Registered Chit funds and scams

Registered Chit Funds Vs Fraudulent investment Schemes

Fraudulent investment schemes where investors are lured into parking their funds with promises of high returns are not unusual in India. Some of the biggest include the Sahara and the Saradha chit fund fraud, which have duped investors of more than INR 66,895 crore(between them). But the problem is when these schemes are dubbed as Chit Funds.

People consider Chit funds, Nidhi Company, CIS, Ponzi schemes as eggs from the same basket and believe these terms can be used interchangeably. Well, before we proceed further, let us clear that that these are not similar at all. They differ in their object, nature of the business and other things that follow. We will list a few features of each to clear these differences.

What is Nidhi Company?

Section 406 of the Companies Act 2013 mentions that Nidhi Company is a type of Non-Banking Financial Company (NBFC) created for the mutual benefit of its members. It plays a pivotal role in helping the middle and lower middle classes by providing easy financial services with minimum formalities. Its salient features are:

  • It is incorporated with the objective of cultivating the habit of savings and self-reliance among its members
  • They are incorporated as Public Ltd company with minimum paid up equity share capital of INR 5 lac
  • It can accept deposits and lend money to its members only at reasonable rates
  • It has been exempted from the Reserve Bank of India (RBI) provisions, and hence no RBI permit is required
  • Within 1 year of commencement, every Nidhi shall ensure that it has atleast 200 members

Collective Investment Scheme or CIS

It is a kind of an investment scheme in which individuals come together and pool their money for the purpose of investing in some assets and for sharing returns that are gained by such investment. Some notable features are:

  • CIS involves a corpus amount of INR 100 crore or more
  • Such contribution is made to earn material profits
  • Every CIS has to be compulsorily registered with the SEBI. It then becomes eligible to raise funds from the public.
  • The investors do not have day to day control over the management and operation of the scheme.

What is Ponzi Schemes?

Ponzi schemes are a kind of pyramid scheme which operate on the “rob Peter to pay Paul” principle.

  • A fraudulent investing scam promising high rates of return with little risk to investors.
  • It generates returns for older investors by acquiring new investors.

Such scheme may unravel due to any of the below reasons –

  • The promoter vanishes with the entire fund without giving payouts to investors
  • New investments stop flowing in, creating a liquidity crunch.
  • Market conditions prompt mass withdrawal of funds creating an issue for the promoter.

What is a Chit Fund Company?

Chit Fund Company is also known as the committee in northern parts of the country. Chit Fund is a simply put, it is a group funding. Unlike Peer to Peer lending, here a group of individuals lend it to one borrower in a closed group. It is one of the special types of companies which require additional licenses to work, which grants immense credibility to the structure. Chit fund is one of the simplest way to access finance in lump sum and is easy to re-pay in monthly installments.

  • Chit Funds are supposed to be registered with the Registrar of Firms Societies and Chits. An unregistered chit fund company is illegal.
  • Investors consistently invest a pre-determined amount for a definite period of time. This amount goes into a common fund, out of which then any one subscriber is paid the entire amount.
  • The person to whom the money will be paid is selected by a draw or by auction.
  • The more diverse the group, the better will be the returns

You can read more about how Chit Funds work in this link here.

What is MLM (Multi Level marketing)?

Multi – Level Marketing (MLM) is relatively a new marketing method or distribution channel. The companies sell their products &/or services direct to the consumers, removing the traditional distribution channels in between. That’s why it is also called Direct Selling. Instead of spending money on advertisements, MLM companies reward their customers and distributors for their word of mouth advertisements and efforts.

MLM companies like Amway, Qnet and Herbalife have always been criticized for being sophisticated pyramid schemes and have always been sued for making inflated claims about the efficacy of their products.

There are certain business entities, which launch schemes for appointing selling agents for their goods and collect registration fees from them with a further requirement that such agents have to appoint more agents collecting registration fees from them. The remuneration paid to the selling agents consists of a share in the registration fees collected from the new selling agents joining the scheme. Such schemes are known as pyramid, Ponzi or multi-level marketing schemes that eventually lead to suffering for the last of the lot.

