CHIT FUNDS

 

What used to be a house-wives part time activity has been led to a dynamic activity with professional integrity. Chit fund is a unique financial concept, which has flexibility to borrow or save.
By paying one-month instalment amount, a person can get to borrow from the chit value, by offering a discount not exceeding the maximum limit ascertained in the chit agreement. In a chit value of Rs.100000/- for a period of 50 months, first the subscriber can get an amount of 55000/-by paying
only Rs.2000/- and remaining instalments he pays over a period of 50 months. 45% is the maximum bid allowed, which means a person foregoes Rs.45000/- and the balance Rs.55000/- is paid to the
prized subscribers. Out of 45% discount 5% goes to the company towards company’s commission for conducting the chit and balance of the discount amount is distributed equally amongst all members
of the group. That is 40 % is distributed to all the members by which next month they have to contribute Rs (2000-800)= Rs.1200/- only and Rs.800/- is declared as dividend for that month. The rate of borrowing is much cheaper than several other financial schemes. The non-prized subscriber who is a saving member up to the last instalments gets dividend which is comparatively higher than the interest that are accrued by way of Recurring Deposit Schemes. The purpose of drawing the
prized amount need not be disclosed. It can be used for any need by the member  for Example:


House construction, Marriage, Education, Expansion of business, buy a Computer or any other purpose at his discretion. A person cannot take more than 2 (Two) chits in a group that too he should have paying capacity for the same. Member can make payments either by cash, Demand
Draft or cheques. Third party cheques are not acceptable. Issued cheques have to be realized before the auction date if the member wants to participate in auction. A Registered Chit Fund Company makes a Security deposit equal to 50% of chit value in a Schedule Bank as FDR, which is pledged in
favour of registrar of chits. Therefore, a member in a registered Chit Fund Company is very much secured than a member in a non-registered company. There is a compulsory saving which earns dividends every month. So even if one takes at the last month, the total dividends earned will be
more than the bank interest rate. Sri Ramoji Rao, the founder of chit concept started Margadarsi Chit Fund Ltd in 1962 that has been the leading chit fund company in India since then.