The Parliamentary Standing Committee on finance, headed by BJP leader Yashwant Sinha, has advocated closure of all chit fund firms across the country.

The panel on Friday grilled Finance Secretary R S Gujral as well as Revenue Secretary Sumit Bose on the increasing menace of chit fund frauds.

Both Gujral and Bose admitted that regulators failed to exchange information, which made any action against such frauds difficult. Both officials also stressed that there was a need to revamp the whole system to check such frauds.

The panel also decided to summon RBI Governor D Subbarao and SEBI Chairman U K Sinha next week, to question them why failed to check such financial frauds.

A source close to the discussions, said, "The officials accepted that the chit fund proliferation was indeed a failure of the regulators as well as the government."

The source added that Gujral and Bose also failed to give an estimate of the number of chit funds operating in the country.

Recently, chit fund-based Saradha Group went burst, leaving thousands of its investors into deep dismay as they lost their hard-earned money, which they had invested in the group in order to reap big returns. The busting of the group even forced some investors to commit suicides.