Chitfund

Chandra Lakshmi Chit Fund P. Ltd.
(Registered under The Madras Chit Fund Act, 1961)

	RISKS IN INVESTING WITH CHIT FUNDS
	THE WORKING OF A CHIT FUND SCHEME
	CHITS PROVIDES A COMPLETE SOLUTION FOR A HOUSE FOR CAR OR ANY ASSET
	LEGAL SANCTITY

RISKS IN INVESTING WITH CHIT FUNDS
The many Benefits of Chits-Chit Funds offer a bouquet of advantages. Catalysing a mind-set that disciplines us to part with a portion of our disposable cash flow for capital generation over time. An instrument of finance that caters to our savings commitment comprehensively and switches to the realm of loan at our own volition. A buffer fund that equates to an insurance against Uncertainties. A psychological support that encourages us to take on the challenges thrown up by the dynamics of everyday living. Plainly a system that links our money to market rates of interest.

The many benefits of Chits get diluted by the lack of awareness about the soundness of its working and certainty of delivery.

Role of a Chit Foreman-The job of a Chit Foreman is to organize a group of people who commit to subscribe a monthly contribution for a defined number of months. The pool collected every month is taken by the members one by one under an agreed system.

For the efficient running of the Chit, the prerequisite is the presence of a group of members that ate trustworthy. It is important that a member is enrolled in a group size that is comfortable for him to subscribe every month over a long time and to track the record of the member before promoting him to groups of larger values. Care must be taken that the Chit Foreman is not exposed to a large Credit risk on one member or group of members. It is therefore important that the Foreman invests adequately into such infrastructure and facilities that help him in the continuos monitoring of his members and analyzing their performance.

A well balanced subscriber base- At Chandra Lakshmi, we are fortunate to have a member base that has grown with us in the nearly three decades of our working. We initially started with small groups of Rs. 10,000/- with Rs. 200/- monthly contribution. The member base that performed well graduated to larger chit values over time. The process of filtration worked automatically and we were left with the cream of clients after the rotation of every group. With every passing group, our association intensified with those members that have performed well. Today, Chandra Lakshmi is blessed with a rich and diversified family of more than a thousand strong members, almost equally represented (20% each) from the salaried classes, traders/ businessmen, manufacturers/ printers and professionals/ service organisations, spread all over Delhi.

Securing Chit-Prize Money-Chit Foreman must be aware at all time that the are handling public money and they must at all times take the best precaution to safeguard such public money. At Chandra Lakshmi we take this issue very seriously. Every professional advice is sought to strengthen our systems. As a rule, chit money is disbursed against presentation of Post Dated Cheques, proper personal sureties and collaterals, as the situation warrants.

Chit Foreman requires adequate capital investment to take care of all their infrastructural requirements and to plug the shortfall of monthly subscriptions should some members delay their payments. Chandra Lakshmi ha been a profit making Company since the time of its inception and it had build up a strong capital base. It has a centrally located and well appointed office premises comprising of three flats in a DDA approved commercial building. It has always invested in modern day infrastructure like computer network/ software, media coolers, fire resistant safe-room for documents and office automation equipment. Three are about fifteen employees to handle the affairs of the Company efficiently. Opening up communication channels with our members had been one of our important virtues. We were one of the first to host an internet site and have one of the best internet addressed in www.chitfund.com.

Chit Foreman must insist on dealing through cheques and banking instruments as a rule. Any excessive dealing through cash increases the riskiness of chit operations. They must discourage any cash transaction, which are a bane. Proper banking habits makes the chit system more dependable and transparent. At Chandra Lakshmi, cash receipts comprise only a couple of percent of our total volume. All payments are made by account payees cheques. We enjoy excellent relations with our bankers, American Express Bank at Connaught Place and Punjab National Bank at West Patel Nagar.

Chit Foreman must comply with all statutory paper work and formalities, follow prudential norms and build goodwill in the local community. Chandra Lakshmi has a blemish less track record with the Registrar of Chit Funds, New Delhi.

