WAJAHAT SHABIR
SRINAGAR: The Jammu and Kashmir Government has notified the Jammu and Kashmir Chit Funds Rules, 2026, introducing a comprehensive regulatory framework for chit fund operations in the Union Territory.
Issued by the Finance Department, under Section 89 of the Chit Funds Act, 1982, and in consultation with the Reserve Bank of India, the rules will come into force from the date of their publication in the Official Gazette.
The new rules regulate chit funds from their commencement and registration to the maintenance of subscriber records, conduct of draws, financial reporting, auditing, security requirements, dispute settlement, recovery proceedings and winding up.
Under the framework, a foreman seeking to commence or conduct a chit must obtain prior sanction from the Government or an authorised officer. The chit agreement must subsequently be registered with the Registrar of Chits, with the prescribed application requiring details of the chit, existing chits being conducted by the applicant and the applicable registration fee.
The rules also strengthen disclosure requirements for subscribers. Foremen are required to provide subscribers with copies of registered chit agreements, while a Registrar-attested passbook is to be maintained for subscribers, recording relevant financial transactions and dividend details.
For draws and auctions, the rules require notices to be issued to subscribers specifying the date, time and venue of proceedings. Subscribers can participate personally or through an authorised agent.
The framework also lays down detailed requirements for maintaining financial records. Foremen are required to maintain subscriber registers, ledgers, day books, receipt books, payment vouchers and records relating to securities furnished by prized subscribers. Entries are to be made promptly as transactions occur, while receipts must be issued immediately upon receiving money.
The balance sheet has to be filed with the Registrar within three months from the expiry of the relevant accounting period. Accounts relating to individual chit groups are also required to be filed within prescribed timelines following termination or during the currency of longer chits.
The rules provide for auditing of chit accounts by a Chit Auditor appointed under the Act, with prescribed procedures and fees for such audits.
A major component of the framework relates to security furnished by the foreman. Where immovable property is offered as security, the rules require title documents and a 30-year encumbrance certificate. For trustee securities, the value of security other than immovable property must not be less than one-and-a-half times the chit amount, while immovable property must be valued at not less than twice the chit amount.
The rules also establish a formal mechanism for resolving disputes between parties. Disputes under Section 64 are to be referred to the Registrar in writing, who may decide the matter himself or refer it to a nominee.
Proceedings can be conducted in English or Kashmiri, Dogri, Hindi or Urdu, with evidence recorded and decisions issued in writing. The rules also prescribe procedures for summons, production of documents and hearings.
In cases involving recovery, the rules provide procedures for attachment and sale of property. Awards passed by the Registrar or his nominee can be executed through a civil court or revenue authorities under Section 71 of the Act.
The notification further provides a structured process for winding up chit operations. A Receiver is required to prepare statements of amounts due to and from the chit and proposals for distribution of its assets. Subscribers and other concerned persons are given an opportunity to raise objections before final orders are passed by the Registrar.
After winding up is completed, the Receiver must submit final accounts to the Registrar within 15 days and deposit the remaining money and records. The Registrar will then issue a final winding-up order.
The rules also provide an appellate mechanism against orders passed under the Act. Appeals have to be submitted in writing before the Government or the authority notified for the purpose and must specify the grounds of challenge and relief sought.
The notification includes prescribed forms and a detailed fee schedule covering registration, audits, security-related applications, disputes, appeals and other regulatory procedures. Fees payable to the Registrar may be paid through cash, cashless or digital modes, with receipts to be issued for payments received.
The rules also require chit records, including registers and books of accounts, to be preserved by the Registrar for eight years after release of security in terminated chits or after completion of winding-up proceedings, as applicable.
