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
The foreman — the company or person conducting the chitty — brings people together and conducts the chitty.
Chit is a mutually beneficial scheme where in a group of people contribute towards the chit value and one member from the group is given the prize amount and the dividends are distributed to all the other members. For Example if we consider a chit value of Rs.1000000/- with 60 members in the group each member has to contribute Rs.100000/- where by (60 X 100000) Rs.6000000/- is collected.
The auction is conducted in which the members participate and the person who discounts the maximum is declared as the prized subscriber. If there are more than one participant for maximum discount the Successful Bidder will be determined by way of lottery. Where in, the tokens bearing the numbers allotted to the members is put into a box and one token is drawn by any of the member present in the auction and thus, the member whose number is mention on the drawn token will be declared as the Successful Bidder.
40% is the maximum bid allowed, which means a person foregoes Rs.2400000/- and the balance Rs.3600000/- is paid to the prized subscribers. Out of 40% discount 5% goes to the company towards company's commission for conducting the chit and balance of the discount amount is distributed equally amongst all members of the group. That is 35 % is distributed to all the members by which next month they have to contribute (Rs.100000/- - Rs.35000/-) = Rs.65000/- only and Rs.35000/- is declared as dividend for that month.
Every month there is a Successful Bidder who gets his prized amount on submission of required Guarantors. The prized subscriber has to continue to pay the monthly installments till the termination of the chit.
Chit fund is a unique financial concept, which has flexibility to borrow or save. By paying one-month installment amount, a person can get to borrow from the chit value, by offering a discount not exceeding the maximum limit ascertained in the chit agreement.
In a chit value of Rs.100000/- for a period of 50 months, first the subscriber can get an amount of 60000/-by paying only Rs.2000/- and remaining installments he pays over a period of 50 months. The rate of borrowing is much cheaper than several other financial schemes.
The non prized subscriber who is a saving member upto the last installments gets dividend which is comparatively higher than the interest that are accrued by way of Recurring Deposit Schemes.
The purpose of drawing the prized amount need not be disclosed. It can be used for any need by the member for Example: House construction, Marriage, Education, Expansion of business, buy a Computer or any other purpose at his discretion.
Maxvalue chits is having a wide range of chit groups available which suits all walks of people for Example: Individual, Employee, Professionals, Agriculturists, Land Lords, Proprietors, Partnership firms, companies, corporate offices, Organization etc., It has a wide range of Chit values starting from Rs.25,000/- to a maximum range of Rs.60,00,000/-.
Maxvalue is having various range of chit duration. They are 60 months , 50 months (Long Term), 40 months (Forty Term), 30 months (Thirty Term), 25 Months and 20 months (Short Term), groups with 60 ,50,40,30,25 and 20 members respectively forming the group.
A person cannot take more than 2 (Two) chits in a group that too he should have paying capacity for the same.
1. Member can make payments either by cash, Demand Draft or cheques. Issued cheques have to be realized before the auction date if the member wants to participate in auction.
2. Online Payment Facility : Pay online directly from your Bank Account through Net Banking to our Bank Account
3. ECS Facility : A Mandate is enough to authorise us to debit your Bank Account every month towards chit installments. For details contact any of our branches.
A Registered Chit Fund Company makes a Security deposit equal to 100% of chit value in a Schedule Bank as FDR, which is pledged in favor of registrar of chits. Therefore, a member in a registered Chit Fund Company is very much secured than a member in a non-registered company.
Auctions are conducted in from where the registration of the particular chit taken place All non-prized subscribers who have paid their Installments up to date are eligible to participate in the auctions. In case the payment is made by cheque the cheque should have been realised one day before the auction date.For every group the auction time is 5 minutes on a specified date and time. It is upto the members to be present in the auction hall 10 minutes before auction time as verification has to be done by branch for signatures of members and identification of proxies and their Bid Authorization letters.
During the first few months there will be more number of participants willing to bid at the maximum discount. This maximum discount is predetermined for each group and should not go beyond 40 % of Chit value.
The maximum bid limit varies between 30% to 40% depending on the duration of the chit. Out of which 5% of the chit value is the company's commission and the balance percentage is distributed as dividends equally among the members in the group. The member pays the next installment minus the dividend and the dividend amount is credited to his account.
