CHITS provides a good source of finance for different type of people viz., small investors, businessmen, small scale industrialists etc. CHITS is a good means of savings for any contingency requiring substantial amount. It serves all persons whether they desire for savings or borrowing to meet extraordinary expenses on special occasions like Marriages, Construction of houses etc.,
Adequate care is necessary to choose a suitable Group. The selection of a particular Group, largely depends on the subscriber’s capacity to provide surplus funds month after month from his normal income for this purpose. This aspect is very important for the subscriber as well as the company’s point of view to avoid any embarrassment at the time of releasing the prize money or in releasing chit installments month after month.
1. What is a Chit?
It is a CONTRACT between the foreman, as the Promoter is called, and the subscribers, who join voluntarily. It is a FINANCIAL SYSTEM under which the periodical and regular savings of a group of subscribers are made available to each subscriber, a SPECIFIED AMOUNT every month (instalment) for a SPECIFIED PERIOD.
The Pooled funds every month are offered to the subscribers at monthly AUCTIONS and the subscriber who BIDS for the highest DISCOUNT is declared the PRIZE WINNER and given the PRIZE AMOUNT on proper security. A Prized subscriber also should continue to pay the subscriptions till the termination of the chit. The amount foregone as discount, less foremans commission is distributed among the subscribers as dividend.
2. What is a Chit group?
A Chit group refers to a specified number of members agreeing to subscribe a specified amount for a specified period. For example, 40 members, 40 months, Rs.500/- a month. The number of members and the number of months are to be the same.
3. Who is a foreman?
Any person under the Act responsible for the conduct of the chit and includes any Person, such as branch manager, discharging his functions.
4. Is the contract of the subscribers with the foreman valid for an indefinite period?
No. It is valid only for the duration of a CHIT GROUP and until the liabilities of subscribers to foreman or vice versa are discharged or paid in full.
5. What are the benefits of chit Subscribers?
a) To save in small amounts to receive a lump sum during the period of chit.
b) To borrow the future savings in advance. Some subscribers join chit funds to borrow and others to save.
6. What is Chit agreement?
The Chit agreement is a contract between the foreman and the individual subscribers to a chit group. It is a set of bye-laws or regulations dealing with the procedure for the conduct of chits. It will be signed in duplicate, duly witnessed. The chit agreements shall contain the name and address of the subscriber, the number of tickets allotted to him, the number of instalments and the instalment amount payable, the interest/penalty for delayed payment, the probable date of commencement of chit and its duration, the manner of deciding the prize winner at each instalment, the maximum discount to be foregone at each instalment, the mode and proportion of dividend and foremans commission, the date, time and place of auction, the instalment at which the foreman is to get the chit amount, the name of the bank, the security to be furnished by prized subscriber etc., Though each subscriber is supposed to sign the chit agreement, in practice, each subscriber signs a declaration in the application form that he has read and understood the terms and conditions of the Chit Agreement. The declaration of all the subscribers are detached from the application form, pasted in a piece of paper and filed with the registrar.
7. How are the subscribers enrolled for a group?
The subscribers have to fill in an application form furnishing particulars of their names, residential and office addresses, approximate gross monthly salary, names of nominees and their relationship to them. They also have to sign the declaration that they have read and understood the terms & conditions of the Chit Agreement.
BENEFITS OF CHIT
1.1 A good source of Finance for all contigencies.
1.2 Way of saving or borrowing to meet Special expenses like marriage or building or purchase of a house or flat
1.3 Source of finance for businessmen
2. DETAILS OF GROUPS AVAILABLE ETC.,
2.1 Details of groups available and other information as to the mode of auction and nature of security required are available the branch.
2.2 The security indicated will normally apply for one chit .If the subscriber holds more than one prized chit in the same branch or other branches of the Company, the combined future liability will be taken into account for the purpose of security.
2.3 The subscriber may select a suitable group depending upon his capacity to pay monthly and also on his ability to provide adequate security, immovable or otherwise.
2.4 Subscribers may seek the guidance or the branch in all matters.
2.5 Right of admission to chits is reserved by management.
3. REMITTANCE OF SUBSCRIPTION
3.1 Subscribers must pay the monthly instalments on or before the due date either by cash or cheque or D.D to pariticipate in the auction. Cheques should have been encashed before the date of the auction for eligibilty to participate in the auction.
3.2 Every month, immediately after the auction (within 7 days) intimation cards containing details of bid amount in the last auction, monthly instalment payable , any payable du, date of next auction, due date for payment etc., are send to the subscribers. no-receipt of intimation card will not be accepted as an excuse for non-payment or belated payment.
3.3 Failure to remit instalments in time by both prized and non-prized subscribers will entail forfeiture of dividend besides being charged interest as detailed in chit agreement. In respect of non-prized subscribers, default in payment of monthly subscription will disqualify them from participating in the auction.
