This document provides a literature review on studies related to chit funds and non-banking financial companies (NBFCs). It summarizes several past studies that have described the origins and operations of chit funds in India and other countries over the past 1000+ years. It also reviews studies that have analyzed the roles of NBFCs and chit funds in providing financial services and credit, as well as their importance in mobilizing savings. However, many of the past studies on NBFCs and chit funds have been descriptive in nature rather than critically analytical. The present study aims to fill this gap through an exploratory empirical analysis of perceptions of chit fund subscribers and employees.
The document is a student paper discussing chit funds in India. It includes:
- An introduction to chit funds as a traditional savings method in India and how they still operate despite expansion of banking.
- Details from a survey of 55 respondents on customers', agents', and managers' perspectives on chit funds. Key findings show most customers are satisfied with returns and services but some want more transparency.
- Suggestions to improve chit funds including offering lower deposit schemes, more transparent transactions, and better staff training to enhance customer relations and service.
Regulatory framework for financial services in INDIAayushmaan singh
Financial services refers to services provided by the finance market such as banking, insurance, and investment. Financial regulation subjects financial institutions to requirements and guidelines to maintain integrity in the financial system. It influences banking by increasing available financial products. NABARD was established in 1982 to oversee agricultural credit and rural development. Its roles include providing credit and refinancing to rural banks, identifying credit potential, monitoring credit plans, and inspecting regional rural banks to regulate the rural banking sector.
This document provides a training report submitted by a student to fulfill requirements for a post-graduate degree in commerce. It includes an introduction to mutual funds, a profile of the company where the training took place (State Bank of India), objectives and methodology of the research project on consumer preferences regarding investment in mutual funds, analysis and findings of the research, and suggestions. The student undertook the training and research project at State Bank of India to study consumer preferences around mutual fund investments.
The document discusses key Indian banking laws and regulations. It outlines the Banking Regulation Act of 1949 and the Reserve Bank of India Act of 1934, which establish the regulatory framework for banking in India. The Banking Regulation Act defines banking activities and sets requirements around licensing, management, and restrictions. The Reserve Bank of India Act establishes RBI as the central bank of India, giving it authority over monetary policy, banking supervision, and other central banking functions.
This document discusses development banks in India. It begins by providing context on the emergence of development banking after World War II to help reconstruct destroyed buildings and industries. In India, the first development bank was the Industrial Finance Corporation of India established in 1948. Development banks are defined as financial institutions that provide subsidized financing to promote important sectors like agriculture, industry, housing, and more. The document then discusses the roles and types of development banks in India, including industrial development banks like IFCI, IDBI, and SIDBI, agricultural banks like NABARD, export-import banks like EXIM Bank, and housing banks like NHB. It provides examples and details on the objectives and functions of some of these key development
The document provides an overview of the Indian financial system. It discusses that the financial system includes financial intermediaries like banks, mutual funds, and insurance companies; financial markets like money markets, capital markets, and derivatives markets; and financial assets/instruments like equity, debt, and indirect securities. The financial system mobilizes savings from households and channels them to corporations and governments through these various institutions and markets, in order to facilitate capital formation and meet short and long-term financing needs.
This document provides a literature review on studies related to chit funds and non-banking financial companies (NBFCs). It summarizes several past studies that have described the origins and operations of chit funds in India and other countries over the past 1000+ years. It also reviews studies that have analyzed the roles of NBFCs and chit funds in providing financial services and credit, as well as their importance in mobilizing savings. However, many of the past studies on NBFCs and chit funds have been descriptive in nature rather than critically analytical. The present study aims to fill this gap through an exploratory empirical analysis of perceptions of chit fund subscribers and employees.
The document is a student paper discussing chit funds in India. It includes:
- An introduction to chit funds as a traditional savings method in India and how they still operate despite expansion of banking.
- Details from a survey of 55 respondents on customers', agents', and managers' perspectives on chit funds. Key findings show most customers are satisfied with returns and services but some want more transparency.
- Suggestions to improve chit funds including offering lower deposit schemes, more transparent transactions, and better staff training to enhance customer relations and service.
Regulatory framework for financial services in INDIAayushmaan singh
Financial services refers to services provided by the finance market such as banking, insurance, and investment. Financial regulation subjects financial institutions to requirements and guidelines to maintain integrity in the financial system. It influences banking by increasing available financial products. NABARD was established in 1982 to oversee agricultural credit and rural development. Its roles include providing credit and refinancing to rural banks, identifying credit potential, monitoring credit plans, and inspecting regional rural banks to regulate the rural banking sector.
This document provides a training report submitted by a student to fulfill requirements for a post-graduate degree in commerce. It includes an introduction to mutual funds, a profile of the company where the training took place (State Bank of India), objectives and methodology of the research project on consumer preferences regarding investment in mutual funds, analysis and findings of the research, and suggestions. The student undertook the training and research project at State Bank of India to study consumer preferences around mutual fund investments.
The document discusses key Indian banking laws and regulations. It outlines the Banking Regulation Act of 1949 and the Reserve Bank of India Act of 1934, which establish the regulatory framework for banking in India. The Banking Regulation Act defines banking activities and sets requirements around licensing, management, and restrictions. The Reserve Bank of India Act establishes RBI as the central bank of India, giving it authority over monetary policy, banking supervision, and other central banking functions.
This document discusses development banks in India. It begins by providing context on the emergence of development banking after World War II to help reconstruct destroyed buildings and industries. In India, the first development bank was the Industrial Finance Corporation of India established in 1948. Development banks are defined as financial institutions that provide subsidized financing to promote important sectors like agriculture, industry, housing, and more. The document then discusses the roles and types of development banks in India, including industrial development banks like IFCI, IDBI, and SIDBI, agricultural banks like NABARD, export-import banks like EXIM Bank, and housing banks like NHB. It provides examples and details on the objectives and functions of some of these key development
The document provides an overview of the Indian financial system. It discusses that the financial system includes financial intermediaries like banks, mutual funds, and insurance companies; financial markets like money markets, capital markets, and derivatives markets; and financial assets/instruments like equity, debt, and indirect securities. The financial system mobilizes savings from households and channels them to corporations and governments through these various institutions and markets, in order to facilitate capital formation and meet short and long-term financing needs.
The document discusses the money market in India. It defines the money market and notes that it deals in short-term financial instruments that can be easily converted to cash. Some key aspects of the Indian money market discussed include the various sub-markets (e.g. call money market), instruments (e.g. treasury bills), participants (e.g. commercial banks), and the role of the money market in providing short-term funds and allowing central bank control of liquidity.
Chit funds are a type of rotating savings system that originated in South India as an alternative to banking where people like friends, family, and neighbors contribute money. Chit funds are governed by both central and state laws, with some states having their own Chit Funds Acts to regulate them. The central Chit Funds Act of 1982 allows states to regulate chit funds by notifying the rules and appointing a registrar. While the RBI does not regulate chit funds directly, it can provide guidance to states on regulation, and SEBI only regulates chit funds that operate as unapproved collective investment schemes. Recent scams by groups like Sarada have increased scrutiny of the industry from both central and state authorities.
