HOW IT WORKS?

HOW IT WORKS

It has always been our endeavor to give you the best services possible.
This Frequently Asked Questions & how Chit Funds will work has been designed with a view to provide information about your chit subscription. It attempts to answer questions you may have now or in the future. We are sure you will find it useful.

What is a Chit ?[ top ]

• It is a contract between the foreman, as the Promoter is called, and the subscribers, who join voluntarily.
• For example, 20 members, 20 months, Rs.5000/- a month. The number of members and the number of months are to be the same.
• Eligibility for prize money is determined by auction. In all auctions commencing from the 2nd installments, subscribers can bid up to a maximum of 40% only. if more than one subscriber offers identical discount, the prized subscribers will be determined by lot.
• The Pooled funds every month are offered to the subscriber’s 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 foreman’s commission is distributed among the subscribers as dividend.

What is a Chit group?[ top ]

• A Chit group refers to a specified number of members agreeing to subscribe a specified amount for a specified period.
• 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 (installment) for a Specified period.

Who is a Foreman?[ top ]

• Any person under the Act responsible for the conduct of the chit and includes any Person, such as branch manager, discharging his functions.

Is the contract of the subscribers with the foreman valid for an indefinite period?[ top ]

• 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.

What are the benefits of chit Subscribers?[ top ]

• To save in small amounts to receive a lump sum during the period of chit
• To borrow the future savings in advance. Some subscribers join chit funds to borrow and others to save.

How are the subscribers enrolled for a group? [ top ]

• 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.

Why should I subscribe to a Chit Scheme ?[ top ]

• Financial planning is mandatory for every one. It is sensible to earmark a small amount from your business every month as a reserve to face any contingencies in business like price fluctuations, change in government policy, vehicle purchase, new competition, or capitalisation in plant or machinery.
• Similarly, social events need to be financially planned. Housing, education, marriage and travel have all become finance intensive.
• Subscribing to chit schemes is to create a generalised contingency reserve, which may be liquidated in case of any business or social contingency. Target money is not bound by end-use considerations.
• The biggest advantage that the institution of chit funds has to offer is that you can plan in advance for any forthcoming capital outflow even if you are not aware as regards the exact timing of such outflow. For example, a marriage may materialise in 5 months, or 15 or 25 months. That the event is certain, timing is not. Planning must be done accordingly.
• The second advantage is when the capital outflow is large, chits offer flexibility of breaking this large requirement into fragments. Membership of a small chit may be taken after convenient time gaps so that installment outflows are easily managed. The sum total of all these small chits may, at a specified time, solve the need for a larger, one-time requirement.
• Whatever be your financial requirement, before deciding on the exact financial plan it is always better to understand what the system of chits have to offer.

Can I plan for my car, computer or any consumer durables through chits ? Will it be more expensive than other financing alternatives?[ top ]

• Financial planning for capital goods purchase may be tailored through chits in a manner that is flexible and convenient.
• Chits are more a product of advance planning and financial discipline. No wonder then that chits work out to be less costly than various other means of financing.

Can I become a part subscriber to a Chit ?[ top ]

• Yes, if you may so desire.
• There may be part subscribers in a husband and wife, brothers or members of the same family, partners of a firm, or any set of like minded people.
• The prize amount of a chit, with part owners, may go to all the owners equally, to the first named owner wholly, or in such a manner as decided by all the part subscribers jointly.
• A chit with several part subscribers can only be prized when decided jointly by all together. Any one part ticket holder cannot participate in an auction for his share of the chit.

Can a non-working housewife take up membership?[ top ]

• If a lady is non-working and has a regular source of income like interest income or rent income, she may subscribe to a chit.
• Sometimes ladies take tuitions, design dresses for boutiques and make sketches or paintings of commercial value. This income must be channelised properly.

