Chit fund or chits are originated 1000 years way back in India. It is a mechanism that combines borrowing and savings in a single scheme.
Chits are initially started with in the known members of same communities. Later they have spread to the office colleagues, neighbors, friends and known persons to the chit administrator. This means chits are confined to a local area only. Due to the limited number of chits & small chit groups every member is known to the chit administrators and, if any chit member who do not pay the amount (the defaulter) after borrowing (or) withdrawing the money his name is immediately spread to all the chit members and chit administrators. Therefore the default member is not considered to join in the forthcoming new chits run by the same chit administrator or other chit administrators until he clears the amount.
As the time passes on, the small chits between the groups, communities, colleagues etc has eventually evolved into big chit fund companies. With more number of chit fund companies flourished in India, Govt of India also framed an act to regulate the chit companies under the chit fund act,1982.
With the advancement of Globalisation, the chit fund companies are also stretched their hands from minor areas to larger areas/states, with providing new & number of chit options to increase their members/customers and revenue for their chit fund company. Due to the expansion, one side chit funds increased their business and profits on the other side chit fund companies also increased the number of defaulters.
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