Under these schemes, only selected promoters at the top of the pyramid derive the benefit and when the chain of appointment of selling agents breaks, large numbers of selling agents at the bottom of the pyramid suffer losses and lose their money.

The two big Financial Scams

Now, let’s see what were the two biggest financial scams in India and the category to which they belong

The Sahara Scam

Roy, founder of Sahara India, is now accused of duping investors of some INR 36,000 crore. The case relates to an investment option that Sahara ran in 2008 where investors had deposited money in their schemes. The SEBI termed these schemes as Ponzi schemes and hence illegal. SEBI asked the company to refund its investors. After Roy’s group failed to refund the money repeatedly, the Supreme Court issued an arrest warrant against Subrata Roy.

The SARADHA scam

Saradha scam was exposed when Kolkata based Saradha group went bankrupt in January 2014. The group collected small deposits and promised payouts of land or cash, with interest rates as high as 24%. Though the company was operating by using the name ‘chit fund’ but in reality it was modeled around the concept of Ponzi scheme.

In a chit fund, no investor can be sure of what profits he will be making as that entirely depends on the number of subscribers who invest in that particular chit fund group.  The Chit Fund scheme basically contemplates that the diverse the number of investors, the better will be the profits, but never promises any fixed returns. However, in the Saradha scam, the alleged Company promised a fixed rate to the investors, which sufficiently demonstrates that it wasn’t a chit fund company but in the nature of a Ponzi scheme

Chit funds, CIS and Nidhi Company all are regulated by different government bodies except the Ponzi schemes.

Ponzi schemes are very meticulously planned and hence, a little difficult to determine. As such, it is always recommended to do a thorough financial analysis of the company before investing in any of its plans. Also, think carefully before you reinvest in further schemes being offered by the company.

It was reported that some individuals/firms/unincorporated association of individuals (unincorporated bodies)/ marketing companies and companies engaged in money circulation schemes have been collecting monies from the public by making tall promises of high returns, either through issue of advertisements or by sale of products.  Some of them even claim that they have the Reserve Bank’s approval for their operations. Some of these entities have reportedly vanished without repaying the monies collected by them.

What you should know?

Money circulation schemes are banned under the Prize Chit and Money Circulation Schemes (Banning) Act 1978 and the respective State Governments have the power to take action against the persons involved in such schemes.

Each time a newspaper report appears referring to fraudulent activities of alleged ‘pyramid companies’ it is sure to mention that these activities were in violation of the Prize Chits and Money Circulation (Banning) Act, 1978 (hereafter referred to as the PCMC Act).

The act aims to ban the promotion and circulation of prize chits and money circulation. As per the act, money circulation scheme is ‘any scheme which promises quick and easy money to the subscriber by making enrollment of such person into the scheme on payment of an entrance amount.

Section 3 of the Act imposes a ban on chit fund schemes of any nature and money circulation scheme where in money is promised to investor. It specifically holds that no person shall encourage or organize or enroll as a member, participate in any of such schemes which are banned under the Act. Any person who breaches the provision shall be punished with an imprisonment extending to three years or with fine extending to five thousand rupees or with both.

Please note that the provisions of the Act shall not apply to prize chits or money circulation schemes conducted and promoted by State government, an authorized authority, state owned company, certain banking institutions, charitable or educational institution notified by the State Government.

Thus the Act enables the State government to keep a control on easy money making schemes which lures a lot of innocents who are willing to make money by investing into money circulation schemes.

Conclusion

The Chit Funds Act 1982 covers prize chits and money circulation schemes, but there is no specific reference to multi-level marketing schemes for goods and services in the Act.

Chit funds are one of the top three savings options, along with investments in gold and land, as it works both as a savings and borrowing tool. Though it doesn’t offer the highest rate of return, it ranks over the bank deposits in both returns and ease of operation. People with lower incomes consider chit fund as an insurance mechanism for their unplanned expenses.

Chit funds if leveraged correctly can give better returns for a good borrower. 