What is my subscription number ?[ top ]

• Every subscriber of a chit is allotted a unique "Ticket-Number". A Ticket Number is never repeated and is a complete reference in itself.
• If a subscriber has subscribed to several chits then for every subscription there will be a separate TICKET-NUMBER.
• A subscriber must quote his Ticket-Number to get a prompt and speedy reply to his queries.

How do I get to know my monthly dues ? [ top ]

• Every subscriber to a chit is mailed (or faxed if so desired) a monthly statement of account which reaches him latest by the 15th day of every month. Your statement indicates the dues payable by you by the "latest pay-by date", and you are expected to clear your dues by that date.
• The statement also acknowledges your receipts during the one month preceding the print date of the statement. Cash receipts are issued at the time of actual receipt and these are not acknowledged in the statement.
• If you have several chit memberships and you wish to have the dues and acknowledgments of all these chits reflected in just one statement, such a request may be entertained.
• Even if the intimation does not reach you for some reason, you are expected to clear your subscriptions by the due date.

How do I send my monthly dues ? [ top ]

• We have made arrangements that our representatives reach you for all your requirements. Our customer friendly staffs will always be available at branch for any assistance that you may require.
• It is within our policy to accept all your future subscriptions in a chit through post dated cheques and in most cases our subscribers prefer this simple system.

What should be my mode of payment ?[ top ]

• It is best to remit all your subscriptions vide a cheque crossed 'A/c Payees Only'. There is no substitute to a bank transaction and cash payments should only be an exception and not a rule.
• If a cash payment is made, always insist on a receipt from the representative who accepts the cash. Cash receipt books issued to the representatives are always offset printed or system generated in serial and it is in your own interest to get a valid, signed receipt for your cash payments.

What if my subscription is delayed beyond the last pay-by date ?[ top ]

• Non payment by the due date entails late-fees and even cancellation of dividend, as per the terms of our agreement.
• Repeated delays in subscriptions or other irregularities like dishonored cheques may adversely affect you computer credit rating with the company.

How do I participate in a Chit auction ?[ top ]

• Subscribers who have a good payment record and up-to-date subscriptions are cleared, are entitled to bid in a chit auction.
• The time, date and venue of auctions are fixed at the time of joining the chit membership. Your monthly statement also provides this information.
• The duration of auction is five minutes. The bidder who bids the maximum is announced as the prized bidder in that auction. If there are more than one bidder offering the maximum permissible bid or else all the bidders are offering a similar bid, then the prized bidder is determined by a draw of lots.
• You may participate in an auction in person, through an authorised representative or by way of a written request.

Does the auction take place every month ?[ top ]

• Not necessarily.
• The pattern of auction is decided at the time you join the chit series. While the conventional chits have an auction term of one month, this is not the rule. We may have series that have auction terms of a fortnight or a week.
• The time gap between two auctions determines the extent of liquidity of that series. The high frequency, weekly auction chits, offer the opportunity to bid for your amount almost instantly.

What if I want to cancel my subscription ? [ top ]

• You must remember that only unprized chits can be canceled. Prized chits can be terminated only in special circumstances and on the condition that all pending and future installments in the chit are paid.
• As an unprized subscriber if you wish to withdraw your subscription, please notify us in writing. As per the bye-laws and agreement for the chit, the actual subscription will be refunded to you after deducting 5% of the chit value or 25% of the subscriber's own subscription whichever is less. If your payments have been timely, the Foreman may consider to relax this deduction. The refundable amount is made available at an early date, as per the terms of our agreement.

Can I introduce outsiders (non-members) for any benefits ?[ top ]

• If your friend requires some financial adjustment then you may discuss the same with the Foreman. On being satisfied the Foreman may give the consent to a financial proposal in part or in full.
• Members of Popular Chit - manufacturers, traders, suppliers of services - at various times, have come out with discount offers on their products for the other members of Popular Chit. This privilege may be passed on to your close friends or associates, in most cases.
• And if the person is really close, go ahead and do a good deed. Enroll him as a member of our schemes, and let him be grateful to you forever after.