This document discusses loan syndication, which is when a group of lenders provide funds to a single borrower for a large project. Loan syndication often occurs when a single lender cannot provide the full funding needed or when the risks are too high. A lead financial institution coordinates the syndication by organizing the transaction and administering repayments, fees, reporting, and loan monitoring. The document then outlines the six main steps in the loan syndication process, including initial discussions with promoters, assessing the project, locating funding sources, preliminary discussions with lenders, preparing the loan application, and assisting with the project appraisal.
This document provides an overview of merchant banking services. It defines merchant banking and traces its origins in London financing foreign trade. Merchant banking services include project counseling, loan syndication, issue management, underwriting public issues, portfolio management, advising on NRI investment, mergers and acquisitions, and offshore finance. They help raise funds for projects, market corporate securities to the public, insure companies issuing public stock, manage investor portfolios, and facilitate foreign investment.
The SARFAESI Act allows banks and financial institutions to recover non-performing assets without court intervention. It aims to expedite recovery of NPAs. The act empowers lenders to issue recovery notices giving 60 days to pay dues and take possession of secured assets if dues are not paid. It provides three methods for NPA recovery - securitization, asset reconstruction, and enforcement of security. The act applies to NPAs over Rs. 1 lakh and was expanded to include NBFCs.
This document discusses credit ratings and the credit rating agencies. It provides information on what credit ratings are, their importance, benefits, factors that affect ratings, rating scales and methodologies. It also discusses the major global and Indian credit rating agencies like S&P, Moody's, Fitch, Crisil, CIBIL and CARE. It outlines the business models, market shares and rating scales of these prominent agencies. Finally, it notes the advantages and disadvantages of credit ratings.
The document discusses underwriting, which refers to an agreement where underwriters guarantee to purchase any shares or securities not subscribed to by the public from a company's public offering. It provides context around why underwriting is needed when a company conducts an initial public offering to reduce uncertainty if the public does not fully subscribe to the offering. It also defines underwriters as those who guarantee subscriptions and are responsible for purchasing unsold shares, distinguishing them from brokers who do not take responsibility. The document outlines different types of underwriting agreements, underwriter roles and responsibilities, and SEBI guidelines regulating underwriters in India.
This document provides an overview of the money market and capital market in India. It discusses the history and development of the money market in India from 1935 when the RBI was established through various committees and reforms. It describes key segments of the money market like the call money market, certificate of deposits, commercial paper market. It also compares organized and unorganized money markets. Similarly, for capital markets it discusses the regulator SEBI, functions, instruments, structure comparing primary and secondary markets and methods to float new issues.
Non-banking financial companies (NBFCs) are financial institutions that provide banking services without meeting the legal definition of a bank. This document provides an overview of NBFCs in India, including their history, regulations, types, and roles. It defines various types of NBFCs such as investment companies, equipment leasing companies, loan companies, and housing finance companies. It also discusses the historical committees that shaped NBFC regulations and compares NBFCs to banks.
This document provides an overview of the merchant banking sector in India. It discusses the evolution of merchant banking in India since 1969. It defines the key terms like merchant banking and investment banking. It describes the various functions of merchant bankers like corporate counseling, project counseling, issue management, portfolio management etc. It also discusses the regulatory framework for merchant bankers in India as laid out by SEBI, including the categories of merchant bankers and their capital adequacy requirements. In conclusion, it discusses some recent developments and challenges in the Indian merchant banking sector.
This document summarizes regulations for merchant banking in India according to SEBI guidelines. Merchant bankers require authorization from SEBI to operate and are classified into four categories based on activities and minimum net worth requirements ranging from Rs. 1 crore to no minimum. SEBI guidelines require merchant bankers to meet qualifications, infrastructure standards, and maintain records and financial statements. Merchant bankers are prohibited from insider trading and SEBI can inspect records and suspend or cancel authorizations for violations. In conclusion, the role of merchant bankers is defined differently in various countries, and in India their scope is limited to capital market activities.
This document discusses credit ratings and the credit rating agencies in India. It provides information on:
- What credit ratings are and how they estimate creditworthiness
- The four major credit rating agencies in India: CRISIL, ICRA, CARE, and FITCH India
- The regulation of credit rating agencies by SEBI and the requirements for registration
100 marks topics for banking and insurance projectsbanking-insurance
Complete topics for 100 marks project for banking and insurance
http://www.managementparadise.com/forums/banking-insurance-final-100-marks-projects/16283-topics-100-marks-project-banking-insurance.html
Credit ratings are evaluations of a debtor's ability to pay back debt, conducted by credit rating agencies. They use both public and private qualitative and quantitative information to assess risk of default. Credit ratings indicate the likelihood that bond obligations will be paid back and are used by investors to determine risk-return tradeoffs. Higher credit ratings indicate lower risk while lower ratings suggest higher risk of default. The document outlines the meaning and purpose of credit ratings, benefits to investors and companies, types of ratings, major credit rating agencies, and their methodology.
The document summarizes the key aspects of the Banking Regulation Act of 1949 in India. It defines banking and banking companies. It outlines the main and subsidiary business activities banks can engage in, as well as prohibited activities. It discusses capital requirements for domestic and foreign banks. It also covers management structure requirements, liquidity reserves like SLR and CRR, licensing provisions, RBI powers of supervision and control, return filing obligations, winding up procedures, and reforms from the Narasimham committee.
The document outlines various activities that banks are permitted to conduct according to the Banking Regulation Act of 1949 in India. It lists collecting and transmitting money, managing and dealing with property acquired to satisfy debts, undertaking trusts, acquiring and maintaining buildings, acquiring other businesses if permitted, and other incidental activities. It specifies that banks cannot conduct any other business or substitute other applicable laws unless stated. The Act does not apply to primary agricultural societies, cooperative land mortgage banks, or other cooperative societies except as provided. It also outlines restrictions on banks granting loans to directors and companies they have interests in.
The document provides an overview of the Foreign Exchange Management Act (FEMA) of 1999 in India. It discusses that FEMA was introduced to replace the previous Foreign Exchange Regulation Act (FERA) of 1973 to facilitate external trade and payments. FEMA regulates all foreign exchange transactions in India and aims to promote an orderly foreign exchange market. It consolidates various rules and regulations pertaining to foreign exchange under the Reserve Bank of India. FEMA also introduced a more liberal and investor-friendly framework compared to the previous FERA.
The document summarizes key provisions of the Banking Regulation Act, 1949 in India. It outlines definitions of banking and banking companies. It discusses the overriding effect of the Act over memorandum, articles, agreements and resolutions of banking companies. It also covers restrictions on use of banking terms, prohibition on trading activities, limits on property holding, payment of brokerage/commission, restrictions on floating charges and dividend payments. Further, it discusses appointment of directors, reserve requirements, cash reserve maintenance, subsidiary business activities and regulatory powers of RBI over banking companies.
Banking in India originated in the late 18th century with the Bank of Hindustan and General Bank of India. The oldest and largest bank still in existence is the State Bank of India, which originated from the Bank of Bengal and later merged with the Bank of Bombay and Bank of Madras to form the Imperial Bank of India. In 1955 it became the State Bank of India. The government nationalized many banks in 1969 and they remain under government ownership as public sector undertakings. The modern Indian banking sector includes public sector banks, private sector banks, foreign banks, regional rural banks, urban cooperative banks and state cooperative banks.
