Chit funds are a popular option for those who want to save money and also borrow money when the requirement arises. Chit funds have a unique business model, so they offer themselves the opportunity to save and borrow money at the same time. In India, chit funds are subject to the Chit Funds Act of 1982. The law requires the registration of funds. The law also prescribes the various rules and procedures that must be followed by a chit fund company. The Reserve Bank of India (RBI) is the regulator of banks and other non-bank financial corporations (NBFCs), but does not regulate fund activities. While Chit funds accept deposits, the term “deposit” within the meaning of the Reserve Bank of India Act 1934 does not include chit subscriptions. However, the RBI can provide advice to state governments on regulatory aspects such as creating rules or exempting certain Chit funds. SEBI regulates collective investment schemes as a regulator of the securities market. But the SEBI Act of 1992 explicitly excludes Chit funds from their definition of collective investment schemes.
In the recent case of the Saradha Group, the SEBI investigation revealed that Sarada was effectively operating as a collective investment undertaking without SEBI`s consent. The law has established various names that can be used to designate a Chit fund. These include chit, chit fund and kuri. So Chits funds help people in different ways. However, when investing, you should also be aware of the pitfalls and regulatory gaps. At the individual level, the credibility and solvency of the company and the fund`s sponsors should be at the forefront. Money invested in state-owned enterprises or registered funds managed by private companies with a long history and/or financially sound funders will help you be financially secure. Chit Agreement is a document agreed upon and signed by foremen and subscribers. It contains all the details about the chit system put into play by the chit find company. It should include the following information: Once you have decided to invest in Chit funds, remember the following: There are countless cases where unregistered Chit traders scam investors, but registered traders are considered safe.
File photo Two copies of all agreements must be submitted to the Registrar within three months. A copy must be endorsed by the Registrar and returned to the applicant. Auctions on the Chit are only permitted after copies of these approved agreements have been distributed to all subscribers. A statement that this distribution has taken place must be submitted to the Registrar. Abhishek had a PhD and had a well-paying job. He didn`t intend to start a business, but he wanted to save his earnings in a way where he could earn good interest rates and withdraw money whenever he wanted. Abhishek also struggled to get an investment program that would allow him to deposit money and withdraw money without losses. No option was suitable. Bank accounts and term deposits had their own limits. And investing in mutual funds and stocks came with many risks.
Although SEBI, as regulator and controller of the securities market, regulates and manages collective investment schemes. But the SEBI Act of 1992 explicitly excludes Chit funds from their definition of collective investment schemes A Chit fund is a rotating savings scheme that has been part of the Indian financial system for over a century. It is also known as chit, chitty or kuree. The Chit Fund is an excellent financial instrument for saving and borrowing. As a savings vehicle, it offers a good return on investment and, as a loan program, it can be a reliable source of financing in case of emergency and other means. Registered Chit Funds: Registered Chit Funds are funds registered with the State Government under the Chit Funds Act 1982. There are more than 10,000 Chit funds registered in India. Chit funds went through several stages of formalization that overlapped in the 20th century.
The organizer became more active in raising funds for the fund and traders and employees, not just farmers, had also begun to participate.  Institutional organizers, including partnerships, limited liability companies, cooperatives and joint-stock banks, have entered the company. In the 1930s, 166 banks in Kerala conducted chit funds.  The first Chit state fund, Kerala State Financial Enterprises, was established by the Kerala government in 1969. Its explicit purpose was to provide an alternative to the unscrupulous private organizers of the Chit Fund.  In 2000, it held 77% of the capital volume of the Chit funds business in Kerala, although only 37.5% of the number of Chit funds.  In 2012, it grew to serve 2.5 million customers with Rs 14,646 crore in annual business.  Some Chit funds are implemented as a savings plan for a specific purpose.
An example is the Deepavali Sweets Fund, which has a specific end date about a week before Deepavali.