Frequently Asked Questions on Chits

  • Chit is an Indian Version of ROSCA (Rotating Savings and Credit Association) prevailing internationally.
  • Different countries it is known in different names under the common name“Rotating Savings and Credit Association(ROSCA)”. ROSCA is a group of individuals who agrees to meet for a defined period in order to save and borrow together, a form of combined peer-to-peer banking and peer-to-peer lending.
  • An ideal solution for financial inclusion – extending financial assistance both saving & borrowing
  • Best funding avenue for MSME sector/Business person

Chit is a simple financial instrument which takes care of both savingand borrowingneeds of the customers. Chit funds are saving cum borrowing schemes, where member or subscriber agrees to contribute fixed amount every month for a fixed period. The total amount contributed by subscribers shall be auctioned and given as prize money to a needy subscriber every month.

Definition of chit fund varies from person to person. For one set of people, it is a money deposit/a saving cum investment scheme and for another set of people, it is a loan/credit scheme

  • Chit is a saving cum borrowing product – with a single product some one can take care of his/her saving & borrowing needs
  • Helps in developing Saving habit – Systematic way of saving money every month.
  • Suitable for both planned & unplanned(emergency) financial requirement- No one can predict the fund emergency, it can raise up at any time in our life and during that time, Chit will be helping them to manage the fund emergency by availing money through monthly Chit auction on a specified date.
  • Any person can accomplish his/her dream by opting Chit rather than depending on a loan.
  • Easiest & economic way of getting funds for business persons

  • Foreman Credibility is the first point in mind while investing in Chits. Muthoot Pappachan Group is a wellestablished organization with overall existence of132 years and TRUST.
  • Muthoot Chits provides customers the maximum collateral options. Apart from the normal security options, we accept ‘Gold Ornaments’, Equity shares, MF, Bonds etc as security for the future liability during Prize money disbursement.
  • Customer has ease of operation, he can make the payment online, chit office and through MFL branches.

All category of customers are Chit customers. The minimum age criteria is 18+ years.

Chit suits for all segments of customers like Upper Lower, Middle, Higher & High Net worth Individuals. Also, it caters the specific profiles like Salaried, Self Employed, Home Makers & Senior Citizens.

  • The sourcing staff should check 2 important things, i.e. Intention & Ability of the customer. Which means that the customer’s intention to opt for Chit fund should be good and should have the ability to repay the monthly instalment without any burden.
  • Very important thing is “Security Norms”, do inform all the customers during sourcing and before enrolling them, as it plays a key factor at the time of Prize Money disbursement.
  • Also, convinced about other terms & conditions like auction process, Forfeiture Penalty clause in case of discontinuation by the customer, interest on delayed payments etc.

  • Firstly, we need to understand the Applicant’s Income and Expenses.
  • Calculate as mentioned in the below table and understand his comfortable CHIT Instalment, suggest the appropriate available chit group for the customer.
Monthly Income / Expenses Analysis
 Income  Expenses
 Description  Value  Description  Value
 Net Salary 30,000  Rental Contribution 5,000
Other Income if any Food Expenses 5,000
 Conveyance Expenses 4,000
 Family Contribution 2,500
Phone Expenses 1,250
Loan EMI Contribution 3,000
Other Expenses 1,250
 Net Salary 30,000  Total Expenses 22,000
 Balance Available = (Net Salary – Total Expenses) 8,000
 Comfortable CHIT Instalment = (Balance Available)/2 4,000

Discontinuation of chit is loss to the customer, so analyse monthly income / expenses and suggest the correct chit group based on the comfortable Chit Instalment.

Customer can bring in a third person who is interested to subscribe / continue the chit in his/her place. If the prospect is acceptable to MPCIL, we will consent for transfer of chit from old subscriber (TRANSFEROR) to new subscriber (TRANSFEREE). This is also called assignment (substitution) of chit.

Customer is discontinuing the Chit by not making instalment, the Foreman commission of 5% of the Chit value with GST will be deducted. If any balance is available, then the same will be settled only after substitution or completion of Chit period, whichever is earlier.

Let us learn with an example of 10000* 50 = 5 lac Chit

In this case Rs.10000 is monthly Instalment, 50 is No of months and 5 lac is Chit value.

Always the Months & The Chit members of the group will be the same, so the members of the chit group will also be 50.

  • Instalment = Monthly Subscription =10000
  • Period = Number of months = 50
  • Chit Amount = Total of Instalments = 5 lac (10000×50)
  • Bid offer Amount = Amount willing to forego by subscriber to win(get the money) the prize Money = Rs.175000 (if we consider Bid = 35%).

