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Introduction
A conventional chit is a financial institution involving
periodical subscription by a group of people
It is a contract between the subscribers and the foreman
which provides that the subscribers shall subscribe a
certain sum by periodical installments for a definite period
Each subscriber shall, in his turn, as determined by lot or by
auction or in such other agreed manner be entitled to the
prize amount
Chit funds provide an opportunity for them to save their
excess cash on a daily or monthly basis and, at the same
time, to have access to easy finance in case of emergency
or other requirement
They are a means of easy and profitable access to finance
for the Small and Medium Enterprises (SMEs)
In Kerala chitty (chit fund) is a common phenomenon
practiced by all sections of the society. In Kerala, there
exists a company under the State Government, called
KSFE (Kerala State Financial Enterprises), the main
business activity of it being the chitty business.
In north India common type of chit fund is where small slips
with each members name are written and gathered in a
box. When all members gather for a monthly or weekly
meeting then concern in charge in front of all members
will pick up one slip from the box and whosoever's name
comes that person will be entitled to get the collection of
that day. Afterwards that person·s name slip is torn and
there after he comes for meetings regularly and gives his
kitty's share but his name won·t be there in the slips of
box as he has already collected his share.


Vome
icefinition
it
reement: the document containing the articles of agreement between the
foreman and the subscribers relating to the chit
it
mount:the sum-total of the subscriptions payable by all the subscribers for any
installment of a chit without any deduction of discount or otherwise
ituine: the business of conducting a chit
ef
ultinucrier: a subscriber who has defaulted in he payment of subscriptions
due in accordance with the terms of the chit agreement.
icount: the sum of money or the quantity of grain which a prized subscriber is, under
the terms of the chit agreement, required to forego and which is set apart under the said
agreement to meet the expenses of running the chit or for distribution among the
subscribers or for both
ividend: the share of the subscriber in the amount of discount available under the chit
agreement for rateable distribution among the subscribers at each installment of the chit
r
: the manner specified in the chit agreement for the purpose of ascertaining the
prized subscriber of any installment of the chit
Forem
n: the person who under the chit agreement is responsible for the conduct of the
chit and includes any person discharging the functions of the chit and includes any person
discharging the functions of the foreman under section 39
Non-prizeducrier: does not include a defaulting sub-scriber
Prizeucrier: a subscriber who has either received or it entitled to receive the prize
amount;
Reitr
r: the Registrar of Chits appointed under section 61, and includes an Additional,
a Joint, Deputy or an Assistant Registrar appointed under that section;


ener
l
r
cteritic
The chit values ranges from Rs.10,000 to Rs.10,00,000 and
the duration from 20 to 50 months
The majority of members of the chit funds are small traders
and businesses
The funds generally allow multiple-membership in each
scheme
The chit companies do not require much documentation
Most of the companies require the members to have a bank
account
Most chit companies admit only members who are either
connected to other existing chit members or known to the
chit manager personally .

0orkinofitFund
A chit scheme generally has a
predetermined value and duration.
ÃDistribution of the amount collected

ÃDistribution of discount

ÃCommission of the company

Schemes may be structured for duration's

varying between 10 months to 100
months.
The rests between successive auctions may
be one week, fortnight, month, two months
or one quarter year.
The chit manager or the company is also a
member in each scheme. This is because
the chit manager has to deposit an amount
equal to the chit value of the scheme with
the Registrar of Chits for the particular
jurisdiction.

FOR
 PL
à Chit Value = Rs.400000, Duration = 40 months and Members = 40.
Each members contributes Rs. 10000 per month.
If highest bid is for Rs.100000 then the successful
bidder gets Rs. 300000.
 The prized subscriber has to continue to pay the
monthly installments till the termination of the
chit.
The discount amount of Rs.100000 is then divided
among the other 39 members equally after
deducting company¶s commission.
The dividend for the 39 members would be Rs.2435
each, assuming 5% commission to the company
The contribution in the second month for the
39 members would be Rs.10000 less
Rs.2435 which is equal to Rs.7565.
For the subsequent month, the contribution
of these members reduces by the amount
of dividend .
The dividend accrued for the 40 months are
the returns on investment for the monthly
deposit made to their accounts.

