Fielding frequently-asked questions about chit funds
What are chit funds
Chit funds are a widely accepted financial system. Here, every member of the group is allotted a ticket (chit) and hence , this is called a chit fund. The trustee of the chit fund is designated as the foreman. The chit funds scheme transforms people’s small savings into a major pool and strengthens many unorganized savings into capital.
How do chit funds work?
Chit funds are created out of the pooled periodic investments by groups of people. the members subscribing to the chit have to contribute an installment based on the value of the chit. The installment to be deposited are already recalculated. This procedure somewhat resembles that of recurring deposits in a bank.
Who governs chit funds?
The pool is managed and cared for by the foreman who is responsible for the conduct of the chit. For prizing the chit, an auction is held and the pool is handed over to the highest bidder who offers the highest discount in the form of a bid.
Is the foreman also a member of the group?
Yes. The foreman is also a member of the chit group and contributes instalments every month like all other members of the chit group.
What is the prize amount?
Every month, an auction is held for each group and the bidder who bids with the highest discount is given the money called the ‘prize amount’, after completion of necessary formalities.
How do I gain?
The amount of discount is divided equally among members but only after deducting the commission of the foremen. Thus, all members earn a dividend on their savings.
Give an example
For example, a chit group of Rs. A Lakh has 25 members contributing Rs.4,000 every month. The amount of discount os reduced by 5% i.e. Rs. 5000, as the 25,000 is dividend among 25 members equally as dividend and deducted from the installments of the same month.
What are the advantages?
Chit funds help to mobilize savings in an organized way on the one hand, and, on the other hand, meet the needs for finance by subscribers for various requirements. The members can plan the divided or the cost of finance only by the proper financial management of funds.
How is it better then other financial schemes?
The borrowing cost is lower than credit cards, private banks and personal loans. Chits have been a source of finance for meeting planned expenses as well as contingencies. Chit funds also score over other avenues of borrowing because there’s less bureaucratic and procedural delay.
Why Should I opt for chit funds?
Financial planning is mandatory for everyone. It’s sensible to earmark a certain amount from one’s resource every month as a reserve to face any contingencies like price fluctuations, change in government policy, vehicle purchase and so on. Similarly, social events need to be financially planned and so do housing, education, marriage, travel and other needs
Chit funds offer flexibility. According to the needs and required funds flow, appropriate groups can be opted for various different group which can be held.
What is a subscription number?
Every subscriber of chit is allotted a unique “ticket number”. A ticket number is never repeated and is a complete reference in itself.
How do I pay monthly dues?
Our representatives will visit you regularly for your assistance and collection of payment. They accept payments and provide you on-the spot acknowledgement. At the time of prizing the chit, we take PDCs for the balance Instalment.
What do I pay my monthly dues?
You can pay either by cheque or in cash.
When does the auction take place?
The auction of each group takes place on a prefixed day, i.e. 1st and 3rd Saturdays of every month.
What is the security of a chit?
Our Company M/s Golden M.P. Chit Funds Pvt. Ltd. Is registered with the Registrar of companies under the companies Act 1956. Chit fund business also runs under the rules and regulations framed by RBI for Non-Banking Financial Companies (NBFCs).
Why should I trust Golden M.P. Chit Fund (P) Ltd only?
Only because your money is absolutely safe with us. Golden M.P Chit Fund (P) Ltd is both a highly reputed company and a brand in itself. We have an excellent track record since 1971 and have always been a default-free company.