Bird’s eye view

Particulars Chit Fund Nidhi Company CIS Ponzi Scheme
Purpose Serves as investment and loan Develop habit of savings and self-reliance among members Investment Investment
Type of Investment Safe Safe Risky Fraudulent
Type of returns Returns depend on bidding, lotteries and distributable surplus Principle of Mutuality is followed Gain on investment is shared among the members Rob Perter to pay Paul principle is followed
Interest rate Moderate rate of returns Lower to Moderate rate of interest Lower rate of interest Higher rate of interest
Fees 5% of the chit fund must be paid as commission fees to the organizer every month No processing charges No processing charges No processing charges
Government regulation Governed by The Chit Funds Act 1982 Governed by the Companies Act, 2013 Governed by SEBI No Government regulations

Chit Funds and Tax

Chit Fund Tax Benefits 

The purpose of any investment is to generate a return. However, without proper homework, without understanding taxation, optimal returns are not possible. This blog deals with taxation and chit fund tax benefits. Here’s our take on the various tax scenarios for investments in chit funds in general.

2 different kinds of people are  involved – you, the subscriber and the foreman. Both have different sources of income. Read on further to know more about how chit funds and tax benefits go hand in hand.

Taxation on the amount received by the subscribers

Let us explain through an example.

If you are contributing Rs. 80,000 during the tenure and getting Rs. 90,000 from the chit Fund after the completion of the tenure, your income from the chit would be Rs. 10,000 only. The same would be your income for the purpose of Income Tax, taxable in the category ‘Other sources’. If your contribution is higher than your return, it is a loss. Businessmen and traders can set off this loss from chit against the business income. This will reduce the cost of capital for the borrower.

Loss or profit and its magnitude can only be ascertained at the end of the chit fund. Declaration of this income/loss, hence, should only be done at the end.

Tax on the dividend received by the subscribers

You don’t have to deduct TDS on the dividends you earn during the chit tenure. The dividend you get each month is not interest, so section 194A is not applicable on this. All these dividends will contribute to income/loss you compute at the end of the chit tenure.

Taxation on the commission earned by the Foreman

Foreman acts on behalf of the chit fund company. He brings the subscribers together and conducts the chitty. He is responsible for collecting the money, presiding over the auctions, and keeping subscriber records. The foreman earns a fixed amount (generally 5%) as his commission/compensation for his efforts to manage the chit.

So if there are 25 subscribers paying Rs. 4,000 monthly for 25 months in a Rs. 1,00,000 Chit, 5% of the chit value (Rs. 5,000 per month) will be the foreman commission.

As per the instruction issued by the CBDT, commission earned by the foreman is income from business and if for any special reason there is loss then it is a business loss. Normally there should be no loss to the organizer unless he takes over the liability of some of the members. In case the foreman is unable to recover this amount, the group has to treat it as bad debt.

Indirect Taxes – GST and Chit Funds :

Now, from the direct taxes to the Indirect taxes, let’s see what Service Tax and GST have in store for Chit funds.

The commission paid to foremen is compensation for the services provided in relation to chit fund, and hence is chargeable to service tax under “banking and other financial services”.

Service Tax is applicable only on 70% of the value of commission. The finance ministry has allowed 30% abatement in this regard. If the commission earned was Rs. 100, then service tax would be applicable on Rs. 70.

With the conversion of Service tax to GST, this informal industry is now gearing up to face the upcoming GST threat.

Though other financial services such as loan providers, leasing, hire-purchase finance and mutual benefit companies in the NBFC sector have exemption, the chit fund companies don’t enjoy this exemption.

The chit fund industry is requesting the government to grant it exemption or a lower slab of 5%  under GST, to ensure that this sector survives and continues to deliver to its customers.

Section 269 ST

Further on, Union budget has proposed a Rs. 2 lac limit on cash transactions, effective April1, 2017. It is one of the measures by the government to promote cashless economy.

This move limits the cash transaction to Rs. 2 lac per day per person. If the amount exceeds, penalty equal to the exceeding amount, will be levied, unless there are good and sufficient reasons.

The parties to the chit fund transactions need to be careful with this clause. The chit fund companies are to ensure that only the following methods are in usage –

  • Account payee cheque
  • Account payee draft
  • Use of electronic clearing system through a bank account

This new rule has a major impact as the parties involved, mostly makes payment in cash for their monthly installments, and even in case of cheque payments, they first deposit cash in the bank accounts.

Chit Fund industry is also making a representation to the Government of India about this rule and its possible impact on the industry.

