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Such chit fund schemes may be conducted by organised financial institutions or may be unorganised schemes conducted between friends or relatives. There are also variations of chits where the savings are done for a specific purpose. HISTORY The chit fund schemes has a long history in the southern states of India . Rural unorganised chit funds may still be spotted in many southern villages. However, organised chit fund companies are now prevalent all over India. ''TBD'' EXAMPLE Functioning of Chit funds are better explained using an example. Take a typical chit fund with 25 members contributing Rs.100 per week. This fund will run for 25 weeks. On the first week all members will contibute Rs.100. An auction meeting will be conducted, and the foreman of the chit fund will preside over it. The total amount will be Rs.2500. The auction will start with this amount. Bidders will start bidding by discounting this amount. Let us consider that lowest any person bids is Rs.2150 (a discount of Rs.350). This amount (Rs.2150) is given to this winning bidder. Rest of the amount is divided by 25, bringing the discount per person to Rs.14. This discount amount is returned back to each member. Sometimes a part of this may be kept by the foreman as service charges, usually in organised chit funds. ORGANISED CHIT FUNDS Chit funds in India are governed by various state or central laws, like Travancore Chit Act of 1945, Chit Funds Act, 1982 and Madras Chit Fund Act, 1961. Organised chit fund schemes are required to register with the Registrar or Firms, Societies and Chits. SPECIAL PURPOSE FUNDS Some chit funds may be conducted as a savings scheme for specific purpose. An example is the Deepavali sweets fund, which has a specific end date - about a week before Deepavali. Neighbourhood ladies will get together to pool their savings each week. This fund will be used to prepare sweets in bulk just before the Deepavali festival, and the sweets will be distributed to all members. Preparation of Deepavali sweets may be a time consuming and costly activity for individuals. Such a chit will reduce the cost, and relieve the members from excess work from an already tense festival season. Nowadays, such special purpose chits are conducted by jewelery shops, kitchenware shops, etc. to promote their products. EXTERNAL LINKS
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