What is a Chit Fund and the evolution of Chit Funds in India


The concept of Chit Fund started decades ago when a group of needy people found that getting a bank loan was too complicated, had unsure and indefinite cash flow, but had to meet big expenses. That was when chit fund came into existence. A set of families or friends would form a group or rather, a ‘chit’ and start a chit scheme. A trustworthy member would be elected to manage the chit. Each family, who would be a member of this scheme, would save/put in a fixed amount of money every month. There would be a monthly auction wherein the highest bidder would be sanctioned the chit amount. As the highest bidder foregoes maximum amount from the total collection, the amount foregone would be divided equally among members. This was named ‘dividend’.

People liked the idea of saving through chit and availing dividend every month. Not only this, chit had other advantages like easy joining, minimum documentation during bid etc. Moreover market fluctuations didn’t affect chits. Chits instilled the habit of compulsory saving for all categories of people which proved especially helpful to the middle class and the poor. Investing in chits helped people adjust huge payments without much hassle which otherwise would have been difficult. Slowly, it became an option for small scale industrialists, businessmen and small investors too, to avail easy finance.

Based on mutual trust, a mode of saving and a source of credit, chit funds evolved over the years only to become an enormous success in the market, despite an occasional tale of deceit and swindle here and there. It was through chits people found a way to invest ideally and profitably. Gradually, as groups became bigger and money involved became higher, small chit-fund companies formed and grew rapidly. And then to regulate chit funds, the government introduced the Chit Fund Act in 1982.

Today, we have many chit fund companies operating from decades with a lot of success. Built on unshakeable faith, most of the leading chit companies today have a variety of clientele from large industries and businessmen to housewives and clerks. Chit fund companies have helped people realize their dreams and given them many a memorable moment in their lives. Encouraging disciplined savings, providing a reliable source of fund for emergencies and financial eventualities, chits have helped the layman in more ways than one.

Shanthala Chits Pvt Ltd is a registered chit fund company since 1996 governed by the Registrar of Chits and abide by the Chit fund Act of 1982.

Here is a neat little infographic about how a chit fund actually works


Padma lochani

A simple human being who is thankful for being who I am, embracing my individuality and emerging stronger each day. I have a great zeal for life and try to add fun and frolic into mine as well as my dear ones’ lives. Am a member of the content marketing team of Shanthala Chits, Bangalore. Juggling between kids, kitchen, pets and work, I try to multi task – but not successfully all the time. I love travelling and am a book-worm.
Padma lochani

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