Chapter 1

INTRODUCTION

1.1 General Introduction

Savings form an important part of the economy of any nation. With the savings
invested in various options available to the people, the money acts as the driver for
growth of the country. Indian financial scene too presents a plethora of avenues to the
investors. Though certainly not the best or deepest of markets in the world, it has
reasonable options for an ordinary man to invest his savings. For an ordinary person
though, they have acted as the safest investment avenue wherein a person deposits
money and earns interest on it.
The objectives of making investments are many and varied and differ from
person to person. These may be either to get a regular, uniform, safe and continuous
return in the future with moderate risk or to enjoy the benefits of capital appreciation
with attached risk. An individuals investment objectives also depend on various
personal factors, such his/her age, sex, occupation, educational level etc.
Chits provide a good source of finance for different type of people Viz.., small
investors, businessmen, small scale industrialists etc. chits are a good means of
savings for any contingency requiring substantial amount. It serves all persons
whether they desire for savings or borrowing to meet extraordinary expenses on
special occasions like marriages, construction of houses etc.,
Adequate care is necessary to choose a suitable group. The selection of a
particular group largely depends on the subscribers capacity to provide surplus funds
month after month from his normal income for the subscriber as well as the companys
point of view to avoid any embarrassment at the time of releasing the prize money or
in releasing chit installments month after month.

Chit
It is a contract between the foreman, as the promoter is called, and the
subscribers, who join voluntarily. 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.
The pooled funds every month are offered to the subscribers at monthly
auctions and the subscribers who bids for the highest discount is declared the prize
winner and given the prize amount a proper security. A prized subscriber also should
continue to pay the subscriptions till the termination of the chit. The amount foregone
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as discount, less foremans commission is distributing among the subscribers as

dividend.

Chit group
A chit group refers to a specified number of members agreeing to subscribe a
specified amount for a specified period. For example, 40 members, 40 months,
Rs.500/- a month. The number of members and the number of months to be same.

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

Validity of the contract of the subscribers with the foreman for an

identification period
The contract of the subscribers with the foreman 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.
Benefits of chit subscribers
a) To save in small amounts to receive a lump sum during the period of chit.
b) To borrow the future savings in advance. Some subscribers join chit funds to
borrow and others to save.

Chit agreement
The chit agreement is a contract between the foreman and the individual
subscribers to a chit group. It is a set bye-laws or regulations dealing with procedure
for the conduct of chits. It will be signed in duplicate, duly witnessed. The chit
agreements shall contain the name and address of the subscriber, the number of
installments and the installment amount payable, the interest/penalty for delayed
payment, the probable date of commencement of chit and its duration, the manner of
deciding the prize winner at each installement, the maximum discount to be foregone
at each installment, the mode and proportion of dividend and foremans commission,
the date, time and place of auction, the installement at which the foreman is to get the
chit amount, the name of the bank, the security to be furnished by prized subscriber
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etc., though each subscriber sign a declaration in the application from that he has read
and understood the terms and conditions of the chit agreement, the declaration of all
the subscribers are detached from the application form, pasted in a piece of paper and
filed with the registrar.

Process of enrolling subscribers for a group

The subscribes 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.

1.2 Need for the study

Chit is a traditional method of financing. This study which gives a broad idea
about customers in chits. At present scenario customers are not satisfied in the chits
because due to rapid growth bogus chit funds to know the satisfaction level of the
customers in Neeladri chits, I preferred to do this study.

1.3 Objectives of the study

To find out the reasons for investing in chit funds.
To find out the socio-economic factors.
To examine the awareness level of investor.
To study the preferences of investors in choosing the investment.
To analyse the factors which favours the investors to make investment.

1.4 SCOPE OF THE PROJECT WORK

This study help us to know about the chit fund and their procedure.
This study help us to know about the awareness and preferences of investors.
Through this study to know about the investors investing in the company.

To assess the level of satisfaction with Neeladri chit funds and so that corrective
action can be taken needed.

1.5 Review of literature

V. Krishnan mentioned the growth, importance, types, features and
malpractices of chit funds. The favouring circumstances that fostered the growth of the
chit funds were the lack of organized credit facilities to permit of savings deposits, the
4

accommodation of small capital and the availability of loans on easy terms. The
dominant feature of the transaction
The chit funds show a great deal of adaptability to the conditions that prevail
in the area in which they have to operate. The indebted landlord, the needy trader, the
improvident weavers and other artisans, the hard working daily labourers and factory
workers and the helpless vegetable vendors all derive benefit from the transaction.
There are importantly three types of chits, (1) The Thattu chit, (2) The Auction chit, (3)
The Prize or the lottery chit. It is inevitable that there are a variety of malpractices in
the system. If such malpractices are only lapses that are bound to exist in any
institution then efforts should be taken to bring the working of such institution under
rigid control to reduce malpractices to the minimum.
Srinivas and Higuchi Observed that Chit funds have been grouped under the
category Mutual Credit Suppliers, because the demand and supply of credit is mutualthat there is a give and take process involved. Participants typically support each other
for credit needs in mutuality. The money supplied or saved by some participants is lent
and borrowed by some other participants. Thus the benefits of the operation are
mutual to all participants and equally distributed. The central idea of mutual credit
suppliers is that they encourage savings from the participants. According to the
information given by The Banking Commission nine banks in Andhra Pradesh,
Kerala, Mysore and Tamil Nadu were conducting chit funds in 1968.
Dr. C.P.S. Nayar had tried to place the role of Chit Funds in the proper financial
perspective. The study emphasized the need to regulate the activities of Chit Funds,
and at the same time, perceived their role as active mobilisers of savings of the
community and as a useful complement to other financial institutions. The work was
an attempt to study all the known types of chit funds, classifying, naming and defining
them wherever necessary. The study also attempted to examine the economic aspects
of chit funds on an empirical and analytical basis. The analysis covered all the patterns
of business of chit funds working throughout the country.
The Author also pointed out that the basic principle underlying a chitty is
accumulation of savings. The unique feature of savings in a chitty as against the
savings in other types of financial institutions such as commercial bank, the post office
savings bank, etc. is that there is a sort of compulsion in effective savings. While
examining the history of chit funds, Nayar has also discussed different stages of their
5

