CHIT FUNDS: ISSUES & CASES1
INDIAN INSTITUTE OF PLANNING & MANAGEMENT
ISSUES & CASES
Submitted by :
NAME : KAUSTAV MANNA , SHRUTI BAGARIA , BALJIT SINGH BATCH : PGP/SS/IIPM/11-13
in his turn. According to Section 2(b) of the Chit Fund Act. What is Chit Fund ?
A Chit fund is a kind of savings scheme practiced in India. A Chit fund company means a company managing. as foremen. 1982. There are also variations of chits where the savings are done for a specific purpose. conducting or supervising. The chit is registered with the Deputy Registrar of Chits and a registered number is obtained. chits as defined in Section 2 of the Chit Funds Act.
. The Foreman promotes and conducts the Chits as per the regulations of the Chit Funds Act and Rules. 1982. 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" Such chit fund schemes may be conducted by organised financial institutions or may be unorganised schemes conducted between friends or relatives. agent or in any other capacity.CHIT FUNDS: ISSUES & CASES2
: SRPF 1 T3
I. chitty. A collection of members called a chit group makes their contribution in the form of money to collect a chit amount and they bid in an auction to be awarded with the prized money which is equal to the chit amount the discount and the foreman's commission. "Chit means a transaction whether called chit. chit fund. kuri or by any other name by or under which a person enters into an agreement with a specified 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 instalments over a definite period and that each such subscriber shall.
he is just a subscriber of the chitty. and there are also many fraudulent tactics practiced by many private firms. For example if the auction is settled on a sum of 40. and so on. 50 is the duration of the chitty in months and 50.000 is the maximum sum assured.000 in the above example. every subscriber come together for the auction/lot. as there must be (not more or less) one subscriber to receive the price money every month.000 -
. that is from 50.: 1000 * 50 = 50. is equally distributed among subscribers or is deducted from their monthly premium. As per Kerala chit act. The chitty starts on an announced date. lot are conducted and the 'Lucky subscriber' get the prize money for the month. He is compensated a fixed amount (generally 5% of gross chitty amount) monthly for his efforts. then a reverse auction is conducted where subscribers open-bid for lower amounts. If there is no person is willing to take the minimum sum. When there are more than one person willing to take this minimum sum.g.CHIT FUNDS: ISSUES & CASES3
II.000 >> 49.000 >> 48.000 (50. presiding the auctions and keeping records of subscribers. the minimum prize money of an auction is limited to 70% of the gross sum assured that is 35. that is the difference between the gross sum and auction amount.000. then the auction discount of 10.
How Chit Fund Works?
Different chit funds operate in different ways. other than that the foreman does not have any specific privileges. The basic necessity of conducting a 'Chitty' is a group of needy people called subscribers. The foreman .brings these people together and conducts the chitty.000. Foreman is also the person responsible for collecting the money from subscribers.000/-. The duration also equals the number of subscribers. Where 1000 is the maximum monthly contribution needed from a subscriber. In both the cases the auction discount. The general pattern of the chitty can be readily noticed by a simple formula: Monthly Premium × Duration in Months = Gross Amount E.the company or person conducting the chitty . The person bidding lowest sum get bid amount.
000) is divided by 50 (the total number of subscribers) and every one gets a discount of 200.
.CHIT FUNDS: ISSUES & CASES4
40. The same practice is repeated every month and every subscriber gets a chance of receiving some money.
on Monday. She will be produced before the Judicial Magistrate Court on Wednesday. Recent Chit Fund Scams/Frauds
Wednesday. They have been remanded in judicial custody after their bail pleas were rejected. 63. including the manager of Laxmi Cooperative Services. from Thoothukudi district in Tamil Nadu.5 crore in the name of the chit fund and had been absconding since November 2011.
Tuesday. they nabbed the five fraudsters from a hotel while they were interviewing a few candidates for employment in their organisation. Bhadrak and Balasore districts.2012
In yet another instance of chit fund fraud. Sambalpur. The complainant who was also working there alleged that the senior officers were engaging the women employees in sex trade. They were just asked to sign on a bond paper of Rs 100 and submit voter I-cards to avail the loan. Sujit Mohapatra and Priyabrata Behera. led by Kalamassery CI Sanal Kumar and Thrikkakara Sub Inspector Abdul Sathar arrested the accused with the help of Tamil Nadu Police. A police team.Police said the organisation had branches in Nuapada.Police said acting on a complaint lodged by one Kalpana Mohanty.650 from each depositor as security money to pay them Rs 1 lakh as loan within a week without any security.Sahadevkhunta police station IIC Manas Deo said the organisation had collected more than Rs 30 lakh from at least 300 persons in three districts in the past six months. The organisation has its branch at BC Sen Road in Balasore town. Rabi Ranjan Biswal. Mayurbhanj. According to the police. the arrested person had been living in Thrikkakara for the last 15 years. April 18. They have been identified as manager Kishore Kumar Mohanty.CHIT FUNDS: ISSUES & CASES5
III. The agents of the organisation had collected Rs 10. 2012
Thrikkakara Police on Tuesday arrested a woman who had been swindling money from several people in the name of a fake chit fund. Jyotsna Jena. Police have arrested five persons. Jajpur. She allegedly duped people of Rs 1. a native of Kollam. after receiving information that she was living in Thoothukudi.
. people in Balasore. Cuttack. She has been identified as Cherupushpam. June 07. the IIC said. Bhadrak and Mayurbhanj districts have been duped by a cooperative organisation which had promised them loans at low interest rate.
said the Kalamboli police. which works out to Rs92. they would get an interest of Rs16. Two years back. investors plan to gather at the Kalamboli police station for a speedy probe in the incident. 2012
The Kalamboli police have filed an FIR against the city-based Jain couple allegedly for duping innocent farmers and common people to the tune of Rs 50 crore in a chit-fund scam.000 to the investors for the period of three months. they launched the “Suryanshi PNS” scheme. who is a chartered accountant. an MBA in finance. for which they first networked PAN card agents and then approached the farmers in 25-odd small villages in Navi Mumbai to lure them with offers. Soon.CHIT FUNDS: ISSUES & CASES6
Police are in search of the managing director of the organisation Gunanidhi Behera who hails from Nuapada district.
Saturday. with “a group of 96 people from rural areas of Navi Mumbai cheated by the couple having filed complaints with us”. in their bid to make quick money. and Sandhya. Balasore police had busted a multi-crore chit fund scam and arrested five persons including Bollywood producer and actor Naseer Khan and his aide. The farmers were told that if they paid Rsone lakh for a year. they found it difficult to manage the accounts and subsequently announced on their website that they are closing the firm. quit their jobs with a famous finance company to float their own share trading firm. To keep their promises.000 a year over their original amount of Rs1 lakh. On Saturday. February 25. Complaints have been pouring in by the day.According to the FIR registered against Rajiv Jain and Sandhya Dongre-Jain under Section 420 act of IPC. Soon.000 a month. the Jains managed to give Rs16. Rajiv.