What is a Chit Fund
A Chit fund is a kind of savings scheme practiced in india. A Chit fund company means a company managing, conducting or supervising, as foremen, agent or in any other capacity, chits as defined in Section 2 of the Chit Funds Act, 1982. According to Section 2(b) of the Chit Fund Act, 1982, "Chit means a transaction whether called chit, chit fund, chitty, kuri or by any other name by or under which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical installments over a definite period and that each such subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be specified in the chit agreement, be entitled to the prize amount".
Such chit fund schemes may be conducted by organised financial institutions or may be unorganised schemes conducted between friends or relatives. There are also variations of chits where the savings are done for a specific purpose. Chit funds also played an important role in the financial development of people of south Indian state of kerala, by providing easier access to credit. In kerala chitty (chit fund) is a common phenomenon practiced by all sections of the society. In Kerala, there exists a company under the State Government, called Kerala State Finacial Eterprise , the main business activity of it being the chitty business.
kerala .A Chit provides good source of finance not only savings to salaried, House holders, employees but for different types of people Viz., small investors, businessmen, small scale industrialists etc.It also provides a means of savings for contingencies.
A Chit is, therefore a good Low, Medium, High Class persons desirous of saving as well as people who like to borrow / Investment to meet expenses on special occasions like marriages, construction of house etc.., and funds for business or industry...like any other needs A person can choose a suitable chit group depending on his capacity to provide extra funds, month after month. The potential to pay regularly is the important criteria to choose a suitable chit group.
- A chit fund investment has it’s share of benefits too.
- It inculcates the habit of compulsory regular saving.
- It earns dividends every month. So the net effective rate of return proves to be pretty attractive.
- For any unexpected financial requirement, bidding for the lump sum amount, could prove to be a better option than going through the hassles of a loan.
- Chit fund investments are not affected by any market fluctuations.
- Finance option through chit funds are easier to re-pay through the remaining monthly instalments
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.
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