Chit Funds-Kuries Savings Schemes Practiced in India

Chit Funds / Kuries: savings schemes practiced in India The checking fund is a simple financial transaction in which a certain number of people join together and contribute money, which is accepted by one person among them at a time. Contribution and acceptance continue in turn until the cycle in which contribution equals acceptance is completed.

For example, suppose 30 people join and contribute Rs. 5,000 / each for a total of Rs. 1,500 / – which is accepted by any of them. Next month too, the contribution of the sum of Rs.5,000 / – is accepted and the same procedure is repeated for 30 months. The entire procedure will become clear after studying the following definitions.

Definitions Subscriber (Chittal) The subscriber is a person who joins a listing run by the organization. Each subscriber has an identification number. Foreman (Thalayal) The foreman is the person who directs the note. He is also one of the chit’s subscribers.

Subscription Subscription is the periodic contribution payable by the subscriber, for example Rs 5,000 / –

Room (face value) Sala is the total contribution collected from all subscribers each time, for example Rs 1.50,000 / – Prize money The prize money is the amount for which the token is awarded or auctioned, for example 1,05,000 / – (see Auction discount)

Auction discount Auction discount = Room – Prize money that is reduced when conducting an auction. The reduction is limited to a certain percentage of room, say 30%. For example, (Rs. 1,50,000 / -) – (Rs. 1,05,000 / -) = Rs. 45,000 / –

Foreman Commission It is a certain percentage of the room, normally 5% of the room. For example, 7,500 / –

Auction dividend The auction dividend is the auction discount minus the foreman commission, which is divided among eligible subscribers. For example, Rs 45,000 – Rs 7,500 = Rs 37,500

Net subscription The net subscription is the subscription minus the auction dividend, which subscribers must pay in cash each time, for example, 5,000 rupees – 1,250 = 3,750 rupees (37,500 / 30 = 1,250)

Precious Subscriber A winning subscriber is a subscriber who has auctioned the token or was awarded.

No subscriber appreciated A non-awarded subscriber is a subscriber who has not yet auctioned the token or who has not yet won the prize.

Foreman responsibility Foreman responsibility for accepting the prize money, usually the first prize money. In the example above, the foreman takes the subscription collections of one month without any deduction, that is, Rs 1,550,000 / -. During the following month, whoever wishes to obtain the receipt, goes to a lottery or an auction to decide the lowest bidder, which must not exceed 30%. If more than one person bids or the reduction exceeds 30%, the case is decided by lottery. The auction dividend (auction discount minus foreman commission) is divided equally among eligible subscribers and the net subscription balance is collected in cash and the total of such collections will equal the prize money payable.

This procedure is continued until the cycle is complete.

Let’s take a simpler example and work in more detail. Suppose there are 10 people in a chitty, including the foreman. Ten people contribute 1000 rupees each month for ten months. So the room is Rs. 10,000 / – per month. Remember that the collection of the subscription for the first month is taken by the foreman without deduction, ie 10,000 rupees. For the next month, the auction is held and there is a bidding limit that is 30%. So let’s say the money price is not less than 70%. Suppose the money price is Rs 7,000 / -, then the first auction discount will be Rs 3,000 / -. The foreman commission is 5% of the room so it will be Rs. 5,00 / -. Now the auction dividend will be Rs 2,500 / – (3,000 – 500). The portion of the auction dividend for each person will be Rs 250 (2,500/10). So next month’s net subscription will be Rs. 750 / – (1000-250).

This process will continue for up to 10 installments.

Room = No: of Quotas * Subscription Amount (10000 = 10 * 1000)

Auction discount = Room – Prize money (3000 = 10000 – 7000)

Prize money not less than or equal to 70% (70% of room (10000) that is 7000)

The foreman commission (FC) is 5% of salary. (5% of 10,000, that is, 500)

Auction Dividend = Auction Discount – Foreman Commission (2500 = 3000 – 500)

Share in auction dividend = Auction dividend / no: of divisions (people) (250 = 2500/10)

Net subscription (NS) = Subscription – Auction participation dividend

(750 = 1000 – 250)

Checking funds in India are governed by various state or central laws, such as the Travancore Chit Act of 1945, the Chit Fund Act of 1982, and the Madras Chit Fund Act of 1961. Organized Check Fund Schemes must register with the Registrar or companies, societies and checks.