Chit Fund

A Chit fund is a kind of savings scheme practiced in India.
A Chit fund company means a company managing, conducting or supervising, as foremen, agent or in any other capacity.Chit fund is a traditional financial scheme carried out based on trust between operators and members, which prevailed even before formal banking began. Unregistered chit funds, whose chit value exceeds Rs. 100, are illegal in India.


 According to Section 2(b) of the Chit Fund 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 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".

How it works:
Different chit funds operate in different ways; and there are also many fraudulent tactics practiced by many private firms. The basic necessity of conducting a 'Chitty' is a group of needy people called subscribers. The foreman - the company or person conducting the chitty - brings these people together and conducts the chitty. The foreman is also the person responsible for collecting the money from subscribers, presiding over the auctions and keeping records of subscribers. He is compensated a fixed amount (generally 5% of gross chitty amount) monthly for his efforts; other than that the foreman does not have any specific privileges, he is just a subscriber of the chitty.




http://www.thehindu.com/news/cities/bangalore/chit-funds-or-cheat-funds/article4733764.ece

http://www.youtube.com/watch?v=5t5t0TzKWfU&feature=share