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A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement
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A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement

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A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement

A project report on cutomer attitude towards investing in chit funds & customer satisfaction measurement

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  • 1. Customer attitude towards investing in chit funds & Customer satisfaction measurement Contents 1. Executive Summary 2. Introduction 1–6 3. Chit Fund – Overview 7 – 42 4. Design of the study 43 – 46 5. Company Profile 47 – 51 6. Analysis & Evaluation 52 – 73 7. Findings 74 – 75 8. Conclusion & Suggestions 76 – 77 9. Bblography 78Babasabpatilfreepptmba.com Page 1
  • 2. Customer attitude towards investing in chit funds & Customer satisfaction measurement Executive Summary Panchajanya Chits Pvt. Ltd (PCPL) is the 1 st registered chit funds co., in the State of Karnataka, registered under the Chit Funds Act 1982. The company being registered under the Companies Act 1956, began its operations in 1984. PCPL is the 1st licensed chit operators coming under the preview of Chit Fund Act, RBI and Registrars of Company The company has a member profile of more than 250 registered business class customers and 100 employed customers participating actively in its chit programmes / schemes Presently the company offers the following chit schemes. Chit Value Months No.of Monthly Subscription Members Rs. 1 lakh 40 40 2500 Rs. 5 lakhs 50 50 10000 Rs. 10 lakhs 25 25 40000 Rs. 25 lakhs 25 25 100000 STATEMENT OF PROBLEM Chit funds in an age old unorganized non banking financial institution over the years both the Government and players in this industry have tried to organize this important institution which has been contributing significantly to the economic development of the country. Both the foreman and subscribers were incurring losses due to unorganisation and lack of state control over the chit business. The Chit Funds Act 1982, was a major step towards organizing this activity. The efforts in this direction have however not been totally successful. The chit fundBabasabpatilfreepptmba.com Page 2
  • 3. Customer attitude towards investing in chit funds & Customer satisfaction measurement operators still face problems as to the default by subscribers on payment, insolvency of subscribers and fraudulent activities of the subscriber. This project study is based on the pronounce of chit industry, Profitability in investing in Chit funds and an attempt is made to find out the implications of running the chit funds and offer suggestions. SCOPE OF THE STUDY The project report covers the Chit Fund Act 1982, the influencing authorities of chit funds, a Company Profiles, an Analysis of the data collected from 50 respondents and their views on chit business and chit funds as a source of finance. The Analysis and evaluation of responses about the risks, advantages of the role of chit funds in the economic development of the country. A reader of this project report would get exhaustive information on the operation of chit business, the legal framework binding chit operators with reference to the PCPL. OBJECTIVES OF THE STUDY The general objectives of this project are to present a consolidated report on the “Profitability in investing in Chit funds of the Country with specific reference to ‘PCPL’”. The other objectives are : a) The functioning of chit funds. b) The legal framework governing the chit fund industry. c) The member profile required for membership of PCPL. d) To know the attitude of the customers about investing in the chit funds. e) Customer satisfaction measurement of PCPL.Babasabpatilfreepptmba.com Page 3
  • 4. Customer attitude towards investing in chit funds & Customer satisfaction measurementResearch Design a) Type of Research Study: A social research on Financial activity for economic development using data collected from Respondents as primary data and theoretical data as secondary data. b) Tool for Collection Data: Structured Questionnaire both for the members of the company and the company. c) Sample Design: Selected Targeted Company, i.e., PCPL and 50 Respondents selected as Random Sample Method. d) Method of Collecting Data: Interview method and investigative method. e) Method of Analysis: Quantitative and Descriptive Analysis. Limitations The project being for educational purpose, was restricted to the study of one chit fund operator being PCPL. Since the study was restricted to one chit fund operator, the study cannot be generalized. Lack of availability of theoretical information on chit funds was one of the major constraints faced. Due to the constraints of time and money, the number of respondents has been restricted to 50 members only. The information has been collected from the Chit Fund Act, Company Profile and Respondents only. On the analysis and evaluation of the data collected from the Respondents The respondents are mostly from the business community and their atitude towards investing is very favorable, and as far as PCPL the customers are very much satisfied with the services provided by the company and are very loyal t te copmany. The members have selected chit funds because of various reasons among which following are important reasons. i. Money is easily available.Babasabpatilfreepptmba.com Page 4
  • 5. Customer attitude towards investing in chit funds & Customer satisfaction measurement ii. It can be repaid in easy monthly installments. iii. Procedural and documentation formalities are very less. III SUGGESTIONS Though the PCPL scheme has been well accepted by the members, yet based on the study made the following suggestions are offered to improve functions of the Chit Fund. 1) The company PCPL can be more aggressive and increase its membership profile. 2) The risk factors can be covered by the company by making a good study of membership profile. 3) The risk perception of subscriber can be overcome, by the company by making its transaction more transparent. 4) The company can introduce more schemes, based on a survey and thus making the company more attractive or beneficial to the members. 5) The company can reduce its commission charges from 5% to a lower rate, thus will increase the scope for more individuals. 6) The company can consolidate the chit business by insuring each scheme against any risks. 7) The company can introduce incentive or schemes, so as to motivate the subscribers to make prompt payment of subscription money. 8) The company can introduce lower amount chit schemes and tap the large lower middle income group people. 9) The general public has to be communicated the advantages of Registered Chit Funds.Babasabpatilfreepptmba.com Page 5
  • 6. Customer attitude towards investing in chit funds & Customer satisfaction measurement A study with Panchajanya Chit Pvt. Ltd. Questionnaire for Members:1. Name:2. Age:3. Address:4. Qualification: Under-Graduate  Graduate  Post-Graduate 5. Occupation: Employed by Others  Business  Others 6. what type of Business:7. Annual Income (If Employed):8. What is your Annual Income ? (If Salary earner) 2 – 3 Lakhs  3 – 4 Lakhs  Above 4Lakhs  (If Business) a. Turnover: Upto 25 lakhs  25-50 lakhs  0.5-1 crore  Above 1 Crore  (If Ohers) 2 – 3 Lakhs  3 – 4 Lakhs  Above4Lakhs 9. Since when are you a member of PCPL?Babasabpatilfreepptmba.com Page 6
  • 7. Customer attitude towards investing in chit funds & Customer satisfaction measurement 1-2 yrs  2-3 yrs  3-5 yrs  5-10 yrs  10 or above 10. In which Chit group are you a member? a. Chit Amount Rs. 1 lakh  Rs. 5 lakhs  Rs. 10 lakhs  Rs. 25 lakhs 11. When do you normally bid for the Chit? B/w 2nd -10th month  B/w 11th -20th month  B/w 21st -30th month  30th month Onwards  As need arises 12. What is the Maximum percentage you would forego? 5-10%  10-15%  15-20%  20% onwards 13. For what purpose do you use the Chit Amount? Business Investment  Private Property  Working Capital  Business Assets 14. Do you give any Security, when you draw a Chit?Babasabpatilfreepptmba.com Page 7
  • 8. Customer attitude towards investing in chit funds & Customer satisfaction measurement Yes  No  15. What according to you are the advantages of Chit Fund? Money is easily & quickly available  Repayment in easy instalments  The profits distributed as dividend  Interest is low  Easy Membership  16. Is investing in Chit Funds profitable? Yes  No  17. Does investing in Chits gain more profit than any other Financial Institution? Yes  No  18. The interest rate on foregoing the Amount is High  Low  19. Are you happy with the Service being provided by PCPL? Yes  No Signature.Babasabpatilfreepptmba.com Page 8
  • 9. Customer attitude towards investing in chit funds & Customer satisfaction measurementFinance Meaning & ConceptFinance is the lifeblood of any business organization. It is the most vital resource of anyorganization.In general, finance may be defined as “The provision of money at the time it is wanted”.A firm secures capital it needs and employs it in activities, which generate returns oninvested capital. The firm employs capital in production and marketing functions.Correspondence Concept and Definitions ( Meaning of Finance )Finance is the process of conversion of accumulated funds to production use. It iscommonly known as “Service of Money”.Finance may be defined as that administrative area or set of Administrative functions inan organization which may be related with the arrangement of cash and credit so that theorganization may have the means to carry out its objective as satisfactorily as possible.“ Corporation finance deals with the financial problems of corporate enterprises. Theseproblems include the financial aspects of the promotion of new enterprises and theiradministrative during early development, the accounting problems connected with thedistinction between capital and income, the administrative questions created by growthand expansion and finally the financial adjustment regarded for bolstering up orrehabilitation of a corporation which has come into financial difficulties “ Encyclopediaof Social Services”.Function of FinanceThere are 2 types of Finance FunctionsI. Managerial Functions.Babasabpatilfreepptmba.com Page 9
  • 10. Customer attitude towards investing in chit funds & Customer satisfaction measurementII. Routine Functions.Managerial Functions 1. Funds requirement decision It relates to allocation of capital and involves decision to commit funds for long term assets which would yield benefit in the future. Its significant aspect in the task of measuring the prospective profitability of new investments. 2. Financing Decision A finance manger has to decide when, where and how to acquire the funds to meet the firms investment needs. The central issue before him into determines the proportion of equity and debt. The central mix of debt and equity is known firms capital structure. The firm’s capital structure is optimum when the market value of shares is maximized. When the shareholders returns is maximized with minimum risk. The market value per share will be maximized and the firms capital structure would be optimum. 3. Dividend Decision The dividend decision should be analyzed in relation to the financing decision of the firm. This decision involves the determination of the percentage of profits earned by the enterprise, which is to be paid to its shareholders. A number of factors like market value of shares, the trend of earnings, the top position of the shareholders play an important role in determining the dividend policy of business.Babasabpatilfreepptmba.com Page 10