There have been back to back many strokes by the Government to ensure all the transactions pass through legal channels and all money involves is accounted for. This will definitely show good returns in the long term. By ensuring all the cash transactions are recorded and are processed through legal channels, these financial transactions can be tracked end to end. This will give the chit fund industry a great upthrust.

This time can be considered as a golden era to Chit funds, as government is keeping a track of all the cash transactions and making every bit to pass through a legal channel. The trust in this industry will soon be rebuild and if the government grants the exemption which the Chit Fund companies are requesting, then there would be no looking back!!!

The ChitMonks Story

Want to know the story of ChitMonks?

A new monk has entered the market place whose identity is unknown to the public. He has successfully got some of the best Chit Fund companies onto one platform and is famously touted as the best online market place for Chit Funds. These are the minutes of the first public interview he has given-

M: Who are you?

ChitMonks: Hello everyone, my name is ChitMonks. I am a one stop solution to check all the available options in the Chit Fund Market. I am a neutral market place for promoting Chit Funds of Registered Chit Fund companies. Chit Fund is a very unique financial instrument helping all customer segments over several decades. By participating in a Chit Fund which is registered as per the Central Act and Governed by the State rules, the subscribers get a Safe, Better and Tax deferred dividends.

M: That sounds nice, but why are you doing this?

ChitMonks: You see Chit funds are credible institutions which have been in the Indian financial system way before banks came into being. They have helped people save, and invest. Simultaneously allowing the poorer sections of society to move towards financial inclusion and providing them with funds when the big banks did not. Chit Funds have been there for the needs of every person- may it be funds required for a wedding or for a child’s education, Chit funds have always been there.

M: So why have you come up now?

ChitMonks: Recently, many people have been scathing the name of Chit funds. They create fake chit funds, register a chit fund in a different state and operate it in a different state and create Ponzi schemes and call them Chit Funds all of this has ruined the image and name of Chit Funds.

(Interrupts ChitMonks)

M: Well, it is fairly simple to blame you for all the scams happening around if there are so many people just calling themselves chit funds and running away with peoples money.

ChitMonks: You see there is a huge difference between registered and unregistered chit funds. Registered Chit Funds are the ones which follow the rules laid down by Chit Fund Act, 1982 and the regulations of the state they operate in. Registered Chit Funds are the only ones you should deal with, the unregistered ones cannot be trusted with your money. In our first ever marketplace I have created, all the companies are registered so you need not worry about the validity of the funds at all!

Anyway, so due to all these scams, there was a technological stagnation in Chit Funds. What I’m trying to do is reimagine this financial instrument using technology. By introducing calculators to calculate your effective rate of interest, faster services in enrolling you into chit groups and much more, I’ve effectively amalgamated technology into this financial tool for the first time.

Subscriber: Is there anything else you do for us?

ChitMonks: Oh so much more! I will not only help you find the perfect Chit Fund based on your needs, I will also help you get in touch with them and help you enrol with them. My help goes much further than that step, once you’re enrolled, I’ll provide you with technical advices on how to manage your chits, provide you with cloud access to your chit group information, messaging and notification service and many more things to come.

Foreman: Hey, what about us?

ChitMonks: Well, think about it. By providing such a marketplace where you can register your company. We can ensure that you get genuine subscribers for your chit fund.

If you guys want to know more about what I can do please check out https://www.chitmonks.com/

ChitMonks: With chit funds, you can become a regular saver now and a potential borrower tomorrow, and with me, you can choose the perfect fund based on your capital needs and future requirements. That’s it folks. I need to go now!

To know more about ChitMonks and his story keep following our ChitMonks Blogs.

Chit Fund Funda

Want to join a Chit Fund?

1)      What is the “Chit Fund Funda”? 

Chit Funds are small groups which collect money pooled in monthly by members. Each month one member (winner member) gets to take the pooled in money. Reverse auction mechanism determines the winning member.

It is the Jacques Kallis(an exemplary all-rounder) of financial instruments, Chit funds are a personal loan and a recurring savings tool both rolled into one.

2)   Is Chit Funds a new concept? 

Not really. Though Chit funds haven’t been around since the Adam and Eve age, the scheme/instrument has been around for a while. 

