Adequate caution is required when selecting a suitable Group. The choice of a specific Group is largely determined by the subscriber’s ability to provide surplus funds from his normal income month after month for this purpose. This aspect is critical from both the subscriber’s and the company’s perspectives in order to avoid embarrassment when releasing prize money or chit instalments month after month.

It is a CONTRACT between the Promoter, or foreman, and the subscribers, who join voluntarily. It is a FINANCIAL SYSTEM in which a group of subscribers’ periodic and regular savings are made available to each subscriber in the form of a SPECIFIED AMOUNT every month (instalment) for a SPECIFIED PERIOD.

Every month, the pooled funds are offered to subscribers at monthly AUCTIONS, and the subscriber who BIDS for the highest DISCOUNT is declared the PRIZE WINNER and given the PRIZE AMOUNT under proper security. A prized subscriber must also continue to pay the subscriptions until the chit expires. The amount foregone as a discount, less the foreman’s commission, is distributed as a dividend to the subscribers.

A chit group is a group of people who agree to pay a certain amount for a certain period of time. For instance, 40 members, 40 months, and Rs.500/- per month. The number of participants and the number of months must be the same.

Any person under the Act who is responsible for the conduct of the chit and includes any Person discharging his functions, such as a branch manager.

No. It is only valid for the duration of a CHIT GROUP and until subscribers’ liabilities to foreman or vice versa are discharged or paid in full.

a) To save in small amounts in order to receive a lump sum during the chit period.
b) Advance borrowing of future savings. Some subscribers join chit funds to borrow money, while others join to save money.

The Chit agreement is a contract between the foreman and the individual chit group subscribers. It is a set of bye-laws or regulations that govern the way chits are conducted. It will be signed twice and witnessed. The chit agreements must include the subscriber’s name and address, the number of tickets assigned to him, the number of instalments and the instalment amount payable, the interest/penalty for late payment, the probable date of chit commencement and duration, the method of determining the prize winner at each instalment, the maximum discount to be foregone at each instalment, and the mode of payment. the mode and proportion of dividend and foreman’s commission, the date, time, and location of the auction, the instalment at which the foreman is to receive the chit amount, the name of the bank, the security to be furnished by the prized subscriber, and so on. Though each subscriber is required to sign the chit agreement, in practise, each subscriber signs a declaration in the application form stating that he has read and understands the terms and conditions of the chit agreement. All subscribers’ declarations are detached from the application form, pasted on a piece of paper, and filed with the registrar.

Subscribers must fill out an application form with information such as their names, residential and office addresses, approximate gross monthly salary, nominees’ names and relationships to them, and so on. They must also sign a declaration stating that they have read and comprehended the terms and conditions of the Chit Agreement.