  • 11. Customer attitude towards investing in chit funds & Customer satisfaction measurement 4. Investment Decision This relates to the decisions relating to the invetment in current capital assets. The finance manager has to evaluate different investment proposals keeping in view the overall objective of the enterprise. The investment in current assets will depend on the credit and inventory policies persuaded by the company. These policies are sent on the basis of sales forecast, demand and supply of materials etc. The investment decision determines the asset portfolios of the firm and the business risk complexion of the firm as perceived by the investors. Investment decisions have the following dimensions a. Scanning and selecting new investments. b. Managing existing efficiently. c. Mergers and acquisitions including the international aspects in the context of globalisation investment opportunities.II Routine Functions 1. Operations Management. 2. Liquidity Organization. 3. Balance between receipts and payments.Finance as base for economic activity 1. Capital FormationBabasabpatilfreepptmba.com Page 11
  • 12. Customer attitude towards investing in chit funds & Customer satisfaction measurement Capital formation is the process of additions to the capital stock or capital goods. The addition refers to the net additions or net investments, i.e. the total investment in the existing stock of capital. Capital formation facilitates capital widening, which result in new workesr provided with the same level of capital as old workers. Where in growth in real capital stock is just equal to the growth of labor force. Capital formation makes possible capital deepening increasing the amount of capital that individual worker has at his disposal. It receives proficiency of labor, promotes technical advancement, helps overcome problems of agriculture, helps in capital accumulation. 2. Capital Output Ratio The capital output ratio may be defined as the relationship of investment in a given economy or industry for a given period of time to the output of that economy or industry for a similar time period. The capital output ratio thus determines the rate at which output grows as a result of a given volume of capital investment. The capital output ratio thus determines the actual output of a country’s based on its capital investment. It depends upon technological and organizational progress so that capital may be used more productively. 3. Dynamic Entrepreneurship An entrepreneur or an organizer acts merely as an agency for bringing together the various agents or factors of production and undertaking to remunerate them for theBabasabpatilfreepptmba.com Page 12
  • 13. Customer attitude towards investing in chit funds & Customer satisfaction measurement work done. An entrepreneur always tries to widen his capital, under his profit margin, adopting new methods of technology, and improved methods of production. Thus triggering economic growth of a country. Finance being an important aspect, it is very vital role of entrepreneur in mobilizing the resources. 4. Domestic Savings Every individual makes some amount of savings either as bank deposits or jewellery or investments in companies’ shares and debentures or his personal cash balance. This savings habit regulates the fund mobilization cycle and there is enough purchasing power with every individual. Once this stage is achieved, the country’s development rate moves with an upward trend. 5. Technology and Technological Changes India’s input investment in research and development activities both in public and private sector has increased very much considerably. Thus as a result of this, the total output in technological advancement also has increased efficiently. Improvements in technology or know how results in better process of production, better products and services, and also a lower cost of production, thus improving the level of economic activity. 6. Ensuring full capacity utilization Ensuring a full capacity utilization would lead in economics of scale and prevent any kind of idle in machine or man hours, thus leading to effective utilization of all the factors of production. A full capacity utilization would lead to a full pledged employment and thus a proper distribution of income. 7. Literacy and EducationBabasabpatilfreepptmba.com Page 13
  • 14. Customer attitude towards investing in chit funds & Customer satisfaction measurement Literacy and education are the pillars of human resource. A well educated person can contribute efficiently to the economic development of a country. A well educated citizen understands his social, political, economic and natural responsibilities. He also understands his role in the country and thus an effective contribution by such educated citizen booms up the development or growth rule of a country. 8. Agriculture Agriculture is the basic occupation of any developing or underdeveloped country. A country self sufficient in its agro produce can compete itself for a position among others in the world. However it is mainly industries that trigger growth, but industries are also dependent on agriculture for raw materials. Labor and also for selling their products etc,. “Agriculture is the back bone of any economy” 9. Banking The banking structure or banking system in a country is very important. Banking basically includes services, but its main component is mobilization of funds. With the new technological advancement, banks have speedened up the process of transfer of money thus resulting in an increase in the growth rate of the economy. Banks also create savings habits among the citizens of the country. Apart from that the backs by their interest rates for lending, determine the inflation index of a country, the lower the rat6e of interest, the lower the rate of increase in inflation. 10. Employment Employment refers to effective utilization of the available work force in the country. A 100 % level of employment in a country ensures a contemporary growth in the economy. When the employment rate is high, the other economic hassles such asBabasabpatilfreepptmba.com Page 14
  • 15. Customer attitude towards investing in chit funds & Customer satisfaction measurement poverty, etc get eradicated and thus contributing to the national income and finally the per capita income of the country. It also includes the workforce, occupational structure. Chit Funds - Overview The economic development of a country depends upon the availability of resources. The main activities that contribute to the growth are production and employment. Production depends upon the inputs of the factors such as finance, raw materials. Labor etc. The most important here bring finance, which is the chief mobiliser of all the factors of production. In a money economy, finance for development initially comes from private savings. These private savings give to the secondary deposits; this is where the financial institutions come into picture. Financial institutions occupy a central place in mobilizing savings from the people and make it available to the trade, commerce and industries either as a capital or loans. The non banking sector comprises of money lenders, indigenous bankers, pawn brokers, nidhis, “chit funds” etc., The origin of chit funds can be traced way back to the 17 th century when the economic wizards of state of malabar ( now known as the state of Kerala) started this activity. Those were the people who actually founded this financial institution. It became so popular and numerous that people started adopting this activity as a profession by the 18th century all over. As the chit industry grew the number of people involved in this industry also grew. This gave rise to many misconceptions, frauds, mismanagement etc., in this industry. To prevent this State Government ofBabasabpatilfreepptmba.com Page 15
  • 16. Customer attitude towards investing in chit funds & Customer satisfaction measurement Travancore took the first initiative and introduced the first Chit Fund Regulation being the Chit Fund Act 1914. One important regulation introduced by this act was that of a commission payable to the foreman. The Act brought about a ceiling limit on the commission payable to the foreman that is 5% maximum which is still the same even to this date. Chit Funds are co-operative in nature. It is a Financial institution wherein few people join together and form a group. All the people are called as the members of the chit group. The chit activity beings by every member contributing a certain sum of money or moneys worth to a common fund created by them. Any one among the members of a chit fund takes the initiative to be the incharge or trustee of such common fund. This common fund is utilized to the benefit of the members of the chit fund. Any one of the members becomes the beneficiary on the first auction of such fund. The circle continues by members continuously contributing by equal installments and members benefit by individual at a time. This is known as chit funds. However over the period of time as the compliments in human activities and business increased the chit funds also grew considerably simultaneously a few of the members took up the job of conducting chit funds as their business. Initially Chit Funds were mainly limited for the use of domestic purposes being that of Marriages, family functions, social functions, education etc. but over the centuries chit funds have secured their way through and now reached the stage as a source of finance for business activities. Chit or chit funds, which have not yet come to the lime light in the financing sector, actually play an important role in the mobilization of financial resources. The chit funds market can be classified into the 1. Registered chit fund operators.Babasabpatilfreepptmba.com Page 16
  • 17. Customer attitude towards investing in chit funds & Customer satisfaction measurement 2. Unregistered chit fund operators. (Illegal chit fund operators) Registered chit fund operators are those who are licensed (registered) under the Chit Fund Act, and registered under the Companies Act, and also come under the preview of RBI. Unregistered chit fund operators exist all over India. They exist in cities, towns, villages, and are more prominent in the southern part of the country. The ratio of the registered chit fund operators to unregister or illegal chit fund is 1:100, i.e., for every single registered fund operators there are 100 illegal chit fund operators. The registered chit fund turnover of our country is estimated to be around 10,000 Crores P.A. (as per the latest article in the Economic Times), however the unregistered chit fund turnover in our country is estimated to be 100times as that of the registered chit turnover. This underlying the importance of chit fund in our country and their ability to mobilize resources in our country. Chit funds are believed and trusted to be the most convenient system of financing or savings. The chit funds are procedure and documentation free, which makes them more attractive. An important statistics about chits reveals that “ For every 10 businesses there is one chit operator ” “ For every 50 employees there is one chit operator ” “ For every 100 house wives there is one chit operator ”Babasabpatilfreepptmba.com Page 17
  • 18. Customer attitude towards investing in chit funds & Customer satisfaction measurement (Based on the research conducted by PCPL) The above statistics reveals to us the intensity of chit activity in India and its growth. Chit Fund Procedure The chit operators or the foreman takes the initiate as to starting a chit group. The foreman based on these surveys of potential subscribers or based on his own decision determines the amount of the chit, the time period of such chit, the number of members, the number of installments and the amount payable on each instalment. Once the foreman has decided on the chit group he has to go ahead with the procedural formalities as follows. I Fixed Deposit The forman has to create a fixed deposit with a scheduled bank upto 100% of the chit value as per the Chit Fund (Karnataka) Rules 1983. This fixed deposit is accountable to the foreman. The period of the fixed deposit has to be the same as that of the chit group or anything exceeding that. II Application of the prior sanction certificate The foreman after obtaining the fixed deposit has to now make an application for prior sanction. This application is to be made to the registrar or the officer incharge of chit funds in that particular state. The application should also have the original copy of the fixed deposit. The registrar after receiving such application and deposit certificate would issue the prior sanction certificate.Babasabpatilfreepptmba.com Page 18
