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-
- Chit Funds run by the State Government-For example, Kerala State Financial Enterprise and Mysore Sales International Limited.
- 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.
- 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.