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Querist : Anonymous

Querist : Anonymous (Querist)

25 April 2011 What is the difference between Nidhi company & Chit-fund company. whether both are same.

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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25 April 2011 Nidhi company is a company registered under Companies Act and notified as a nidhi company by Central Government under Section 620-A of Companies Act. It is a non-banking finance company doing the business of lending and borrowing with its members or shareholders.

A Chit fund is a kind of savings scheme practiced in India. A Chit fund company means a company managing, conducting or supervising, as foremen, agent or in any other capacity, chits as defined in Section 2 of the Chit Funds Act, 1982. According to Section 2(b) of the Chit Fund Act, 1982, "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 sum 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 specified in the chit agreement, be entitled to the prize amount".
Such chit fund schemes may be conducted by organised financial institutions or may be unorganised schemes conducted between friends or relatives. There are also variations of chits where the savings are done for a specific purpose. Chit funds also played an important role in the financial development of people of south Indian state of Kerala, by providing easier access to credit. In kerala chitty (chit fund) is a common phenomenon practiced by all sections of the society. In Kerala, there exists a company under the State Government, called Kerala State Financial Enterprise, the main business activity of it being the chitty business. Chit Funds are also misused by its promoters and there are many instances of the founders running what is basically a Ponzi scheme and absconding with their money.
for more info:-

https://www.caclubindia.com/mobile/forum/faq-on-nbfc---111745.asp

Querist : Anonymous

Querist : Anonymous (Querist)

25 April 2011 ok. Then can i say that both are engaged in same nature of Business or their business may be related to each other.

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