Merchant banking provides various financial services including investment banking, portfolio management, underwriting public offerings, and mergers and acquisitions advice. It originated in London when banks helped finance foreign trade and raise funds for developing countries. In India, merchant banking grew with the establishment of banks like Grindlays and Citibank in the 1960s-1970s. Merchant banks operate under regulations set by the Securities and Exchange Board of India that classify banks by the types of services they can provide and require minimum capital levels. They must obtain authorization, follow code of conduct guidelines, and contribute to the market by channelizing capital and ensuring regulatory compliance.
This document provides an overview of non-bank financial institutions (NBFIs) from a course on modern banking. It defines NBFIs as financial institutions that do not have a full banking license and are not supervised by banking regulatory agencies. The document outlines key features of NBFIs such as mandatory registration with regulatory bodies, restrictions on deposits, and lack of deposit insurance. It compares NBFIs to banks and notes it is easier to obtain a registration as an NBFI than a banking license. Finally, the document discusses the importance of NBFIs in providing greater financial reach and flexibility, as well as retail services to small and medium businesses.
The document discusses various aspects of inflation including:
- Defining inflation as a general rise in prices over time.
- Factors that can influence inflation like increases in money supply, demand for goods/services, and decreases in supply of goods/services.
- Two main ways of measuring inflation.
- Different types of inflation like creeping, galloping, and hyperinflation.
- Problems high inflation can cause like economic uncertainty, reduced investment and savings, and worsening poverty.
- Historical inflation rates in India and measures taken to control inflation through monetary and fiscal policies.
The document discusses the money market in India. It defines the money market and notes that it deals in short-term financial instruments that can be easily converted to cash. Some key aspects of the Indian money market discussed include the various sub-markets (e.g. call money market), instruments (e.g. treasury bills), participants (e.g. commercial banks), and the role of the money market in providing short-term funds and allowing central bank control of liquidity.
Chit funds are a type of rotating savings system that originated in South India as an alternative to banking where people like friends, family, and neighbors contribute money. Chit funds are governed by both central and state laws, with some states having their own Chit Funds Acts to regulate them. The central Chit Funds Act of 1982 allows states to regulate chit funds by notifying the rules and appointing a registrar. While the RBI does not regulate chit funds directly, it can provide guidance to states on regulation, and SEBI only regulates chit funds that operate as unapproved collective investment schemes. Recent scams by groups like Sarada have increased scrutiny of the industry from both central and state authorities.
This document discusses loan syndication, which is when a group of lenders provide funds to a single borrower for a large project. Loan syndication often occurs when a single lender cannot provide the full funding needed or when the risks are too high. A lead financial institution coordinates the syndication by organizing the transaction and administering repayments, fees, reporting, and loan monitoring. The document then outlines the six main steps in the loan syndication process, including initial discussions with promoters, assessing the project, locating funding sources, preliminary discussions with lenders, preparing the loan application, and assisting with the project appraisal.
This document provides an overview of merchant banking services. It defines merchant banking and traces its origins in London financing foreign trade. Merchant banking services include project counseling, loan syndication, issue management, underwriting public issues, portfolio management, advising on NRI investment, mergers and acquisitions, and offshore finance. They help raise funds for projects, market corporate securities to the public, insure companies issuing public stock, manage investor portfolios, and facilitate foreign investment.
The SARFAESI Act allows banks and financial institutions to recover non-performing assets without court intervention. It aims to expedite recovery of NPAs. The act empowers lenders to issue recovery notices giving 60 days to pay dues and take possession of secured assets if dues are not paid. It provides three methods for NPA recovery - securitization, asset reconstruction, and enforcement of security. The act applies to NPAs over Rs. 1 lakh and was expanded to include NBFCs.
This document discusses credit ratings and the credit rating agencies. It provides information on what credit ratings are, their importance, benefits, factors that affect ratings, rating scales and methodologies. It also discusses the major global and Indian credit rating agencies like S&P, Moody's, Fitch, Crisil, CIBIL and CARE. It outlines the business models, market shares and rating scales of these prominent agencies. Finally, it notes the advantages and disadvantages of credit ratings.
The document discusses underwriting, which refers to an agreement where underwriters guarantee to purchase any shares or securities not subscribed to by the public from a company's public offering. It provides context around why underwriting is needed when a company conducts an initial public offering to reduce uncertainty if the public does not fully subscribe to the offering. It also defines underwriters as those who guarantee subscriptions and are responsible for purchasing unsold shares, distinguishing them from brokers who do not take responsibility. The document outlines different types of underwriting agreements, underwriter roles and responsibilities, and SEBI guidelines regulating underwriters in India.
This document provides an overview of the money market and capital market in India. It discusses the history and development of the money market in India from 1935 when the RBI was established through various committees and reforms. It describes key segments of the money market like the call money market, certificate of deposits, commercial paper market. It also compares organized and unorganized money markets. Similarly, for capital markets it discusses the regulator SEBI, functions, instruments, structure comparing primary and secondary markets and methods to float new issues.
Non-banking financial companies (NBFCs) are financial institutions that provide banking services without meeting the legal definition of a bank. This document provides an overview of NBFCs in India, including their history, regulations, types, and roles. It defines various types of NBFCs such as investment companies, equipment leasing companies, loan companies, and housing finance companies. It also discusses the historical committees that shaped NBFC regulations and compares NBFCs to banks.
This document provides an overview of the merchant banking sector in India. It discusses the evolution of merchant banking in India since 1969. It defines the key terms like merchant banking and investment banking. It describes the various functions of merchant bankers like corporate counseling, project counseling, issue management, portfolio management etc. It also discusses the regulatory framework for merchant bankers in India as laid out by SEBI, including the categories of merchant bankers and their capital adequacy requirements. In conclusion, it discusses some recent developments and challenges in the Indian merchant banking sector.
This document summarizes regulations for merchant banking in India according to SEBI guidelines. Merchant bankers require authorization from SEBI to operate and are classified into four categories based on activities and minimum net worth requirements ranging from Rs. 1 crore to no minimum. SEBI guidelines require merchant bankers to meet qualifications, infrastructure standards, and maintain records and financial statements. Merchant bankers are prohibited from insider trading and SEBI can inspect records and suspend or cancel authorizations for violations. In conclusion, the role of merchant bankers is defined differently in various countries, and in India their scope is limited to capital market activities.
This document discusses credit ratings and the credit rating agencies in India. It provides information on:
- What credit ratings are and how they estimate creditworthiness
- The four major credit rating agencies in India: CRISIL, ICRA, CARE, and FITCH India
- The regulation of credit rating agencies by SEBI and the requirements for registration
100 marks topics for banking and insurance projectsbanking-insurance
Complete topics for 100 marks project for banking and insurance
http://www.managementparadise.com/forums/banking-insurance-final-100-marks-projects/16283-topics-100-marks-project-banking-insurance.html
Credit ratings are evaluations of a debtor's ability to pay back debt, conducted by credit rating agencies. They use both public and private qualitative and quantitative information to assess risk of default. Credit ratings indicate the likelihood that bond obligations will be paid back and are used by investors to determine risk-return tradeoffs. Higher credit ratings indicate lower risk while lower ratings suggest higher risk of default. The document outlines the meaning and purpose of credit ratings, benefits to investors and companies, types of ratings, major credit rating agencies, and their methodology.