evolution. Stated that the original home of chit funds is South India, in the last three
decades there has taken place a growth of chit funds in several parts of India. He has
mentioned the growth of chit funds in the Union Territory of Delhi and in the state of
Maharashtra. He estimated the annual turnover of business of 125 chit companies at
.217 lakh, in Maharashtra and in Delhi, 109 registered companies with annual
turnover of 1.6 Crore, by the end of 1968-69.
The study of Dr. C.P.S Nayar, highlighted that the chit funds is different from
others Savings and credit institutions in that it is more than a savings bank to the saver
and more than a lender to the borrower. The chitty offers many facilities to the
borrowers. (1) The loans in most cases are unconditional. (2) They are clean loans.
Tangible assets are rarely used as security. (3) They can be rapid in easy installments.
(4) The borrower need not keep a margin for the loan. The increasing popularity of
chit funds even in those areas where the banking habit of the people is wide spread
shows that the scheme is basically sound and cannot be brushed aside as an
irrelevant or anachronistic business practice. It becomes easy when the chit funds are
operated by disciplined institutions such as the commercial bank, a Government
owned company or a public limited company.
Shri K.M. Balavenkataramana studied about progenitor Moyy Murai. Moyy
means call money pooled and Murai means custom. It was a sahaya-nidhi, with a
strong element of co-operative spirit. The principle of chit fund was known to rural
India for a fairly long time. For years, women in villages had formed the habit of saving
a handful of rice or other grains for a rainy day, and this became very useful to face
unexpected guests and unforeseen expenditure. A chit fund is a financial arrangement
or institution based on mutual trust and confidence. A chit fund is primarily a mutual
benefit society in which some people join to save and others to borrow. A financial
intermediary gathers the savings of the people and distributes the funds to numerous
borrowers, thus affecting the allocation of real resources. The difference of a financial
intermediary and a chit fund is, chit fund collects the savings of the members by
periodical subscriptions for a definite period of time, and it connects the borrowing
class directly with the lending class and the pooled saving is lent out to the same group
of savers.
In so far as the chit funds have no control over the end-use of the funds, the
intermediation does not necessarily result in an efficient use of resources. The efficient
6

use of resources takes place only in the case of those members who utilize the prize
amount in acquiring income-earning assets, which directly or indirectly promote capital
formation. It is therefore; better to consider chit funds as a co-operative endeavour.
G. jagadisan indicated that, some measures of regulation of chit funds. Chit
funds like any other non-banking financial institution are treated as Para-banking
institution. It has been recognized that chit funds arose at a time when banking facilities
had not developed and thus they filled an important credit gap in the economy. Another
important aspect is that many companies are coming to rely upon chit funds as a
source of finance. The fact that the strength to a chit fund company is the foreman and
his reputation for promptness, straight forwardness and honesty. It is very essential
that the number of chit companies in each state is reduced over a period of time so
that supervision and control become effective. Every chit company should obtain a
license before commencing its business. And also the company should be issued the
license only if it furnishes the bank guarantee. Government should use the banks as
agents to supervise the working of chit funds. Besides it will make the Reserve Bank
to exercise some control over chit funds.
S. Narayanaswamy addressed that chit fund was attractive in so far as it
proved a ready-money bank for the subscriber, what time it was equally attractive for
the enterprising foreman, who got the feel of the subscribers monthly contribution on
which he paid no interest, though he was free to earn it himself by sagacious and
shrewd investment. The five per cent commission is the wage for his organizing the
outfit. Chit fund was born and has stayed to serve the needs of a closely knit
community of people living very near each other often in the same village, each of
whom was keenly conscious of the rainy day that might call abruptly for a large sum
of money. Communications were tenuous or did not exist. Perhaps, the close proximity
of all subscribers made for smooth and successful conduct of the chit operations.
Mohandas attempted to evaluate the Central Chit Funds Act 1982 as a
regulatory measure for chit business. And also deal with the features of Chit finance,
conceptual issues involved in chit fund regulation and also with the economic
implications of the major provisions of the Act. The study suggested a graduated
ceiling on discount ranging from thirty to fifty per cent for chits of different durations.
To eliminate unnecessary competitive bidding, the study recommended restriction on
open bidding up to twenty five or thirty per cent of the chit amount and allow further
7

bidding up to fifty or sixty per cent only on the production of cash deposits above the
initial limit. The study also analysed the economic gain to the saver and cost of
borrowing in terms of effective annual interest yield and effective annual interest cost.
Itoop M.L has identified the factors leading to the growth of Chit Funds in
Kerala especially in the 1980s. He also examined its utility as a saving instrument and
supplier of easy credit and thus employment potential. The findings of the research
revealed that quries help industry, agriculture and even house construction. The only
unproductive expenditure related to the money spent on marriages and on durable
consumer goods. The study also found that the cost of credit is cheaper compared to
the cost of credit with reference to the commercial banks other financial institutions.
Joseph M A evaluated various savings / investment schemes available in
comparison to the chit schemes. It showed that chit schemes can be treated as the
best investment alternative available. The rate of return on chit was calculated by
dividing the annual dividend by the annual net subscription. The study showed that the
rate of return calculated for a chit was much more than the rate of return applicable to
the various investment alternatives. It also presented the various characteristics of
chit schemes and concluded that unauthorized chit business was in the ruins due to
hard and stringent provisions of the enactments and KSFE was far away from the
reach of the common people.
S. Radhakrishnan argued that Chit Funds and Nidhis have not received the
attention they deserved in the scheme of reforms. The paper included certain
measures of reforms to enable Chit Funds to grow on sound and healthy lines,
including the introduction of credit rating for all incorporated Chit Fund companies.
Indira Raja Raman tried to explain Rotating Savings and Credit Associations
and their similarities with Chit Funds in India. The article showed that these
associations are functional in various parts of the world including highly developed
countries. Random ROSCAs are similar to Prize chits in India, while bidding ROSCAs
are similar to our Auction chits.
Rajendran attempted to provide a brief resume of the evolution of credit in
Kerala, the different practices and the institutions concerned, since the beginning of
the 19th century. The role of chitties in terms of their number, extent and volume of
operation up to 1936 has been included in the study. The study pointed out that the

vital links between the preinstitutional and the institutional phases were provided by
Chit Funds which gradually emerged into banking institutions.
Namrata Acharya mentioned that chit funds are looking down in terms of
number and are growing in terms of value. The registered chit funds find it less
lucrative to fund the poor due to the rising operating costs. According to AIACF,
running chit funds is no longer viable. Though the money circulated has increased, the
number is going down. It may come down further in the years to come. On the other
hand, unregistered chit funds have found a utility in evading tax and access to large
deposits. The clout of unregistered chit funds is tremendous. The number of
unregistered companies is almost 100 times than the registered companies.
Prof. Mudit Kapoor opined strongly that the chit funds are an important source
of finance for small businesses and low-income households in India. Registered chit
funds are away from low value chit schemes due to increased operational costs and
strict rules imposed by Government. Chit funds are very safe mode of financing and
saving. They offer loans at lower interest rates than money lenders and sometimes
than banks also. The size of the unregistered chit funds is stated about 67 times of the
registered industry in Delhi and 3.2 times in Chennai. On an average 50% of chit fund
clients are poor households and most of them save for particular target events like
marriage, education etc., and also they value the flexible provision of credit.
Customers feel comfortable with the bidding process and 96% of them perceiving
registered chit industry as safe or very safe. Most funds have moved away from
smaller chit schemes due to strict regulatory norms imposed by the Government and
increasing wealth levels in India.
Preethi Rao suggested that chit funds are good financial sources to small
businesses, which has been suffered from the money lenders with their high cost of
loans and banks with their stringent procedures. They can save the money with chit
funds and when in any emergency need of capital they can take loan out of the money
saved. The Author has mentioned the reasons of failures of chit funds, like the
regulatory hurdles due to the stringent rules proposed by the Government and the
increased costs of operations for the registered companies are the setbacks of the
industry. Because of these reasons, the registered companies are shifting their
operations to unregistered companies.

