Thiruvananthapuram: Just when it looked like the non-resident Keralites were taking to the 'Pravasi Chitty' in a big way, the opposition has thrown a big question mark over the conduct of the chitty. They say the chitty has no legal sanction and is an attempt to trick the Gulf Malayali into parting with his hard-earned money. But finance minister T M Thomas Isaac insists the chitty has all the necessary sanctions, and is absolutely insulated from all legal tangles.

Isaac wants to mobilise at least Rs 10,000 crore from the Pravasi Chitty, which he intends to channelise into major Kerala Infrastructure Investment Fund Board (KIIFB) projects. In what can be said to be a phenomenal demonstration of interest, nearly 1.40 lakh Gulf Malayalis have till now formally expressed interest in the innovative chitty scheme. At least, 1,000 non-resident Malayalis call on the KSFE toll-free number daily to enquire about the chitty. It has now been tentatively decided to launch the Pravasi Chitty from UAE on September 15.

At a time when the going seemed good, Kerala Congress leader K M Mani, freshly returned to the UDF, fired the first salvo. Mani said that investing the Pravasi Chitty funds in KIIFB bonds was illegal. (The chitty is designed in such a way that the money that comes in as subscription gets automatically converted into KIIFB bonds through a bond convertor.)

KIIFB an impostor bank

Mani said the RBI regulations did not allow the KIIFB to handle the chit fund subscriptions or deposit amount. Only licensed banks, he said, could handle the money. And KIIFB, he argued, was not such a bank. “It would be liable to pay a hefty fine for violation of the Foreign Exchange Management Act (FEMA) regulations,” the former finance minister warned.

Mani also made the charge that under the Chit Fund Act, Kerala State Financial Enterprises (KSFE), which is organising the Pravasi Chitty, had not been cleared to operate the Pravasi chit fund.

Opposition leader Ramesh Chennithala promptly asked the finance minister to respond to Mani's charges. Chennithala then added his own bit of criticism. “The chitty lacks transparency, and it’s illegal as it does not provide the mandatory security to subscribers,” he said.

Isaac termed Mani's and Chennithala's charges baseless. He said, like any other chitty conducted by the KSFE, Pravasi Chitty too had been started after satisfying all the necessary conditions. "We have also secured all legal sanctions," he said.

Double legal cover

The finance minister said that it was the clause that bank guarantee was required for the security of the chitty amount that the opposition was using against the KIIFB. “Fact is, bank guarantee is just one of the three types of security cover that can be provided for the chitty amount. The other two are government security and the security based on Indian Trust Act,” he said and added: “The security provided to Pravasi Chitty through the KIIFB falls under the Trust Act.”

It is section 14 (1) (C) and section 20 (1) (C) of the Chit Fund Act that facilitates the deposit of chit funds in recognised securities. The state government, as per section 20 of India trusts Act of 1882, also stands guarantee for the principal amount, and also its interest amount, deposited in recognised securities. “The government provides 100 per cent guarantee to KIIFB bonds as well, Isaac said. “So depositing chitty funds in the KIIFB is both legal and fully secure," he added.

Then, pointing to the irony of the opposition charge, Isaac said that it was none other than Mani who introduced the amendment to allow the security amount of a chitty to be deposited in the government treasury. "The order still stands," Isaac said. But he said that there was no need for such an order to deposit pravsi chitty funds in the KIIFB as as long as 100 per cent government guarantee for KIIFB bonds exists.

Pravasi Chitty's bouquet of benefits

The NRK chitty, though it functions just like a normal chitty, has extra benefits. There will be an insurance cover for non-resident subscribers. If a chitty holder dies, the remaining payment will be made by the insurer. And when the chitty matures, the prize money will be routed to the account of the closest kin. An agreement has already been entered into with LIC. The premium will also be paid by KSFE from its profits. There will be insurance cover when a chitty holder suffers permanent disability, too.

There are other add-on benefits. If the chitty holder dies, the person will be flown to his hometown at the state’s expense. The flight cost of the person accompanying the body will also be met by the state. Perhaps, more importantly there will be a pension scheme. If the subscriber deposits the prize money in a pension fund, she will start to receive a regular monthly pension just when she crosses 60 years.

The various chitties within the Pravasi Chitty have been designed to benefit both the Malayali living in labour camps and also high-earning professionals. The monthly instalments range from Rs 2,500 to Rs 25,000.