FAQs
Faqs
FAQs
What is a chit fund, and how does it work?
A chit fund is a savings and borrowing scheme where a group of people contribute a fixed
amount every month. Each month, an auction is held wherein the subscribers (members of a
chit fund scheme) bid for a discounted percentage of the ‘chit value/pot’ (total pooled
money). The subscriber who bids for the highest discount on the pot wins the prize money
for that particular month and is referred to as that auction’s prized subscriber. This cycle of
auctions continues until all members have bid for their prize money.
After each auction, 5 % or 7 % of the discount value offered by the prized subscriber
(winning bidder) is paid to the chit fund company as the “foreman’s commission”. The
balance amount from this discount (after the deduction of the foreman’s commission) is
distributed among all the subscribers as the “chit dividend”.
How safe is it to invest in chit-fund schemes?
investments are safe since such companies are regulated under The Chit Fund Act, 1982.
However, when you invest in chit-funds with an unregistered or unrecognized chit-fund
company, your money is not in safe hands as such companies are not regulated by law and
you are left at the mercy of such companies’ promoters/operators.
Who is eligible to join chit funds?
all valid ID and address proofs, and has a fair degree of financial stability is deemed eligible
to join chit fund schemes. Furthermore, once members have joined a chit fund scheme, they
must be committed to making their monthly contributions towards the ‘pot’ without fail, which
consequently also makes them eligible to participate in the monthly auctions.
Not to mention, the most primary eligibility criterion to join a chit fund scheme is that a
member must be at least 18 years old.
Can businesses also join chit fund schemes?
How do chit funds help with regard to the financial goals of a person or business?
Helps inculcate the habit of disciplined savings.
Offers an easy borrowing option without exorbitant interest rates unlike banks and
other financial institutions.
Businesses can borrow funds from the pooled money (‘pot’) to fund their working
capital needs, source raw materials, and other essential goods, and provide a
stimulus to their business to thrive during peak seasons.
Simple documentation process for borrowing, unlike with banks and other financial
institutions.
Members can access transparent and vibrant community support from like-minded
members who are part of the chit fund schemes.
The disciplined savings can turn into a significant corpus over the long term and help
people to achieve any of their dreams.
Through what modes can the subscribers/members make their monthly contributions toward the chit fund pool?
even in cash at our office.
How is the prize money paid to the prized subscriber and how long after the auction does it take to disburse the prize money?
money is disbursed to the prized subscriber within a few days; the amount is directly
transferred to the subscriber’s bank account or is paid via a cheque.
What action is taken against defaulting subscribers?
encourage such members to promptly make their payments and refrain from defaulting in the
future. Despite sustained efforts, if subscribers persistently default, measures are initiated to
restrict their participation in the chit fund schemes. If deemed necessary, the company may
also initiate proceedings in a court of law to recover due payments from the such defaulting
subscribers.
How do I join a chit fund scheme?
address proof, and income details). Our team will guide you through the enrollment process.
Can I withdraw from a chit fund before its completion?
certain deductions or penalties.