The document summarizes the key aspects of the Banking Regulation Act of 1949 in India. It defines banking and banking companies. It outlines the main and subsidiary business activities banks can engage in, as well as prohibited activities. It discusses capital requirements for domestic and foreign banks. It also covers management structure requirements, liquidity reserves like SLR and CRR, licensing provisions, RBI powers of supervision and control, return filing obligations, winding up procedures, and reforms from the Narasimham committee.
The document outlines various activities that banks are permitted to conduct according to the Banking Regulation Act of 1949 in India. It lists collecting and transmitting money, managing and dealing with property acquired to satisfy debts, undertaking trusts, acquiring and maintaining buildings, acquiring other businesses if permitted, and other incidental activities. It specifies that banks cannot conduct any other business or substitute other applicable laws unless stated. The Act does not apply to primary agricultural societies, cooperative land mortgage banks, or other cooperative societies except as provided. It also outlines restrictions on banks granting loans to directors and companies they have interests in.
The document provides an overview of the Foreign Exchange Management Act (FEMA) of 1999 in India. It discusses that FEMA was introduced to replace the previous Foreign Exchange Regulation Act (FERA) of 1973 to facilitate external trade and payments. FEMA regulates all foreign exchange transactions in India and aims to promote an orderly foreign exchange market. It consolidates various rules and regulations pertaining to foreign exchange under the Reserve Bank of India. FEMA also introduced a more liberal and investor-friendly framework compared to the previous FERA.
The document summarizes key provisions of the Banking Regulation Act, 1949 in India. It outlines definitions of banking and banking companies. It discusses the overriding effect of the Act over memorandum, articles, agreements and resolutions of banking companies. It also covers restrictions on use of banking terms, prohibition on trading activities, limits on property holding, payment of brokerage/commission, restrictions on floating charges and dividend payments. Further, it discusses appointment of directors, reserve requirements, cash reserve maintenance, subsidiary business activities and regulatory powers of RBI over banking companies.
Banking in India originated in the late 18th century with the Bank of Hindustan and General Bank of India. The oldest and largest bank still in existence is the State Bank of India, which originated from the Bank of Bengal and later merged with the Bank of Bombay and Bank of Madras to form the Imperial Bank of India. In 1955 it became the State Bank of India. The government nationalized many banks in 1969 and they remain under government ownership as public sector undertakings. The modern Indian banking sector includes public sector banks, private sector banks, foreign banks, regional rural banks, urban cooperative banks and state cooperative banks.
Merchant banking provides various financial services including investment banking, portfolio management, underwriting public offerings, and mergers and acquisitions advice. It originated in London when banks helped finance foreign trade and raise funds for developing countries. In India, merchant banking grew with the establishment of banks like Grindlays and Citibank in the 1960s-1970s. Merchant banks operate under regulations set by the Securities and Exchange Board of India that classify banks by the types of services they can provide and require minimum capital levels. They must obtain authorization, follow code of conduct guidelines, and contribute to the market by channelizing capital and ensuring regulatory compliance.
This document provides an overview of non-bank financial institutions (NBFIs) from a course on modern banking. It defines NBFIs as financial institutions that do not have a full banking license and are not supervised by banking regulatory agencies. The document outlines key features of NBFIs such as mandatory registration with regulatory bodies, restrictions on deposits, and lack of deposit insurance. It compares NBFIs to banks and notes it is easier to obtain a registration as an NBFI than a banking license. Finally, the document discusses the importance of NBFIs in providing greater financial reach and flexibility, as well as retail services to small and medium businesses.
The document discusses various aspects of inflation including:
- Defining inflation as a general rise in prices over time.
- Factors that can influence inflation like increases in money supply, demand for goods/services, and decreases in supply of goods/services.
- Two main ways of measuring inflation.
- Different types of inflation like creeping, galloping, and hyperinflation.
- Problems high inflation can cause like economic uncertainty, reduced investment and savings, and worsening poverty.
- Historical inflation rates in India and measures taken to control inflation through monetary and fiscal policies.
The document summarizes the various non-bank financial institutions (NBFIs) that are supervised by government agencies in Malaysia. It discusses five major groups of NBFIs: 1) development finance institutions that provide financing and services to promote investment, 2) savings institutions that promote savings, 3) insurance companies, 4) provident and pension funds, and 5) financial intermediaries like factoring companies, leasing companies, and credit institutions. It provides examples and roles of institutions within each group.
Nidhi company full form, nidhi chit fund company, nidhi company management, d...Ravi Pseo
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This document discusses chit funds in India. It defines chit funds as a type of savings scheme managed by a foreman where subscribers contribute a fixed monthly amount and one subscriber receives the total amount each month through a bidding process. The document provides details on how chit funds operate, regulations governing them, differences between chit funds and Ponzi schemes, analysis of the size and characteristics of the chit fund industry in India, and the Saradha scam - one of India's largest alleged Ponzi schemes that was run through chit funds. It concludes with safety tips for investing in chit funds and why they can be a good savings option if the fund is registered and members are known.
SEBI (Securities and Exchange Board of India) was established in 1988 to regulate the securities market in India. SEBI aims to protect investors, maintain orderly markets, and promote market development. It oversees stock exchanges, registers market intermediaries like brokers and merchant bankers, and regulates substantial acquisitions of shares and takeovers. SEBI is divided into departments and has offices across major Indian cities. It works with advisory committees to achieve its goals of regulating primary and secondary markets and protecting investors.
A Nidhi Company is a type of non-banking financial company that is incorporated to provide savings opportunities and loan facilities to its members. Key requirements for a Nidhi Company include having a minimum paid up capital of Rs. 500,000 and issuing only equity shares of Rs. 10 nominal value. A Nidhi Company can accept various types of deposits from members and must use the deposits to provide loans only to its members, within specified limits. It must also comply with regulatory requirements regarding financial ratios, branch operations, auditors and dividend distribution.
The document discusses India's debt markets, which comprise government securities and corporate bonds. It notes that government securities dominate in terms of outstanding securities, market capitalization, and trading volume. Corporate bonds include those issued by public and private corporations. While government securities are the benchmark, corporate bonds generally offer higher yields but also higher risks. The debt market has grown in recent years, with increasing issuances and a more diverse set of investors and instruments. However, further development is needed, including improving secondary market liquidity and addressing regulatory overlap.
This document provides a flowchart and overview of the key components and features of a chit fund company's software system. It describes 3 main parts: the main branch, sub-branches, and customer details. It then outlines 14 main sections of the software including adding chit schemes, subscriber details, payment details, bid details, reports, agents, daybook, user management, and more. The document aims to map out the end-to-end workflow and functionality available to administrators, branches, agents, and customers within the chit fund software system.
This is the comprehensive and latest presentation on Indian Corporate Bond market. It starts with basic features, 3 Main pillars of Indian Corp bond market ecosystem & its importance. It then covers Primary Placement, Valuation/MTM as per RBI/FIMMDA norms, Valuation using excel IRR() function with example, Credit rating scales, Market timing & Reporting.
It also covers few topics like ISIN & ends with challenges and Limitation of India corp bond market.
The document provides an overview of Nidhi companies under the Companies Act 2013 and Nidhi Rules 2014. It defines Nidhi companies as mutual benefit societies notified by the government for cultivating thrift and savings among members. Key points include:
- Nidhi companies can only borrow and lend to members. Non-members cannot deposit or do business with them.
