Caro

Chit fund schemes possess a predetermined chit value and duration. The amount collected from members is auctioned out every month. Bidders can bid up to a maximum of this total collected value. The difference between the gross sum collected and the actual auction amount, known as the discount, is then equally distributed among subscribers, or, is deducted from the next month’s premium.

piyush is correct.

In chit company generally there is a group formed of 40 or 50 members, starting from Rs.1lac and no upper limit with a period of about 40 months or 50 months depending upon the size of group formed.

This group is formed by chit company through its agents who in return gets commision for each member brought in by him.

The bidderers in the auction for eg. of Rs. 1 lac chit group may bid 70000 or 65000 etc.

The lowest bidder (i.e. 65000) will win the bid and will be entitled to withdraw the said amount on successfully keeping some security with the chit company.

Thus the member of group receives fund easily.