Chit Fund is a saving scheme practiced in India. It originated 1000s of years ago. It was started as informal association of traders and households with in communities. It enables poor people to convert small savings into lump sums.
Though chit fund companies are a category of Non-Banking Financial Companies (NBFC), chit funds are exempt from being registered with the Reserve Bank of India
Let’s say there are 20 people who come together and form a group. Each one will contribute Rs 1,000 per month and this will continue for next 20 months