Frequently asked questions

It is a savings vehicle which enables participative savings. Each scheme has 20/25 members each of whom saves a fixed amount for a fixed period. Every month the scheme-runner known as the foreman, conducts an auction for the benefit of the members. It is run as a reverse-auction where the "prize amount" is bid on discounts to it. This discount is shared equally between the members. The foreman collects a fee for running the scheme. Each scheme is registered with the State Govt, as required under regulatory rules, thereby ensuring the governance and the safety of the members’ savings.

How does the scheme work?

Each chit scheme has 20/25 subscribers who contribute a fixed amount every month for a period of 20/25 months. The amount thus collected is auctioned and paid to the bidder who agrees to take the least amount. The money left is then equally distributed among the members. Thus you end up paying less than your normal monthly instalments!

Is My Money Safe?

Yes it is! Chits conducted are governed by the Chit Fund Act 1982. Thereby, it is regulated by the Registrar of Chits and your money is absolutely safe. The aggregate value of each chit scheme is to be deposited with the Registrar of Chits.

How does the scheme work?

Each chit scheme has 20/25 subscribers who contribute a fixed amount every month for a period of 20/25 months. The amount thus collected is auctioned and paid to the bidder who agrees to take the least amount. The money left is then equally distributed among the members. Thus you end up paying less than your normal monthly instalments!

Is My Money Safe?

Yes it is! Chits conducted are governed by the Chit Fund Act 1982. Thereby, it is regulated by the Registrar of Chits and your money is absolutely safe. The aggregate value of each chit scheme is to be deposited with the Registrar of Chits.

Why should I join Narithookkil Chit Funds?

This is a company registered under the Chit Fund Act, 1982. The activities of a registered chit fund company are registered by the Chit Fund Act making Narithookkil chits the 100% safest option. We offer multiple schemes that are designed to suit salaried individuals, professionals and business owners.

How is a chit fund a better saving option?

By joining a chit fund, a person is forced to save a small part of his income, to meet his planned/unplanned investments or expenditure. In case of contingency, borrowing from the chit fund is much easier, simpler, faster and cheaper. In case a person wants to save till the last, the return a subscriber gets by way of chit dividends is much higher.

What are the benefits?

Persons who want to save money and receive the prized/bid amount in the second half of the chit period, earn very much higher return (12-18% per year) than their periodic savings kept with a bank.

Those in need of money are able to raise money by receiving the prized/bid amount when they are in need of money. The interest or chit loss in such cases is very much less than the market rates.

All persons joining a chit group are forced to save a small amount of their income to finance their dream projects such as – purchasing a plot or building a house or meeting marriage expenses or buying domestic articles, or discharging an existing liability etc.

Each person who pays his periodic installments up to date is entitled to receive the prized amount at a period of his choice, after participating in a lottery/auction.

What are the benefits of receiving chit amount in the first few months, at a discount or loss?

Since the successful bidder, in the initial few months is allowed to use the chit amount, for his personal use ahead of others, he offers to take the chit amount at a discount, after calculation interest and cost of funds. It may be noted that a successful bidder withdraws more money from the company, than he had already paid, and repays the excess amount withdrawn, in periodic installments until completion of the chit period. The excess amount so paid is known as chit loss.

What is auction discount?

The difference between chit value and the amount at which a successful bidder takes a chit in a lottery auction is known as auction discount.

What is an auction?

Auction is a procedure for identification of the non-prized subscriber who wants to take a chit amount at the highest permissible discount. All non-prized subscribers who have paid their installments up to date are allowed to participate in the auction for bidding up to the highest auction discount, within a period of five minutes allowed for each auction.

What are the benefits to the Foreman/Chit Fund Company?

The chit fund company conducting the chit business also known as Foreman charges 5% of the chit value as commission or service charge for the services rendered by it. The foreman has to gather a group of persons to form a chit group, collecting money from each subscriber every month, arranging payment of prized money to one person each month and collecting money from prized subscribers etc is work for the foreman.

What action will be taken against defaulting subscribers?

Penalty is collected from all subscribers who make delayed payment of periodic installments. In case a non-prized subscriber defaults for a continuous period of three months, such subscriber will be removed. The actual amount paid by him in the chit minus company commission will be repaid to such defaulting subscriber, after completion of the cit period. In case a prized subscriber defaults for a continuous period of three months, a penalty of 6% per month will be collected and dividends will also not be paid to such defaulting prized subscriber. Legal action will be initiated against the said defaulting prized subscriber and his guarantors in court of law, for recovery of all dues.

Can I withdraw from a chit group after becoming a member?

When a subscriber withdraws, the foreman has to find an alternate subscriber in his place. Until then the chit fund company has to arrange funds on behalf of such a defaulting subscriber, for payment to a prized subscriber each month. Hence withdrawal is permitted, but the actual amount paid by the subscriber in the chit minus company commission will be repaid to such a defaulting subscriber at the end of the chit period.

How soon can I expect payment once I bid for the chit?

Payment can be expected after completion of documentation.

Who is a prized subscriber?

A subscriber who has lifted his chit or to whom the chit amount is paid is called a prized subscriber.

Who is a Non-prized subscriber?

A subscriber who has not lifted his chit or to whom the chit amount has not been paid yet is called a non-prized subscriber.

What is chit dividend?

Auction discount minus company commission (5% of chit value) is the total group dividend. Total group dividend is distributed equally amongst all the subscribers. This dividend so distributed is deducted from the next installment payable by the subscriber.

What are the income tax benefits by saving and borrowing using chits?

The chit loss can be deducted from the income from profession or business. The net surplus or dividends after completion of the chit period need to be offered as income, but some courts have ruled that this income is not subject to income tax.

What are the modes of payment?

Cash, cheques, demand draft, pay order and bank transfer are accepted modes of payment.

How many chits can I take in a chit group?

A subscriber can participate in not more than three chits in the same chit group.

Who can subscribe to chit funds?

Any regularly earning member of a family can become a member of the Narithookkil Chits community, as also business-persons, traders, institutions and entrepreneurs.

How do I become a member?

Narithookkil Chits has devised various schemes to suit everyone’s budget. Whether you are a salaried person, businessman, lawyer, architect or any professional, we have schemes to suit everyone’s needs. You can choose any of our schems and get in touch with us.