1. Ensure it is a registered Chit funds
Chit funds are a popular savings and investment tool in India, but before you invest your money in one, it's important to make sure it is a registered chit fund. This will protect you from fraud and ensure that your investment is safe. To do this, you can check with the state registrar of chits to see if the fund is registered. You should also confirm that the fund has a valid certification from the Chit Fund Act.
2. Prior Sanction of Chits
The chit fund business is regulated by the Chit Funds Act, 1982. Prior sanction of the Registrar is required to commence any chit fund business. Prior sanction of chits means that a chit fund company must get approval from the Registrar of Chits before it can start operations. This is to ensure that the company is reputable and will not engage in any fraudulent activities.Sanctioned chits are also subject to ongoing supervision by the Registrar, to ensure that they continue to meet all the required standards.
3. Deposit with Registrar
The company deposits an amount equivalent to the chit value with the registrar of chits. The registrar provides a security to the company in the form of a surety or a bank guarantee for the full value of the chit. In other words, the registrar acts as a trustee for the chit fund subscribers.
4. What is the Foreman’s commission
Under the Chit funds Act, the 'foreman' is the person or entity responsible for managing the chit fund. He is entitled to a maximum commission of 5% of the chit amount.
5.Reports
The chit fund company is required to submit monthly reports detailing their activities to the concerned authorities. These reports contain information on the number and value of chits issued, as well as the names of the subscribers. They also provide information on the amount of money collected and the amount of money paid out.
