Chit Funds/Life Insurance Policies/Fixed Deposits in Banks

(24) Chit Funds/Life Insurance Policies/Fixed Deposits in Banks by Government servants-Clarification regarding – 

Clarification have been sought by Ministries/Departments from time to time on the following points :-

(i) Whether a Government servant requires permission of the Government for joining Chit Funds;

(ii) Whether a Government servant should report to or seek prior permission from the prescribed Authority for taking Life Insurance Policies; and

(iii) Whether a Government servant should obtain prior permission from the Prescribed Authority for making Fixed Deposits in Banks?

The above points are clarified in the succeeding paragraphs.

2. The subscriptions which a Government servant gives to a chit fund would be a transaction in movable property with-in the meaning of sub-rule (3) of Rule 18 of the CSS (Conduct) Rules, 1964. If the annual subscription to the chit fund exceeds the monetary limits, prescribed in Rule 18 (3) the Government servant has to report it to the prescribed authority under the aforesaid rule. Previous sanction of the Government would be necessary only if the Government servant concerned has official dealings with the chit fund and if it is not a registered chit fund company.

The amount that the Government servant may receive from the chit fund can be classified into two categories :-

(i) receiving the amount of the sum total of the contributions payable by all subscribers for any one installment less the discount or commission payable to the Chit Fund Company by bid before the expiry of the period upto which the subscription is to be made; and

(ii) receiving the amount at the time of maturity.

2.2. As regards 2 (i) above, since the amount received by a subscriber from the chit fund by bid would be more than the amount subscribed by him and the difference will have to be made good by him by future subscriptions upto the total period of the chit fund, the amount received in such case would amount to a loan received from the Chit Fund Company. Since the Chit Fund Company is not a banking company and the provisions of the Banking Regulations Act, 1949, are not, therefore, applicable to such companies, the loan received from the Chit Fund Company as explained above, may be regulated under sub-rule (4) of rule 16 of the CCS (Conduct) Rules, 1964. As regards (ii) above, if the amount received from the Chit Fund exceeds the prescribed limits in sub-rule (3) of rule 18 ibid the Government servant has to report to the prescribed authority under that sub-rule because the amount received by him would not be exclusively the amount subscribed by him but will also include the commission payable by the Chit Fund Company.

3.1 As regards the second point in para 1 (ii), it is clarified that a Government servant need not obtain prior permission from the Prescribed Authority for taking a Life Insurance Policy. He should, however, submit a report to the Prescribed Authority, if the annual premium on an insurance policy exceeds the monetary limits laid down in Rule 18 (3) of the CCS (Conduct) Rules, 1964. If , in any case, the annual premium initially determined was less than the monetary limits prescribed in the aforesaid rule 18 (3), but on conversion, the annual premium exceeds the said limits, a report to the Prescribed Authority is necessary at that stage. When a Government servant receives the sum assured as survival benefit/on maturity of the policy, he need not submit any report in this regard.

3.2 A Government servant need not report to the Prescribed Authority the fact of his having taken an insurance policy, if the annual premium thereon is less than the monetary limits prescribed in rule 18 (3) of the CCS (Conduct) Rules, 1964. He should, however, submit a report to the Prescribed Authority at the time of receiving the sum assured as survival benefit/on maturity of the policy.

4. Regarding the point raised in para 1 (iii) it is clarified the Fixed Deposits in Bank or Deposits in a Savings Bank account made by a Government servant from out of his salary or of accumulated savings would not come within the purview of rule 18 (3) of the CCS (Conduct) Rules, 1964.

[Cabinet Sectt. DP&AR OM No. 11013/12/76-Estt. (A), dated the 4th October, 1976].