It must be the duty of every potential subscriber to verify that he is subscribing to a chit with a Chit Company that is properly registered and has a satisfactory track record.

THE WORKING OF A CHIT FUND SCHEME
The modus operandi of the chit fund, in a nutshell, is as follows:

The foreman of the fund collects a specific periodic subscription from each of a certain number of subscriber-members. The total of the periodic subscription, called the capital of the chit fund, is given out periodically as the prize amount to any one of the members through a system of auction. There will be many periodical installments as there are members. Thus each members gets an opportunity to receive the prize amount once during the tenure of the scheme. All members contribute towards the periodic subscription till the end of the duration of the chit scheme.

The scheme involves the following functions:

Pooling together of scattered sums of a group of individuals;
Loaning out of the pooled amount to a member of the group; and
Continuing the process of collection and distribution of amounts for a certain definite period. This time-bound function of collecting and distribution of funds is different from the function of other financial intermediaries.

Let us illustrate by way of an example. A chit scheme with a duration of 25 months and a face value of Rs.1,00,000/- will have monthly subscription of Rs.4,000/-. There will be, conventionally, 25 members in the scheme. Each member will pool in his subscriptions of Rs.4,000/- every month for 25 months and ends up paying Rs.1,00,000/- in the month in which he requires the consolidated amount.
Industrial practice, the dealings do not take place at face values. The subscribers who takes the fund in the beginning gets it at a discount. This discount is divided equally in favour of all the 25 members of the fund after providing for the service charges of the foreman. The capital funds received by subscribers in succeeding months shows a rising graph and with each passing month the subscribers get a bigger prize amount. The discount/dividend each month is the profit for all the subscribers have taken their prize money at the end of 25 months.
The actual practice, schemes may be structured for duration's varying between 10 months to 100 months. The rests between successive auctions may be one week, fortnight, month, two months or one quarter year. The total number of subscribers that may enroll in a scheme may be 10 on the lower side and on the higher side there may be built into the chit schemes.

CHITS PROVIDES A COMPLETE SOLUTION FOR A HOUSE FOR CAR OR ANY ASSET

Housing finance and car finance plans offered by financial companies are PRODUCT DRIVEN and the money in these plans can be utilized for the specified activity or product. As compared, chit schemes are PROCESS - DRIVEN and, therefore, chit money may be utilized for an activity that a prudent subscriber considers relevant. The flexibility offered by chit schemes is enormous. Memberships for small chits may be taken form time to time depending on convenience and repayment capacity and then totaled up to purchase an asset or a car worth several lacs of Rupees. The purchase of the asset or car becomes easier because of the breaking up of capital cost into smaller chits. Car finance schemes offered by financial companies start only after the purchase of the car or asset. As compared, chit schemes can be subscribed when you start planning for your asset or car, thereby building the finance for your asset according to your convenience, advance planning and repayment capacity. While you may be building your finances for a desired asset or car, in case there is some other urgency, You may actually get the money for that new development as if you had planned for the same. Whats more, there are no filling charges. Most chit schemes compare favorably with the cost of funds in schemes offered by specialized car finance companies. That's flexi-finance for complete flexibility in your planning. So next time when you plan any asset or car do consult the friendly financial counsellor from your friendly chit company.

Kamal Bhambhani

LEGAL SANCTITY

Chandra Lakshmi Chit Fund (p) Ltd. reports to The registrar of Chit Funds, Delhi. It has been Registered under the Madras Chit Fund Act, 1961, for almost two decades.

Chandra Lakshmi Chit Fund (p) Ltd..submits its annual return to the reserve Bank Of India. It is a company with Limited Liability, registered with The Registrar of Companies.

Chit schemes are in the nature of Insurance Against Event Uncertainty. Chit schemes are not similar to any schemes offered by banks, the general insurance corporation or the life insurance corporation.

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