1. What is a chit ?

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".

A group of people participate in a Scheme to contribute fixed periodical amounts and distribute the amount so collected to each of the participants as determined by a draw or auction.

2. WHY DO PEOPLE INVEST IN CHITS ?

Chit funds are the Indian equivalent of the Rotating Savings and Credit Associations (ROSCA) that are famous throughout the world. ROSCAs are a means to save and borrow. At the same time, it is considered one of the best instruments to cater to the needs of the subscriber.

3. WHY SHOULD PEOPLESUBSCRIBE TO A CHIT SCHEME ?

There is always a need to secure oneself for Future requirements especially when there is no social security system in the country. One has the compulsion to think of contingencies of future such as for Health, Property, Marriage or for any other type such as future business investments etc. That is to save safely with maximum returns that suit the timing of one’s needs. The best part in chit fund is that unlike the other sources of investments such as Banks or any other investment, in which one can get back what one has invested; in chit fund you can borrow from your future savings.

4. WHY IS IT BETTER TO PROCURE FUNDS FROM CHITS WHEN COMPARED TO OTHER INTERMEDIARIES ?

Service is more personalized,and formalities are simpler, when compared to Banks and other Institutions. Evaluation is intrinsic when compared to the elaborate paper work, as practiced in the formal sector. Last and not the least, the saving rate is higher and borrowing cost, much lower.

5. WHO CAN BECOME A MEMBER OF A CHIT?

Anyone who has a regular source of income and the capacity to repay can apply for membership.

6. CAN ONE BECOME A SUBSCRIBER TO A CHIT JOINTLY WITH SOMEONE IN THE FAMILY ?

Yes, one can have a chit in joint name with any family member or a friend. The prize amount in such case is given in the manner in the ratio of subscription to the subscribers individually or in any one name as may be given in writing to the Company.

7. CAN A MINOR SUBSCRIBE FOR A CHIT ?

No a minor cannot subscribe for a chit individually.

8. HOW CAN A SUBSCRIBER PAY THE MONTHLY DUES ?

The subscription can be paid by Cash, Cheque, NEFT, RTGS as per one‘s convenience. Many subscribers’ prefer to give Post Dated Cheques for the entire duration of the chit. It is the most convenient method for both the Subscriber and the Company. The Subscriber is informed about the amount vide Intimation through courier or by e-mail. In case of ‘Daily’ chits we provide doorstep collection.

9. HOW SOON CAN THE SUBSCRIBER GET THE CHIT AFTER THE AUCTION ?

Prize amount is payable latest before the next auction date, provided some surety/security is given by the prize bidder for the proper repayment of the future installments. This is in the interest of the system as a whole.

10. WHAT IF SUBSCRIBER WANTS TO CANCEL THE CHIT ?

Subscriber must know that only non-prized chits can be canceled. Prized chits can be pre-matured only on the condition that all pending and future installments in the chit are paid in advance. A non-prized subscriber can withdraw their subscription by a written request to the Company. The Company will, as per the bye-laws and chit-agreement, make the payment after the deductions, on actual subscribed amount.

11. WHAT ARE THE RISK FACTORS IN JOINING A CHIT FUND, AS AT TIMES, THERE ARE ADVERSE PAPER REPORTS ON THEIR WORKING ?

You may look for the credentials of the company with the office of the Registrar in the State, Registered chit companies.

12. IS INVESTING IN CHIT FUNDS SAFE ?

Yes, There are a number of chit funds in India. In the past there have been instances of people investing in unorganized groups and unregistered firms and losing money, as many organizers have Cheated investors. However, many have benefited from chit funds as well. There are many reputed chit fund organizers, especially the companies that bring some safety into play and AVIRATHA is one of them.

13.WHAT IS THE CAP FOR MINIMUM AND MAXIMUM BIDDING ?

Maximum bid permitted varies between 30% and 40% and minimum bid permitted is 5% of chit value as per chit act.

14. WHETHER ANY SECURITY IS REQUIRED TO BE OFFERED BY THE PRIZED BIDDER ?

Yes, Prized amount will be disbursed on furnishing adequate security such asBank Guarantee

• By providing sureties acceptable to Aviratha.
• Mortgage of property of adequate value, normally 150% of future Liability.
• Assignment of LIC endowment policy

15. IS DIVIDEND TAXABLE ?

Company will not deduct any tax other than S/T at source. The dividend earned in a chit is not taxable unless the bid amount is shown as loss in which case the dividend should be shown as revenue income by the subscribers.