A chit fund company is a company that manages, conducts, or supervises such a chit fund, as defined in Section of the Chit Funds Act, 1982. According to Section 2(b) of the Chit Funds Act, 1982:
“Chit means a transaction whether called chit, chit fund, chitty, kuree 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 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”
Though chit fund companies are a category of Non-Banking Financial Companies (NBFC), chit funds are exempt from registration with the Reserve Bank of India. Chit funds are a category of NBFC where the regulators regulate the funds and thus exempt from the requirement of registration with RBI.
To start a chit fund business in India, it is compulsory to form a Private Limited Company to operate a chit fund business. After the incorporation of a private limited company, the company should apply with the relevant Chit Fund Registrar of the State to obtain registration. A chit fund business can commence only after obtaining chit fund business registration from the relevant State Registrar.
Though they are not required to be registered under the RBI Act, chit funds are regulated as Miscellaneous Non-Banking Companies (MNBCs). Their activities relating to soliciting deposits are governed by the Non-Banking Financial Companies and Miscellaneous Non-Banking Companies (Advertisement) Rules (1977) framed by the Government of India under Section 58A of the Companies Act 1956.
It is very easy to register this type of business as very few documents are needed. The required documents include:
Registration of the Chit Fund Company takes the shortest time and can be completed within a min. of 7-10 working days. Despite registration taking the shortest time possible, this solely depends on government procedures and approvals during the time of your registration.
The Government’s registration fee starts at Rs.1900 while professional fees start at Rs.15000 and the variance would depend based on the type of business, number of employees and location of the business and even the requirements to be met while registering your particular business.
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