Chit Funds / Kuries – saving schemes practiced in India Chit fund is an easy monetary transaction the place by sure variety of peoples be a part of collectively and contribute cash, which is accepted by one individual amongst them at a time. The contribution and acceptance are continued in turns till the cycle is accomplished the place up on the contribution equals the acceptance.
For instance, assume that 30 individuals be a part of collectively and contribute Rs.5, 000 /-each totaling to Rs.1, 50,000/- which is accepted by anyone amongst them. Subsequent month additionally, the sum contribution of Rs.5, 000/- is accepted and the identical process is repeated for 30 months. The whole process will probably be clear after finding out the next definitions.
Definitions Subscriber (Chittal) Subscriber is an individual who joins a discount run by the group. Every Subscriber is having an identification quantity. Foreman (Thalayal) Foreman is the one that conducts the chit. He’s additionally one of many subscribers of the chit.
Subscription Subscription is the periodic contribution payable by the subscriber.Eg.Rs.5,000/-
Sala (Face worth) Sala is the entire contribution collected from all of the subscribers every time.Eg.Rs.1,50,000/- Prize Cash Prize cash is the quantity for which the chit is prized or auctioned.Eg.Rs.1, 05,000/- (see Public sale Low cost)
Public sale Low cost Public sale Low cost = Sala – Prize Cash which is diminished by conducting public sale. The discount is proscribed to a sure proportion of sala say 30%.Eg.(Rs. 1,50,000/-) – (Rs.1,05,000/-) = Rs.45,000/-
Foreman’s Fee It’s sure proportion of sala, usually 5% of sala. Eg.7, 500/-
Public sale Dividend Public sale Dividend is Public sale Low cost much less Foreman’s Fee, which is split among the many eligible Subscribers. Eg.Rs.45, 000 – Rs.7, 500=Rs.37, 500
Internet Subscription Internet Subscription is Subscription much less Public sale Dividend, which is to be paid in money by the subscribers every time.eg.Rs.5, 000 – Rs.1, 250 = Rs.3, 750 (37500/30=1250)
Prized Subscriber A Prized Subscriber is a subscriber who has auctioned the chit or who was prized.
Non Prized Subscriber A Non Prized Subscriber is a subscriber who’s but to public sale the chit or who’s but to win the prize.
Foreman’s Legal responsibility Legal responsibility of the foreman for accepting the prize cash, usually the primary prize cash. Within the above instance, subscription collections of 1 month is taken by the foreman with none deduction i.e Rs.1, 50,000/-. For the subsequent month, whoever needs to get the receipt both goes for a lottery or an public sale to resolve the bottom bidder, which mustn’t exceed 30%. If a couple of individual bids or discount exceeds 30%, the case is determined by draw on tons. The public sale dividend (Public sale Low cost much less Foreman’s Fee) is equally divided among the many eligible subscribers and the steadiness web subscription is collected in money and the entire of such collections will probably be equal to the prize cash payable.
This process is sustained till the cycle is accomplished.
Let’s take an easier instance and work it out in additional element. Assume that there are 10 individuals in a chitty together with the foreman. Ten individuals contribute Rs.1000/- every month for ten months. So the sala is Rs.10, 000/- per thirty days. Bear in mind for the primary month’s subscription assortment is taken by the foreman with out deduction i.e. Rs.10, 000/-. For subsequent month, public sale takes place and there’s a restrict for bidding it’s 30%. So, shall we say the value cash will not be lower than 70%. Suppose the value cash is Rs.7, 000/- then first public sale low cost will probably be Rs.3, 000/-. Foreman’s fee is 5% of sala so it will likely be Rs.5, 00/-. Now public sale dividend will probably be Rs.2, 500/- (3000 – 500). Share of public sale dividend for every individual will probably be Rs.250 (2500 / 10). So, subsequent months web subscription will probably be Rs.750/- (1000 – 250).
This course of will proceed until 10 installments.
Sala = No: of Installments * Subscription Quantity (10000 = 10 * 1000)
Public sale Low cost = Sala – Prize Cash (3000 = 10000 – 7000)
Prize cash not lower than or equal to 70% (70% of sala (10000) i.e. 7000)
Foreman’s fee (FC) is 5% of sala. (5% of 10000 i.e. 500)
Public sale Dividend = Public sale low cost – Foreman’s fee (2500 = 3000 – 500)
Share of Public sale dividend = Public sale Dividend / no: of divisions (individuals) (250 = 2500 / 10)
Internet Subscription (NS) = Subscription – Share of Public sale dividend
(750 = 1000 – 250)
Chit funds in India are ruled by varied state or central legal guidelines, like Travancore Chit Act of 1945, Chit Funds Act, 1982 and Madras Chit Fund Act, 1961. Organised chit fund schemes are required to register with the Registrar or Companies, Societies and Chits.