Chapter - 2

ABOUT THE COMPANY

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2.1 COMPANY PROFILE

Neeladri Chit Fund Private Limited has exhibited expertise in the financial area and
solid operational excellence ever-since 1988 its incorporation. Neeladri provides good
source of finance not only savings to House holders, Employees, Business people and
also different types of people Viz., small investors, businessmen, Women
Entrepreneurs small scale industrialists etc. It also provides a means of savings for
contingencies.
A chit is, therefore a good Low, Medium, High Class persons desirous of saving as
well as people who like to borrow / Investment to meet expenses on special occasions
like marriages construction of house etc.., and funds for business or industrylike any
other needs. A person can choose a suitable chit group depending on his capacity to
provide extra funds, month after month. The potential to pay regularly is the important
criteria to choose a suitable chit group.

Products and services

Chit fund services

Lorries services

Fund services

Mutual fund services

NCFPL Objects
This chit is aimed to encourage saving habit among members and help them to meet
their financial needs on the principles of cooperation, good faith and trusteeship
among the members and the company as the foreman, who conducts auction or
drawing chits.

NCFPL Enrolment
Members who intending to become subscribers shall be enrolled on receipt of
application in prescribed form mentioning the group number and details of the chit
along with the 1st installement. The foreman reserve the right to refuse admission to
any applicant without assigning any reason what so ever. On admission, every
subscriber shall be given an enrolment number and a chit pass book with all details.
In case of loss/torn of pass-book, a duplicate pass book will be issued against a
payment of Rs. 100/11

Mode of payments
The Forman/company shall not responsible for any payment made to an unauthorised person. Subscriber shall pay the instalments wide account payee
cheques/pay-orders/DDS. In case of cash payment it is the responsibility of the
subscriber to get a proper receipt for the same. Outstation cheques are not accepted.
A sum of Rs. 200/- will be charged as bank charges in case of return of cheques by
the bankers (dishonour of cheques).

NCPFL Monthly chit auction:

Chit auctions for all groups are conducted once in a month. Chit amount will be
paid to a successful bidder (i.e. prized subscriber) offering the highest discount subject
to the condition that the maximum discount shall not exceed 30% to 35% of the chit
value. If more than one subscriber agree to forego the maximum discount, the
successful bidder will be decided by draw of lots. Only subscribers who have paid their
chit installments up to date without any default will be eligible to participate in chit
auction. Nominated proxy will be allowed to attend the auction on prior approval in
case of absence of a subscriber. Non prized subscriber will be allowed to take part in
further auctions or to be included in the future draw of the chit.

Date and venue of auction:

Date of 1st auction will be intimated to the respective subscribers on completion of
the enrollment of each group. The foreman will try to conduct the auction on 4 th
Saturday of every month, so that the subscribers need not take leave from office to
participate in auction. If such auction day falls on a public holiday, the auction will be
held on next week on the same day.

Payment to prized subscribers:

Chit amount will be paid to a successful bidder (prized subscriber) after 7 days
from furnishing necessary securities to the satisfaction of the foreman for the payment
of future installments due from them & completion of necessary documents, in the form
of account payee cheque.

NCFPL last date for installement & penalty:

Last date for payment of monthly installement is before the day of every action
date of each month. Subscribers who make the payment after auction date are eligible
for penalty.
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Security for payment of chit:

The prized subscribers are required to furnish necessary securities to the
satisfaction of the foreman for the payment of future installments due from them. The
security should be any one of the following:
Two permanent Government servants each drawing an unencumbered
minimum monthly salary or income of Rs.20, 000/ Assignment of insurance policy provided the surrender value of the policy is at
least one and half times the liability of the prized subscriber.
Deposits with the Foreman in the Chit or otherwise which should not be less
than the subscribers liability to the Foreman.
Bank Guarantee from a Nationalised or Scheduled Bank.
In addition to any one of the above Securities, the prized subscriber has also to
give post-dated cheques covering future Chit Dues etc. All expenses in
connection with the inspection of securities, Registration charges, stamp duty
or legal charges shall be borne by the subscriber.

Additional Sureties:
The Foreman shall be at liberty to call for the further or fresh security/surety or
both from prized subscribers who have drawn chit amount when he finds that what is
furnished is insufficient, inadequate or defective.

Failure of furnishing Security by the Prized Subscriber:

If the prized subscriber fails to furnish the required Security and draw the chit
amount within 15 days of the auction / draw date, the Foreman shall have the power
to cancel the bid or lot of such subscriber and the second last bid offered in that auction
will be confirmed as successful bidder or to re-auction the amount amongst the other
eligible subscribers. If the amount is confirmed at a lesser discount, the difference in
discount shall be borne by the subscriber who fails to draw the amount first.

13

Distribution of Auction Discount:

2.5% of the chit amount will be the Foremans Commission and the remaining
auction discount will be distributed equally among all the subscribers as dividend in
the subsequent month by way of reduction in monthly installment. Subject to the
condition that defaulting subscribers will not be entitled for any dividend.

Defaulting non-prized subscribers:

The defaulting subscribers who makes the payment in the subsequent month/s
should pay the interest @ 2% per month on the defaulted installment/s for the period
of default. He/she is also not eligible for the dividend of the default period. The
Foreman may remove any subscriber in default for 3 months or more by giving a notice
in writing. The defaulting subscriber will be entitled to a refund of the actual
subscription paid by him less 2.5% of the Chit value as Foremans Commission after
the termination of the Chit.

In the event of death:

Subscriber before the termination of the chit, the nominee/legal heirs/successors
of the subscriber as per law, shall be eligible to continue the chit and also be liable to
the company to the extent that of the original subscribers liability to the Company. In
case the nominee of a non-prized subscriber is not willing to continue the chit, then
the subscription will be removed and refund (of the actual subscription paid by the
diseased subscriber) to the nominee will be paid less 2.5% of the Chit value as
Foremans Commission after the termination of the Chit.

Amendment of Rules:
The Company reserve to itself the right to amend or decide rules on any matter
that is necessary for the smooth and proper conduct of the chit and the same shall be
binding for all existing as well as future subscribers.

NCFPL advantages

100% transparency for all the chit transactions

All our chits registered as per chit fund act, 1982

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Amazing service to our esteemed customers.

Why with us
This chit scheme is aimed to encourage saving habit among members.
Members who intending to become subscribers shall be enrolled on receipt of
application.
Auction shall start with a discount of 2.5%. Chit auctions for all groups are
conducted.
For the convenient of the subscribers collection for the chit monthly
subscription can be made at their door steps.
Chit amount will be paid to a successful bidder.