3.4 Cheques form outstation subscribers drawn on any bank which is a member of Banker’s clearing house only will be accepted at par.
3.5 If cheques given are dishonoured, future subscription will be accepted only in cash. Penalty charges by the Bank in respect of such dishonoured cheques will be recovered from the subscriber.
3.6 To facilitate subscribers, monthly instalments are being accepted in all branches and Service Centres in Tamilnadu even if the chit does not belong to that branch. Such a facility is only gratuitous. The Company however will not be held responsible if the remittance details are not received by the branch in which the chit is held from the other branch or service centre where remittance is made before the auction date.
3.7 The facility of payment of subscriptions in a branch other than the branch where the chit is held, will not be available to defaulted prized subscribers against whom awards have been passed by the Deputy Registrar of Chits. If however such subscribers pays such amount in “other branch” such amount will be treated as only as “on account” and not relating to any particular instalment.
3.8 Subscribers are advised to give only “Account Payee” cheques in the name of the Company. Issuing blank cheques or Self cheques to our collection agents should be strictly avoided.
3.9 In the event of a prized subscriber receiving a notice under Sec.33 even though he had remitted the uptodate instalment in another branch of the company, it is the duty of the subscriber to produce such receipt to the branch where his chit is held and reconcile the matter.
4. PROCEDURE FOR AUCTION
4.1 Eligibility for prize money is determined by auction. In all auctions commencing from the 2nd instalment, subscribers can bid upto a maximum of 40% only. if more than one subscriber offers identical discount, the prized subscribers will be determined by lot. The bid amount shall be in multiples of Rs. 50. the minimum discount foregone shall be not less than the foreman’s commission for the group.
4.2 The duration of auction will be 5 minutes. Specific time is assigned for each group on a specific date. If the auction date falls on a holiday or if owing to unforeseen cause the date and time have to be changed, such change of time/date will be notified individually and also in the branches.
4.3 Subscribers can participate either in person or through a duly authorised representative. Written authorisation is necessary.
4.4 The subscribers can also communicate offers in writting in a closed cover superscribing as : “Bid offer to be opened at the time of auction only, for Group No………. auction on ……………”
4.5 Telephonic/Telegraphic offers are not accepted. Original receipt should be produced at the time of auction, if cash payment of subscription is made on the date of auction.
4.6 The request for offer/ tender/ Inclusion in lot should be presented only at the branch in which chit is held.
4.7 Whenever a non-prized subscriber has given his chit under lien to another prized ticket, such non-prized subscriber can participate in auction only when the liabilities of the prized ticket are fully paid or alternative acceptable security is offered and the lien is lifted.
5. Subscribers who had given standing offers should ascertain the trend of bidding and modify their offers if necessary.
5.1 Distribution of Dividend
5.2 5% of the chit value shall be deducted from the amount towards foreman commission and the balance distributed as dividend equally among all eligibile subscribers in all chts started after October 2008. The dividend will be adjusted in subscription for the next instalment. As per the present policy four groups with 30,40,50 and 60 months duration will be floated by our branches.
6. RELEASE OF PRIZE MONEY
6.1 The prize money will be paid to the successful subscriber on a working day before the next auction date on the basis of adequate and satisfactory security, offered to cover the combined future liability of all chits held by the subscriber in all branches of the company.
6.2 Prize money will be released by “A/c Payee Cheques” only . If payment is desired through Bank draft by outstation subscribers, it will be obtained deducting D.D Commission provided a branch of the bank with whom the company is having account is functioning there
6. With effect from 01-06-2007 ‘Service Tax’ is leviable from the Prize Money received by every Prized subscriber at the rate of 12.36% on the foreman’s commission for the Prized Chit. The rate is liable to change as per government orders.
7. CHANGE OF ADDRESS
Any change in the address of a subscriber prized and non-prized and gaurantors in the case of prized chits should be promptly intimated to the Foreman under acknowledgement. In the absense of such proper intimation the Foreman is not responsible for non-receipt of any intimation or notice from the Foreman in connection with their chit.
Subscribers are advised to keep watch over the trend of bidding every month and at a convenient point of time, they can bid the chit. There are opportunities for investing the Prize Money in attractive Company deposits to ensure a good return. Shriram Investments Advisory Division will be able to offer you valuable guidance in respect of acceptance of deposits by Shriram Group Companies and subscribers can avail their free service without any obligation.
The above information is indicative of the broad procedure followed. For all Purposes, the provisions in the Chit Funds Act, 1982 the Rules framed thereunder and the Chit agreement will be final. Chit branches will provide you with all information required. Sometimes you may face certain difficulties or grievances against the branch. You may refer such cases to the concerned Divisional / Regional Manager / Zonal Chief Executive for immediate attention. Still if you find any difficult you may write to :
Navachethana Chits Company Pvt, Ltd.
Beauty Plaza, Ground Floor,
Balmatta Road Opp. City Light Building,
Mangalore – 575001,
Karnataka – INDIA.