Calculating rate of borrowing & rate of return on chit fund

Illustrating

1. Illustrating Chit as a prudent Borrowing: 
   Surprisingly enough, it is worth noting here that from a borrower’s perspective also the rate of borrowing is on the lower side as compared to other credit options. Let us have an   illustration in this respect:
   Chit Fund Value           Rs :    1,00,000/-
   Monthly Subscripttion   Rs:     2000/-
   No. of installments Month:     50/-
   
   As per the provisions of the Act, 1st Auction goes to the Company, which is required to be deposited with the Registrar.
   Situation I Auction N0 : 2
2. If the borrower subscriber could get success in 2nd auction, situation will be as follows:

   Bid amount   Rs.                                   : 30,000/- 
   Prize Money  Rs.                                  : 70,000/- 
   Amount to be paid in 50 month: Rs.    :  82,000/- 
   Cost of Borrowing Rs.                         : 12,000/- 
   Period                                                  : 50 month.

                                                   Total Cumulative Actual Investment - Prize Money                                      12month 
   Rate of Borrowing = --------------------------------------------------------------------X 100 X --------------------------------------
                                                                                    Prize Money                                                                    50 Month (Chit Duration)

         82000 – 70000                             12
   = -------------------X 100 X --------------------
                70000                                       50

   = 4.11%

   Rate of Borrowing (P.A.):      4. 11 %
   Rate of Borrowing (P.M.):.    0. 3425%

Situation I Auction N0 : 21st

   2) If the borrower subscriber could get success in 21st   auction, situation will be as follows:
   Bid amount   Rs.                                     : 25,000/-
   Prize Money Rs.                                     : 75,000/-
   Amount to be paid in 500 Days: Rs.        : 82,000/-
   Cost of Borrowing      Rs.                       : 7000/-
   Period:                                                    : 30 Month

                                                 Total Cumulative Actual Investment - Prize Money                                        12 Month
   Rate of Borrowing = --------------------------------------------------------------------X 100 X ----------------------------------
                                                                                    Prize Money                                                                              30 Month

         82000 – 75000                        12
   = -------------------X 100 X --------------------
                75000                                     30
   = 3.733%

   Rate of Borrowing (P.A): 3.733 %
   Rate of Borrowing (P.M.):0.311%

Security to be furnished: Bank guarantees, immovable property, assignment of LIC policy.

   2) Rate of Return:

1) If the Return subscriber could get success in 3rd auction, situation will be as follows:

   Bid amount:                                                       Rs. 30,000/-
   Prize Money:                                                      Rs. 70,000/-
   3rd Auction Cumulative Actual Investment:      Rs. 5500/-
   Dividend Amt:                                                    Rs.   500/-
   Period:                                                              :50 Month

                                             Dividend Amt
   Rate of Return = ------------------------------------------- X 100
                                          Cumulative Investment

                     500
         = -------------X 100
                    5500
        = 9.090% P.M

Rate of Return (P .M):9.090%

Source- Maxcare chit fund pvt ltd