banks and co-operative banks as defined under the Reserve Bank of India Act, 1934.
Practical examples
1In 2026, National Trust Bank wants to launch a new monthly savings chit scheme for its customers. Under Section 86(1), the bank is strictly prohibited from starting this new chit business and cannot do so.
2Apex Co-operative Bank started a five year chit scheme for local merchants in June 1981, before the Act commenced. Under Section 86(2), the bank can continue running this specific chit until its completion in June 1986, following their pre-existing agreement.
FAQ
1. Which laws apply to a bank's pre-existing chit while it is being completed?
The provisions of the original chit agreement and the laws that were applicable to it immediately before this Act commenced will continue to apply to that pre-existing chit.
Test yourself
Q1.Under Section 86 of The Chit Funds Act, 1982, what is the restriction placed on banks regarding chit business after the Act commences?
Q2.Under Section 86 of The Chit Funds Act, 1982, what happens to a chit that was already started by a bank before the Act came into force?
Q3.Under Section 86 of The Chit Funds Act, 1982, the definition of a bank is tied to which specific legislation?
Q4.Under Section 86 of The Chit Funds Act, 1982, which cross-referenced definition in Section 2(e) of the Act represents the activity that banks are prohibited from performing?