  • 19. Customer attitude towards investing in chit funds & Customer satisfaction measurement III Formation of chit group. The foreman is allowed to communicate or advertise about the new chit group only after obtaining the prior sanction certificate. The foreman now invites application from prospective subscribers. The application is in the form of chit agreement, which is filled in triplicate by the subscribers and duly signed and attested. The foreman has to now sort all these application in order.IV Certificate of CommencementThe foreman after collecting all application from the subscribers and deciding on thenumber of subscribers for the chit group has to make an application to registrar for thecertificate of commencement. The application should accompany all the applicationsreceived by the foreman from the subscribers. The registrar on proper scrutiny of theapplication and collection of the charges would issue the certificate of commencementand also attest the applications received.V Communication of Certificate of CommencementThe foreman has to now communicate to all his registered subscribers the receipt of thecertificate of commencement and he has to send the chit agreement duly attested andsigned by the foreman himself and the registrar. The foreman also collects the firstinstalment of the chit.VI. Chit AuctionThe date and time of auction is decided and communicated to all the subscribers. All thesubscribers interested in drawing the chit amount make themselves present at the auction.Babasabpatilfreepptmba.com Page 19
  • 20. Customer attitude towards investing in chit funds & Customer satisfaction measurementThere should be a minimum of 2 subscribers present at the auction as per the Chits FundsAct 1982.The chit auction is conducted in the presence of all the subscribers and the foremanhimself. The auction begins on the order of the foreman. The bid for the auction has tostart from 5% of the chit amount which can go up to a maximum of 30% of the chitamount. The subscribers who are in immediate need of funds make to higher bid. Thesubscriber making the highest bid to forego the maximum percentage is declared as thePrized subscriber in the presence of all the other subscribers. In case there are more thantwo subscribers who are willing to forego the maximum of 30%, the prized subscriber isdecided by a lucky draw.VII. Payment to the Prized subscriber and Security.The foreman is liable to pay the amount in full to the subscriber as per the bid. Thepayment has to be made within a maximum of 30 days from the date of such auction orbefore the next draw.VIII. Distribution of Surplus as Dividend.The amount foregone by the prized subscriber is the Surplus for the chit group. Thissurplus is to be distributed equally among all the subscribers also known as Dividend.This surplus can be distributed either in cash or can be adjusted towards the nextinstallment of such chit.IX. Minutes of the Chit.The minutes of the chit along with all the details of the prized subscriber, the amountforegone by him etc., are to be communicated to the Registrar of Chits. This report has tobe submitted to the Registrar within a maximum of twenty one days from the date of suchauction.Babasabpatilfreepptmba.com Page 20
  • 21. Customer attitude towards investing in chit funds & Customer satisfaction measurementThe cycle continues by the Foreman collecting the next installment from the subscriberand making the next auction. CHIT FUNDS AS TAX PLANNING TOOL.An important advantage of Chit funds is its tax saving aspect. Income Tax Act of 1961provides a special benefit to chit fund subscribers. The chit subscribers are allowed towrite off their chit loss against their source of income. This can be best explained withthe following exampleAssumptions 1) Mr. ‘X’ is carrying on a proprietary business, and has a net income under the head income from business of Rs. 2,00,000/-. Also assuming that Mr. ‘X’ has other sources of income which set off the basic exemption and the differential rates of tax and that his business income of Rs. 2,00,000/- is qualifying for 30% tax bracket.Then the tax payable on his business income is2,00,000 x 30% =Rs. 60,000.Babasabpatilfreepptmba.com Page 21
  • 22. Customer attitude towards investing in chit funds & Customer satisfaction measurementBut if he is a chit subscriber and that he has drawn a chit by foregoing Rs. 30,000/- hecan set off his this chit loss of Rs. 30,000/- against his income from business. Thus his netincome from business would be Rs. 1,70,000/-. The net tax payable on this amount is Rs.1,70,000/- is1,70,000 x 30% =Rs. 51,000.The net savings that Mr. ‘X’ is making on his tax liability is Rs. 9,000/-. Thus, byinvesting in chit funds Mr. ‘X’ is saving Rs. 9,000/- and this amount reduces his interestburden of drawing such a chit. CHIT FUNDS AS COMPARED TO OTHER SOURCES OF FINANCEAny business organization has to its options various sources of finance. It is purely adecision of the businessman as to choose which source. While taking such a decisionevery businessman would look into the costs, advantages and disadvantages of everysource and thus determine the best source. The different sources of finance have alreadybeen discussed in this Project Report. The short term sources being Bank Overdraft, CashCredit, Money Tenders, Trade Credit and Chit Funds.Chit Funds as a source of finance have occupied a very important place in the businessactivity. Most important advantage of chit funds is the lowest effective interest rate. Thisparticular advantage has been emphasized throughout this project. Chit funds along withits other advantages has proved a point as a position in the company sources of finance.The aspect of lowest interest rate can be explained as below with the following example:AssumptionsBabasabpatilfreepptmba.com Page 22
  • 23. Customer attitude towards investing in chit funds & Customer satisfaction measurement 1) Mr. ‘X’ is a member of a chit group of Rs. 1,00,000/-. The group comprises of 40 members and 40 installments equally divided into Rs. 2.500/- per month. 2) Mr. ‘X’ is in need of money and presents himself at the chit auction. He makes a bid to draw the chit. He successfully draws the chit at 30% discount. 3) Mr. ‘X’ makes his draw in second month of the chit.Mr. ‘X’ is paid Rs. 70,000/- by the foreman. Mr. ‘X’ having foregone Rs. 30,000/- andthus his interest rate would be(30,000 / 38 months / 70,000) x 100=1.13% per month.i.e. 13.50% per annum.(Note: 38 months, because he draws the chit in the second month, and the chit group isfor 40 months, thus the period for which he actually uses the money and calculatedinterest is 38 months).However this 13.50% is not the correct interest rate that Mr. ‘X’ pays because he alsoenjoys the other benefits such as dividends and taxation benefits which reduces interestburden.The company records reveal that on an average every member of a Rs. 1,00,000 chitgroup gets a total dividend of Rs. 15,000/- during that chit group. Thus Rs. 15,000/- beingan income to Mr. ‘X’ reduces his effective interest burden.Another important aspect reducing the interest burden would be the Income Tax benefit.As already calculated let us say Mr. ‘X’ earns a tax benefit of Rs. 9,000/-. Thus theeffective discounted amount of Mr. ‘X’ would be 30,000 (The actual 30% foregone by Mr. ‘X’)Babasabpatilfreepptmba.com Page 23
  • 24. Customer attitude towards investing in chit funds & Customer satisfaction measurement- 15,000 (Dividend earned by him) _______ 15,000- 9,000 (Being income tax benefit) ________ 6,000 (This amount is the actual discount or amount foregone by Mr. ‘X’)Thus, considering this Rs. 6,000/- as the foregone amount the interest rate applicable toMr. ‘X’ would be as follows:(6,000 / 38 months / 94,000) x 100=0.167% per month.i.e. 2.01% per annum.The effective rate of interest applicable to Mr. ‘X’ is 2.01% per annum.Example 2:Assumptions: 1) Mr. ‘X’ is a member of a chit group of Rs. 1,00,000/-. The group comprises of 40 members and 40 installments equally divided into Rs. 2,500/- per month. 2) Mr. ‘X’ this time makes a draw in the end of the chit group.Mr. ‘X’ who makes a draw in the last would have to forego only 5% of the chit amountbeing the company commission.The net amount that Mr. ‘X’ would get is Rs. 95,000/-.Mr. ‘X’ who has right since the beginning being paying his installments has been earningsufficient dividends on those also.Babasabpatilfreepptmba.com Page 24
  • 25. Customer attitude towards investing in chit funds & Customer satisfaction measurementAs the company records reveal that a chit subscriber of Rs. 1,00,000/- group with 40installments earn a dividend of Rs. 15,000/-. Mr. ‘X’ is actually earning an interest on hisevery installments being15,000 / 40 =375. (This is the monthly dividend he receives).Thus the interest he is earning on every installment is(375 / 2500) x 100=15%.This reveals that even if Mr. ‘X’ makes a draw in the last he is actually not losing anyinterest but instead earning an interest of 15% every month on his installment that beingthe total dividend money he earns through the chit group.Table Showing Comparison. Particulars (source) Interest Rate ChargedBank overdraft 16.5%Cash Credit. 16%Discounting of Bills 18%-20%Term loan 15%-16%Indigenous Money Lenders 18%Trade Credit. 24%Babasabpatilfreepptmba.com Page 25
  • 26. Customer attitude towards investing in chit funds & Customer satisfaction measurementDISTRIBUTION OF SURPLUS / DIVIDENDChit funds is the only Financial Institution wherein a borrower enjoys the benefit of profitfrom his lender. Any person making an investment in chit funds is said to be making hisbest investment. Even the amount which he foregoes as a discount is against distributedto him as dividend.When a chit auction is conducted the members bid from 5% upto 30% of the chit amount.5% being company commission and 30% being the upper ceiling limit as per the ChitFund Act 1982.Example:Let us take a Rs. 1,00,000/- chit group of 40 members and 40 installments of Rs. 2,500/-each. Mr. ‘X’ draws the chit in the second month at a discount of 30%. Thus Mr. ‘X’discounts Rs. 30,000/- from Rs. 1,00,000/- and takes only Rs. 70,000/-Babasabpatilfreepptmba.com Page 26
  • 27. Customer attitude towards investing in chit funds & Customer satisfaction measurementOut of this Rs. 30,000/- the company deducts its 5% commission being Rs. 5,000/-. Thusthe net surplus of the chit being Rs. 25,000/-. This Rs. 25,000/- is distributed equallyamong all the 40 subscribers at Rs. 625/- per member.The dividend can be either paid in cash or can be adjusted against the next installmentdue from all the subscribers that is Rs. 2,500-Rs. 625 = Rs. 1875.Thus Rs. 1875 is the net amount payable on next installment. THE CHIT FUNDS ACT 1982. TO PROVIDE FOR THE REGULATION OF CHIT FUNDS AND FOR MATTERS CONNECTED THEREWITH. A. PRELIMINARY 1) SHORT TITLE, EXTENT AND COMMENCEMENT 1. This Act may be called the Chit Funds Act, 1982. 2. It extends to the whole of India except the State of Jammu and Kashmir. 3. It shall come into force on such date as the Central Government may by notification in the official Gazette, appoint, and different dates may be appointed for different states.Babasabpatilfreepptmba.com Page 27