- Section 406 and Nidhi Rules 2014 govern Nidhi companies, which must be public companies with a minimum paid-up capital of Rs. 5 lakh.
- Nidhi companies must have at least 200 members, net owned funds of Rs. 10 lakh, and follow deposit to net owned funds ratio of not
This document is an Act passed by the Indian Parliament to regulate chit funds. Some key points:
- It defines important terms related to chit funds such as foreman, subscriber, chit amount, prize amount, etc.
- It requires all chits to be sanctioned by the state government and registered according to this Act in order to be commenced or conducted legally.
- It prohibits the invitation of subscriptions without meeting certain conditions like obtaining required sanctions.
- It specifies the necessary particulars that must be included in the chit agreement document signed by subscribers and foreman, such as subscriber details, installment amounts, manner of determining prized subscriber, etc.
Nidhi company rules 2014 an analysis w.r.t. nidhi company registrationEquiCorp Associates
With the implementation of new rules for operations of Nidhi Company, into effect from April 01, 2014, what will be fate of the public deposit schemes? How these Rules, 2014 are going to impact the Indian Financial Sector, especially Nidhi Companies in India? Nidhi Companies are created mainly for cultivating the habit of thrift and savings amongst its members. The amount of business conducted by Nidhi Companies is not as big as commercial banks or deposit taking Non-Banking Finance Companies. Nidhi Companies are highly localized and mostly single office institutions. They are also referred to as mutual benefit societies, because they accept deposits and give loans to only their own members; and membership is limited to individuals.
A Nidhi company is a company incorporated under the Companies Act, 2013 that accepts deposits only from, and lends only to, its members. Key requirements for a Nidhi company include having a minimum of 7 members, 3 directors, a minimum capital of Rs. 5 lakhs, and maintaining net owned funds of at least Rs. 10 lakhs. A Nidhi company can accept various types of deposits from members and can lend to members at an interest rate no more than 7.5% above its highest deposit rate. A Nidhi company must have at least 200 members and meet other financial requirements within 1 year of incorporation.
A presentation on chit fund scam of Saradha GroupHimanshu Arora
This document provides an overview of the Saradha chit fund scam that occurred in India. It describes how Saradha Group operated illegal Ponzi schemes that collected money from investors by promising high returns. The group violated securities laws and misused funds. When the scam collapsed in 2013, it impacted the economy and caused political issues. The West Bengal government and courts launched investigations as thousands of small investors lost their savings.
Non-bank financial intermediaries in Malaysia include development financial institutions, saving institutions, employee provident and pension funds, insurance companies, and other financial intermediaries such as factoring companies. Development financial institutions provide medium and long-term financing for projects in specific sectors to promote development goals. Saving institutions such as the National Savings Bank mobilize savings from middle and lower income groups. Employee provident funds such as the Employees Provident Fund provide retirement benefits and help mobilize long-term savings.
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The document discusses regulations surrounding the listing of securitized debt instruments in India. It outlines how amendments to the Securities Contracts Regulation Act in 2007 allowed securitized debt instruments to be publicly traded. SEBI then issued regulations in 2008 governing public offerings and listings of securitized debt instruments. This created a new market for these instruments with various players like originators, special purpose entities, trustees, and investors. SEBI also issued a listing agreement in 2011 to improve transparency and disclosure requirements for listed securitized debt instruments. However, issues around foreclosure laws and tax treatment of special purpose vehicle trusts still affect growth of the securitized debt market in India.
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This document summarizes regulations surrounding the listing of securitized debt instruments in India. It discusses how 2007 amendments to the Securities Contracts Regulation Act allowed securitized debt instruments to be publicly traded by defining them as securities. In response, SEBI introduced regulations in 2008 governing public offerings and listings of securitized debt instruments. The regulations establish rules for special purpose entities issuing the instruments and require disclosures. SEBI also released a listing agreement for these instruments in 2011 to increase transparency and secondary market liquidity. Issues remaining include lack of effective foreclosure laws and ambiguity in the tax treatment of SPV trusts.
This document discusses special purpose vehicles (SPVs) used in securitization. It provides details on:
1) The concept and purpose of SPVs, which are established to hold securitized assets separately from the originator in order to provide bankruptcy protection to investors.
2) Examples of SPVs used in different countries, including the roles of Fannie Mae, Freddie Mac, and Ginnie Mae in the US mortgage market, as well as structures used in Argentina and Morocco.
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This document discusses chit funds in India. It defines chit funds as a mechanism where subscribers contribute a fixed monthly amount over a period to a total fund. Each month, one subscriber receives the full fund amount through a bidding process. The key aspects covered include:
- How chit funds operate through subscriber contributions, bidding processes, and distributions
- Regulations governing chit funds through acts like the Chit Funds Act of 1982
- Examples of large chit fund scams like the Saradha scam in West Bengal
- Safety measures for investors to consider when choosing a registered and reputable chit fund provider
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1. CHAPTER ONE
INTRODUCTION
The strategic role of the financial system is to channel funds from
surplus units to deficit units. The financial system comprising the set of
institutions, markets and instruments facilitates capital formation and
accelerates the pace of economic development. The gap between gross
capital formation and gross domestic savings in India necessitates the need
for augmenting the growth rate of voluntary domestic savings. So, the
working of different financial intermediaries for mobilising savings from
various income categories will have to be widened and strengthened. It is in
this context that one has to appreciate the role of the Non-Banking Financial
Intermediaries in supplementing the functions of the Banking Institutions.
The Non-Banking Financial Intermediaries' ability to purvey
funds depends to a large extent on the resources they can mobilise.
Miscellaneous Non-Banking Companies or Chit Funds being a category of
Non-Banking Financial Intermediaries, contribute significantly to the value
of financial markets in India.
1.1 NON-BANKING FINANCIAL COMPANIES (NBFCs)
Non-Banking Financial Companies have emerged as an integral
part of the Indian financial system. NBFC is a generic term, which includes
a host of different types of institutions performing various types of financial
services. Sub-section (b) of section 45-1 of the Reserve Bank of India Act.
1934 defines a Non-Banking Financial Company as: (a) a financial
institution which is a company; (b) a non-banking institution which carries
on the business of accepting deposits under any scheme, arrangement or any
other manner or the business of lending in any manner and (c) any other
non-banking institution or class of institutions which the Reserve Bank may
2. ,
notify in the official Gazette with the previous approval of the Central
Government.1 They are generally categorised into the following types on the
basis of their principal business.
• Equipment Leasing Company (ELC)
• Hire Purchase Company (HPC)
• Loan Company (LC)
• Investment Company (K')
• Mutual Benefit Financial Company or 'Nidhi' Company (MBFC)
• Housing Finance Company (HFC)
• Residuary Non-Banking Company (RNBC) and
• Miscellaneous Non-Banking Company (MNBC) ie., Chit Fund Company
1.2 MISCELLANEOUS NON-BANKING COMPANY
The principal business of MNBCs or Chit Fund Companies is
managing, conducting or supervising as a promoter, foreman, or agent of any
transaction or arrangement by which the company enters into an agreement
with a specified number of subscribers that everyone of them shall subscribe
a certain sum in instalments 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 manner as may be provided for in the arrangement, be entitled to
the prize amount.