Who we are
Neeladri chit fund private limited has exhibited expertise in the financial area
and solid operational excellence ever-since 1988 its incorporation. Neeladri provides
good source of finance not only savings to house holders, employees, business people
and also different types of people Viz., small investors, businessmen, women
entrepreneurs small scale industrialists etc. It also provides a means of savings for
contingencies.

Payment options
1. Quick pay by NEFT/RTGS fund transfer:
On receipt of intimation card you can do a fund transfer to our bank A/C by
logging into your own banks online banking system and transfer money by
using the NEFT/RTGS option there.
2. Collection Agent
3. Payment at Branch
4. Debit and Credit Card (coming soon).

2.2 INDUSTRY PROFILE

All India Association of Chit Funds:
The chit fund also known as chitty, or kuri in India and ROSCA (Rotating
Savings and Credit Association) internationally, occupy a unique position in the
financial system of India. This indigenous financial institution prevalent even before

15

the evolution of banking, had its origin in Southern of India, when the transactions
were in the Barter System.
From a humble beginning to its present gigantic growth, the chit fund Institution
has now attained the status of a quasi-banking system, and has turned out to be a
boon to the aggressively growing economy of the nation. According to a report of Asian
Development Bank, the turnover of some 1066 chit fund companies, as far back as
1986 was, an astounding Rs.81.6 billion. The estimated turnover of Registered Chit
companies all over India as of now is exceeding Rs 35,000 crores per annum. Under
the aegis of M/s Bill & Melinda Gates Foundation, we are on the process of reaching
the Lower and Middle income household, in the Micro Finance model. Institute of
Financial Management and Research, Chennai , who were engaged for the first ever
study of this Industry on an all India basis is now on the process of launching different
Pilot Projects in this regard.

Aims and objectives of All India Chit Funds Association:

To create sense of brotherhood, mutual harmony, love and affection among the
members of the Society and to help in solving the internal disputes/ matters of
the members of the Society
The All India Association of Chit Funds an Apex body at the national level, committed
to:
Confederate the functioning of all State and District Chit Associations in India,
promote ethical values in its working, for the overall benefit of the subscribing Public;
propagate and uplift the image of chit fund Industry, bring in value addition in its
working and position this Traditional Financial Technology against other financial
intermediaries in the Financial Inclusion program, without compromising on the
Investor protection measures.
The Association, in existence for the last 3 decades had been interacting with
various government agencies playing a major role in the formulation and
implementation of various legislations at Central and State level. As the Chit Industry
is yet to breathe the fresh air of the ongoing liberalization programme, we have the
huge responsibility of bring in awareness on our role in the National Economy among
the Legislatures, Administrators and the Subscribing Public. As it is not the mere
formulation of legislation but the effective implementation that matter, the need of the
16

hour is have a user-friendly legislations, in tune with the ongoing Government policies
Though the total number of members in the Association through the State and District
Associations are exceeding 30,000 in number, the immediate challenge before the
Association is to cover the unregistered segment expected to be at least 100 times of
the registered ones to the mainstream in the overall interest of every one.

Advantages of chits over other financial intermediaries:

It is a borrowing cum savings instrument.
The rate of borrowing is determined by the participants themselves and not by
an external agency.
The intermediation cost is the lowest when compared to other instruments.
The process of intrinsic evaluation based on factors like Social Collateral etc.
give a lead this Institution, over the formal Banking sector, as a Financial
Inclusion Activity etc.

Chit funds for savings and investment:

Investing is a lifelong process. The sooner you start; the better off you'll be in
the long run. It's best to start saving and investing as soon as you start earning money.
The discipline and skills you learn will benefit you for the rest of your life. But no matter
how old you are when you start thinking seriously about saving and investing, it's never
too late to begin.
There are two compelling reason to save using chits
1. A higher rate of return in comparison to a bank deposit.
2. They are liquid in nature. A chit can be used to meet any unforeseen expenditure.
It can also be used to meet a planned expenditure.
A chit is the only financial product that allows you to save and borrow. The rate
of return generated by saving using a chit is much higher than what is offered by banks.
The risk involved in saving using a chit would depend on the chit fund company. We
would recommend using a registered chit fund company which has been operating for
at least a decade or more with a proven track record. While parking your hard-earned
money as a fixed deposit with a bank would entail no or negligible risk and similarly
generate less returns, rotating your funds using a chit fund would entail low risk while
generating competitive returns annually depending upon which month you lift the chit.
17

An intelligent investor is one who diversifies his risk portfolio. Entire disposable
income or surplus income should not be invested in any one single financial product
alone. Investments must be spread across various financial products like Insurance,
Stocks, Mutual Funds, Bank Deposits and Chits.
The individual investor should act consistently as an investor and not as a
speculator. This means that he should be able to justify every purchase he makes and
each price he pays by impersonal, objective reasoning that satisfies him that he is
getting more than his moneys worth for his purchase Mark Cuban.

Chit as a loan:
Small and Medium Enterprises (SMEs)
Cash flows are the lifeline of business - big or small. Usually big businesses
manage to meet their capital requirements with the help of banks and other formal
financial channels. Banks extend timely support to big enterprises and it is a win-win
situation for both parties. Small businesses are traditionally avoided by banks and
formal nancial institutions because of their accounting procedures, lack of proper
recordkeeping and are unable to provide satisfactory security. They have been
historically wedged between the money lenders, with their exorbitant cost of loans,
and banks, with their stringent procedures. Chit funds are a more suitable nancing
model for small businesses mainly because they do not require rigorous
documentation. Chit funds have been helping small businesses overcome their
nancial constraints. As and when the need arises, SMEs bid in the auction and
receive the loan out of their own funds. Once they receive the loan, they continue to
pay the monthly contributions, and this accounts for payment towards both the interest
and principal which makes the repayment easier and less arduous. Also, in chit funds,
small traders can decide their own interest rates depending on their need. Chit fund
interest rates are in effect the market determined interest rates. Thus a small
enterprise, with prudent planning can meet their capital requirements with the help of
a Chit Fund.

Individual / Family
All of us would like to own a Car, a Home, Land, a Personal Computer an LCD
TV and myriad other possessions to make our life worth living. It is possible to own
18

every conceivable luxury with proper financial planning. In short you can fulfil every
dream with proper financial discipline. Investing a portion of your income in chits would
help you own any gadget or vehicle land and other assets etc you have been keen on
possessing. An equated monthly installment (EMI) offered by a retail outlet would
include hidden charges and interest costs. Most importantly, the asset itself is
mortgaged/hypothecated to the finance company or retail outlet offering such EMI.
Planning via a chit fund would not entail any such hypothecation and the interest cost
would be equal or less than what is offered by the retail outlet or finance company.

