Benefits Of Chit Funds

➢ Excellent way to save every month

➢ Convenient schemes

➢ Minimal formalities

➢ Popular saving and borrowing method

➢ Funds borrowable with successful bidding

Risks Involved

Although Chit funds is one of the best micro-finance systems, it is slightly risky too. The subscribers, as well as the organizers, are subjected to credit risk in case of defaults. Defaults are inevitable in this business. Thus Chit fund companies ask subscribers to submit surety when they win the auction.

Also, the government doesn’t insure your Chit fund payments and thus is a riskier savings method than saving via the bank.

Legalities Involved

It is mandatory for any Chit fund organization to be registered with the Registrar of Firms, Societies, and Chits. According to the Chit Funds Act, 1982, a Chit fund company will manage, conduct, or supervise a Chit fund. Chit fund organizations are supervised as Miscellaneous Non-Banking Companies (MNBCs) although they don't fall under the RBI Act. Thus the NBFC and MNBC Rules, drafted by the government of India in 1977 under Section 58A of the Companies Act 1956 regulate the activities in line with Chit fund deposits.

Special Purposes & Technology

Chit funds are also being organized for special purposes such as festivities by the sweet makers, jewelers, and Kitchenware owners to promote their product and as well as benefit the subscribers.

With e-commerce rising in India, Chit funds are also being made available online. The auctions are conducted online and the subscribers can pay and receive funds through online transactions.

Future Scope

Chit funds can be a great tool to financially support one another among your family and friends. Any earning segment and any number of subscribers can take part in it. You should only take care to include trusted subscribers and try to avoid defaulters.