Chit Funds are saving devices through pooling of money by a
group of persons by way of periodical instalments of fixed amount paid over
a fixed period of time under inter-se agreement that each member of the
group is entitled to the pooled amount, The scheme involves three functions
such as pooling together the scattered savings of a group of individuals,
lending out the collected savings to a member of the group and continuing
the process of collection and distribution of amounts for a certain period.
2
3. 1.3 'CHIT' - AN AGREEMENT
The 'Chit' is an agreement by the subscribers with the foreman,
who conducts the Chit. The Kerala Chitties Act 2 defines the Chit agreement
as the document containing the Articles of agreement between the foreman
and the subscribers of the Chit. It contains provisions as to the number of
instalments, amount payable for each instalment, provision of interest for
default or late payment of instalments, manner of conducting the auction,
determining the bidder in the auction, mode of disbursement of discount,
limit if any on the discount, manner of disbursing the Chit amount, details of
security to be offered by the prized subscribers, etc.
Chit foreman has been described as the hub of the Chitty wheel. 3
It is the foreman, who links the savers and borrowers together for their
mutual benefits. The small savings which otherwise might find little
productive application have been mobilised and turned into tangible wealth
by his catalytic action. Thus the foreman acts as a social functionary. From
an individual foreman, with very limited resources and area of operations,
the proprietor of a Chit has grown into a company managed by a Board of
Directors or to a public sector Chit company, having abundant resources and
wider frontiers of business. These changes have had far reaching influence
in the sphere of Chit Finance in Kerala. This unique financial institution
facilitates savings and capital formation even among the poor in the society.
1.4 ORIGIN OF CHIT FUNDS
This indigenous financial institution had its origin in the State of
Kerala as Grain Chit or 'Dhannya Chit',centuries back. 'Chit' means a
written note on a small piece of paper. In Malayalam language, it is known
as 'Kuri'; a synonym of Chit. The 'Chit' or 'Kuri' is a derivative, the root
being the 'lot'.
The Chit Fund business is administered by the respective State
Governments through the offices of the Registrar of Chits. The Chit Fund
3
4. Companies are exempted from the requirement of registration under the RBI
Act. However, the deposit acceptance activities of these companies are
regulated under the Miscellaneous Non-Banking Companies (MNBCs)
Directions, and those relating to the advertisement for soliciting deposits are
governed by the Non-Banking Financial Companies and Miscellaneous Non-
Banking Companies (Advertisement) Rules, 1977 framed by the Government
of India under section 58 A of the Companies Act, 1956.
1.5 CONCEPTS AND DEFINITIONS
"Chitty" means a transaction, whether called Chit or Kuri, by
which one or more persons, hereinafter called the "Foreman" or "Foremen",
enter into an agreement with a number of persons that every one of the
contracting parties shall subscribe a certain amount of money or quantity of
grain or other commodity by periodical instalments for a certain definite
period and that each in his turn, shall be entitled to the prize amount,
whether payable in cash, kind or any other article of value or in such other
manners that may be provided for in the agreement.4
"Chitty amount" or 'sala' means the sum total of the
subscriptions payable by all the subscribers for any instalment without any
deduction for discount.
"Discount" means the amount of money or quantity of grain or
other commodity, which a prize winner has, under the terms of the •variola',
to forego for the payment of 'veethapalisa'; foreman's commission or such
other expenses as may be prescribed.
"Variola" means the document containing the articles of
agreement between the foreman and the subscribers relating to the Chit.
"Veethapalisa" means the share of a subscriber in the discount
available under the variola for rateable distribution among the subscribers at
each instalment of the Chit.
4
5. "Drawing" includes the mode of ascertaining the prize-winner at
any instalment of the Chit by lot or by auction or in such other manner as
may be provided for in the •variola'.
"Foreman" means the person who, under the variola, is
responsible for the conduct of the Chit and includes all persons taking his
place under section 35 of the Act.
"Subscriber" includes a person who holds a ticket or fraction of a
ticket and also a transferee by assignment in writing or by operation of law.
"Ticket" means the share of a subscriber in a Chit, which entitles
the holder thereof to the Chit amount at anyone instalment with or without
any deduction by way of discount.
"Prize amount" means the Chit amount whether payable in cash,
kind or in any other article of value, less the discount.
1.6 DIFFERENT CATEGORY OF CHIT FUNDS.
Chit Funds are of different categories, which come under the
broad heading, 'Chit Finance'. In Kerala they include the public sector Chit
Company (The Kerala State Financial Enterprises Ltd.), Co-operatives,
Private Chits and those in the informal sector.
1.7 KERALA STATE FINANCIAL ENTERPRISES LTD. (KSFE)
The KSFE, a fully owned Government Company was established in
the year 1969 as a discipline factor to private Chit Funds. The share of KSFE
in the total volume of Chit business registered in Kerala is 77 per cent as on
March 2000, though the number of Chits registered is only 37.5 per cent.
KSFE has been included in the few profit-making public companies in the
State with a profit of RS.793 Lakhs at the end of March 2000. There are over
11 Lakh subscribers in various schemes of KSFE. The number of Chits run by
KSFE amounts to 7,446 with a total capital (sala) of over Rs.952 Crore.
5
6. Table 1.1
Number and Sa/a of Registered Chits
as on March 2000 (Rs. Lakbs) Institution-wise
Name of the Number of
Share of each
Capital
Share of each
to total to total
Institution Chits /Kuries
Percentage
sala
Percentage
I. KSFE 7446 37.5 95249 77
2. CO- OPERATIVES 8793 44.2 21101 17
3. PRIVATE CHITS 3633 18.3 7701 6
Total 19872 100 124051 100
Source: Government of Kerala, Legislative Assembly Interpretation
Registration Dept. I.G of Registration, Trivandrum.
The Number of Chits run by Co-operative societies amounts to
8,793 (44.2%) with a total capital (sa/a) of Rs.211 Crore (17%) and the
number of Chits run by Private Chit Funds amounts to 3633 (18.3%) with a
total capital (sala) of RS.77 Crore (6%) for the above period. It is thus clear
that KSFE Ltd. has the predominant share in Kerala's Chit industry. Table
1.1 above presents the growth of the Chit Fund Industry in the registered
sector only. The actual volume of Chit business would be several times
greater if one included the volume of Chits in the informal sector and those
with bases outside Kerala.
1.8 CO-OPERATIVES
Co-operative Institutions are also conducting Chit business as one
of their most profit making schemes. Wide prevalence of co-operatives even
in the remote villages enables the mobilisation of the scattered savings
among the common people. To escape from certain provisions of the Kerala
Chillies Act, the co-operatives have started 'Chit like' schemes 5 such as
Monthly Deposit Scheme (MDS) and Mutual Benefit Scheme (MBS) without
getting Chits registered with the Registrar. Though the number of registered
Chits with the co-operatives forms 44.2 per cent, the share of it in the total
volume of Chit business is only 17 percent.
6
7. 1.9 PRIVATE CHITS
Private Chit Funds have flourished in Kerala from time
immemorial. Though the share of private Chits forms 18.3 per cent in the
number of Chits registered, their share in the total volume of Chit business is
only 6 per cent. This is due to the reason that a considerable volume of Chit
business in the private sector are conducted without registration in the State
and therefore outside the purview of official records.
