Question 1

1. How does a chit operate?

Prashant Reddy · Accepted Answer

Chit is a mutually beneficial scheme where in a group of people contribute towards the chit value and one member from the group is given the prize amount and the dividends are distributed to all the other members. For Example if we consider a chit value of Rs.1000000/- with 40 members in the group each member has to contribute Rs.25000/- where by (40 X 25000) Rs.1000000/- is collected.

The auction is conducted in which the members participate and the person who discounts the maximum is declared as the prized subscriber. If there are more than one participant for maximum discount the Successful Bidder will be determined by way of lottery. Where in, the tokens bearing the numbers allotted to the members is put into a box and one token is drawn by any of the member present in the auction and thus, the member whose number is mention on the drawn token will be declared as the Successful Bidder.

35% is the maximum bid allowed, which means a person foregoes Rs.350000/- and the balance Rs.650000/- is paid to the prized subscribers. Out of 35% discount 5% goes to the company towards company's commission for conducting the chit and balance of the discount amount is distributed equally amongst all members of the group. That is 30 % is distributed to all the members by which next month they have to contribute (Rs.25000/- - Rs.7500/-) = Rs.17500/- only and Rs.7500/- is declared as dividend for that month.

When there are no maximum bidders, then the members will bid in the open auction that is conducted within 5 minutes for each group and the person who bids the highest is declared as Successful Bidder. For Example: Suppose, in the 10th month the Successful Bidder was declared at 30%, then all members of the group will get a dividend of Rs.6250/-each i.e. (Rs 250000/-divided among 40 members) and each member has to pay Rs.18750/- towards Installment.

Therefore the members have to pay the installment amount less the dividend, the dividends earned workout to be the interest on the Installment payments made by the member. Successful Bidder is supposed to give the required sureties depending on the future liability of the chit. Only Non-Prized Subscribers whose payments are up to date can participate in the auctions.

Every month there is a Successful Bidder who gets his prized amount on submission of required Guarantors. The prized subscriber has to continue to pay the monthly installments till the termination of the chit.

Question 2

1. How does a chit operate?

Prashant Reddy · Accepted Answer

Chit is a mutually beneficial scheme where in a group of people contribute towards the chit value and one member from the group is given the prize amount and the dividends are distributed to all the other members. For Example if we consider a chit value of Rs.1000000/- with 40 members in the group each member has to contribute Rs.25000/- where by (40 X 25000) Rs.1000000/- is collected.

The auction is conducted in which the members participate and the person who discounts the maximum is declared as the prized subscriber. If there are more than one participant for maximum discount the Successful Bidder will be determined by way of lottery. Where in, the tokens bearing the numbers allotted to the members is put into a box and one token is drawn by any of the member present in the auction and thus, the member whose number is mention on the drawn token will be declared as the Successful Bidder.

35% is the maximum bid allowed, which means a person foregoes Rs.350000/- and the balance Rs.650000/- is paid to the prized subscribers. Out of 35% discount 5% goes to the company towards company's commission for conducting the chit and balance of the discount amount is distributed equally amongst all members of the group. That is 30 % is distributed to all the members by which next month they have to contribute (Rs.25000/- - Rs.7500/-) = Rs.17500/- only and Rs.7500/- is declared as dividend for that month.

When there are no maximum bidders, then the members will bid in the open auction that is conducted within 5 minutes for each group and the person who bids the highest is declared as Successful Bidder. For Example: Suppose, in the 10th month the Successful Bidder was declared at 30%, then all members of the group will get a dividend of Rs.6250/-each i.e. (Rs 250000/-divided among 40 members) and each member has to pay Rs.18750/- towards Installment.

Therefore the members have to pay the installment amount less the dividend, the dividends earned workout to be the interest on the Installment payments made by the member. Successful Bidder is supposed to give the required sureties depending on the future liability of the chit. Only Non-Prized Subscribers whose payments are up to date can participate in the auctions.

Every month there is a Successful Bidder who gets his prized amount on submission of required Guarantors. The prized subscriber has to continue to pay the monthly installments till the termination of the chit.