FAQ

A chit fund is a financial savings system where a group of members contribute a fixed amount every month. The collected amount is given to one member every month through a transparent bidding or auction process.

A group of members joins a chit scheme and contributes a fixed monthly amount. Every month, the total collected amount is auctioned among members, and one member receives the chit amount.

Anyone interested in saving regularly or needing access to funds can join a chit fund, including business owners, salaried employees, and individuals.

• Encourages disciplined savings

• Provides access to funds when needed

• Helps achieve financial goals

• Offers flexible savings options

A chit auction is a monthly bidding process where members bid for the chit amount by offering a discount. The member offering the highest discount wins the auction and receives the chit amount.

Chit schemes usually run for a fixed period, commonly 25 to 30 months, depending on the scheme value and number of members.

Members are expected to make payments on time. If a payment is missed, penalties or other conditions may apply according to the chit scheme rules.

The chit amount is distributed to the member who wins the monthly auction after completing the necessary documentation and verification.

A chit dividend is the amount distributed among members from the discount offered by the winning bidder during the auction. This reduces the effective monthly payment for members.

The foreman is the company managing the chit fund. A small commission is charged for organizing, managing, and conducting the chit scheme.

The maximum discount allowed in a chit auction is regulated by the Chit Funds Act, 1982 to protect members from excessive bidding and ensure fairness.

Members who win the chit auction may need to provide security such as guarantors, post-dated cheques, or other documentation as per the company’s policy.