1.10 INFORMAL CHITS
Along with the formal Chit Fund sector, there exists a highly
heterogeneous and dynamic informal sector, with huge volume of business.
This includes Chits conducted by the associations of traders/merchants,
employees in the offices and those informal Chits in urban and rural
localities, churches, temples, educational institutions, small and medium
Chits in the neighbour-hood run by housewives, etc. In every nook and
corner of Kerala, one can find 'Chit collectors'" mobilising substantial
amounts of savings daily for which authentic data is not available. Though
the presence of informal Chit sector is significant, there have been numerous
cases of fraud, misappropriation, disappearance of foremen, etc., which
cause loss to the subscribers and damage the reputation of Chit Funds
Industry in the State.
1.11 STATEMENT OF THE PROBLEM
Our analysis of Table 1.1 had established the predominant
position of KSFE in Kerala's Chit industry. However, this statistics takes
into account only the data from registered Chits. But it is a well-known fact
that there is a much larger unregistered informal sector on which we have no
reliable data. The continued popularity of the non-registered sector even
after so many years of existence of KSFE and the implementation of Chilly
Acts is intriguing and calls for a detailed enquiry.
7
8. It has to be appreciated that the pre-eminent position of KSFE is
very good for the healthy growth of the entire industry. However, despite the
remarkable growth of KSFE, there are many forces in the environment,
which act as a threat to the organisation and to the Chit industry as a whole.
Chit business in Kerala flourished in the hands of private monopoly
till the implementation of the Kerala Chitties Act, 1975. The Act was brought
into force to introduce a unified procedure to regulate the Chit business in
Kerala and to protect the interests of the Chit subscribers. But the
implementation of the Act resulted in an exodus of foremen from Kerala to
other states for starting Chits, especially from bases in Jammu & Kashmir and
Haryana defeating the very purpose of the Act. At the same time, why the
foremen rushed out of the State has not been comprehensively accounted for.
The introduction of the Central Chit Funds Act, 1982 7 was
expected to take care of this exodus. However many States including Kerala
have not yet adopted the Central Chit Funds Act. Hence there is the need to
examine the limitations of the existing Chit legislation and the whole gamut
of it in the light of the experience gained so far.
Despite the growth of a wide range of savings avenues and the
widespread network of banks and other financial institutions, Chit scheme
still forms an important part in the asset portfolio of many households and
firms in Kerala. The promoters of Chits in the private sector appropriated for
themselves substantial amounts accruing out of their management and there
was also ample scope for exploitation of the subscribers. With a view to
ensure safety, security and better service to the Chit subscribers, the State
Government established, The Kerala State Financial Enterprises Ltd. (KSFE)
in 1969 for conducting Chit business and other financial transactions. The
objective of starting KSFE was to check the mushroom growth of private
Chit Funds by offering effective competition and thereby safeguarding the
interests of the Chit subscribers. The co-operative sector also has developed
into a stronghold of Chits. In addition, there is the conspicuous presence of
the informal Chit Fund sector. Though there are different avenues of savings
8
9. and different categories of Chit Funds mobilising the scattered savings of the
people, what motivates the subscribers in preferring Chits and also particular
types of Chit institutions has not been examined.
One of the most important objectives in setting up KSFE Ltd. as
already mentioned was that it would take up the leadership in Chit Funds
business as a whole and thereby safeguard the interests of subscribers by
offering effective competition. Hence it is also worth examining the
effectiveness of KSFE as the leading institution in this industry. There has
been criticism against the complicated formalities, inadequate customer
service and the high rate of interest charged on its loans. The high default
rate, the under utilisation and mismanagement of funds have been subjected
to lively discussion. Red-tapism and bureaucratic delays in the operation of
KSFE and its role as a competitor to other Chit Fund institutions have been
questioned by many, and so needs to be examined and evaluated. As part of
the current economic policies, KSFE might even face the threat of
disinvestment and if so has to forgo the privileges enjoyed by it as a
government company.
Hence, there is need for a study, which seeks to make an inter-
institutional comparison between various categories of Chit Funds. It also
requires a detailed analysis of the challenges and opportunities of KSFE
from a strategic management angle.
1.12 SCOPE AND RELEVANCE
The present study entitled " A Study of Chit Finance in Kerala
with special emphasis on Kerala State Financial Enterprises Ltd. " hence
examines the socio-economic aspects of Chit schemes run by the private Chit
Funds, KSFE, co-operatives, and informal Chit Funds. The study is an
attempt to find the reasons for the growing popularity of Chit Funds as
savings cum borrowing avenues even in the presence of various other
avenues of savings and borrowings and also to understand how the Chit
subscribers utilise the funds. This study also examines the limitations of the
9
10. Chit Acts and suggests suitable recommendations. An analysis of the
working of Chit Funds helps us to suggest the necessary measures required
for improving the functioning of such institutions.
The study takes stock of the working of Chit Funds in general and
KSFE in particular, reviews the performance and estimates the cost and
return on Chits. The study covers the period from 1960 to 200 l. KSFE was
selected as the focal point of the study for the following reasons:
1. The Kerala State Financial Enterprises Ltd. is a unique experiment as the
only public sector Chit Fund Company in the whole of India, which is
fully owned by a state government.
2. KSFE is the dominant foreman in the Chit business in Kerala managing
about 77 per cent of the total Chit capital (sola).
3. The presence of KSFE is believed to check the unscrupulous operation of
private Chit business.
4. The KSFE is one of the few profit making public sector enterprises in the
State and also generates direct employment opportunities to more than
3000 persons.
The review of literature shows that there are only a few studies on
Chit Finance. The All India Rural Credit Survey District Monograph, Quilon
(Reserve Bank of India, 1958) 8 is one of the first attempts at a scientific
enquiry into the working of Chit Funds. But it surveyed the Chit Funds of a
very limited area only. The reports of the study groups appointed by RBI and
Government of India from time to time have explained their working in some
detail and made a few recommendations for the healthy growth of NBFCs
including Chit Funds. 9 Individual researchers like C P S Nayar (1973) 10 and
Radhakrishnan, S (1975) II have done pioneering works on Chit Finance, but
these studies are rather too old and hence may not reflect the present picture.
Although there are studies on Chit Finance, there is no specific
comprehensive study on the public sector Chit Fund Company (KSFE)
especially, in comparison with its competitors. In this context, an enquiry is apt
10
11. to be made on the socio-economic objectives and the performance of KSFE vis-
a-vis the other Chit Fund companies in the financial sector of Kerala.
1.13 OBJECTIVES OF THE STUDY
The objectives of the study specifically are: -
I. To examine the trends and pattern of growth of Chit Funds in the formal
sector in Kerala.
2. To assess the performance of KSFE as the only public sector Chit Fund
Company in India.
3. To identify the determinants behind the preferences for joining Chit Funds.
4. To estimate the cost and return on Chit Funds.
5. To assess and compare the relative preferences of Chit subscribers
towards KSFE with that of other Chit Funds.
6. To identify the major problems of Chit Funds in Kerala in general and
KSFE in particular.
7. To make suitable suggestions for improving the working of KSFE and
Chit institutions in general.
