Chit Funds / Chitty / Kuri/ Miscellaneous Non-banking Company
Chit funds are essentially saving institutions. They are of various forms and lack any standardised form. Chit funds have regular members who make periodical subscriptions to the fund. The periodic collection is given to some member of the chit funds selected on the basis of previously agreed criterion. The beneficiary is selected usually on the basis of bids or by draw of lots or in some cases by auction or by tender. In any case, each member of the chit fund is assured of his turn before the second round starts and any member becomes entitled to get periodic collection again.
Chit funds are the Indian versions of Rotating Savings and Credit Associations found across the globe.
Chit fund business is regulated under the Central Act of Chit Funds Act, 1982 and the Rules framed under this Act by the various State Governments for this purpose. Central Government has not framed any Rules of operation for them. Thus,Registration and Regulation of Chit funds are carried out by State Governments under the Rules framed by them.
Functionally, Chit funds are included in the definition of Non- Banking Financial Companies by RBI under the sub-head miscellaneous non-banking company(MNBC). But RBI has not laid out any separate regulatory framework for them.
Cheating by Chit Fund company through fraudulent schemes is an offence under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. The power to investigate and prosecute lies with the State Governments.
For better identification of Chit Fund Companies, Rule 8(2)(b)(iii) of Companies (Incorporation) Rules, 2014 framed under the Companies Act, 2013, provides that if the company’s main business is that of a chit fund, its incorporation will not be allowed unless its name is indicative of that financial activity, viz., Chit Fund
As per Section 2 (b) of the Chit Funds Act 1982, chit means “a transaction whether called chit, chit fund, chitty, kuri or by any other name by or under which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical installments over a definite period and that each such subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be specified in the chit agreement, be entitled to the prize amount.A transaction is not a chit within the meaning of this clause, if in such transaction, -
- some alone, but not all, of the subscribers get the prize amount without any liability to pay future subscriptions; or
- all the subscribers get the chit amount by turns with a liability to pay future subscriptions;
List of Chit fund companies may be seen here.As at the end of March 2012, there are around 4256 Chit funds in India.
The list of registered NBFCs may be seen at
The quantum of deposits mobilized by these entities may be seen at
http://dbie.rbi.org.in/DBIE/dbie.rbi?site=statistics (under the tab “financial sector”)