A totally Indian concept, the chit fund system has now won
universal acclaim.
In the villages of Kerala, many centuries ago, a small group of farmers operated a unique
scheme. Each farmer gave a fixed quantity of grains periodically to a selected TRUSTEE.
The Trustee, after keeping aside a portion for himself, gave the rest to a member of the
group to help him to meet his social commitments and other needs.
The farmer who received the lot continued to give the fixed quantity till every member of
the group received his lot.
The additional benefits when receiving the lot earlier led to competition. Some members
were even willing to forgo a certain portion (like a discount) of the lot, in order to get
an earlier chance. So, an auction was held and the highest bidder got the lot. This was the
basis of what we know today as the "Chit Fund Scheme"
The Chit Company forms different group each consisting of a certain number of subscribers.
They agree to contribute a specific amount as instalment for a certain number of
months.
As soon as the group is complete and the Government Certificate of Commencement is
secured, an auction is held. On the date of the auction, the subscribers in the particular
group assemble, either in person or through proxy. They bid for the amount and the person
offering the highest discount receives the chit amount. Out of the discount foregone, the
Company's commission (5% of the chit amount) is deducted and the balance is divided
equally among the subscribers in the group. The subscribers then deduct the dividend and
pay only the balance in their next instalments.
Before the successful bidder draws the amount, he proposes securities - immovable
properties, Life Insurance Policies, Debentures of good companies, Unit Trust of India
Certificates, Bank Guarantee etc. Personal sureties of persons employed in government
offices, government undertakings and reputed public limited companies are also accepted.
The prize amount is given as soon as the securities/sureties are accepted. |