When do I renew my chit membership ?[ top ]

When to subscribe or renew a chit subscription is clearly a function of how well you plan and organise yourself.

How do I take care of the chit accounting in my books of accounts ?[ top ]

• Book-keeping for chit transactions requires some thinking. The method of book-keeping may also have a bearing on your tax planning. It is important to consult a CA before you finally decide on the method you choose.
• If you have more than one chit subscription, every chit must be accounted for separately. Further, the method of accounting must remain same for all the chits.

Do you deduct any TDs from earnings in chits ?[ top ]

• None, under the present income-tax provisions.

How do chits compare with bank schemes ? [ top ]

• Chit schemes are organised on a personal basis and have lesser stringencies involved. Decision making is comparatively faster.
• The income from chit schemes compare favorably with the incomes from bank schemes in many cases.
• Liquidity is compromised when you make a FD or join a recurring deposit scheme. You may get a loan up to 75% of your deposits. In chits, the prize amount is always more than the amount of deposits made in the chit.
• Banks schemes and chit schemes are two absolutely different financial instruments offering benefits in their own different ways. Chit schemes are unique and as such the two may not be comparable.

Do I get any other regular information connected with my chit membership ?[ top ]

• At Apollosaral Chits, we believe that you are special. Utmost care is taken so that all relevant and updated information is made available to you. For this purpose we also maintain a highly specialised on-line computer system.
• You may have the year-end statement of account on demand. Certificate of amounts subscribed and prize details are also made available at year end or termination of chit. These are provided within three clear working day of your making the request.
• In addition to the above a regular feature packed newsletter is mailed to all the subscribers.
• At times, small information booklets or leaflets are made available to provide additional information on subjects encompassing income-tax or finance.

What do I do if I have to move ? [ top ]

• It is important that any change of address is immediately conveyed to us. To eliminate any potential communication error, it is essential to send your request in writing, quoting your ticket number.

What if I have any other questions ? [ top ]

• We invite inquiries and comments from all our subscribers. If you have any questions or suggestions, please write to us at the address given below or Call us.

The Auction Procedure [ top ]

• The institution of "Chit" is firmly based on a "system" that is the engine that transforms the scattered small savings of our economy into capital pools usable for productive enterprises. This is the "System" that generates a savings dividend for all the subscribers of the chits and ensures that the demand for money in the economy is met with supply at a rate of interest that reflects and supports the market reality and not on any predetermined, superficially imposed, administered values as in other financial institutions. This "System" is the auction procedure that is the backbone of the financial mechanism of chits.
• The auction procedure makes the chit schemes an economist's delight, a financial product based on market mechanics in such a pure form as to be unparalleled by any other single financial product available in the economy.
• The auction procedure imparts a unique brand of flexibility to the chit scheme. The subscriber uses this technique to switch over from savings mode to borrowing mode at will. He is able to earn interest from his savings, he can monitor the returns that he earns on his savings, he can evaluate the effectiveness of his returns in relation to other savings products, he can analyse the utility of funds at that rate of interest and he can make a shift from the savings to the borrowing mode. The inherent flexibility of the system has prompted many businessmen to term chits as an "Integrated financial support system".
• Many financial analysts perceive the auction procedure as the core that assumes a very important psychological element. The uniqueness of the system to provide to the subscriber a lump sum pool of capital buffer in the time of emergency needs has prompted the financial analysts to name chits as an "Insurance against event uncertainty"

Tips on Auction Procedure [ top ]

• Chit Auctions usually take place in specially designated 5 minute duration.
• Auctions take place at regular specified intervals at a fixed date, time and venue.
• The date and time of the Auction must be known to every subscriber to help him make the best use of the flexibility of the chits.
• The bidding in the Auction has to be in particular range. There are specified limits on maximum and minimum bids that can be entertained.
• The limits on bidding are pre-approved by the Registrar of Chit Fund so as avoid any excessive loss to any needy subscriber. The subscribers must find out about these limits.
• Participation in the Auction can be by written advice if personal presence is difficult.