  • 28. Customer attitude towards investing in chit funds & Customer satisfaction measurement 2) DEFINITION: a) “Approved Bank” means the State Bank of India constituted under Sec 3 of State Bank of India Act – 1955 or a Subsidiary Bank constituted under Sec 3 of the SBI (Subsidiary) Act 1959, or a corresponding New Bank constituted under Sec 3 of Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 or a Regional Rural Bank established under Sec 5 of Regional Rural Bank Act 1976 or a corresponding New Bank constituted under Sec 3 of Banking Companies (Acquisition and Transfer of Undertakings) Act 1980 or Banking Company defined under clause (C) of Sec 5 of Banking Regulation Act 1949, or a Banking Institution notified by the Central Government under sec 51 of the Act or such other Banking Institution as the State Government may, in consultation with the Reserve Bank, approve for the purposes of this Act. b) “Chit” means a transaction whether called chit, chit fund, chitty, kuri or by any other name by or under which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain amount of money (or a certain quantity of grain instead) by way of periodical installments over a definite period and that each such subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be defined in the chit agreement, be entitled to the prize amount. c) “Chit Agreement” means the document containing the articles of agreement between the foreman and the subscribers relating to the chit. d) “Chit Amount” means the sum total of the subscription payable by all the subscribers for any installments of a chit without any deduction of discount or otherwise.Babasabpatilfreepptmba.com Page 28
  • 29. Customer attitude towards investing in chit funds & Customer satisfaction measurement e) “Chit Business” means the Business of conducting a chit. f) “Defaulting Subscriber” means a subscriber who has defaulted in the payment of subscription due in accordance with the terms of the chit agreement. g) “Discount” means the sum of money (or the Quantity of grain) which a prized subscriber is, under the terms of the chit agreement required to forego and which is set apart under the said agreement to meet the expenses of running the chit or for distribution among the subscribers or both. h) “Dividend” means the share of the subscriber in the amount of discount available under the chit agreement for rateable distribution among the subscribers at each installment of the chit. i) “Draw” means the manner specified in the chit agreement for the purpose of ascertaining the prized subscriber at any installment of the chit. j) “Foreman” means the person who under this chit agreement is responsible for the conduct of the chit and includes any person discharging the functions of the foreman. k) “Prize Amount” means the difference between the chit amount and the discount and in case of a fraction of a ticket means the difference between the chit amount and the discount proportionate to the fraction of the ticket. l) “Registrar” means the Registrar of Chits appointed under Sec 61 and includes an Additional, a Joint, Deputy or an Assistant Registrar appointed under this section.Babasabpatilfreepptmba.com Page 29
  • 30. Customer attitude towards investing in chit funds & Customer satisfaction measurement m) “Subscriber” includes a person who holds a fraction of a ticket and also a transferee of a ticket or fraction thereof by assignment in writing or by operation of law. n) “Ticket” means the share of a subscriber in a chit. All to override other laws, memorandum, articles etc.B. REGISTRATION OF CHITS, COMMENCEMENT AND CONDUCT OF CHIT BUSINESSSec 4:- PROHIBITION OF CHITS NOT SANCTIONED OR REGISTEREDUNDER THE ACT.4(1) : No chit shall be commenced or conducted without obtaining the previous sanctionof the State Government within whose jurisdiction the chit is to be commenced orconducted or of such officer as may be empowered by that Government in this behalf,and unless the chit is registered in that state.Babasabpatilfreepptmba.com Page 30
  • 31. Customer attitude towards investing in chit funds & Customer satisfaction measurementSec 5:- PROHIBITION OF INVITATION FOR SUBSCRIPTIONS EXCEPTUNDER CERTAIN CONDITIONS.No person shall issue or cause to be issued any notice, circular, prospectus, proposal orother document inviting the public to subscribe for tickets in any chit unless such notice,circular, prospectus, proposal or document contains a statement that the previous sanctionrequired under sec 4 has been obtained and the particulars of such sanction.Sec 6:- FORM OF CHIT AGREEMENT 1) Every Chit agreement shall be in triplicate, and shall be signed by each of the subscriber or by any person authorized by him in writing and the foreman and attested by atleast two witnesses, and it shall contain the following particulars. a) Full name and address of every subscriber. b) The number of tickets including the fraction of a ticket held by each subscriber. c) The number of installments, amount payable at every installment, interest, penalty. d) Probable date of commencement and duration of the chit. e) Manner of ascertaining the prized subscriber. f) The maximum amount of discount which the prized subscriber has to forego (The discounted amount cannot exceed 30%) Sec 6(3). g) The mode and proportion in which the discount amount would be distributed by way of dividend. h) The name of the approved bank in which chit money shall be deposited by the foreman.Babasabpatilfreepptmba.com Page 31
  • 32. Customer attitude towards investing in chit funds & Customer satisfaction measurement i) The consequences to which a non prized subscriber or prized subscriber of the foreman shall be liable in case of violation of any of the provisions of the chit agreement. j) The nature and particulars of the security to be offered by the foreman.6(2) : The duration of a chit shall not extend beyond a period of 5 years from the date ofcommencement.Provided the State Government may permit the duration of a chit up to a period of 10years as per satisfaction of the necessary provision.Sec 7 :- FILING OF CHIT AGREEMENT. 1) Every chit agreement shall be filed in triplicate by the foreman to the Registrar (JRC). 2) The registrar shall retain one copy and return the duplicates to the foreman with an endorsement that the chit agreement is registered.The registrar may refuse if a) The security is insufficient. b) The foreman has been convicted of any offence of this Act or any other Act regulating Chit Business. c) Foreman has defaulted in payment of fees or filing of sanction. d) That the foreman has been convicted of any offence involving moral turpitude and sentence to imprisonment for any such offence.Sec 8 :- MINIMUM CAPITAL REQUIREMENTS FOR COMMENCEMENT OFA CHIT AND CREATION OF A RESERVE FUND, BY A COMPANY.Babasabpatilfreepptmba.com Page 32
  • 33. Customer attitude towards investing in chit funds & Customer satisfaction measurement 1) A company shall not commence or carry on chit business unless it has a paid up capital of not less than 1 lakh rupees (not withstanding the provisions of Sec 1 of Companies Act 1956). 2) Every company with its paid up capital being less than 1 lakh has to increase its paid up capital upto 1 lakh with in 3 years from the such commencement. 3) Every company carrying on chit business shall create and maintain a Reserve Fund and transfer 10% of the profit as per the profit and loss account before any dividend.Sec 9 :- COMMENCEMENT OF CHIT: 1) After all the tickets are fully subscribed the foreman files a declaration with the registrar. 2) Registrar after satisfying himself with the formalities shall issue “Certificate of Commencement” to the foreman.Sec 10 :- COPIES OF CHIT AGREEMENT TO BE GIVEN TO SUBSCRIBERS 1) The foreman shall furnish the Certificate of Commencement as per sec 9(2) to all the subscribers before 1st draw. 2) The foreman has to file to the registrar that the provision of Sec 10(1) have been complied.Sec 11 :- USE OF WORDS “CHIT”, “CHIT FUND”, “CHITTY” OR “KURI” 1) The person carrying on such business shall include any of above terms.Sec 12 :- PROHIBITION OF TRANSACTING BUSINESS OTHER THAN CHITBUSINESS BY A COMPANY.Babasabpatilfreepptmba.com Page 33
  • 34. Customer attitude towards investing in chit funds & Customer satisfaction measurement 1) No company carrying on chit business shall conduct any other business except under permission from State Government. 2) Any company carrying on any other business, it shall be wound up with in 3 years of commencement of this Act.Sec 13 :- AGGREGATE AMOUNT OF CHITS 1) Foreman other than AOI, Co, Co-op society shall conduct chit business, the aggregate amount of which exceeds (25000) Twenty Five Thousand Rupees. (As per the latest amendments this limit has been enhanced to Rs. 1,00,000/- incase of individuals). 2) Where the foreman is a firm or other association of individuals, the aggregate chit amount of the chits conducted by the firm or other association shall not at any time exceed. a) Where the number of partners of the firm or the individuals constituting the association is not less than four, a sum of rupees one lakh; (This has been amended to Rs. 1,00,000/- per partner upto a maximum of Rs. 6,00,000/-). b) In any, other case, a sum calculated on the basis of twenty five thousand rupees with respect to each such partner or individual. 3) Where the foreman is a company or co-operative society, the aggregate chit amount of the chits conducted by it shall not at any time exceed ten times the net owned funds of the company or the co-operative society, as the case may be.Sec 14 :- UTILISATION OF FUNDS 1) A foreman cannot utilize money collected in respect of chit business except for a) Carrying out Chit Business. b) Giving loans and advances to non prized subscribers on appropriate securities.Babasabpatilfreepptmba.com Page 34
  • 35. Customer attitude towards investing in chit funds & Customer satisfaction measurement c) Investing in trustee securities. (Indian Trusts Act 1982 Sec 2). d) Deposits with approved banks mentioned in the Chit agreement. (Money from chit business does not include commission or remuneration payable to such person or interest or penalty received).Sec 15 :- ALTERATION OF CHIT AGREEMENT.It can be added, altered, cancelled with consent in writing of the foreman and allsubscribers.Sec 16 :- DATE, TIME AND PLACE OF CONDUCTING CHIT 1) Every draw shall be conducted on such a date, time and at a place as mentioned in chit agreement or as per notice issued by foreman to the subscribers. 2) Every draw shall be conducted in the presence of atleast 2 subscribers in the manner prescribed. 3) Where any draw was not conducted, registrar would direct the draw as the case may be.Sec 17 :- MINUTES OF PROCEEDINGS 1) The minutes of proceedings of a draw shall be entered in a book after the end of such draw and signed by the foreman, prized subscriber and any two subscriber as per 16(2) or as per provisions of 16(3). 2) The minutes shall clearly state a) Date and hour when proceedings started and ended and the place of draw. b) The number of and amount of installment. c) Name of prized subscribers and other subscribers.Babasabpatilfreepptmba.com Page 35
  • 36. Customer attitude towards investing in chit funds & Customer satisfaction measurement d) Amount of discount.Sec 18 :- COPIES OF MINUTES TO BE FILED WITH THE REGISTRARA true copy of the minutes of the proceedings of every draw certified as such by theforeman shall be filed by the foreman with the Registrar within twenty one days from thedate of draw to which it relates. C. RIGHTS AND DUTIES OF A FOREMANSec 20: SECURITY TO BE GIVEN BY FOREMANBabasabpatilfreepptmba.com Page 36
  • 37. Customer attitude towards investing in chit funds & Customer satisfaction measurement 1) For the purpose of conduct of the chit every foreman shall before applying for a previous sanction a) Deposit in an approved bank an amount equal to chit amount in the name of Registrar (as per the latest amendment 50% can be provided as Fixed Deposit and the rest 50% as Bank guarantee). b) Transfer Government securities in face value / market value (which ever is less) of not less than one and a half times the chit amount in favour of the Registrar. 2) A separate security has to be provided for every chit. 3) The registrar at any time during the currency of chit, permit the substitution of chit. 4) The security given shall not be liable to be attached in execution of a degrees or otherwise until the chit is terminated and claims of all the subscribers are fully satisfied.Sec 21 : RIGHTS OF A FOREMAN 1) The foreman is entitled. a) To receive the 1st installment of the chit without deduction of the discount, provided he is a subscriber to that chit agreement. b) To such amount not exceeding 5% of the chit amount by way of commission, remuneration or for meeting the expenses of running the chits. c) To interest and penalty payable to the foreman as per the chit agreement. d) To receive and realize all subscriptions from the subscribers and to distribute the prize amounts to the prized subscribers. e) To demand sufficient security from any prized subscriber for the payment of future subscriptions payable by him. f) To substitute subscribers in place of defaulting subscribers andBabasabpatilfreepptmba.com Page 37
