Chit Funds are registered by the State Governments under the Chit Funds Act, 1982 – an Act administered by the Ministry of Finance but with responsibilities of implementation resting with the States. Cheating by Chit Fund company through fraudulent schemes is an offence under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. The power to investigate and prosecute lies with the State Governments.

Insofar as Companies Act is concerned, cases of violations of the provisions of the Act by Chit Fund companies are dealt with in accordance with the Act. So far the Ministry has ordered investigations against 68 such companies by Serious Fraud Investigation Office (SFIO) under the provisions of Section 235 of the Companies Act, 1956. These investigations are in addition to action initiated by State Police Authorities under the laws referred above.

This was stated by Smt. Nirmala Sitharaman, MoS in the Ministry of Corporate Affairs in written reply to a question in the Rajya Sabha.

Chit fund regulation: prize-chit offences and company-law breaches trigger parallel state and corporate investigations. Chit fund operations are regulated by state registration under the Chit Funds Act, 1982, while cheating through fraudulent chit schemes is an offence under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, subject to State investigation and prosecution. Corporate-law violations by chit fund companies are pursued under the Companies Act via investigations conducted by the Serious Fraud Investigation Office, which operate in addition to actions initiated by State police authorities.