1.14 SOURCES OF DATA AND METHODOLOGY
The study is based on data both from primary and secondary
sources. To study the trend, volume and growth of Chit business in the
formal sector, data have been collected from the Registration Department,
Government of Kerala and from Registrars' Offices at district level. To
assess the performance of KSFE Ltd, data have been collected from the
head-office and from its various branches selected randomly. Data were also
collected from Reports, Journals, Books, Reserve Bank of India Publications
and Government Publications.
To study the trend and volume of Chit business run by co-
operative societies, data have been collected from the State administrative
office of co-operative societies at Trivandrum, and Joint-Registrar's offices
at the district level. An attempt was also made to collect data on Chit Fund
11
12. institutions registered outside Kerala especially from bases in Jammu and
Kashmir and Faridabad with the help of Chit Foremen Associations.
A survey among subscribers has been conducted to identify the
motivational factors behind joining Chits, reasons for preferring various
categories of Chit Funds, to analyse the fund utilisation pattern of Chit
subscribers, to trace their problems and to obtain suggestions for the better
performance of the institutions.
A survey among KSFE employees was conducted to get their
opinion on KSFE schemes, its problems and level of customer service.
Personal interview was conducted with a number of private Chit
foremen including those who are registered and with bases outside Kerala to
study their working, the rights and obligations, the legal aspects of their
registration, the problems faced by them and also to collect suggestions.
1.15 THE SAMPLING DESIGN
A sample of 400 Chit subscribers was selected from all the
traditional three regions 12 in Kerala, namely, Trivandrum, Ernakulam and
Calicut. The selection of these districts was also guided by the fact that these
are the three districts with the highest volume of Chit business. A fourth
district, viz. Trichur, also was selected due to the strong presence of private and
informal Chit Funds. It also coincides with the location of KSFE headquarters.
The sample subscribers were selected from all the four districts,
from among different categories of Chit Funds, namely, KSFE, co-
operatives, private and informal, by taking into consideration their share in
the volume of Chit capital and also to represent rural and urban areas.
Accordingly 160 (40%) subscribers were taken from KSFE, 114 (28.5%)
from co-operatives, 86 (21.5 %) from private, and 40 (10%) from the
informal sector. Selection of sample subscribers was made at random from
the subscribers' list with the foremen, by giving representation to rural and
urban areas.
12
13. A sample of 165 KSFE employees was selected from the four
districts: Trivandrum-50, Ernakulam-45, Trichur-40 and Calicut-30, taking
into consideration the staff strength in the respective districts.
1.16 TOOLS OF ANALYSIS
Simple statistical tools such as averages, percentages and ratios
are used for the analysis of data.
To examine the trend in the number of Chits registered and in the
volume of Chit business, trend analysis by the method of least squares has
been used.
Scoring and Ranking Method has been used to identify the
determinants behind the preferences for joining Chit Funds.
To estimate the cost and return on Chits, Discounted Cash Flow
Method has been used.
To assess and compare the relative preferences of subscribers to
various categories of Chit Funds, Chit Funds Rating Analysis (Competitor
Rating Analysis) has been used. Ranking of parameters done by the
subscribers, vis-cl-vis its peers have been used to work out Chit Funds
Rating. Weights have been (different levels) given to these ranks to
rationalise them.
BCG Growth-Share Matrix, Default-Revenue Matrix and SWOT
Analysis have been used to identify the challenges and opportunities of
KSFE as a Chit Fund Company in comparison to its competitors. The present
study being exploratory in nature does not advance any hypothesis.
1.17 LIMITATIONS OF THE STUDY
The inability to estimate the volume of Chit business operated by
the private Chit Funds from bases outside Kerala poses difficulties.
13
14. Similarly there is paucity of reliable data on the huge volume of Chit
business in the informal sector.
The general reluctance of the people to reveal data on income and
savings made the task of collecting data somewhat difficult.
1.18 SCHEME OF THE STUDY
The study is presented in seven chapters. The introductory chapter
presents the statement of the problem, scope, objectives and the research
methodology adopted.
The second chapter reviews the available literature in the area and
highlights the theoretical backing.
Chapter Three gives an overview of the evolution, growth and
importance of Chit Funds with its unique features, the operational techniques
used by different Chit institutions and an estimation ofthe cost and return on
the Chit scheme.
Chapter Four presents the origm, development and performance
evaluation of KSFE in the State of Kerala.
The fifth chapter presents the motivational factors for joining
Chits, particular types of Chit Funds, an analysis of the problems of Chit
subscribers and a comparative assessment of various Chit Funds in Kerala.
Chapter Six analyses the challenges and opportunities of the Chit
Fund industry with special emphasis to KSFE.
The concluding chapter provides a summary of the findings,
makes suggestions and discusses policy implications.
14
15. Notes and References
1. Statutory Guide for Non-Banking Financial Companies: An Authorised
Publication of Reserve Bank of India. The Taxman Allied Services Pvt.
Ltd., (2000), pp.I-12.
2. The Kerala Chitties Act, 1975 (Act 23 of 1975). An Act to define,
amend and consolidate the law relating to Chitties in the State of Kerala,
Ganesh Publications, Kochi, (1995), p.I.
3. Nayar, C.P.S. Chit Finance: An Explorative Study on the Working of
Chit Funds, Vora and Co. Publishers Pvt. Ltd., Bombay, (1973), p.115.
4. The Kerala Chitties Act, 1975, op. cit., p.2.
5. The 'Chit-like' Schemes function exactly like the Chit scheme. They can
be conducted by co-operative society/bank without registration after
obtaining sanction for their bye-laws from the Joint Registrar of Co-
operatives of the concerned circle, thereby escaping from the provisions
of the Kerala Chitties Act, 1975. Such schemes fall outside the purview
of official Chit records.
6. Agents or commission agents who collect Chit subscription regularly at
the door of the clients.
7. The Chit Funds Act, 1982. (Act No. 40 of 1982). An Act to provide for
the regulation of Chit Funds and for matters connected with it, Law
Publishers (India) Pvt. Ltd., (1998).
8. All India Rural Credit Survey, District Monograph, Quilon, Reserve
Bank of India Publication, Bombay, (1958).
9. For example: (i) The Report of the study group on Non-Banking
Financial Intermediaries: Banking Commission, Government of India,
(1972), had recommended the need for a uniform Chit Funds legislation
applicable to the whole country. The Commission also observed that it
would be desirable to provide in the legislation that only public limited
companies can run Chit Funds.
15
16. (ii) The Report of the study group on Non-Banking Companies under the
Chairmanship of James S Raj (1974) recommended for the enactment of
the central legislation for Chit Funds. The group also recommended that
the administration of the law should be left to the State government
concerned which in turn could seek the advice and assistance of the RBI
on policy matters. They recommended a ban on prize Chits! benefits !
saving schemes, as these were detrimental to general public interest.
(iii) The Report of the working group on financial companies, under the
Chairmanship of A C Shah (1992).
10. Nayar, C.P.S. op.cit.
11. Radhakrishnan, S. et al, Chit Funds and Finance Corporations, IFMR
Publications, Madras, (1975).
12. Traditionally Kerala consisted of three regions namely the princely
States of Travancore, Cochin and the region of Malabar. On November
1, 1956, these regions were merged to form the new State called Kerala.
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