Statistics of Chit Funds

Around Rs 11,088 crore are being circulated via chit fund schemes in the
southern states of Tamil Nadu, Andhra Pradesh and Kerala.
Around 58 million households are participating in chit fund schemes
currently.
Andhra Pradesh tops the list of States with 14 lakhs household participation
in chit funds and Rs 7200 crore money circulated through chit schemes.
Tamil Nadu had eight lakhs households participation with Rs 3700 crore
money in circulation. The comparative data for Delhi were 35,000
households and Rs 271 crore and Kerala 8.3 lakhs households and Rs 188
crore.
The interest charged per annum ranged from 8% to 28%, though higher
than bank loans, is lower compared to 24 to 36% charged by other
private financiers
83.1 per cent the people participating in the chit schemes are men who are
in the age of around 43.4 and majority (43 per cent) of them are self-
employed, while 37 per cent are salaried, 10 per cent housewives, 5.3 per
cent are retired. 67% of the investors uses chit mainly for savings as it
gave them better returns. Besides, the funds are available at better rates
compared to other financial vehicles such as MFI and demanding less
paperwork and collateral\guarantee.


itfundep
rtment



The Chit Fund Department was set up by the Government

with the main objective of controlling the activities of chit
fund companies
The Chit Fund Department is responsible for performing the
following activities
‡ Registration of new Chit Fund Companies
ù Issuance of previous sanction in respect of new Chit Groups
ù Endorsement of chit agreements
ù Grant of commencement certificates to new Chit Groups
ù Release of FDRs after termination of Chit Groups
ù Redressal of grievances of subscribers


enefit


Chit fund can be seen as emergency saving, which can be

withdrawn at any time interval
There are no complex procedures for applying for loans from
chit funds as the loans are provided on the basis of trust
Ã There is good returns for any scheme

à The money is safe in the care of the stable group

The money borrowed is against the person¶s own future

Ã

savings
The amount is given on personal sureties too unlike in banks
which demand a tangible security
Chit funds can be relied upon to satisfy personal needs.
Unlike other financial institutions, you can draw upon your chit fund for any
purpose - marriages, religious functions, medical expenses, etc


 
MARGADARSI
CHITS FUNDS


 
INTRODUCTION
RRVIITFUNPRIVT LI IT 
Over three decades ago, Margadarsi Chit Fund
showed the people of Andhra Pradesh the way for a
happier life. Guided by the vision and determination
of Sri Ramoji Rao, Margadarsi made its humble
beginning in October, 1962, in a small office with just
two people working.
Margadarsi enjoyed exponential growth over the
years and today employs 3,700 employees, and has
8,000 agents, 99 Branches, over 3,70,000 subscribers
and a turnover of over Rs. 5000 crores. Margadarsi is
not only No.1 Chit Fund Company, but also a
household name in Andhra Pradesh.

IVTORYOFITFUNV

Chit Funds are indigenous financial institutions unique to
South India and predating commercial banks. They have
stood the test of time, as evidenced by the growth in the
number of chit fund companies in the South. However, the
importance of any financial institution cannot be judged by
its numerical strength alone, but by its performance.
Tracing back the history of the origin of chit funds reveals
that they evolved at a time when banking facilities had not
developed, thus filling an important credit gap in the
economy. But with the growth of banks, chit funds were
doomed to closure. However, on the contrary, vast
expansions in the chit fund business were witnessed over
the years, neck to neck with that of the banking system.
Proof enough that chit funds continue to fill the credit gap
in the developing economy of our country. Today chit fund
companies are recognized as important credit and
investment agencies.


How Margadarsi works

Withits vast experience in the field, Margadarsi
has made systems and procedures simple,
systematic and full proof. Subscribers can choose
from a wide range of chits from Rs. 25,000 to Rs.
50,00,000 designed to suit a variety of
requirements. To become a subscriber,
individuals need to fill out an enrollment form,
and opt for any of the chit schemes available with
monthly installments ranging from Rs. 1000 to
Rs. 1.00,000. Depending upon the requirement,
one may choose Long Term Chits (50 month
duration) for saving purpose and Short Term
Chits (25 months duration) for emergency
planning.

BENEFITS OF MARGADARSI CHITS

The hallmark of Margadarsi·s success is its
meticulous planning, coupled with hard work and
deep commitment to serve its customers in the best
possible manner. New schemes are introduced form
time to time to meet the financial needs of the
customers and fulfill their aspirations
Keeping with its promise of providing high quality
professional and personalized service, Margadarsi started
the unique 72 hour response facility. This facility of quick
disbursement of money (subject to documentation) is
unique to Margadarsi and currently not being offered by
any other chit fund company