Education and Marriage

For a majority of Indians, Education and Marriage of their children are of prime
importance. Increasing education costs all the way from primary schooling to higher
education and beyond puts the onus on parents to plan for such expenses from the
very beginning. Taking an education loan is expensive in India. Interest rates charged
by banks on an education loans are much higher than home loans since there is no
tangible collateral for the bank when the loan is approved. Investing consistently in
chits would help a parent meet the education expenses of their children.
Marriages in India are an expensive affair. They may be made in heaven but
have to be paid for on earth. Since marriage is inevitable, it must be planned for, more
so in the case of a girl child. Chit Funds can provide the liquidity that is required to
fund a wedding at a much lower interest cost in comparison with bank loan.

Chit vs other financial instruments

Chits (vs) Fixed deposit
A Fixed deposit is accepted for a pre-determined time period. Interest paid by
banks range between 7.5-9.5% and is dependent on government regulation. The
interest earned from fixed deposits can either be taken out periodically
(monthly/quarterly/half yearly/yearly) or an investor can earn cumulative interest which
is paid at the end of the term period. Fixed deposits offered by corporate sector carry
a higher rate of interest but are risky and an investor will have to take an informed
decision. A fixed deposit is illiquid. The principle amount cannot be used by the
investor, if he has to incur any unforeseen expenditure. If the investor opts for a

19

cumulative interest group, the entire amount is returned only on maturity of the fixed
deposit.
A chit on the other hand can help an investor by paying him an competitive
interest rate than banks. The interest is paid in the form of dividend. If an investor has
lump sum amount, he can invest the same in a vacant chit. By investing in a vacant
chit, the waiting period is shorter; the investor can participate in an auction and use
those funds for any planned or unplanned expenditure or wait until the end of the chit
and enjoy higher dividends.

Chits (vs) Recurring deposits

Recurring Deposit scheme is offered by almost all banks in one form or the
other. Recurring Deposit is very popular among the salaried class, especially who can
afford to save only few hundred or say few thousand rupees per month. This scheme
is a boon for people who do not have a large amount of savings and thus cannot use
the Fixed Deposit scheme of the banks. Under this scheme, the customer deposits a
minimum amount (normally fixed) every month and bank pays the interest at the predetermined rates (which is usually lower than that for fixed deposits). At the end of
the period i.e. on maturity date, the customer is paid the maturity value i.e. principle
deposited and the interest payable. The current rate offered by banks is around 8.5%.
This is subject to government regulation.
The same money can be invested in a chits and the investor can earn more than bank
rates. He can also borrow against the chit which is not possible with a recurring
deposit.
Chit (vs) Bank Loans
Tremendous growth in the banking sector has seen an explosion of personal
loans given to young salaried employees in the information technology, BPO and other
sectors. This segment has higher disposable income and is willing to spend on cars,
motorbikes and the like. Banks/financial institutions charge an interest rate anywhere
between 12-24% on personal loans. There is also no guarantee that the loan
application will be accepted. The Equated Monthly Installments (EMIs) are higher due
to higher interest costs. If an employee is smart, he can plan his purchase of a car

20

using a chit. The interest cost, paperwork and sureties required are much lesser in
comparison with a personal loan.
Chits (vs) Mutual Funds
Systematic Investment Plans or SIPs as they are popularly known are
marketed aggressively to the younger generation, high net worth individuals and the
like. A SIP is a financial scheme where investments are made daily, monthly or
quarterly. These investments are invested by the fund company in the stock markets.
Every fund has a Net Asset Value (NAV). The fund issues shares. The number of units
allotted to the investor would depend on the amount he invests and the NAV of the
fund at that particular point in time. So the number of units issued would vary
depending on the NAV. It is important to note that the NAV is entirely dependent on
the market conditions prevailing at that time. There are chances where the current
value of investment is less than the actual cost of investment. There are entry and exit
loads i.e. charges which have to be paid by the investor to join or exit the fund. To sum
up investing in a mutual fund carries moderate to high risk depending on the market.
Investing in a chit is similar to a SIP, where the investor would invest money monthly
into a chit fund group he chooses. The monthly installment would vary depending on
the competition in the group. There is no entry or exit fee charged and the risk involved
in investing here would be very low in comparison to a mutual fund.

Chits (vs) Credit Card

Credit card is a convenient way to spend money. It entices the customer as he
does not have to shell out any money when he makes purchases at a retail store. It
also induces him to spend more than he can actually afford with the BUY NOW PAY
LATER mantra. The bank at the end of the billing cycle, which is usually at the end of
the month, allows its customer to pay a minimum balance instead of the full amount
allowing its customer to carry the remaining balance to the next month. The bank allots
a higher credit amount without giving much thought to the paying capacity of the
customer. The customer falls into this trap by buying more than he can afford, paying
the minimum balance at the end of the month, transferring remaining balance to the
next month. This becomes a vicious cycle. Little does the customer realize that he is
charged exorbitantly almost up to 40% when the credit card balance is revolved in this
manner? He gets caught in the credit card debt trap.
21

A smart investor would want to use the SAVE-BORROW-PAY mantra instead

of BUY NOW PAY LATER. He would save at a higher interest cost, borrow at a lower
cost and rescue himself form unnecessarily exorbitant interest costs. This is possible
by having financial discipline and by planning, investing and saving and borrowing
using chits.

Chits (vs) Stock Markets

Investing in the stock market requires a lot of personal time and effort to
understand the financials of the stock, to time the market and buy the stock. After
purchasing the stock, the investor cannot be complacent. He must keep a track of the
stock market and the company in which he has brought stock and keep a constant tab
on whether he in must hold or sell the stock. Even an investor who wants to invest for
a five year time period must keep himself abreast with the happenings of the stock
market. He must make financial calculations whether the returns gained from the stock
market may be more than what he would have gained from a less risky financial
instrument, like a chit.

22

Chapter 3

RESEARCH METHODOLOGY

23

Research methodology
Marketing research is the systematic and objective process identifying,
formulating and objective stating of a marketing problem and collecting, processing
analysing, interpreting and presenting data in order to find a justified solution for a
problem that guides the data collection and analyse phases of a research projects.
This research implies the identification of present trends in their fields of marketing
and also identify for alternative courses of action.
There is never a single standard and correct method of carrying out a piece of
research. Because there are many ways to tackle a problem - some good, some bad,
but probably several good ways. There is no single perfect design. A research design
is not like the solution to a problem in algebra. There are three basic types of
research designs, viz., (i) Exploratory, (ii) Descriptive, and (iii) Casual, which are
discussed in the ensuing text.
Fundamental to the success of any formal research project is a sound research
design. A good research design has the characteristics, viz., problem definition,
specific methods of data collection and analysis, time required for research project,
and estimate of expenses to be incurred. The function of a research design is to ensure
that the required data are collected and they are collected accurately and
economically.
A research design is purely and simply the framework or plan for a study that
guides the collection and analysis of data. It is a blueprint that is followed in completing
a study. It may be worthwhile to mention here that a research design is nothing more
than the framework for the study ensures that: (1) the study will be relevant to the
problem, and (2) the study will employ economical procedures.
All marketing research projects must start with exploratory design. This is a
preliminary phase and is absolutely essential in order to obtain a proper definition of
problem at hand. The major emphasis is on the discovery of ideas and insights.
Exploratory study is characterized by flexibility and informality; Formal design is
conspicuous by its absence in exploratory studies. Exploratory studies rarely uses
detailed (structured) questionnaires. These do not involve probability-sampling plans.
Ingenuity, judgment and good luck play a part in such studies. Notwithstanding the
flexibility, the research experience has demonstrated that (i) literature surveys, (ii)