Chit funds have been existing in India since before the word “bank” was coined.

Villages, used it for the collection/management of grain and supplies since before the term “coin” was coined. The village headmen collects the grain from all the villagers to store for contingencies. The village headman did the redistribution of the excess grains to the villagers  periodically. If a particular family/households requests more grain for some expenses, depending on the capacity and capability of the borrower to repay, the village headman releases the grain.

3)   Why should I have a chit fund in my kitty of investments?

It is prudent to invest in a Chit fund especially if you see yourself requiring a hefty sum of money soon. Owing to its nature of being a saving and borrowing tool, it has the potential to give you competitive return as compared to other financial investment options and allows you to pay less interest when you borrow. There are several benefits of investing in chit funds including tax benefits! Stay tuned to our blog to discover more of those ?

 

 

4)  Are there different types of Chit Funds?

Although all chit funds work under the same principle, they vary on the basis of the duration, pooled amount, number of members and monthly installments of the chit fund. Chit funds can also be differentiated on the way they’ve been registered into-

  1. Chit Funds run by the State Government-For example, Kerala State Financial Enterprise and Mysore Sales International Limited.
  2. Private Register Chit Funds– There are nearly 10,000 private registered Chit Funds in India. These funds are registered as per Chit Funds Act 1982 and follow the regulations as laid down by the state they operate in.
  3. Unregistered chit funds – It is illegal to run an unregistered chit fund. However, you will find many unregistered chit funds across the country*SCAM ALERT*.We don’t encourage you to invest in unregistered Chit Funds unless you want to experience being cheated.

5)   I’ve read in the news that most of these Chit Funds are scams to fool investors. Is that true?

The media always shows the chit funds to be some scam schemes. People think twice before investing in a Chit Fund. There are two kinds of chit funds. Registered chit funds and unregistered chit funds. The unregistered chit funds are the fraudulent schemes. You should avoid them. However, state governments regulate the registered chit funds. They cannot and will not run away with your money.

Check out some of the registered chit funds which ChitMonks have tied up with at ChitMonks

*Never forget to check whether the chit fund is registered in the state they are operating from or not*

**Chitmonks is an online marketplace for only registered Chit Funds. So you don’t need to think twice about the validity of the chit fund when investing through us.

6)   But what about Saradha Scam? It was big chit fund which fooled so many people!

The Saradha Scam was NOT a chit fund scam! It was a Ponzi scheme and that is different from a chit fund. As the general secretary of the Delhi-based All India Association of Chit Funds, TS Sivaramakrishnan puts it, “”There is a lack of awareness about chit funds among the media and general public. Anything that fails is branded a chit fund.”

Stay Tuned to know more about Chit Funds, their benefits and more.

Demonetization and Chit funds

Demonetization and Chit Funds

Lot has been spoken, written, interpreted and forecasted on Currency Demonetization already. I was waiting on something to be written for Chit funds as well. I am going to attend one of the diamond jubliee celebrations of a chit fund association in Tamilnadu, where there will be veterans, academicians, politicians who will be talking about the impact, and how the registered Chit fund industry is gearing it up to take it further. Here are my 2 cents as to how demonetization will impact this industry. 

While all of us love to earn money and spend it on our needs, growth and luxuries, we tend to move away from understanding some of the basic principles of money. Talking about Micro, Small and Medium Enterprises, or savers (employees) who are trying to grow their funds, everyone wants the best for their hard earned money. 

Recently there was a beautiful article in Your Story – “Disorganised chit funds will remain working capital lifeline for micro SMBs”. The author has beautifully portrayed the importance of this disorganized sector of the industry. Some key things. 

  1. Credit is fundamental to commerce and chit funds can be used more effectively than being treated as taboo. 
  2. As per Crisil, there are 45M MSMEs that use this form of lending and savings platform. 
  3. Around 400M Indians are estimated to be using such disorganized services. 
  4. There are towns where women thrive in this business and helped them to set up small business units. 

and the author went to recommend that government should do something to formalize the industry, rather than going after such platforms. 

