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Chit Fund – Is it an Ideal Financial Instrument?
Author(s) : Dr. B. JohnsonVolume & Issue : VOLUME 1 / 2013 , ISSUE 1
Page(s) : 6
Abstract
Chit funds are considered as the poor men’s banks in India. Individuals who live in rural and semi-urban areas find chit fund as a means of finding solution to their financial problems to a great extent. Presently, the chit fund business in India is governed by Indian chit fund Act 1982. Chit funds operate in different forms like private organized institutions, private unregistered institutions, co-operatives and government sector institutions. The various principles of chit fund business are equity, assurance, probability, co-operation, reward and legitimacy. Chit fund is a dual financial instrument as money can be invested in it in anticipation of a fair return and it offers loan facility, on the guarantee of the amount invested, at a reasonable rate of interest.
Keywords
Chit Fund, financial instrument, prize money, net rate of return
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