24

experience surveys, and (iii) analysis of selected cases, are particularly productive in
exploratory research design.
Descriptive research design is also called explanatory design. This is the one
that simply describes something such as demographic characteristics of individuals
who use the product. The descriptive study is typically concerned with determining
frequency with which something occurs or how two variables vary together. This study
is typically guided by an initial hypothesis.
As exploratory study is characterized by its flexibility and informality, a
descriptive study can be considered usually rigid and formal. A descriptive study
requires a clear specifications of what, who, when, where, why and how aspects of the
research. It requires formulation of more specific hypothesis and testing these through
statistical Inference techniques. Despite its merits, the important fundamental
weakness is that descriptive research does not find the cause and effect relationships
among variables.
Studies that establish casual relationships between variables may be termed as
explanatory studies. The emphasis is on studying a situation or a problem in order to
explain the relationships between variables. Experimental or casual is a classical form
of research, which owes much to the natural sciences, although it features strongly in
much social science research, particularly psychology.
The methodology regarding the study on investor awareness & preferences
towards chit funds with reference to Neeladri chit funds private limited Hyderabad is
discussed as below.

3.1 Research design and Area of Study

Research Design is the framework or plan for a study that guides the collection and
analysis of data.
The research design can either be
(i)Exploratory, (ii) Descriptive, or (iii) Experimental Design
The type of research design chosen for this study is descriptive design and
quantitative in nature.

25

3.2 Data collections methods

There are two types of data are there
Primary Data
Secondary Data
3.2.1 Primary Data collection
Relating to study the primary data was collected from different respondents like
salaried people, professionals, business people, and retried people who are living in
different places.
3.2.2 Secondary Data
Auto-magazines, company brochures and trade journal books, magazines and
other trade journals played a major role in collection of secondary data.
Questions formulations and wordings
In general all questions were framed keeping in the mind the following standards:
They should be easily understood by respondents.
They should be concentrating and should conform as much as possible to the
respondents way of thinking.

3.3 Research Instrument

Questionnaires were developed to carry out the survey. Different types of
questioning methods like Open-ended, Multiple choice, and Ranking questions were
employed.
In this method, a pre-printed list of questions arranged in sequence is using to
elicit response from the informants. The questionnaire is mailed to respondents who
are expected to read and understand the questions and write down the reply in the
space meant for the purpose in the questionnaire itself.

3.4 sampling proceeds

3.4.1 Sample size
Sample size for the study was fixed at 100 customers.

3.4.2 Sampling method

The questionnaire designed is structured questionnaire consisting of close ended,
multiple choices, dichotomous, and open-ended questions to appropriateness.
26

3.5 Pilot survey

The pilot study of 10 samples has been collected to identify the effectiveness of the
questionnaire; as no modification was required in the questionnaire.

The same

questionnaire was used for final survey.

3.6 Period of study

The study was undertaken for a period of two months, including data preparation,
analysis and report presentation.
Objectives were set and questionnaire was finalized.
Data were collected and recorded.
Data were analysed and interpreted.
Reports were generated.

3.7 Statistical tools used

Percentage method
The percentage method was extensively used for finding various details as mentioned
in the chapter at analysis and interpretation. It can be generally calculated as follow.

No of respondents favourable
Percentage =

______________________________
Total respondents

3.8 limitations of the study

The market survey was conducted in different places but still it may not reflect
the original opinion of all the customers.
Because of time constraints, the sample size is restricted to 100, which may not
reflect the original market.
The percentages and Averages calculated are rounded off to the nearest
decimal point, where absolute accuracy may be absent.

27

Chapter - 4

DATA ANALYSIS & INTERPRETATION

28

Analysis and Interpretation

The data after collection has to be processed and analysed in accordance with the
outline laid down for the purpose at the time of developing the research plan. This is
essential for the scientific study and for ensuring that we have all the relevant data.
Processing implies editing, coding, classification, and tabulation of collected data so
that they acquiescent to analysis.

Part 1
The 1st part of this presents the economic factors of the respondents by taking
variables such as gender, age, employment, monthly income etc.

Socio Economic factors of respondents

Sl.no

Factors

Category

Gender

Male

84

84%

Female

16

16%

18-25

8%

25-40

20

20%

40-60

36

36%

Above 60

36

36%

Govt. Employee

12

12%

Professional

12

12%

Private firm

16

16%

Self Employed

20

20%

Business person

4%

Agriculturist

20

20%

Others

16

16%

Below Rs. 1 lakh

68

68%

Between 1 lakh to

12

12%

Age

Employment

Frequency Percentage

Employee

Income

2 lakh
29

Between 2 lakh to

16

16%

0%

0%

4%

3 lakh
Between 3 lakh to
4 lakh
Between 4 lakh to
5 lakh
Above Rs. 5 lakh
Source: Primary data

Table 5.1.1

Interpretation:
It is observed from the table that out of 100 respondents, 36% of the respondents are
in the age of 25-40 years and 40- 60 years and nearly 84% are males. Majority of
respondents are working like farmers and self- employment and their income Rs.1 lakh
below per annum.

30

Table no 4.1.1 No of respondents indicating gender

Gender

No of respondents

Percentage

Female

16

16%

Male

84

84%

Table 4.1.1

Source: primary data

Male

Female

16%

84%

Fig no 4.1.1

Interpretation:
The above table shows that 84% of population are male where as 16% of population
are female.

31

Table no 4.1.2 - AGE WISE CLASSIFICATION OF RESPONDENTS:

Age

No of respondents

Percentage

18 to 25

8%

25 to 40

20

20%

40 to 60

36

36%

Above 60

36

36%

Source: primary data

Table 4.1.2

40
35
30
25
20
15
10
5
0
18 to 25

25 to 40

40 to 60

Above 60

Fig 4.1.2

Interpretation:
The above table indicates that 8% of respondents lie between 18 to 25 age group.
20% of respondents lie between the age group of 25-40. 36% of respondents lie
between the age group of 40-60 and 36% of respondents are of more above 60 years.

