When the auction is announced, the member who bids the highest discount wins the Bid. Example:Īssume a chit fund scheme with 50 members that will run for 50 months, with each paying a monthly instalment of ₹10,000/- to create a ₹5,00,000/- pot. The process is repeated each month, thus allowing each member to win the Prize Money.Ī Chit fund offers you the unique advantage of allowing you to borrow from your future savings. The balance amount is distributed as a dividend among all members after deducting the Foreman’s Commission (5%). The subscriber willing to take the lowest sum with the lowest bid is declared the winner and receives the Prize Money for that month. Members contribute their monthly instalments to the pot, and a reverse auction is conducted each month allowing members to bid for the Prize Money. Simply put, the chit fund begins on a specified date and continues for the number of months equal to the number of subscribers.
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