When there are more members for maximum discount their tokens are put in a box and one token is picked by way of lottery. The member who holds the ticket that is marked on the picked up token is declared as successful bidder who has to submit the required sureties depending on the Future Liability.
When there are no maximum bid offers in the auction members can participate in open bidding during the auction time. When there are no maximum discount bidding members are supposed to participate in open bidding during auction time, which starts with a minimum 5% of chit value or any bid offer that has been given by a member prior to auction time. Members are supposed to bid in multiples of Rs.100/- from the minimum bid offer amount and the person who quotes the highest bid amount on the completion of 5th minute shall be declared the successful bidder by the foremen.
If there are no offers above the bid offer the member who has given the highest amount as bid offer is declared as successful bidder. Bid offer is to be given to the office 24 hours prior to the day of auction in which one can mention the maximum bid amount that is acceptable to them. If a member is unable to participate in the auction the member can authorize some other person whose signatures has to be authenticated by the member. Generally member authorizes the family member or Development Officer's and Agents as proxies to participate in the auctions.
A member can participate in auction right from the first auction itself, only if he or she has made the payments up to date. If paid by cheque, it should be realized before the auction date. A defaulter whose payment is not upto date before auction is not eligible to participate in the auction.
In every chit group some members will be in need of money. So all the members who are in need of money will be participating in the auction for bidding. The purpose of bidding is to declare the successful bidder who gives the highest bid amount (Not exceeding maximum limit) within the specified auction time i.e. 5 minutes.
The dividends earned in a chit are not taxable. If you want to claim the bid as loss then these dividends has to be shown as revenue income in the assessment. Hence the entire dividend earned in a chit is not taxable if you don't claim the bid amount as loss.
A member can give sureties depending on the future liability of the chit. Following are the sureties generally submitted by the members.
1.Property Pledge: Deposit of title deeds of urban property can be submitted as surety. Third party property can also be given as surety.
2. Gold Ornaments
4. Fixed Deposits In Banks
Once a member is declared successful bidder it is his responsibility to provide satisfactory sureties/guarantors based on the future liability as specified in the byelaws. On receipt of the surety form the Branch forwards it to Corporate Office for Guarantor search. The liability of the member and guarantors are verified and then if the guarantors are acceptable it is sent back to the Branch for Documentation. The Branch has to prepare the document that mainly includes the guarantor bond and pro-note apart from the other requirements depending on the kind of sureties submitted.
Once the documentation and verification is complete, the document is forwarded to CO, which scrutinizes the document in all aspects, and if the document is found to be satisfactory payment is released with in 2 days.
In most of the cases the entire transactions are completed within 10 days very much depending on the kind of sureties and the document produced by the member. Members who make regular payments and those who submit the required documents immediately will have the greatest opportunity to receive the fastest payment.
"Foreman" means the person who, under the chit agreement is responsible for the conduct of the Chit and includes all persons taking his place under the Act.
Sala / Chit amount
Chitty amount" or 'sala' means the sum total of the subscriptions payable by all the subscribers for any installment without any deduction for discount.
Discount” means the sum of money, which a prized subscriber is, under the terms of the chit agreement required to forego for the payment of 'dividend'; foreman's commission or such other expenses.
Dividend means the share of a subscriber in the discount available under the Chit Agreement for rateable distribution among the subscribers at each installment of the Chit.
Chit agreement means the document containing the articles of agreement between the foreman and the subscribers relating to the chit.
Foreman shall be entitled to a commission or remuneration of 5% of the chit amount at each installment.
Apart from the rights and duties specified under section 21 and 22 of the chit funds act 1982, foreman is responsible for enrolling the required number of subscribers for each chitand to conduct the same as per the guide lines specified by the board of directors of the company.
All our chits are registered with Dy.Registrar of Chits,or Asst. Registrar, Chits, Thrissur .The relevant sanction order and sanctioning authority details are published in pages of Details of Chit Schemes in this Web Site.
It is the responsibility of the foreman to collect the payment from prized subscriber. Failure on the part of the prized subscriber to make payment is not a reason for delay of payment by foreman to the prized subscriber. As spelt out in chit agreement, the foreman can approach the Registrar for recovery of payment from the prized subscribers.
The foreman can substitute the non prized subscriber as per the terms of the chit agreement.