32

Table no 4.1.3- Categories of the respondents

Category

No of respondents

Percentage

Government employees

12

12%

Professional

12

12%

Private employees

16

16%

Self employed

20

20%

Business person

20

20%

Farmers

16

16%

Others

4%

Source: primary data

Table 4.1.3

25
20
15
10
5
0

Fig 4.1.3

Interpretation:

The above table indicates that 12% of respondents are

government employees, 12% of respondents are professionals, 16% of respondents

are private employees, 20% are self-employed, 20% are business people,16% are
farmers and remaining 4% belongs to others.

33

Table no 4.1.4 - Annual income is in the range of different people

Annual income

No of respondents

Percentage

Below 1 lakh

68

68%

Between 1 lakhs to 2 lakhs

12

12%

Between 2 lakhs to 3 lakhs

16

16%

Between 3 lakhs to 4 lakhs

0%

Between 4 lakhs to 5 lakhs

0%

Above 5 lakhs

4%

Source: primary data

Table 4.1.4

Above 5 lakhs
Between 4 lakhs to 5
lakhs
Between 3 lakhs to 4
lakhs
Between 2 lakhs to 3
lakhs
Between 1 lakhs to 2
lakhs

Series1

Below 1 lakh
0

20

40

60

80

Fig 4.1.4

Interpretation: The above shows that 68% of respondents lie below 1 lakh income
group, 12% of respondents are between 1 to 2 lakhs of income group, 16% of
respondents are between 2 to 3 lakhs of income group, 4% of respondents are under
the group of above 5 lakhs income. No respondent lie between 3 to 4 and 4 to 5 lakhs
income group.

34

Part 2
The second part of this chapter analyses the investment Awareness and Preferences
of investors.

Table no 4.2.1 - Investment of savings most

Investment avenues

No of respondents

Percentage

Savings bank

56

56%

Fixed deposit

12

12%

Shares/debentures

12

12%

Postal savings

0%

Chit funds

12

12%

Insurance

8%

Others

0%

Source: primary data

Table 4.2.1

60
50
40
30
20
10
0

Fig.no 4.2.1

Interpretation:
The table shows that 56% of respondents are investing their savings mainly in savings
bank, 12% of respondents are investing in fixed deposits, 12% in shares/debentures,
12% are investing in chit funds and 8% are investing in insurance.

35

Table no 4.2.2 - Awareness of chit funds

Awareness

No of respondents

Percentage

Yes

84

84%

No

16

16%

Table 4.2.2

Source: primary data

16%

84%

Yes

84%

No

16%

Fig no 4.2.2

Interpretation:
The table shows that 84% of respondents are aware of chit funds whereas 16% are
not aware of chit funds.

36

Table no 4.2.3 - Primary goal of your investment

Primary goal of

No of respondents

Percentage

Education

24

24%

House

16

16%

Retirement benefits

4%

Others

56

56%

investing

Source: primary data

Table 4.2.3

60
50
40
30
20
10
0
Education

House

Retirement benefits

Others

Fig no - 4.2.3

Interpretation:
The above shows that 56% of the respondents primary goal of investment Belongs to
others, 24% of the respondents primary goal of investment is for education purpose
and 16% of the respondents goal is for retirement benefits.

37

Table no 4.2.4 - Influential factors towards the respondent to

participate in the chit
Persons

No of respondents

Percentage

Family

62

62

Friends

19

19

Business partners

Chit agents

14

14

Others

Table 4.2.4

Source: primary data

5%

Family

14%

Friends

0%

19%
62%

Business
partners
Chit agents
Others

Fig no 4.2.4.

Interpretation:
The above table shows that 62% of the respondents are introduced by their family to
invest in chitfunds.19% of the respondents are introduced by friends, 14% are
introduced by chit agents and 5% are introduced by others.

38

Table no 4.2.5 - No of years they are participating in chit funds

according to respondents
Since when

No of respondents

Percentage

1 to 2 yrs.

48

48%

2 to 3 yrs.

10

10%

3 to 5 yrs.

0%

5 to 10 yrs.

9%

Above 10

33

33%

Source: primary data

Table 4.2.5

NO OF RESPONDENTS
1 to 2 yrs.

2 to 3 yrs.

3 to 5 yrs.

5 to 10 yrs.

Above 10

33%
48%

9%
0%

10%

Fig no 4.2.5

Interpretation:
From the above table it is known that 48% of the respondents are members of chit
funds from 1 to 2 years. 33% of the respondents are the members of chit funds from
10 years above. Only 9% of the respondents are the members between 5 to 10 years
and 10% of the respondents lie between 2 to 3 years.

39

Table no 4.2.6 participating a member in chit group

Chit groups

No of respondents

Percentage

1 lakh

71

71%

5lakhs

24

24%

10lakhs

0%

Above 10 lakhs

5%

Table 4.2.6

Source: primary data

80
70
60
50
40
30
20
10
0
1 lakh

5lakhs

10lakhs

Above 10 lakhs

Fig no 4.2.6

Interpretation:
The above table shows that 71% of respondents belong to 1 lakh chit fund group, 24%
of respondents are belong to 5 lakhs chit fund group and 5% of respondents are above
10 lakhs chit fund groups.

40

Table no 4.2.7 Performance of the respondent regarding the level of

bidding.
No of

Normally bid for chit

Percentage

respondents

Between 2nd to 10th month

52

52%

Between 11th to 20th month

22

22%

Between 21st to 30th month

8%

As need arises

18

18%

Table 4.2.7

Source: primary data

No of respondents
As need arises

Between 21st to 30th month

Between 11th to 20th month

Between 2nd to 10th month

0

10

20

30

40

50

60

Fig no - 4.2.7

INTERPRETATION:
The above table shows that 18% of the respondents bid when need arises, 52% of the
respondents bid between 2nd and 10th month, 22% of the respondents bid between
11th to 20th month and 8% of the respondents bid between 21st and 30th month.

41

Table no 4.2.8 - Maximum percentage of bid the participants would

forego
Maximum % of bid

No of respondents

Percentage

5-10%

56

56%

10-15%

24

24%

15-20%

16

16%

more than 20%

4%

Table 4.2.8

Source: primary data

60
50
40
30
20
10
0
5-10%

10-15%

15-20%

more than 20%

Fig no 4.2.8

Interpretation:
From the above table 56% of the respondents would forego 5-10%, 24% of the
respondents would forego 10-15%, 16% of the respondents would forego 15-20% and
4% of the respondents would forego more than 20%.

42

Table no 4.2.9 - Usage of chit amount regarding to participants

Usage of chit amount

No of respondents

percentage

Business investment

38

38%

Private property

52

52%

Working capital

0%

Business assets

10

10%

Table 4.2.9

Source: primary data

52

38

10
0
Business investment

Private property

Working capital

Business assets

Fig no 4.2.9

Interpretation:
The above table shows that 52% of the respondents use their chit amount for private
property, 38% of the respondents use for business investment and 10% of the
respondents use for business assets.

