How it works:

 
 

Transperency in chit operations

• Chit is a financial product which blends the advantages of both investment and borrowing.

Concept: Under a Chit, a group of persons join together to contribute specific sum of money periodically (monthly contribution is most common). The individual/institution who/that has undertaken the responsibility of the organizing and conducting the Chit and assumes the associated responsibilities and risks is called ‘Foreman’. The other persons who contribute the money periodically are known as ‘Subscribers’. The money paid by all the subscribers every month or in any periodical interval will be pooled together which is called as ‘Chit Value’ and all the subscribers have right to bid for the chit amount by means of open auction conducted for the purpose. The subscribers who are willing for bidding the chit amount have to be prepared to forego a portion of the total amount to which he is otherwise eligible for and that portion is known as the 'Discount'. The maximum bidding percentage will be 40% of the Chit value and minimum is 5% of the chit value which is Foreman’s commission. This foregone amount by the subscriber is utilized to distribute among all the subscribers of the chit group in proportion to their tickets in the form of 'Dividend', after deducting 5% of the Chit value towards Forman's Commission. The successful bidder is called as ‘Prized Subscriber’. The money which the prized subscriber is eligible for minus the discount forgone is called ‘prize money’ which will be disbursed to the prized subscriber after he/she produces the adequate security for the future liability as per the Company norms. This process is being repeated every month and every month there will be one prized subscriber. The prized subscriber has to continue paying the installments till the termination of the chit. (Security Norms)

Those members who do not want to bid and want to just contribute to the chit till the end can do so. When there are no bidders for any particular auction, one of the non-prized subscribers will be picked as Successful Bidder through lucky draw. The monthly dividends accrued for the whole duration of the chit are the returns on investment for the monthly deposit made to their accounts.

• In case of ‘MSIL Chits’, MSIL is the ‘Foreman’

• Chit Groups with different denomination and value will be started from time to time as per the demand from the public.

• The number of subscribers in each group will be equal to duration of the Chit. For ex: 40 months chit will have 40 subscribers