Section 87 of the Chit Funds Act, 1982 - Power to Exempt

Section 87 empowers the State Government, after consultation with the Reserve Bank, to exempt a person, a class of persons, a chit or a class of chits from all or specified provisions of the Chit Funds Act, 1982. The exemption must be made by notification in the Official Gazette and may be subject to stated conditions.

Text of Section 87 - Power to Exempt

Meaning and Scope of Section 87

Section 87 is an exemption-enabling provision. It does not itself create a general exemption. Instead, it authorises the State Government to issue a specific Gazette notification granting an exemption within the limits stated in that notification.

• Competent authority: The statutory power is vested in the State Government.
• Consultation with the Reserve Bank: The provision expressly requires consultation with the Reserve Bank before the exemption is granted.
• Official Gazette notification: The exemption is to be made through a notification in the Official Gazette.
• Who or what may be exempted: The notification may cover any person or class of persons, or any chit or class of chits.
• Extent of exemption: The exemption may relate to all provisions of the Act or only specified provisions.
• Conditions: The State Government may attach conditions to the exemption, and the scope of relief therefore depends on the wording of the applicable notification.

What Is a "Chit" Under the Act?

Section 2(b) of the Chit Funds Act, 1982 defines a "chit" in substance as a transaction under which persons agree to subscribe a certain sum of money, or a certain quantity of grain, by periodical instalments for a definite period and each subscriber, in turn, becomes entitled to the prize amount as determined by lot, auction, tender or another manner specified in the chit agreement. The statutory definition should be consulted when deciding whether a particular arrangement falls within the Act.

Role of the State Government and RBI

The Chit Funds Act, 1982 is a Central enactment administered through State Governments. RBI guidance also explains that chit fund business under the Act is implemented by State Governments rather than being regulated by RBI in the same manner as ordinary NBFC business. Section 87 nevertheless expressly builds RBI consultation into the exemption process.

Practical Effect of an Exemption Notification

Whether a person or chit is exempt cannot be decided from Section 87 alone. The relevant State Government Gazette notification must be checked to identify the beneficiary, the provisions from which exemption is granted, the effective period, and any conditions or limitations. An exemption from one provision should not be treated as an exemption from the entire Act unless the notification expressly provides so.

Legal note: This page explains the statutory provision generally. For a particular chit or transaction, verify the current Act, applicable State rules and the relevant Gazette notifications.

Official Legal Resources

For the current statutory text, see the Chit Funds Act, 1982 on India Code. For regulatory information concerning chit funds and the Reserve Bank's role, see the Reserve Bank of India.