  • 38. Customer attitude towards investing in chit funds & Customer satisfaction measurement g) To do all other acts that may be necessary for the due and proper conduct of the chit.Sec 22: DUTIES OF FOREMAN 1) The foreman shall pay the prized subscriber only on sufficient security for payment of future subscriptions. 2) In case if draw remains unpaid then such amount shall deposited in a separate account with an approved bank before next draw and intimate the registrar and all other subscribers. 3) The foreman shall not appropriate to himself any amount in excess of entitled under clause (b) or (c) or 21(1). 4) The foreman shall distribute the dividend either as cash, grains or by way of adjustment towards the subscriptions payable towards next installments.Sec 23 : BOOKS, RECORDS, ETC., TO BE KEPT BY FOREMANThe foreman shall at his Registered office, or his prinicipal place of business or naybranch office, sub office, or office in any other state maintain a) a registrar containing i. The names and full particulars of the subscribers. ii. The date on which the subscribers signed the chit agreement. iii. In case of an assignment of a ticket by a subscriber, name and address of such assignee. b) A book containing the minutes of the proceedings of each draw.Babasabpatilfreepptmba.com Page 38
  • 39. Customer attitude towards investing in chit funds & Customer satisfaction measurement c) A ledger containing i. Amount paid by subscribers in each chit and dates of such payments. ii. Amount paid by prized subscribers and dates of such payments. iii. Deposits with approved banks if any. d) Register showing the amounts deposited in approved Banks as per provisions of this act.Sec 24 : BALANCE SHEETThe foreman shall prepare a Balance Sheet and a Profit and Loss Account at the end ofsuch financial or calendar year audited by an approved auditor as per the provisions ofCompany’s Act of 1956.Sec 25 : LIABILITY OF FOREMAN TO SUBSCRIBERS 1) Every foreman shall be liable to account to the subscriber for amounts due to them. 2) Where there are more than one foreman in a chit, each one of them jointly and severally and if the foreman is a firm or other association of individuals, each one of partners or individuals thereof jointly and severally and if the foreman is a company, the company as such, shall be liable to the subscribers in respect of the obligations arising out of the chit.Babasabpatilfreepptmba.com Page 39
  • 40. Customer attitude towards investing in chit funds & Customer satisfaction measurement D. RIGHTS AND DUTIES OF NON PRIZED SUBSCRIBERSSec 27: NON PRIZED SUBSCRIBERS TO PAY SUBSCRIPTIONS AND OBTAINRECEIPTS.Every non prized subscriber shall pay his subscription within the due date for each drawand also obtain receipts for such payments.Sec 28 : REMOVAL OF DEFAULTING SUBSCRIBERSIn case of default by any subscriber on the payment of subscription amount, he is liable tohave his name removed from the list and a written notice is issued by the foreman to suchsubscriber within 14 days of such removal.Babasabpatilfreepptmba.com Page 40
  • 41. Customer attitude towards investing in chit funds & Customer satisfaction measurement E. RIGHTS AND DUTIES OF PRIZED SUBSCRIBERSSec 31 : PRIZED SUBSCRIBERS TO FURNISH SECURITYEvery prized subscriber shall furnish security for the future subscriptions amount payableto the satisfaction of the Registrar.Sec 32 : PRIZED SUBSCRIBER TO PAY SUBSCRIPTIONS REGULARLYEvery prized subscriber should pay his subscriptions promptly and on his failure he shallbe liable to make consolidated payment of all future subscriptions forthwith.Sec 33 : FOREMAN TO DEMAND FUTURE SUBSCRIPTIONS BY WRITTENNOTICE. 1) A foreman shall not be entitled to claim a consolidated payment from a defaulting prized subscriber. 2) In case of any dispute, the adjucating authority would make the defaulting customer to pay al due subscriptions, interest, penalties and legal charges as claimed by the foreman and also collect all future subscription as a consolidated amount with interest as case may be. 3) Any person who holds any interest in the property furnished as security or part there of, shall be entitled to make payments under sub sec (2). 4) A consolidated payment for future subscription shall be deposited in an approved bank mentioned in the chit agreement and such amount shall be used only for payment of such future subscriptions.Babasabpatilfreepptmba.com Page 41
  • 42. Customer attitude towards investing in chit funds & Customer satisfaction measurement F. TRANSFERSSec 34 : RESTRICTIONS ON TRANSER OF RIGHTS OF FOREMAN 1) The right of foreman to collect subscriptions from prized subscribers shall not be transferred, without the previous sanction in writing by Registrar.Sec 35 : TRANSFER OF NON PRIZED SUBSCRIBERS RIGHTS TO BE INWRITINGTransfer of a non prized subscriber rights in a chit agreement shall be in writing dulysigned and attested by 2 witnesses and shall be filed with the foreman.Sec 36 : RECOGNITION OF TRANSFER BY FOREMANEvery transfer shall within 14 days from the date of proposal for such transfer berecognized by the foreman.Babasabpatilfreepptmba.com Page 42
  • 43. Customer attitude towards investing in chit funds & Customer satisfaction measurement G. MEETINGS OF GENERAL BODY OF SUBSCRIBERSSec 38 : MEETINGS OF GENERAL BODY OF SUBSCRIBERS 1) The foreman may on his own motion, convene a special meeting of the General body of Subscribers for considering any proposal to pass a special resolution. 2) The foreman shall convene the meeting on requisition of not less than 25% of the non prized and unpaid prized subscribers. The meeting shall be convened within 30 days of date of receipt of requisition. If the foreman fails then such group of subscribers can approach the Registrar. 3) The registrar shall within 21 days of notice under Sub Sec (2), direct the convening of a Special Meeting.Babasabpatilfreepptmba.com Page 43
  • 44. Customer attitude towards investing in chit funds & Customer satisfaction measurement H. TERMINATION OF CHITSSec 39 : PROVISION FOR CONTINUATION OF CHITS IN CERTAIN CASES 1) Where foreman dies, becomes of unsound mind or in otherwise incapacitated the chit may continue in accordance with the provisions of the chit agreement.Sec 40 : TERMINATION OF CHITSA chit shall be deemed to have been terminated a) When the period specified in chit agreement has expired provided the payment dues to all the subscribers has been completed or b) When all the non prized and unpaid subscribers and the foreman consent in writing to the termination of the chit or c) When a foreman dies, becomes insecure or is otherwise incapacitated and the chit is not continued as per provisions of chit agreement.Babasabpatilfreepptmba.com Page 44
  • 45. Customer attitude towards investing in chit funds & Customer satisfaction measurement I. INSPECTION OF DOCUMENTSSec 44 : FOREMAN TO ALLOW CERTAIN SUBSCRIBERS TO INSPECT CHITRECORDS.The foreman shall allow all non prized subscribers, unpaid subscribers and also prizedsubscribers to inspect the books of account on all the dates of draw or as provided in theagreement. They shall be allowed to check securities furnished by prized subscriber, allchit records including books of accounts, pass books, Balance Sheets, Profit and LossAccount.Sec 45 : PRESERVATION OF CHIT RECORDS BY FOREMANAll the records pertaining to a chit agreement shall be maintained for 8 years.Sec 46 : INSPECTION OF CHIT BOOKS AND RECORDS BY REGISTRAR. 1) The registrar or a person appointed by State Government may inspect chit books or all records of a chit on any working day at the premises of the foreman with or without any notice. 2) The Registrar or any person appointed by State Government issue a 7 days notice to a foreman for the submission of all chit records. 3) On the finding of any defects, the registrar or office may order the foreman to rectify such errors giving certain period of time.Babasabpatilfreepptmba.com Page 45
  • 46. Customer attitude towards investing in chit funds & Customer satisfaction measurement 4) Every foreman shall be bound to comply with directions contained in an order made under Sub Sec (3).Sec 47 : POWER OF RBI TO INSPECT CHIT BOOKS AND RECORDS 1) The power of RBI to inspect chit books and records remain same as stated in Sec 45 N of RBI Act 1934. 2) The RBI if it considers necessary may forward a report on the inspection of chit books and records of a foreman for taking necessary action. 3) Any foreman is bound to comply with the report received from RBI, and even make periodical reports to RBI as may be needed. 4) The RBI may forward a report to State Government or Registrar to inspect the chit books and records.Babasabpatilfreepptmba.com Page 46
  • 47. Customer attitude towards investing in chit funds & Customer satisfaction measurement J. WINIDING UP OF CHITSSec 48 : CIRCUMSTANCES UNDER WHICH CHITS MAY BE WOUND UPA chit may be wound up by the Registrar either on his such motion or on an applicationmade by any non prized or unpaid prized subscriber. a) If the chit has terminated under clause (c) of sec 40 or b) If the foreman commits any such act in respect of the security specified in Sec 20 as is calculated to impair materially the nature of the security or the value thereof or c) If the foreman fails to deposit any amount required to be deposited under any of the provisions of this Act or d) If it is proved to the satisfaction of the Registrar that the foreman is unable to pay the amounts due to the subscriber or e) If the order issued by Registrar as foreman has not been complied with for payments to any subscriber or f) If it is proved that there has been fraud or collision on part of foreman in the matter of taking securities from the prized subscriber or g) If the foreman has appropriated amount to prized subscribers without appropriate securities.Babasabpatilfreepptmba.com Page 47
  • 48. Customer attitude towards investing in chit funds & Customer satisfaction measurement h) If registrar is satisfied that the affairs of the chit are being conducted in a manner prejudicial to the interests of the subscribers or i) If it is just and equitable that the chit should be wound up. K. APPOINTMENT OF OFFICES AND LEVY OF FEESSec 61 : APPOINTMENT OF REGISTRAR AND OTHER OFFICERS 1) The State Government may by notification in the Official Gazette appoint f Registrar of Chits and as many Additional, Joint, Dy. And Assistant Registrars L. DISPUTES AND ARBITRATIONSec 64 : DISPUTES RELATING TO CHIT BUSINESSAny disputes relating to the management of Chit business, shall be referred to any of theparties to the dispute, to the Registrar for arbitration, if each party thereto is of thefollowing (non withstanding any other law for the time being in force) a) A foreman, prized subscribers, non prized subscriber defaulting subscriber, past subscribe or a person claiming through a subscriber or a deceased subscriber to a chit. b) A surety of a subscriber, past subscriber or a deceased subscriberBabasabpatilfreepptmba.com Page 48
  • 49. Customer attitude towards investing in chit funds & Customer satisfaction measurement ii. a claim by or against a foreman or any debt or demand due to him from a subscriber or due from him to a subscriber, past subscriber or the nominee, heir or legal representative of a deceased subscriber whether such debt or demand is admitted or not. iii. A claim by a surety for any sum or demand due to him from the principal borrower in respect of a loan by a foreman and recovered from the surety occurring to the default of the principal borrower, whether such sum or demand is admitted or not, and iv. A refusal or failure by a subscriber, past subscriber or the nominee heir or legal representation of a deceased subscriber to deliver possession to a foreman of land or any other Asset resumed by him for breach of condition of the Assignment. 2) Where a question arises whether the matter referred to the Registrar by any one of the parties is a dispute or not, shall be decided by the Registrar whose decision shall be final. 3) No civil court shall have jurisdiction to entertain any suit in respect of any dispute as referred to in Sub Sec 1.Sec 66 : SETTLEMENT OF DISPUTES 1) If the Registrar is satisfied that the matter referred to him is within the meaning of Sec 64, he shall settle the dispute himself or refer it to a person appointed by him (so called nominee) subject to the rules of this Act. 2) Where any dispute is referred to a nominee, the Registrar at any time, for reasons recorded by him in writing, withdraw such dispute from the nominee and settle it himself or appoint any other nominee.Sec 67 : PROCEDURES FOR SETTLEMENT OF DISPUTES AND POWERS OFREGISTRAR OR NOMINEEBabasabpatilfreepptmba.com Page 49
