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A chit fund is a kind of savings scheme practiced in India. A chit fund company is a company that manages, conducts, or supervises a chit scheme. It is regulated by provisions of Chit Fund Act, 1982.There is a new chit group that is commencing. The value of the chit is 500,000. This amount is known as the Chit Value. For the purpose of this illustration, we will consider the duration of the chit to be 50 months. This is known as term period for the chit group.

Chit Fund Company has to gather 50 people who are interested in investing in this chit group. These 50 persons are called Subscribers. Once the chit group commences, the foreman has to register the chit with the registrar of chits. He has to pay 100% of the chit value as security. This amount can be withdrawn only after the said chit group closes and every subscriber is paid what is due to him or her. This regulation protects the interests of the subscriber to a certain extent.The amount to be saved every month by the Subscriber is Chit value/No of person’s i.e. 500,000/50 = 10,000.

The amount to be saved every month by the Subscriber is Chit value/No of person’s i.e. 500,000/50 = 10,000. This is also known as Monthly Subscription. It may be noted here that the number of persons investing in a chit and the duration of the chit is always the same. The maximum monthly contribution or Subscription Amount that a Subscriber will pay is 10,000.The Subscriber does not always pay the entire Subscription amount every month. Let us find out how and why he does not have to pay the entire amount.

In this manner, the subscribers can borrow more than what they paid in the first half period of the chit term and save their money if they decide wait further into the chit period.