Fundamentally, politicians have been claiming that this is a problem of banking reach. But I think economists were right in identifying that it is beyond making banking accessible to these segments. It is about the accessibility to credit in the system based on socio economic norms. This is where Chit Funds have been more successful than any other formal sector of financial services. In Chit funds, trust plays a vital role and this trust is built based on knowing the person in real, understanding his business locally, taking some minimum guarantees (to help protect the interests of the group). No other financial institution can do this to help the local businesses and build trust along the way. Existing financial institutions, depends mostly on your cash flow, historical information – that too recent historical information.

While 8M kirana retailers depend on mostly disorganized sector of chit funds, I think it is time for them to start looking at registered chit funds as the way to go. Money raised in the chit funds can be used as a loan and can be declared appropriately while filing the returns. Instead of doing a chit on individual, you can start putting it on your firm name and use it for much better opportunities. 

With the impact of demonetization, no matter how fast or how soon we move to a cashless economy, when India is moving to more of digital payments, it makes all the more sense for all registered Chit fund companies also to gear up for accepting digital currency and take part in this big move. 

Here are the few things which I feel Chit fund industry should look forward to do. 

  1. Educate the customer the importance of this move. Help them to understand that it is going to do more good to them. 
  2. Make systems and process more subscriber friendly, by making it more transparent.  
  3. Leverage technology to participate in this big move. 
  4. All state associations should come together as one entity and make a representation to the GOI, asking why this industry should get its due significance. 

If, an industry is celebrating golden jubliee – 60 years of existence, that means to say this system is approved by the people and more importantly trusted by them to a very large extent. At ChitMonks, we are trying to leverage technology to bring the best of these services and help both the chit fund industry and the subscribers to make the best of this beautiful system which has been the defect banking industry to Millions of Indians. 

To conclude, my guru says, “Money in the hands of Good people will do enormous Good to the Society”. The statement doesn’t tell you, if you are good or not. So, as long as you are good, you have the moral responsibility of making more and more money. Let’s hope this demonetization will open doors for good people to be more rich. 

How do Chit Funds work?

How do Chit Funds Work?

Many articles and blogs / posts have been written across the .com but we would like to state it in our way here too.

We at ChitMonks believe that Chit Fund is one very traditional but a unique financial instrument which acts like a group borrowing / savings platform, which allows you to borrow money while you started to save every month in the same group. This opportunity of raising money from the group works out to be very cheap compared to going for a borrowing upfront from other instruments out there in the market. No other financial instrument has this kind of advantage. This is the only instrument which combines both savings and borrowing capabilities which is not heavy on your pocket.

If the subscribers can choose a good company and invest safely and stick to the rules of Chit Fund companies strictly, this can be a very wonderful financial tool. ChitMonks is one place where you will be able to get that service. We will discuss the pros and cons of Chit Funds and the care we need to take as investors in a different blog, but let us understand how this traditional but unique financial instrument works.

In this blog, we will be talking about the procedure, as to how a registered Chit Fund should be working.

A picture is worth a 1000 words. Let us see the below image.

How Does a Chit Fund Work

We keep getting two generic questions

  1. What will happen, if no one participates in the auction?
  2. What will happen, if two people bid for the same amount?

Here is how we should look at it.

  1. If no one participates, the person (it could be you) who invests that 5 minutes in a month and go to auction can get lucky to bid for the lowest possible amount (generally 5% of chit value) and take the big prize money which is due for him in the end.
  2. If two subscribers get to bid for the same money, then there will be a lucky dip between them and the prize money will be given to the one who wins in the lucky dip.

Most of the times, this is how the Chit fund auctions are operated. This is a clear “Open Auction” system where every customer has a say in it.

There could be some Chit fund companies who does a “Closed auction” system, where the bid letters are submitted once you pay your subscription and all of them are opened during the auction in front of the customers. The one who quotes the maximum permissible amount, will be awarded the prize money.

In few cases, it can be a combination of both systems. Few customers who will just submit the bid letters and don’t participate in the open auction. This case, customer participating in the auction can pay little more than the open offer and take the prize money.

So, at ChitMonks, we generally encourage our customers to go and participate in the auction directly. Because in cases where money is involved, the best judge is Subscriber alone.

We will talk more on how you can manage your chits more smartly in our next blog.

Until then.

Take care.