  • 50. Customer attitude towards investing in chit funds & Customer satisfaction measurement 2) A Registrar or a Nominee having a dispute under Sec 66 shall in addition to the powers conferred on him under that section, have the same powers as are vested in a Civil Court while trying a suit under the Code of Civil Procedures 1908 (5 of 1908) in respect of the following matters namely : a) Summoning and enforcing the attendance of persons and examining them on oath. b) Requiring the discovery and inspection of documents. c) Receiving evidence on affidavits. d) Requisitioning any public record or copies there of from any count or office. e) Issuing commissions for the examinations of witnesses or documents. f) Any other matter which may be prescribed. 3) Except with the permission of the Registrar or the Nominee, no party shall be represented at the hearing of any dispute by a legal practitioner. 4) A) If any person whether he is a subscriber or not, has acquired any interest in the property of the person who is a party to the dispute and the registrar is satisfied by above act, the registrar may give an order which is binding on that person who has acquired the interest in the property, in the manner as if he were the original party to the dispute. B) Where a dispute has been referred in the name of a wrong person, or where all the necessary parties have not been included, the Registrar or the nominee may if he is satisfied that it was due to a genuine mistake, order any other person to be substituted or added as parties to the dispute at any stage of hearing of the dispute on such terms as he thinks fit. C) The Registrar or Nominee may at any stage of proceedings either upon or without an application of either party and on such terms as may appear to the Registrar orBabasabpatilfreepptmba.com Page 50
  • 51. Customer attitude towards investing in chit funds & Customer satisfaction measurement Nominee to be just may order that the name of any party improperly joined be struck off. D) The person who is a party to the dispute and entitled to more than one relief in respect of the same cause of action may claim all or any such relief, but if he wants to claim any such relief, but he shall not be entitled to claim that relief, except with the leave of the Registrar or the Nominee. M. MISCELLANEOUS Sec 73 : ADVISORY ROLE OF RBI The Reserve Bank may tender to any State Government such advice on Questions of policy with respect to this Act as it thinks fit either on its own motion or on a request made by the State Government.Babasabpatilfreepptmba.com Page 51
  • 52. Customer attitude towards investing in chit funds & Customer satisfaction measurement STATEMENT OF PROBLEM Chit funds in an age old unorganized non banking financial institution over the years both the Government and players in this industry have tried to organize this important institution which has been contributing significantly to the economic development of the country. Both the foreman and subscribers were incurring losses due to unorganisation and lack of state control over the chit business. The Chit Funds Act 1982, was a major step towards organizing this activity. The efforts in this direction have however not been totally successful. The chit fund operators still face problems as to the default by subscribers on payment, insolvency of subscribers and fraudulent activities of the subscriber.Babasabpatilfreepptmba.com Page 52
  • 53. Customer attitude towards investing in chit funds & Customer satisfaction measurement This project study is based on the pronounce of chit industry, Profitability in investing in Chit funds and an attempt is made to find out the implications of running the chit funds and offer suggestions. SCOPE OF THE STUDY The project report covers the Chit Fund Act 1982, the influencing authorities of chit funds, a Company Profiles, an Analysis of the data collected from 50 respondents and their views on chit business and chit funds as a source of finance. The Analysis and evaluation of responses about the risks, advantages of the role of chit funds in the economic development of the country. A reader of this project report would get an exhaustive information on the operation of chit business, the legal framework binding chit operators with reference to the PCPL.Babasabpatilfreepptmba.com Page 53
  • 54. Customer attitude towards investing in chit funds & Customer satisfaction measurement OBJECTIVES OF THE STUDY The general objectives of this project is to present a consolidated report on the “Profitability in investing in Chit funds of the Country with specific reference to ‘PCPL’”. The other objectives are : a) The functioning of chit funds. b) The legal framework governing the chit fund industry. c) The member profile required for membership of PCPL. d) To know the attitude of the customers about investing in the chit funds. e) Customer satisfaction measurement of PCPL. Research Design a) Type of Research Study: A social research on Financial activity for economic development using data collected from Respondents as primary data and theoretical data as secondary data. b) Tool for Collection Data: Structured Questionnaire both for the members of the company and the company. c) Sample Design: Selected Targeted Company, i.e., PCPL and 50 Respondents selected as Random Sample Method. d) Method of Collecting Data: Interview method and investigative method. e) Method of Analysis: Quantitative and Descriptive Analysis.Babasabpatilfreepptmba.com Page 54
  • 55. Customer attitude towards investing in chit funds & Customer satisfaction measurement The findings are recorded based on evaluation of Data, the evaluation is done for each data and conclusion is based on the evaluation of the data. Suggestions are given at the end of the project study. Limitations The project being for educational purpose, was restricted to the study of one chit fund operator being PCPL. Since the study was restricted to one chit fund operator, the study cannot be generalized. Lack of availability of theoretical information on chit funds was one of the major constraints faced. Due to the constraints of time and money, the number of respondents has been restricted to 50 members only. The information has been collected from the Chit Fund Act, Company Profile and Respondents only.Babasabpatilfreepptmba.com Page 55
  • 56. Customer attitude towards investing in chit funds & Customer satisfaction measurement COMPANY PROFILE Panchajanya Chits Pvt. Ltd (PCPL) is the 1 st registered chit funds co., in the State of Karnataka, registered under the Chit Funds Act 1982. The company being registered under the Companies Act 1956, began its operations in 1984. PCPL is the 1st licensed chit operators coming under the preview of Chit Fund Act, RBI and Registrars of Company.Babasabpatilfreepptmba.com Page 56
  • 57. Customer attitude towards investing in chit funds & Customer satisfaction measurement The company began its operation with a meager turnover of Rs. 32 lakh by the end of 1984, but with its constant dedication, hardwork and effort towards the growth of chit industry and business community it has reached a record high of Rs. 1200 crores in the year 1998-99, showing a average growth rate of 235% every year for the past 16 years. The company has a member profile of more than 250 registered business class customers and 100 employed customers participating actively in its chit programmes / schemes. Presently the company offers the following chit schemes. Chit Value Months No.of Monthly Subscription Members Rs. 1 lakh 40 40 2500 Rs. 5 lakhs 50 50 10000 Rs. 10 lakhs 25 25 40000 Rs. 25 lakhs 25 25 100000 In order to meet the growing demand of its clientele, the company proposes to start the full chit schemes. Chit Value Months No.of Monthly Subscription Members Rs. Rs. 50 lakhs 25 25 Rs. 2,00,000 Rs. 75 lakhs 25 25 Rs. 3,00,000 Rs. 100 lakhs 25 25 Rs. 4,00,000The management team comprises of Board of Directors, known of their commercialacumen, who plan the company’s long term strategies and implement them in order toBabasabpatilfreepptmba.com Page 57
  • 58. Customer attitude towards investing in chit funds & Customer satisfaction measurementreceive results. The company has dedicated staff at all levels working in a smooth andefficient manner.MISSION“Panchajanya endeavors to reach the zenith of business excellence through value – basedservice and uncompromising quality there by ensuring complete customer satisfaction”OBJECTIVES  To develop business models and strategies that maximizes customers and employee value.  To be a forerunner in the use of Chit solutions.Babasabpatilfreepptmba.com Page 58
  • 59. Customer attitude towards investing in chit funds & Customer satisfaction measurement  To ensure service norms and standard systems, on dot and round the clock support.  Develop and retain key resource and capabilities.  To evolve continuously servicing organizations.BOARD OF DIRECTORS01 D. Ramachandra Chairman.02 Prashanth R. Dhondale Managing Director.PROMOTERS:-Mr. D. Ramachandra, Chairman.Mr. D. Ramachandra, 58 years, studied in Bangalore University. He worked in thefamily’s retail cloth stores and readymade garment industry. He started an IndustrialManagement Consultancy services in the year 1976 to 1984. He had exhaustiveknowledge of Industry, which resulted into the preparation of project reports, marketBabasabpatilfreepptmba.com Page 59
  • 60. Customer attitude towards investing in chit funds & Customer satisfaction measurementsurveys and excellent contact and repo with banks and financial institutions and duringhis stinct as consultant, he prepared around 300 project reports and innumerousrepresentations of industrialist before financial institutions. Soon it proved to be a domainfor new business learning and contacts. In 1984 he promoted Panchajanya Chits (P) Ltd.As its founder Chairman and Managing Director he made a humble beginning in the Chitindustry. Panchajanya Chits scaled new heights year after year and has to its distinctionas the first licensed chit operator in the state, first to promote and operate Rs. 1 lakh, Rs.2 lakhs, Rs. 3 lakhs, Rs. 5 lakhs, Rs. 10 lakhs and Rs. 25 lakhs chit groups in the state ofKarnataka. He became the President of Karnataka Chitsters Association, and in the year1999 he was elected as the President of All India Association of Chit Funds, New Delhi.He participated in number of meetings, seminars and workshops on Banking, Finance andChit Industry. Presently he is the Chairman of Banking and Finance and Chit Industry.Presently he is the Chairman of Banking and Finance Committee with variouseducational, religious and social organizations and has been an active member of manyinstitutions, clubs including the Rotary International.Sri. Prashanth R. Dhondale, Managing Director.Mr. Prashanth R. Dhondale, 24 years, is the son of Mr. D. Ramachandra, the founder ofPanchajanya Chits. He studied as a commerce student from the University of Bangalore.He was associated with Chit Industry from the age of his teens, who was virtuallybrought up in and among the Chit Industry. His penchant for Chit Industry resulted intohis choosing the same as a career. His contact with Chit Industry began as early as 18years and he has very wide knowledge of chits under the tutege of his illustrious fatherBabasabpatilfreepptmba.com Page 60