Min Bid Amount -5% (Foreman Commission), Max –  30% (for 30 & 40 months chit) and 35% (for 50 months Chit)

  • Prize Money = Net Amount to be given to Prized Subscriber = Rs.325000(Chit Amount minus Bid Offer Amount)
  • Total Dividend = Bid offer Amount minus Foreman Commission(5%) = 150000
  • Dividend per Customer = Total Dividend/No of Subscribers = 3000 (150000/50)
  • Next Month Instalment = Gross Instalment minus Dividend Per Customer = 7000 (10000-3000)

If someone withdraws at last

Total Amount Invested  = 419500

Total Amount Received = 472000(5 lac – (FC + 12% of FC as GST)

Net Margin  = 52500

Note :- The above calculation is for learning purpose, the actual return depends upon the auction discount as decided by the group members

The customer is eligible for Chit group auction from 2nd month onwards.

Before the auction, the Chit member should have paid all his instalments and there should not be any pending instalment in his Chit. If the customer has any pending instalment in his chit, then he will not be eligible to participate in the auction.

  1. Attending personally (“Direct Participation”)in Chit office on the specified Date & time mentioned in the chit agreement.
  2. Second option is “Bid Offer Letter”, he can fill the complete details, sign it and send to Chit’s office.
  3. Third option is “Bid Authorization Letter”, he can authorize another person to participate in auction, who comes with authorization letter & Attender’s ID proof.

Future Liability is an important thing when it comes to Security.Future Liability (FL) = (Fixed Monthly Instalments  X No of pending months)
Customer can opt any one or combination of the following:

Sl Type of Security Value Required Remarks
1 Gold Ornaments 100% of Future Liability Valued currently at Rs.2500/gm
2 Assignment of Life Insurance Policies Surrender Value should exceed100% of Future liability Only traditional Policies are accepted. The subscriber needs to obtain surrender value certificate and assignment confirmation from LI Co
3 Equitable Mortgage by Deposit of Title Deeds (Regd)  The value of the property should exceed 150% of the future Liability local immovable urban house property. Vacant land & rural properties are not accepted
4  Bank Guarantee 100% of Future Liability Scheduled bank acceptable to company
5 Fixed Deposits 100% of Future Liability The subscriber must obtain a lien charge from the Bank.
6 Paid up subscription in Non – Prized chits by Pledge of Pass Book 100% of Future Liability Paid up minus 5%of chit value only be considered
7 Deposits with the Group company 100% of Future Liability NCD, Debentures, FD etc – physical/dematerialised
8 Security Pledge- Dematerialized 200% of Future Liability Accepted Only NIFTY 100 shares
9 Personal Guarantee/Surety Minimum of 3 qualified Persons Surety No of surety may increase based on the profile & value of future liability


Upto Rs. 10,000/- Rs. 4,500/-
Over    Rs. 10,000/-        to      Rs. 15,000/- Rs, 5,000/-
Over    Rs. 15,000/-       to       Rs. 20,000/- Rs. 5,000/-
Over    Rs.  20,000/-        to       Rs. 25,000/- Rs. 6,000/-
Over   Rs. 25,000/-         to        Rs. 50,000/- Rs. 6,500/-
Over   Rs. 50,000/-         to        Rs. 75,000/- Rs. 8,000/-
Over   Rs. 75,000/-         to        Rs. 1,00,000/- Rs. 8,500/-
Over   Rs. 1,00,000/-     to        Rs, 1,50,000/- Rs.  9,000/-
Over   Rs. 1,50,000/-     to        Rs, 2,00,000/- Rs. 11,000/-
Over   Rs. 2,00,000/-     to        Rs. 2,50,000/- Rs. 12,500/-
Over   Rs. 2,50,000/-     to        Rs. 3,00,000/- Rs. 14,500/-
Over   Rs. 3,00,000/-     to        Rs, 3,50,000/- Rs. 15,500/-
Over   Rs. 3,50,000/-     to       Rs. 4,00,000/- Rs. 17,000/-
Over   Rs. 4,50,000/-     to       Rs, 5,00,000/- Rs. 18,000/-
Over   Rs. 5,00,000/-     to       Rs. 6,00,000/- Rs. 20,000/-
Over   Rs. 6,00,000/-     to       Rs. 7,00,000/- Rs. 23,000/-
Over   Rs. 7,00,000/-     to       Rs. 8,00,000/- Rs. 24,500/-
Over   Rs. 8,00,000/-      to      Rs. 9,00,000/- Rs.26,000/-
Over   Rs. 9,00,000/-     to      Rs. 10,00,000/- Rs. 27,500/-
Over   Rs. 10,00,000/-   to      Rs. 10,00,000/- Rs. 29,000/-
Over   Rs. 11,00,000/-   to      Rs. 12,00,000/- Rs. 33,000/-
Over   Rs. 12,00,000/-   to      Rs. 13,00,000/- Rs. 33,000/-
Over   Rs. 13,00,000/-   to      Rs, 14,00,000/- Rs. 34,500/-
Over   Rs. 14,00,000/-   to      Rs, 15,00,000/- Rs. 36,000/-
Over   Rs. 15,00,000/-   to      Rs, 16,00,000/- Rs. 37,500/-
Over   Rs. 16,00,000/-   to      Rs. 17,00,000/- Rs. 39,000/-
Over   Rs. 17,00,000/-   to      Rs. 18,00,000/- Rs. 40,500/-
Over   Rs. 18,00,000/-   to      Rs. 19,00,000/- Rs. 42,000/-
Over  Rs. 19,00,000/-    to      Rs. 20,00,000/- Rs. 43,500/-