Some more useful links we found in online this space are

https://www.quora.com/Personal-Savings-How-do-chit-funds-work

What are Chit Funds? How do Chit Funds Work?

How Chit Funds Works

Keywords in Chit Funds and their meaning

Important terms in Chit Funds

After listening from customers who are asking about Chit Funds, we realized that about 80-90% of the customers are new to the concept. Hence this is an honest attempt to put forward all the terms that are used in general.

 

So, please feel free to comment and let us know if you need anything in specific and we will be more than happy to assist you.

Here are some of the key words which are generally used in the Chit Fund industry.

  1. Chit Value:Chit Value is the amount of Chit that you are subscribing to.
  2. Chit Duration :Number of months during which the Chit will be operated. It is always equal to the number of Subscribers.
  3. Subscriber :A member or subscriber is used interchangeably and he / she represents one person in the Chit Group.
  4. Chit Group :A group of subscribers coming together to participate in the Chit.
  5. Foreman :Company which is taking the responsibility of forming the group, executing daily chores of collecting money from subscribers, conducting monthly auctions, awarding winner with the prize money, validating the documentation of the prized subscriber, disbursing the money to subscribers and running the actual business so to speak.
  6. Ticket :A ticket is a word used by the foreman to represent each subscriber. Every subscriber will have a ticket id.
  7. Bidding :Every month there will be group of borrowers who will come for borrowing money. An auction will be conducted to decide who will get to take the money. This process of auction is called Bidding.

Auction starts from a minimum bid percentage (generally 5% of Chit value) and can go up to maximum bid percentage (changes based on the Chit value and duration). The subscriber who bids for maximum wins the auction.

If there is more than one subscriber for the same bid amount, there will be a lucky draw among them. Therefore the one who wins the lucky draw will be awarded the money.

  1. Prized Subscriber :The Prized Subscriber is the subscriber who gets the money in the auction.
  2. Bid Amount :Bid amount is the money foregone in the auction.
  3. Foreman Commission : Foreman/Chit Fund company takes 5% of the chit value for managing the Chit Groups. This is called as foreman commission.
  4. Dividend :( (Bid Amount – Foreman Commission) / Total subscribers) is the dividend which every subscriber gets. That is, the foreman commission is deducted from the bid amount and divided across all the subscribers including the prized subscriber.
  5. Subscription amount :Subscription amount is the money paid by the subscriber every month to the chit group. This amount is paid after the dividend is given to the customer.

ChitMonks is one of the unique service platform connecting genuine people who are either looking for better savings opportunities or best borrowing interest rates.

We help them to understand how a registered Chit Fund works and give them the Chit they need the most. We also hand hold them through out their Chit experience.

Please visit our website ChitMonks for more information on what Chit you need or

If you are an existing subscriber of any registered chit fund, you can download our app (ChitMonksApp), register and add your Chit for tracking it seamlessly.

Please feel free to write back to us at our info@chitmonks.com for any further information.

Alternatively you can also call us at 9100 347 847 to know more details.

ChitMonks Smart Chit Manager

ChitMonks : What we do

ChitMonks is a neutral market place for promoting Chit Funds of Registered Chit Fund companies. Chit Fund is a very unique financial instrument helping all customer segments over several decades. By participating in a Chit Funds which is registered as per the Central Act and Governed by the State rules, the subscribers get a Safe, Better and Tax deferred dividends.

ChitMonks is re imagining this traditional financial instrument using technology. We plan to bring different insights helping the subscribers, agents and foreman alike.

You as a subscriber, who can be a Micro, Small and Medium Enterprise owner or a regular saver now and a potential borrower tomorrow, can choose a Chit which suits your capital needs / future requirements. ChitMonks help you to maximize your returns from the Chits by considering your opportunity cost.

Your rate of return is in Your hands. At ChitMonks we help savers, borrowers, agents to get the best of the tool. Foreman companies will get benefited with genuine subscribers.

ChitMonksTM – Your Smart Chit Manager. Come, explore the tool for yourself.

The chit funds facility is available in Andhra Pradesh,Hyderabad, Delhi, Bangalore, Maharashtra, Tamil Nadu, Chennai and Telangana. So, what are you waiting for? Invest your saving in a smarter way and register with ChitMonks today!