  • 61. Customer attitude towards investing in chit funds & Customer satisfaction measurementand is a veteran in solving all problems concerning chits. His yound hunger for growthand excellence has led the company at an astounding growth rate and he is instrumentalin establishing alliances with top notch Captains of Industry, Trade and Commerce. Heheads the Corporate office of the company, which is equipped with all modern businessequipment, fully computerized and has an air conditioned ambience at Madhav Nagar,Race course Road, Bangalore 560001. He leads a highly efficient and result orientedteam of professional executives, who are instrumental in promotion and operation of chitgroups worth Rs. 3790 lakhs in a short span of 36 months, which is a record in the fieldof Chit Industry. He is connected with many organizations, institutes and clubs. He isalso a good classical singer.The company has its registered office at Chickpet but with a objective to serve itscustomers more effective and meet the growth of the company, a new corporate officewas set up in Madhav Nagar which began its operation in June 1997. ANALYSIS AND EVALUATION OF DATAChit Funds are age old conventional financial institution in India. But of late chit fundshave taken the role of a organized system. However it could not be classified as BankingSystem nor lending system, but it is having its own unique financial operations. In viewBabasabpatilfreepptmba.com Page 61
  • 62. Customer attitude towards investing in chit funds & Customer satisfaction measurementof the very high risk factors both for the members and for the people who conduct chitfunds. Many normal educated persons who are not investing in this financial institutions.Only those who had (immediate need for) unexpected need for finance who wereengaged in risky business and those who did not want to invest in Banking institutions,those who wanted high yields were investing in Chit funds. Persons with (high) soundfinancial background, those who had control in their own local areas were running chitfunds in unorganized manner. There were incidents of incurring loss, both by themembers and the chit fund owners, but it was a fact that very heavy turnover was carriedout throughout country especially in Rural and sub urban areas. Money was notaccounted for and there was not control over the chit fund activity.Chit Funds have contributed widely for economic development because most of themembers were those who were engaged in one or other kind of business and the moneywas doubled. Considering the importance of Chit Funds in the company activity, theGovernment of India enacted the Chit Fund act in 1982 to control and regulate the chitfunds. It ensured the state control and the control by RBI on chit funds activities and nowchit funds has become one of the recognized financial institutions in India. The chit fundcompanies have been registered under companies act 1956, with their Articles ofAssociation and Memorandum of Association.Upto this day, the searches made on various studies pertaining to finance have revealedthat no project study was made on the Profitability in investing in Chit Funds. Therefore acase study is undertaken to conduct a study with the objective of understanding theintrigues of running a chit fund company and the expectations of members.Among many registered firms dealing with Chit funds in Karnataka, the PanchajanyaChits Pvt. Ltd, is the one which has become popular and therefore this study is withparticular reference to Panchajanya Chits Pvt Ltd.Babasabpatilfreepptmba.com Page 62
  • 63. Customer attitude towards investing in chit funds & Customer satisfaction measurementThe data has been collected from 50 respondents who are the members of PCPL. Astructured Questionnaire was used to collect the data which is placed at Annexure A.Each data is tabled and analyzed.AnalysisTable 1 : Indicates the name profile of the respondentsBabasabpatilfreepptmba.com Page 63
  • 64. Customer attitude towards investing in chit funds & Customer satisfaction measurement Particulars No. of Respondents Percentage Name Given 48 96 Name not Given 02 04 Total 50 100 4% Name given Name not given 96%From the above table and graph, 48 persons has given their name and only 2 persons havenot given their name.Inference:Name indicates the identity of the respondents and his opinion in furnishing the data,which could be relied upon.It is seen from the above table and graph that 96% of the respondents have given theirname and therefore it is evident that they are totally willing to participate in the projectstudy. Hence, the data supplied by them can be reliable.Table 2 : Indicates the age profile of the respondents.Babasabpatilfreepptmba.com Page 64
  • 65. Customer attitude towards investing in chit funds & Customer satisfaction measurement Particulars No. of respondents Percentage 20 – 25 Years 2 4 25 – 35 Years 16 32 35 – 45 Years 22 44 45 & Above 10 20 Age Profile No. of respondents 25 22 20 16 15 10 Series1 10 5 2 0 20 - 25 25- 35 35-45 45 & above YearsInference:From the above its clearly shows that the respondents between the age group of 35 – 45Years are majority and hence it shows that they are all experienced in their respectivefields and have good decision make abilities in investing in chit funds.Table 3 : Indicates the qualification profile of the respondents.Babasabpatilfreepptmba.com Page 65
  • 66. Customer attitude towards investing in chit funds & Customer satisfaction measurementParticulars No. of respondents PercentageUndergraduate 08 16Graduate 32 64Post Graduate 10 20Total 50 100 Qualification Profile 20% 16% Under Graduate Graduate Post Graduate 64%Inference:Educational qualification makes respondents to take the right decision in investments.From the above, it is presumed that respondents will have clear thinking about theadvantages and care to be taken in chit fund investments.Table 4 : Indicates the occupation profile of the respondents.Particulars No. of Respondents PercentageBabasabpatilfreepptmba.com Page 66
  • 67. Customer attitude towards investing in chit funds & Customer satisfaction measurementSalary Earners 5 10Business 37 74Others 8 16Total 50 100 Occupation Profile 16% 10% Salary Earners Business Others 74%Inference:From the above its clear that most of the respondents are engaged in business andtherefore they need money for cash flow to carry out the business as working capital.They can take a decision when to bid the amount from chit unlike applying to the bankand rising the loan where securities issues arise.Table 5 : Indicates the annual income profile of the respondents.Babasabpatilfreepptmba.com Page 67
  • 68. Customer attitude towards investing in chit funds & Customer satisfaction measurement5a. Salary Earners Income No of Respondents Percentage 2 – 3 Lakhs 2 40 3 – 4 Lakhs 2 40 More than 4 Lakhs 1 20 Total 05 100 Income Level 20% 40% 2- 3 lakhs 3- 4 lakhs More than 4 Lakhs 40%Inference:Respondents having considerable amount of income to over come the risk and invest inchit funds.Babasabpatilfreepptmba.com Page 68
  • 69. Customer attitude towards investing in chit funds & Customer satisfaction measurement5b. Businessmen’s Turnover No. of respondents Percentage Up to 25 Lakhs 08 22 25 – 50 Lakhs 13 35 50 – 100 Lakhs 12 32 Above 1 Crore 04 11 Total 37 100 Turnover Level 11% 22% Upto 25 Lakhs 25-50 Lakhs 32% 50- 100 Lakhs Above 1 Crore 35%Inference:Every business must have a annual turnover, which decides the stability and growth ofbusiness. This decides the profit and investment pattern.From above it is presumed that the respondents have considerable amount of turnover toover come the risk and invest in chit funds.Babasabpatilfreepptmba.com Page 69
  • 70. Customer attitude towards investing in chit funds & Customer satisfaction measurement5c. Other Respondents Income No of Respondents Percentage 2 – 3 Lakhs 3 38 3 – 4 Lakhs 4 50 More than 4 Lakhs 1 12 Total 08 100 Income level 13% 38% 2- 3 Lakhs 3-4 Lakhs More than 4 Lakhs 49%Inference:Respondents having considerable amount of income to over come the risk and invest inchit funds.Babasabpatilfreepptmba.com Page 70
  • 71. Customer attitude towards investing in chit funds & Customer satisfaction measurementTable 6: Indicates the membership profile of the respondents. No. of Years No. of respondents Percentage Below 2 08 16 2–4 06 12 4–6 08 16 6–8 10 20 Above 8 18 36 Total 50 100 Duaration of Members with PCPL 20 18 18 16 Respondents 14 12 10 10 8 8 Series1 8 6 6 4 2 0 Below 2 - 4. 4 - 6. 6 - 8. Above 2 8 No. of YearsThis data is to ascertain the period of association of membership with PCPL.Inference:It is confirmed from the above data that the respondents have built a good rapport withPCPL and have been the members of different types of chit schemes over many years.This will definitely attract other members to join the chit fund and also the new membersto continue the membership.Babasabpatilfreepptmba.com Page 71
  • 72. Customer attitude towards investing in chit funds & Customer satisfaction measurementTable 7 : Indicates the chit group membership. Chit Amount No. of Respondents Percentage 1 Lakh 12 24 5 Lakh 20 40 10 Lakh 06 12 25 Lakh 08 16 50 Lakh 04 08 Total 50 100 Chit Groups of Members 25 No of Respondents 20 20 15 12 Series1 10 8 6 4 5 0 1 Lakh 5 10 25 50 lakhs Lakhs Lakhs Lakhs AmountInference :From the above data it seems that the most popular chit groups are 1 lakh and 5 lakhsgroups, which attract moderate and stabilized business groups. However there are highinterest business respondents who are members of other chit groups.This evaluation further reveals that the respondents must have a high monthly incomebecause the instalment towards chit fund ranges from minimum of Rs. 2500 per month toa maximum of Rs. 2 lakhs per month, besides this other expenditures and commitments.Hence it is felt that those business that have continuous sources of income can becomethe members of high value chit groups.Babasabpatilfreepptmba.com Page 72
  • 73. Customer attitude towards investing in chit funds & Customer satisfaction measurementTable 8 : Indicates when the chit is normally bid. Period No. of Respondents PercentageBetween 2nd & 10th month 15 30Between 11th & 20th month 11 22Between 21st & 30th month 09 18 30th month onwards 09 18 As need arises 06 12 Total 50 100 Bidding of Chits 16 15 14 No of Respondents 12 11 10 9 9 8 Series1 6 6 4 2 0 0. s es 0. 0. rd -1 -2 -3 is wa ar 2 11 21 0n ed 30 ne As MonthsInference:The chits are bid based on financial requirement and sometimes when their ia urgency,the subscribers may bid by foregoing heavy amount.Babasabpatilfreepptmba.com Page 73
  • 74. Customer attitude towards investing in chit funds & Customer satisfaction measurementThe above data reveals the patterns in which the respondents have bid and drawn theirchit amounts. Every respondent has its own needs for funds. It could be necessary for onebidder or more at a time, whereas others might not have such an immediate need.The need for such finance to creep over the financial crisis or constraints brings out thepicture, the discount or bidding or auction factor. The members in need make their bid inauction and person with the highest bid takes the chit draw.However, the analysis of the data reveals that the bidders plan well and do not lose muchby foregoing the chit fund.Babasabpatilfreepptmba.com Page 74
  • 75. Customer attitude towards investing in chit funds & Customer satisfaction measurementTable 9 : Indicates the maximum percentage foregone.Percentage foregone No. of Respondents Percentage 5 – 10 % 25 50 10 – 15 % 12 24 15 – 20 % 08 16 Above 20 % 05 10 Total 50 100 Maximum Percentage Forgone No of Respondents 30 25 25 20 15 12 Series1 10 8 5 5 0 5 - 10. 10 - 15. 15 - 20. Above 20 PercentageInference :Respondents who forego 25% onwards are early drawer or bidders who actually needquick money. There is corroboration in the response from table 8 and 9, normally thosewho forego less percentage by bidding will have already earned more than or equalamount by way of dividends and virtually they are not the losers.Babasabpatilfreepptmba.com Page 75
