Chit Fund Registration and Management Services

Chit Fund

Chit Fund is the oldest indigenous financial institution in India. The origin of chitty or kuri or chit fund is traceable beyond more than a century in the rural parts of Southern India. Periodically, a fixed measure of grain was deposited with a trustee and received back when sufficiently large quantity was collected. The needy person was ascertained through draw of lots. The word 'chit' suggests its origin. Chit means a written note on a small piece of paper. Since the winner of the Chit amount was to be ascertained though draw of lots, it involved writing of names of eligible members on separate chits, as in a lottery. The Scheme thus came to be known as 'chit funds'. Its equivalent in Malayulam 'kuri' is derived from 'Kurippu' which is a synonym of chit.

The trustee's reputation for honesty attracted more savers to him. In the earlier stages when the idea of modern banking had not reached the people, chit fund institutions developed quickly and spontaneously. It was an expression of co-operative efforts of mustering savings through instalments and advancing the pooled savings as loan to the members with facilities of repayment in instalment. With the growing importance of commerce and industry and the consequential rise in the population of towns and cities, chit fund was brought to the urban areas.

Under the modern times chit fund as acquired a form of financial institution operated, governed and regulated by the legislative statute "The chit Fund Act, 1982" and rules framed by the states. Object of legislation is to regulate the conduct of chit funds by requiring the foreman to obtain permission of competent authorities before a chit fund can be started, stipulating security to be provided by the foreman to the Registrar, detailing his rights and obligations and providing for punishment for infringement of law. No foreman can start a chit fund until the Registrar is satisfied about the bye-laws of the fund and the security offered by the foreman.