43

Table no 4.2.10 - Determine the final bidding amount

No of
Determine the final bidding amount
Calculate the interest rate from the outside

respondents

Percentage

16

16%

24

24%

Both of the above

56

56%

Others

4%

option and then decide the bidding amount

Depends on the rate of return from the project
for which the prized money will be used

Table no 4.2.10

Source: primary data

Chart Title
4%

56%

Calculate the interest rate

from the outside option and
then decide the bidding
amount

16%

Depends on the rate of

return from the project for
which the prized money will
be used

24%

Both of the above

Others

Fig no 4.2.10

INTERPRETATION:
The above table shows that 16% of the respondents determine their final bidding by
calculating the interest rate from the from the outside option , 24% of the respondents
determine their final bidding on the rate of return from the project and 56% of
respondents determine final bidding by using both options. And 4% of the respondents
are others.
44

Table no 4.2.11 Advantages of chit funds for investing

Advantages of chit funds

No of respondents

percentage

Money is easily & quickly available

67

67%

14

14%

5%

14

14%

The profit distributed as dividend

Interest is low
Easy membership

Table no 4.2.11

Source: primary data

14%

14%

67 %

Fig no 4.2.11

Money is easily & quickly available

Repayment in easy installments
The profit distributed as dividend
Interest is low

Interpretation:
The table shows that 67% of respondents opinion for advantage of chit fund is money
is easy and quickly available by this it is known that maximum no of respondents felt
advantage as it is easy and quickly available.5% of the respondents opinion is interest
rate is very low.by this it is known that they feel it is advantage because of low interest
rate.

45

Table no 4.2.12 OPINION OF THE RESPONDENT ABOUT THE

SECURITY OF INVESTMENT

No of respondents

percentage

33

33%

46

46%

Moderate

21

21%

High secure

0%

Secure in chit funds

Not sure
Not at all but I feel its a need

Table 4.2.12

Source: primary data

High secure
Moderate
Not sure

Not at all but I

feel its a need
Fig no 4.2.12

Interpretation:
The above table shows that 46% of the respondents felt secure in chit funds because
of need, 33% of the respondents are not sure of security and 21% felt secure in chit
funds as it is moderate.

46

Chapter 5

SUMMARY OF FINDINGS AND SUGGESTIONS AND

RECOMMENDATIONS

47

5.1Findings:
Neeladri chit funds covered under chit fund act 1982.
According to analysis, male members are preferred to investing more in chit
funds.
The company runs the minimum chit amount is 1 lakh and maximum chit
amount is 25 lakhs.
According to analysis they preferred most in savings account.
Self-employed persons and business persons are investing more in these.
There is minimum of 5% of the bid amount to be foregone by the subscriber
and the subscriber cannot go beyond 30%.
Majority of respondents are working like farmers and self- employment and their
income Rs.1 lakh below per annum.
Money is easily and quickly available in the chit fund.
Opinion of the respondents about the security of investment not at all, but they
feel it is a need.
Usage of chit amount regarding to participants mainly used for private property
Performance of the respondent regarding the level of bidding between 2nd and
10th month.
Friends are the main Influential factor to participate in the chit funds

48

5.2 Suggestions:
Many investors are found to invest during the fall in stock market. So it is
suggested the Neeladri chit funds can capitalize and extend its customer base.
Even though, there is a company profile in product like investments, insurance,
loans, and stock broking, most of the customers are willing to invest the money
in the mutual funds because of getting high returns. The company may derive
more satisfaction to their investors.
The company can introduce more schemes, thus making the company more
attractive or beneficial to the members

5.3 Conclusion:
The project study makes a deep study on the chit fund industry and the responses of
foreman and its subscribers. The project covers the aspect of customer awareness
and preferences towards chit funds. The legal framework governing the Chit business,
and the responses of the members of the Chit Business to know the attitude of the
customers towards customer awareness in chit funds and customer perception
measurement.

49

BIBLIOGRAPHY
The chit fund act, 1982 M/s vijaya Lakshmi publications
Business finance
Financial Management
P.N. Reddy, H.R. Appannaiah, B.G. Sathyaprasad; Himalaya Publication
House.
Finance and Profits
N.J. Yasaswy ; Vision Books Pvt. Ltd.

WEBSITES:
www.mbainfoline.com
www.business.mapsofindia.com
www.aiacf.com
www.ssijmar.in
www.ijrmbs.com

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APPENDEX
Questionnaire on customer awareness and preferences towards chit
funds with reference to Neeladri chit fund private limited company
1. Name:
2. Gender:
A) Male

B) Female

3. Age:
A) 18 25 years

B) 25 40 years

C) 40 60 years

D) Above 60

years
4. Location:
5. Qualification:
A) Illiterate

B) Up to SSC

D) Up to post Graduate

C) Up to Graduate

E) Ph.D.

6. You belong to which one of the following category:

A) Govt. Employee

B) professional

Employed

C) Pvt. Firm Employee

E) Business person

F) Agriculturist

D) self

G) others

7. Your annual income is in the range of:

A) Below Rs. 1 lakh

B) Between 1 lakh to 2 lakh

C) Between 2 lakh to 3

lakh
E) Between 3 lakh to 4 lakh

F) Between 4 lakh to 5 lakh

G) Above Rs. 5 lakh

8. Where do you invest your savings most?

A) Savings bank

B) Fixed deposit

E) Chit funds

F) Insurance

C) Shares/Debentures

D) postal savings

G) Others

9. Do you have awareness of chit funds?

A) Yes

B) No

If yes, then
10. Primary goal of your investment?
A) Education

B) House

C) Retirement benefit

D) Others

11. Who introduced you initially to chit schemes?

A) Family

B) Friends

C) Business partners

E) Others
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D) Chit agents

12. Since when you a member in chit funds?

A) 1-2 yrs.

B) 2-3 yrs.

C) 3-5 yrs.

D) 5-10 yrs.

E) 10 or above

13. In which chit group are you a member?

A) 1 lakh

B) 5 lakhs

C) 10 lakhs

D) 10 lakhs above

14. When do you normally bid for the chit?

A) Between 2nd to 10th month

B) Between 11th to 20th month

C) Between 21st to 30th month

D) As need arises

15. What is the maximum percentage you would forego?

A) 5-10%

B) 10-15%

C) 15-20%

D) 20% more than

16. For what purpose do you use chit amount?

A) Business investment

B) Private property

C) Working capital

D) Business assets

17. How do you determine the final bidding amount?

A) Calculate the interest rate from the outside option and then decide the bidding
amount
B) Depends on the rate of return from the project for which the prized money will be
used
C) Both of the above
D Other (specify
18. What according to you are the advantages of chit fund?
A) Money is easily & quickly available

B) Repayment in easy installments

C) The profit distributed as dividend

D) Interest is low

E) Easy membership
19. How secure do you feel in chit funds?
A) Not sure

B) Not at all but I feel its a need

secure
20. Did you hear about Neeladri chit funds in Hyderabad?
A) Yes

B) No

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C) Moderate

D) High