  • 76. Customer attitude towards investing in chit funds & Customer satisfaction measurementTable 10 : Indicates the interest rate on the foregone amount.Particulars No. of respondents PercentageInterest rate is high 02 04Interest is low 48 96Total 50 100 Interest rate on the forgone amount 4% Rate is high Rate is low 96%Inference:From the above table and chart it is clear that the interest rate on the foregone amount isless and it works out in favor of the bidder, compared to the interest charged on theamount when taken on credit from the market.Babasabpatilfreepptmba.com Page 76
  • 77. Customer attitude towards investing in chit funds & Customer satisfaction measurementTable11 : Indicates the use of the chit amount.Particulars No. of Respondents PercentageBusiness: - Working Capital 32 64 - Business Assets 10 20 Private Property 08 16 Total 50 100 Usage of Chit Amount 16% Working Capital 20% Business Assets 64% Private PropertyInference:The pattern of chit fund is an interesting topic to discus. Every individual has his ownplan for the use chit amount. In the above table 64% of the respondents used their chitamounts for their working capital in their business, basically because they are from thebusiness class, the most important factor is business growth. A total a 20% of the ‘R’ usechit amount for acquiring the business asset, which help in increasing the productivity ofthe firm. Only 16% of the respondents used the chit money for their private or personalBabasabpatilfreepptmba.com Page 77
  • 78. Customer attitude towards investing in chit funds & Customer satisfaction measurementuse for buying certain personal assets or private properties. From this it is clear that themembers who draw the chit money for business savings, a few members may use it forprivate expenditure or property.Table 12 : Indicates the security demanded and provided.Particulars No. of respondents Percentage Security Provided 20 40 Security not Provided 30 60 Total 50 100 Security Demanded & Provided 40% Security Provide Security Not 60% ProvidedInference :The above data provides details on security demanded by the company from the prizedsubscribers. However, the above data reveals that the majority of the clients being 60% ofthe respondents have not given any security, i.e., because they have built a very goodrapport with the company and since their guarantee stands at their association with thecompany for the past years on the past performance.However, 40% of respondents have been asked to submit th security as against the drawnamount or chit, being the security for default of such prized subscribers. From the above,it may be ascertained that the chit funds for the business people are preferred to the banksBabasabpatilfreepptmba.com Page 78
  • 79. Customer attitude towards investing in chit funds & Customer satisfaction measurementor any other financial institution because these securities are must, though a client iscontinuously doing business with them. In chit fund, personal rapport plays a vital roleand therefore security is not always required.Table 13: Indicates the advantages of chit funds.Sl. No Particulars No. of respomdents Percentage 1 Money is easily & quickly available 08 16 2 Repayment in easy instalments 20 40 3 The profits distributed as dividend 4 08 4 Interest is low 10 20 5 Easy Membership 8 16 Total 50 100 Advantages of Chit Funds 25 20 20 15 10 Series1 10 8 8 4 5 0 1 2 3 4 5Inference:Babasabpatilfreepptmba.com Page 79
  • 80. Customer attitude towards investing in chit funds & Customer satisfaction measurementFrom the above data, most of the people invest in chits due to easy monthly instalments.Table 14 : Indicates profitability in investing in chit funds. Particulars No. of Respondents Percentage Profitable 50 100 Not Profitable Nil 00 Total 50 100 Profitability in investing in chit funds 0% Profitable Non Profitable 100%Inference :The above data reveals that all the respondents believe that investing in chit funds arevery profitable.Babasabpatilfreepptmba.com Page 80
  • 81. Customer attitude towards investing in chit funds & Customer satisfaction measurementTable 15 : Indicates the average profit earned from chits. Profit (Range) No. of Respondents Percentage 1–5% Nil 00 10 – 15 % 22 44 Above 15% 28 56 Total 50 100 Average Profit earned from chits 0% 1 - 5. 44% 10 - 15. 56% 15 or moreInference :The data clearly shows that the 56% of the respondents earn a profit of 15% and moreand this shows that the profit earned through chit funds is a very considerable amount.Babasabpatilfreepptmba.com Page 81
  • 82. Customer attitude towards investing in chit funds & Customer satisfaction measurementTable 16 : Indicates the comparison of profit with other financial institution. Particulars No. of respondents Percentage Profits earned more than 32 64other financial institutionsProfits earned lesser than 18 36other financial institutions Total 50 100 Comparision of profit with other FIs 36% More than other FIs Less than other FIs 64%Inference :The above data reveals that 64% of the respondents agree that they earn good profitsthrough chit funds. Hence, investing in chit funds is a profitable activity.Babasabpatilfreepptmba.com Page 82
  • 83. Customer attitude towards investing in chit funds & Customer satisfaction measurementTable 17 : Indicates the satisfaction of the customers towards the service provided by the company. Particulars No. of respondents Percentage Satisfied with the service 45 90Not satisfied with the service 05 10 Total 50 100 Costomer satisfaction towards service 10% Satisfied Not satisfied 90%Inference:Babasabpatilfreepptmba.com Page 83
  • 84. Customer attitude towards investing in chit funds & Customer satisfaction measurementFrom the above data, it reveals that 90% of the respondents are satisfied with the serviceprovided by the company. Hence, it shows that the company is very much concernedabout its customers in providing them with good service. FINDINGS, CONCLUSION AND SUGGESTIONS1. FINDINGSOn the analysis and evaluation of the data collected from the chit fund company, thefollowing important findings are recorded. 1) PCPL is a well established company having established in the year 1984, which is registered under Companies Act. 2) It is also covered under Chit Funds Act 1982. 3) It has to obtain the license for every chit group as per the Act. 4) The company runs the chit under 4 schemes at present which are all designed for Business community because minimum chit amount is 1 lakh and maximum chit amount is 25 lakhs. 5) The monthly Turnover for each chit group would range from 2000 to 1,00,000 rupees and for each chit fund there will be requirement of members and these are meticulously fulfilled. 6) Majority of the members are from Karnataka and only few are from other states. 7) The members are not permanent and their membership is confirmed only to a chit group, after which it is left to them to become a member for a new chit group. 8) The members who want to draw money have to being their bid where the minimum bid is prescribed for every chit fund. 9) There is no private prizing and it is a monthly bidding.Babasabpatilfreepptmba.com Page 84
  • 85. Customer attitude towards investing in chit funds & Customer satisfaction measurement 10) The bidding is an open activity only among the members. 11) There is minimum of 5% of the bid amount to be foregone by the subscriber and the subscriber cannot go beyond 30%. 12) The bidding surplus is distributed equally as dividend among subscribers and thereby the loss, if any by early bidding is made good to a maximum extent. 13) The RBI controls the chit fund activities as stipulated under Chit Fund Act. 14) The Joint Registrar of Chits controls all the chit fund activities in Karnataka, because many returns have to be sent to him. 15) Normally the member profile must be those as follows  Established in Business – Balance Sheet and Income Statement to be provided.  Whose credentials are well known. 16) The chit funds demand securities in the form of Bank Guarantee, property documents, in the initial stages, and when once the rapport is built, then the demand for security is relaxed. 17) The new schemes are developed based on the customer (member) demands, company decisions, and reserves and surplus of the company.On the analysis and evaluation of the data collected from the RespondentsThe respondents are mostly from the business community and their atitude towardsinvesting is very favourable, and as far as PCPL the customers are very much satisfiedwith the services provided by the company and are very loyal t te copmany.The members have selected chit funds because of various reasons among whichfollowing are important reasons. iv. Money is easily available. v. It can be repaid in easy monthly installments. vi. Procedural and documentation formalities are very less.The surplus is distributed among members as dividend.Babasabpatilfreepptmba.com Page 85
  • 86. Customer attitude towards investing in chit funds & Customer satisfaction measurementII CONCLUSIONThe project study makes a deep study on the chit fund industry and the responses of theforeman and its subscribers.The project covers the aspect of profitability in investing in Chit funds. The legalframework governing the Chit business, and the responses of the members of the ChitBusiness to know the attitude of the customeers towards investing in chit funds andcustomer satisfaction measurement.The objective of the study being a depth study of the chit business operation and risksinvolved in such business. The ways of overcoming such risks in chit business have beenidentified in this project study. The project also covers the responses of 50 members, whowere surveyed, supported the fact that chit funds is very important and preferable ascompared to other sources of finance.This study has fulfilled the objective of the researcher i.e., the researcher has learnt how achit fund can be of help to the people in Business community in providing adequatefinancial resources. It has also revealed that the chit funds in India, which were runBabasabpatilfreepptmba.com Page 86
  • 87. Customer attitude towards investing in chit funds & Customer satisfaction measurement(conducted) most unorganized have now been legalized as one of the Non BankingFinancial Institutions with statutory control over the activities.III SUGGESTIONSThough the PCPL scheme has been well accepted by the members, yet based on the studymade the following suggestions are offered to improve functions of the Chit Fund. 10) The company PCPL can be more aggressive and increase its membership profile. 11) The risk factors can be covered by the company by making a good study of membership profile. 12) The risk perception of subscriber can be overcome, by the company by making its transaction more transparent. 13) The company can introduce more schemes, based on a survey and thus making the company more attractive or beneficial to the members. 14) The company can reduce its commission charges from 5% to a lower rate, thus will increase the scope for more individuals. 15) The company can consolidate the chit business by insuring each scheme against any risks.Babasabpatilfreepptmba.com Page 87
  • 88. Customer attitude towards investing in chit funds & Customer satisfaction measurement 16) The company can introduce incentive or schemes, so as to motivate the subscribers to make prompt payment of subscription money. 17) The company can introduce lower amount chit schemes and tap the large lower middle income group people. 18) The general public has to be communicated the advantages of Registered Chit Funds. BIBLIOGRAPHY  The Chit Fund Act, 1982 – M/s Vijaya Publications.  Modern Economic Theory – S. Chand & Co. Ltd. – K.K. Dewett.  Economics of Development and Planning - A.N. Agrawal ; Vikas Publishing House Pvt. Ltd., - Kundan Lal.  Finance and Profits - N.J. Yasaswy ; Vision Books Pvt. Ltd.  Business Finance.  Financial Management - P.N. Reddy, H.R. Appannaiah, B.G. Sathyaprasad; Himalaya Publication House.Babasabpatilfreepptmba.com Page 88
  • 89. Customer attitude towards investing in chit funds & Customer satisfaction measurementBabasabpatilfreepptmba.com Page 89

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