What Is Chit Fund?

By Author: Santhosh Kumar
Total Articles: 54
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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 such a chit fund, as defined in Section of the Chit Funds Act, 1982. According to Section 2(b) of the Chit Fund Act, 1982

"Chit means a transaction whether called chit, chit fund, chitty, kuree or by any other name by or under which a person enters into an agreement with a specified number of persons 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".

Such chit fund schemes may be conducted by organised financial institutions, or may be un organised schemes conducted between friends or relatives. In some variations of chit funds, the savings are for a specific purpose. Chit funds also played an important role in the financial development of people of south Indian state of Kerala, by ...
... providing easier access to credit. In Kerala, chitty (chit fund) is a common phenomenon practiced by all sections of the society. A company named Kerala State Financial Enterprise exists under the Kerala State Government, whose main business activity is the chitty. Chit fund concept came into the eyes of people in 1800's when Raja Rama Varma, ruler of erstwhile Cochin state gave a loan to a Syrian Christian trader, by keeping a certain portion of it to himself for other expenses and later he drew that money for the principle of equity.