Up to 10 lac Liability

Liability Slab (Rs) Govt Employee Pvt Sector Employee & Business Person/others
Below 3 lac Minimum of 1 Property document – Best efforts basis Minimum of 1 Property document – Best efforts basis
3 lac to less than 5 lac Minimum of 1 Property document – Best efforts basis Minimum of 1 property document – Mandatory
5 lac to 10 lac Minimum of 1 property document – Mandatory Minimum of 2 property document(2 persons) – Mandatory


Note :-

Property Documents means person should own property & submit required proof like copy of tittle deed, EC, tax receipt, Electricity bill etc.

If Prized Subscriber and all guarantors are govt employees, then only the conditions applicable to Govt employees will apply. If any of them are non govt employees, the conditions applicable to Pvt Sector employees & business person will apply

NOTE- More than 10 lac Chit, consult respective Chit Branch Manager in closing the deal.

General Points
Personal surety of Minimum four persons
Branch Manager/Area Manager/Key Accounts manager/Credit Manager should meet prospective Subscriber /visit his /her business place & Office /scrutinize the papers and get satisfied before Enrolment
Subscriber & Guarantors should be income tax assesses.
Copy of bank statement of account for minimum 12 months period (Salaried people – where salary is credited, business people – business account)
Minimum of 3 people among the Subscriber & Guarantors should have property documents. It should be urban residential or commercial property and not vacant site. They must submit copy of the tittle deed/Encumbrance Certificate/Tax Paid Receipt/Electricity Bill of 3 properties.
Surety of business Persons
Subscriber & Sureties must be in business for a minimum period of 10 years. Balance Sheet and Profit & Loss A/c and IT returns with Computation Sheet and auditors report for latest 3 years should be available.
Net profit should be Rs. 10 Lakhs & above for all 3 years. Net profit of Rs.5 Lakhs & above for all 3 years can be considered along with copy of Property documents.
Successful bidder or at least one of the sureties must have residential property with NIL encumbrance (without loan on the property) in 50 KM radius from Chit office. Copy of tittle deed with forced Sale value of 150% of liability along with NIL Encumbrance Certificate (not older than one month) should be submitted.
 Surety of employees
1 Private Employees – Minimum Service of 7 years with take home pay after all deductions and loan EMIs should be minimum of Rs. 50,000/-

Govt Employees – Permanent employees with take home pay after all deductions and loan EMIs should be minimum of Rs. 50,000/-

2 CIBIL Score of subscriber & guarantors should be above 650 & above.
3 Subscriber & guarantors should be residents within a radius of 50 KM from Chit Office.

  1. Id Proof – Self attested
  2. Address Proof- Self attested

Apart from filling/executing internal documents, applicant must submit the KYC document as specified below

A. KYC Documents – Mandatory with all class of Security from both Subscriber/s & Guarantors
Identity / Age Proof – Copy of Aadhar Card / Voter ID / PAN Card / Passport (Self attested)
Address Proof – Copy of Aadhar Card / Voter ID / Passport / Gas Bill / Electricity Bill / Mobile Bill (Self Attested)
Permanent Address Proof – Copy of Aadhar Card / Voter ID / Passport / Gas Bill / Electricity Bill / House Tax receipt (Self attested)
*# Copy of House / Property – latest Tax paid receipt 

Note: – *# Mandatory in the case of Personal Guarantee/Surety (19.1) ONLY.  Other cases on best effort basis
Also, required income document specified below, if the applicant is opted Security option as “Personal Surety”

B. Income Documents
For Employees: For businessperson/s/professionals/others
Copy of Employee ID Card Copy of GST Certificate / Licenses / Govt approvals
Computerized Pay slip / Salary Certificate (self-attested) / with disbursing officer attestation for latest 3 months Copy of Proof of business established for 10 years
Copy of Bank Account statement for latest one year (self-attested) – salary account Copy of Bank Account statement for latest one year (Self attested) – business account
Copy of Form No. 16 issued by Employer (for latest 3 years) Copy of Audited Balance Sheet / Profit & Loss Account / adjusted statement of income certified by auditor, GST Returns for latest 3 years
Copy of Income Tax Return for latest 3 years with Acknowledgment / income computation (Self attested)
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