General History of Chit Funds Concept of Chit Funds originated 1000 years ago during Mourya Dynasty and the credit goes to Kautilya, Finance Minister to king Chandragupta. What are Chit funds? Chit funds are native financial institutions in India. The system caters to financial needs by combining processes of credit and saving in one scheme. The chit funds are Indian equivalent to Rotating Savings and Credit Associations (ROSCA). Commonly called as Save and Borrow schemes. Chit funds are financial schemes which are limited to a group of people who come together on a mutual trust with planned need and usage of funds. These schemes are designed on the principles of – No one stands to loose and all stands to gain. What is a Chit group? A chit group is formed by group of members who agree to invest specific amount for a specific period. Generally number of months and number of members is same. Who is a foreman? Any person who is registered and licensed to legally conduct chits. Foreman is the one with permission to start a new group as per Chit act 1982. How a Chit fund scheme works? A group of individuals contribute pre-determined amount for a pre-determined period. Every month up until the end of the tenure collected money is loaned internally through bidding to a member who deserves. Benefits of Chit Fund Schemes Serves two main benefits - serves people who need funds and serves people who want to save. Is investing in Chit funds safe? Chit Funds in India are regulated and institutionalized. Legal Chit Fund operators provide variety of chit schemes. Chit schemes have transformed to chit business as they became a regulated activity to provide security for saving made. Investing with registered Chit Funds is safe in India. Chit funds act came into existence in 1982 as an enactment of government of India. In Karnataka the chit funds business is under the regulatory control of Registrar of Co-operative Societies and Chits. Why use Chit Funds? Address needs like - Marriage, Education, Property, etc… Pay off Costlier loans Address working capital, business expansion, start-up capital Emergency need Future savings Example of a chit fund Assume 25 members team contributing to a chit value of Rs. 25,000 at Rs. 1000 per month for 25 months. The foreman conducts an auction meeting for a total amount of Rs. 25,000/- where bidders can bid by discounting with a maximum of 30% and minimum of 5%. Winning bidder gets Rs. 17,500/-. Discount amount is further divided amongst the 25 members after deducting foreman commission of 5%. What is a chit agreement? Chit agreement is a legal contract between foreman and subscribers. Agreement includes rules, regulations and other details. What is the procedure to join a chit group? Subscribers should fill prescribed applications, with personal details, salary details, contact details, nominee details and other things. Format for the application are available at every Surabhi Branch office after providing KYC Norms. When will be a subscriber eligible to receive dividends? Once the subscriber pays full subscription for 2 months then from 3rd month he will be eligible to receive dividends. What are the discount rates over the chit value? Maximum discount will be – 30% and Minimum discount will be 5%. Are there any hidden charges? Hidden charges are not applicable however there are other forms of charges which may fall on every subscriber. Failure in remittance before due date attracts penal interest. Cheque returned charges are compulsory and applicable. Penal interests are also applicable on delayed installments. Discontinued chit accounts attract 5% penalty of actual chit value. for details contanct manjunath c k 09620984183
Posted on: Tue, 19 Nov 2013 08:11:35 +0000
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