Chit fund is the oldest indigenous financial Institution in India. The term CHIT FUND is known as chit, Chittie or Kuri in different parts of the country. But its operation is same throughout the Country. Chit Fund is only convenient financial instrument which serves twin purpose of Savings and Borrowings to a subscriber. The financial institution, ensuring safest in investment, subjecting itself to the control of central and state chit fund acts, which empowers the common man is none other than Jagapathi Chits Pvt. Ltd.
Chit means a transaction whether called chit, chit fund, chitty, kuri or by any other name by or under which a person enters into an agreement with a specified number of people, that every one of them shall subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical installments over a definite period and that each such subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be specified in the chit agreement, be entitled to the prize amount.
The general pattern of the chitty can be readily noticed by a simple formula:
Monthly Premium * Duration in Months=Gross Amount
30,000 * 30Months = 9,00,000
Example: 30 subscribers agree to subscribe an amount of Rs. 30,000/- for 30 months i.e. for a total chit value of Rs.9,00,000/-, each subscriber will get his chit amount in his turn as determined by draw of lot or by auction. During auction all non-prized subscribers bid by allowing percentage of subscription to be forgone. The highest bidder i.e. who allows maximum percentage to subscribers is given the chit amount. The amount, foregone by the subscriber is distributed as dividend amongst all the subscribers in every draw, after deducting 5% commission / remuneration to be paid to the foreman of the company. Maximum bid is normally at 30%. In case there is more than one highest bidder in an auction, then draw of lots is made and the chit amount is given to the successful subscriber. These (25) subscribers constitute a ‘Chit Group’ and the Chit fund company can run many such groups. For each group approval of bye-laws and commencement certificate from the office of the Registrar of Chit Funds, is a must. The share of a subscriber in each chit is also known as a ‘ticket’.