Can i invest in chit funds? Is there a limit as to which I can invest?


I am an NRI but I am seeking to invest in a chit fund company. Can i invest in chit funds? Is there a limit as to which I can invest?


Yes as a non resident Indian you can invest in chit fund companies. The RBI has recently given a go ahead for NRIs to invest in chit funds provided the money is invested through regular banking channels and accounts maintained in India. The state governments or Registrar of Chits has allowed chit funds to accept subscription from NRIs on non-repatriation basis. As of now there is no ceiling on the maximum amount of investment you as a NRI can make in chit funds. Make sure that chit fund you choose is a registered one and not any ponzi scheme operating under the garb of a chit fund company.


Do chit funds offer any fixed returns assuming i am investing in a chit fund company registered
with the government?


@Sohini Chit fund offers no fixed returns like other deposit schemes. Like fixed deposits have a fixed rate of interest which you can bank upon, the returns of the chit fund companies depend on what the reverse auction with no fixed returns surety.

So if you are a conservative investors looking for assured returns you are better off avoiding any chit fund investments.


Hi NMahesh,

NRIs can invest in chit funds if they have a rupee account in India. We don’t think there is a limit to the investment. A chit fund is a savings cum borrowings scheme, wherein a few people (known as members or subscribers) come together and invest a fixed amount every month for a fixed period.

In a chit fund, the number of months for which the investment is made is the same as the number of subscribers in the scheme. Every subscriber gets a turn to take the total amount collected in a month; this means, in every month, one subscriber will get the collected amount.

The subscriber that gets the money, which will be decided based on a bidding system. Once a subscriber gets his turn, he is not allowed to participate in the bidding again. Generally, those who are in need of money during a particular month participate in the bidding, and the subscriber with the lowest bid is allowed to take the amount.

The chit fund scheme is managed by one of the members, who is known as the Foreman. He is responsible for collecting the subscription amount from the subscribers, recording details of members and conducting the auctions. For these duties, he is paid a fee, which is generally 5% of the amount collected. The Foreman’s fee is reduced from the amount paid to the subscriber who wins the bid. Any extra amount from the monthly collections is distributed equally among all the subscribers.

Registered funds are regulated and governed by law, but unregistered chit funds are not bound by any regulations. When fraudulent chit funds closed shop, several investors lost their hard earned money. It is therefore not advisable to invest in unregistered chit funds.

Looking for a Fixed Deposit? Click here.

BB Expert