What is Chit?
 
Conducting the Chit
 
Payment of each Instalment
 
Receiving the Prized Amount
 
Discount
 
Foreman's Commission
 
Transfer
 

 What is Chit?

A collection of members called a chit group makes their contribution in the form of money to collect a chit amount and they bid in an auction to be awarded with the prized money which is equal to the chit amount minus the discount and the foreman's commission.

The chit is registered with the Deputy Registrar of Chits and a registered number is obtained. The Foreman promotes and conducts the Chits as per the regulations of the Chit Funds Act and Rules.

 Conducting the Chit:

  • The auction will be conducted and determined by Tender/Auction in person at the date, time and place specified in Article III. Subscriber who have paid upto date instalment alone will be permitted to participate in auction.

  • The duration of Auction shall be 5 minutes excluding the time taken for completing preliminaries. Participants other than those who had given tenders should be present in the auction room at the time mentioned in Article III of this agreement.

  • Auction Methods: Auctions in all the months will start with minimum of 5% of the chit value, +6% interest of chit amount.

  • The maximum amount of discount, or bid amount which a prized subscriber can forego at any instalement shall not exceed 40% of the chits amount.

  • The subscriber who bids for the highest amount of discount subject to the maximum of 40% will be confired as the prized subscriber.

  • If neither tenders are received not any subscriber present, the prized subcriber shall be determined by lot. Such prized subscriber also will be governed by all the provisions of the Chit Agreement regarding the proportion and mode of distribution of restricted dividend. If more than one subscriber offers the same amount of discount in the tender or in person, the prized subscriber shall be determined by lot.

  • A defaulter subscriber shall not be entitled to take part in the auction.

  • Any person, not being a minor authorised by the subscriber, may participate on behalf of the subscriber.

  • If the chit is in the joint names of one or more persons any of them can bid and the same will be binding on the others also except where the others have intimated to the company in writing to the contrary before the chit auction date and obtained an acknowledgement.

  • The amount payable to a successful bidder(also called prized winner or prized subscriber) after the deduction of the discount he has offered to forego shall be the prize money. The prized subscribers shall not be eligible to take part in further auctions or to be included in further lots.

 Payment of each Instalment:

  • Every subscriber shall on or before the date of each instalment pay to the Foreman the amount due for his ticket for each instalment and get a receipt. Non-receipt of intimation card is no excuse for any default in payment of subscriptionm in time.

  • If any prized subscriber fails to pay the particular instalment on or before the due date of such instalment he shall render himself liable to be penalised by an amount equal to dividend and also interest at the rate of 36% per annum. In case more than one instalment is defaulted consecutiverly for a period of two months, the prized subscriber will lose future dividends form the date of default. They shall also lose the benefit of paying the future subscription in instalments and they shall become liable to make a consolidated payment of all the future subscriptions inclusive of the defaulted instalment with interest @ 36% per annum from the date of default.

  • If a non-prized subscriber fails to pay the instalments on or before every auction date, he will be permitted to pay the same within 15 days thereof with a penalty equal to interest at 36% per annum, and if he fails to do so he will not be entitled to the dividend in respect of the said instalment and the Foreman will be entitled to enforce payment of penalty, in case the sunscriber fails to pay the subscriptions for two consecutive instalments he shall be liable to be removed from the list of subscribers and the foreman at his option shall be entitled to substitute a new subscriber in the place of such defaulting subscriber.

 Receiving the Prized Amount:

  • A Prized Subscriber or his nominee shall receive from the foreman the prize amount within the date of next succeeding instalment after furnishing to the satisfaction of the foreman sufficient security/surity for the payment of future subscriptions. The prized subscriber can furnish any the following securities.

    • a. Unencumbered immovable residential(non-agricultural) properties with clear title and adequate value and Nill encumberance for the period as required by the legal Adviser of the Foreman.

    • b. Life Insurance policy, the surrender value of which should cover the future dues.

    • c. Subject to adequancy of security, promptness in payment and circumstances of the case, surities of three permanent Government employees or persons in Quasi Government or Public Sector undertakings or in reputed and leading Private Organisation, with a carry home pay depending on the chit value and to the satisfaction of the foreman. The salary Certificate should be bonafide and to the satisfaction of the Foreman.

    • d. Lien on Non-Prized chits on the basis of paid-up value(Net Subscription paid less Foreman's commission) in respect of Chit of the Subscriber or in any other name held in the same branch or in any other branch of our company. The holder of such chit where in lien has been marked shall not participate in the auction of the lien chit or receive payment until the liabilities on the original chit is fully paid.

    • e. Two established businessmen who have paid income-tax for five years immidiately preceeding the current year(in which case on account of the assets and liabilities and stock-in-trade of the businessman shall be made available to the foreman for checking), provided always that the foreman shall have absolute discretion in deciding as to the adequancy or acceptability of the surities offered.


  • In case the Prized Subscriber or his nominee fails to receive the prize amount furnishing sufficient security/surity the foreman shall deposit the amount in an approved Bank and inform the fact to the prized subscriber and the Registrar.

 Discount:

The dividend if any, at every auction shall be distributed equally amongst all the prized and non-prized subscribers from out of the discount, less the foreman's commission.

 Foreman's Commission:

The foreman shall be entitled to a commission or remuneration of 5% of the chit amount at each instalment.

 Transfer:

Only on application by non-prized subcriber, the foreman may recognise the transfer subject to the provisions of Sec 35 and 36 of Chit Act.