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Monday, Mar 25, 2002

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`Shriram, Margadarsi top chit fund players'

C.R. Sukumar


SHRIRAM Chit Ltd and Margadarsi Chit Fund Ltd have emerged as the two main players in the chit funds market of South India with turnover of over Rs 1,000 crore each, according to a study conducted by Deloittee, Haskins & Sells (DHS), part of Deloittee Touche Tohmatsu, one of the top five global consultancy firms.

The study was undertaken by DHS as a part of a debt-restructuring programme and valuation of shares for the companies of Model group, the Hyderabad-based lease finance, hire purchase and chits conglomerate.

Chit funds, one of the country's oldest indigenous financial institutions, is said to have originated over a century ago in the rural parts of South India. According to the available statistics, the total turnover of the chit funds industry during 1966 stood at around Rs 400 crore. Of this, the lion's share came from Kerala followed by Tamil Nadu.

The current size of the registered chit funds market is guesstimated to be in the region of Rs 20,000 crore, with Shriram Chit and Margadarsi Chit as the main players.

Chit funds, governed by Chit Funds Act, 1982, are monitored by the Registrar of Chits within whose jurisdiction the chit is to be commenced or conducted.

The chit fund has to file its balance sheet with the Registrar, duly audited by auditors qualified to act as auditors under the Companies Act 1956 or by a chit auditor appointed under Section 61 of the Chit Funds Act 1982.

The maximum discount currently permissible under the Andhra Pradesh Chit Funds Act is 40 per cent, while the foreman may earn a maximum commission of five per cent. The dividends to subscribers are usually in the range of 15 per cent to 20 per cent.

Chits often provide a convenient source of finance for different type of people — small investors, businessmen and small-scale industrialists.

However, according to major chit funds such as Shriram Chits, subscribers normally do not view chit funds as primarily savings instruments. Chits are usually preferred by the salaried class and traders as a source of funding on tap to meet their commitments, the DHS report says.

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