Chit Funds is a Non-Banking Financial Institution originated in India which comes under the RBI Act 1934. These companies are governed by the Chit Fund Act 1982. “Chit” as characterized by the act, implies an exchange by the method of which a foreman goes into a concurrence with various subscribers that all of them will buy in a specific amount of cash in periodical portions over some period of time i.e.
Chit funds are a traditional means of savings and borrowing in which members or subscribers agree to contribute a fixed amount of money for a fixed duration of time. The total amount collected (by foreman) is then auctioned and given out as prize money to the member or subscriber in need. So, this allows the members to save a part of their earnings for the times when needed.
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