a good source of finance for different type of people viz., small investors,
businessmen, small scale industrialists etc.
- a good means of savings for any contingency requiring substantial amount.
- all persons whether they desire for savings or borrowing to meet extraordinary expenses on special occasions like Marriages, Construction of houses etc.,
Chit fund is an Indian concept, which has now won universal acclaim. In the villages of Kerala, few centuries ago, a small group of farmers operated a unique scheme.
Each farmer gave a fixed quantity of grains periodically to a selected TRUSTEE. The Trustee, after keeping aside a portion for himself, gave the rest to a member of the group to help him to meet his social commitments and other needs.
The farmer who received the lot continued to give the fixed quantity till every member of the group received his lot.
Origin of Chit Funds
The chitfund also known as chitty, or kuri in India and ROSCA (Rotating Savings and Credit Association ) internationally, occupy a unique position in the financial system of India. This is an indigenous system which has its origin in India; particularly in the southern region. This century old system can be traced as the brain child of agriculturists of those times, who formed into small groups and pooled their harvest of grains half yearly or so and appropriated it by turn. Later, money substituted grain, when this system attracted the imagination of the public at large, who identified it as an ideal mode to meet their financial needs. Thereafter, the scheme underwent yet another growth to be adopted at commercial level. This stage brought about the involvement of large sums of money in the system and came very handy to trade, commerce and industrial activities.
From a humble beginning to its present gigantic growth, the chitfund has now attained the status of a quasi banking system, and has turned out to be a boon to the aggressively growing economy of the nation. According to a report of Asian Development Bank, the turn over of some 1066 chit fund companies, as far back as 1986 was, an astounding Rs.81.6 billions. From individuals to large institutions like Public Limited Companies, now functioning as chit promoters, remarkably well cater to the financial needs of different strata of the society.
- Because of its dedicated efforts AIACF has come to be recognised by the Government as the representative and spokesman of the chitfund fraternity. Reserve Bank of India, the advisory body to Government in matters relating to chit funds, has also extended due recognition by consulting AIACF whenever policy decisions on chit funds are made.
- In 1997, the Reserve Bank of India brought "The Amendments of Non Banking Finance companies Act" which fixed a minimum capital requirement of Rs. 50 Lakhs which also included chit fund industry. Later parliament reduced the minimum capital to Rs.25 Lakhs which was again enhanced to Rs. 2 Crores. The powerful lobby by the All India Association of Chit Funds resulted in the exclusion of chitfund industry from the purview of the amendment resulting in the chit fund industry to retain the capital at Rs. 1 Lakh.
- As a crowning glory, Parliament has acceded to the relentless pursuit of AIACF and has relaxed certain stringent restrictions in the law governing chit funds. As a result, ceiling on volume of business permitted to individuals and partnerships has been enhanced by four folds and six folds respectively