Dear Subscriber,

The Reserve Bank Of India (Amendment) Ordinance, 1997 was promulgated by the President, Dr. Shankar Dayal Sharma, on the 9th of January'1997. This new law will at once bring a revolution to the Chit Fund trade.

The new legislation aims at the Indian Financial Market such that Financial Institutions must have net owned funds of a minimum of Rs Fifty Lacs as a prerequisite to carry on the business of finance. The Financial Institutions will also have to maintain reserves out of its earnings so as to strengthen the capital base on a regular basis. In this manner, the RBI aims to improve the quality of the financial players rather than their quantity.

The RBI, in its zeal to protect the deposits of the India public, has taken a very big step. The capital adequacy will no doubt strengthen the working of finance companies but at the same time it will badly affect the informal financial sector and tens of thousands of finance companies might not be able to bring in the minimum net owned funds. While every new law has its merits and demerits, it remains to be seen if financial services continue to reach the common man in all the remote areas of this vast nation. On the other hand the financial players under the new legislation will be stronger, better organized and offer higher degree of protection to funds.

So far as Chandra Lakshmi is concerned, we have been regularly reporting to the RBI in the past several years. At Chandra Lakshmi, we are committed to move with the times and to function in a manner that comes up to the standards laid down by the relevant authorities. Our policies have always been guided by such considerations as 'safety' and 'transparency' and we are determined to continue in the same direction in the future too!

Kamal Bhambhani