Chit fund act 1982 pdf

Section of the Chit Funds Act, 1982. Such chit fund schemes may be conducted by organised financial institutions, or may be unorganised schemes conducted between friends or chit fund act 1982 pdf. In some variations of chit funds, the savings are for a specific purpose. Kerala State Government, whose main business activity is the chitty.

Chit fund concept came into the eyes of people in 1800’s when Raja Rama Varma, ruler of erstwhile Cochin state gave a loan to a Syrian Christian trader, by keeping a certain portion of it to himself for other expenses and later he drew that money for the principle of equity. Chit funds operate in different ways, and this may lead to many fraudulent tactics practised by private firms. The basic necessity of conducting a ‘chitty’ is a group of needy people called subscribers. The foreman — the company or person conducting the chitty — brings these people together and conducts the chitty. The foreman is also responsible for collecting the money from subscribers, presiding over the auctions, and keeping subscriber records.

Other than that, the foreman has no specific privileges, he is just a chitty subscriber. Where 1000 is the maximum monthly contribution needed from a subscriber, 50 is the duration of the chitty in months and 50,000 is the maximum sum assured. 35,000 in the above example. When more than one person are willing to take this minimum sum, lots are conducted and the ‘lucky subscriber’ gets the prize money for the month.

The person bidding the lowest sum will get the bid amount. In both the cases the auction discount, that is the difference between the gross sum and auction amount, is equally distributed among subscribers or is deducted from their monthly premium. The same practice is repeated every month and every subscriber gets a chance of receiving some money. These chit companies provide employment to about 35,000 persons directly and an equal number indirectly. Chit funds in India are governed by various state or central laws.

Organised chit fund schemes are required to register with the Registrar or Firms, Societies and Chits. When all members are at a monthly or weekly meeting, the one in charge — in front of the other members — picks a slip from the box. The member so selected gets that day’s collection. Afterwards, that person’s name slip is discarded. Thereafter, he comes to the meetings and pays his share, but his name isn’t selected again. Some chit funds are conducted as a savings scheme for a specific purpose. Neighbourhood ladies pool their savings each week.

They use this fund to buy and prepare sweets in bulk just before the Deepavali festival, and they distribute sweets to all members. Preparation of Deepavali sweets may be a time consuming and costly activity for individuals. Such a chit reduces costs, and relieves members from extra work in a busy festival season. Nowadays, such special purpose chits are conducted by jewellery shops, kitchenware shops, etc.

With the advent of ecommerce in India, chit funds have also started going online. Online chit funds conduct auctions, and subscribers can pay their monthly dues and receive the prize amounts online through online transactions, including electronic fund transfers. Each member has an online account to manage their chit funds. Does Competition in the Microfinance Industry Necessarily Mean Over-borrowing?