Question

Which part of India is popular for its Chit Fund system?

Answer 1

Hint:A chit fund is a type of rotating savings and credit association system practiced in India. Chit fund schemes may be organised by financial institutions or informally among friends, relatives and neighbours.

Complete answer:
The system of Chit fund is more popular and widely used in South India than it is in North India. In urban areas of Tamil Nadu, Karnataka, Andhra Pradesh and Kerala 5% to 10% of households participate in the registered chit funds.Chit companies are more active in rural and town areas.
Chit Fund companies primarily invest in the stock market, real estate, hotels, entertainment and tourism, micro finance, newspapers and electronic media.

Chit funds are often microfinance organizations. Chit Funds are also known as the Chitty, Kuree, chit. According to All Kerala Kuri foreman’s association Kerala has around 5000 chit companies with Thrissur district accounting for maximum 3000. These chit companies provide employment to about 35000 persons directly and an equal number indirectly. Under the chit fund agreement; a certain amount is deposited on a regular basis by the different persons and after the gap of a specified period of time the amount is returned to the users with interest.

Chit fund helps in collecting the small savings of the individuals which turns into a big amount. As of 2002, they were less popular in North India, except in Delhi, Gujarat, Maharashtra and Haryana.It is much more popular in the villages of southern India.

Hence, we can conclude that the system of chit funds is much more active in the states of southern India as they are in the states of northern India.

Note:With the advent of E-commerce in India, chit funds have also started going online. Though they are not registered under RBI Act, chit funds are regulated as miscellaneous and non-banking companies. Classifying them as contracts, the Supreme Court has read chit funds as being part of the Concurrent List of the Indian Constitution, hence both the centre and state can frame legislation regarding chit funds.