1. The amount of a said scheme is called the chit value.
2. The duration of the scheme is known as term period.
3. The people who are interested in investing in the scheme are called subscribers.
4. The amount to be saved every month by the subscriber is known as subscription.
5. The person or company operating the chit fund is known as the foreman.

Monthly Subscription= Chit Value/No. Of Members
5,000=1,00,000/20
Explanation
5,000= Monthly Subscription
1,00,000=Chit Value
20=No. Of Members

The duration of chits are normally 20 months means no. Of members and no. Installments will be same

Chit funds are not affected by market fluctuations

1. It inculcates the habit of compulsory and regular savings.
2. It earns dividends every month. So the nett rate of return proves to be attractive It earns dividends every month. So the nett rate of return proves to be attractive.
3. It is much easier and faster to get a lump sum loan than a regular bank in case of an emergency.
4. From a low-income homemaker to a businessman, anybody can join a chit fund.

Auction is a procedure for identification of the non-prized subscriber who wants to take a chit amount at the highest permissible discount. All non-prized subscribers who have paid their installments up to date are allowed to participate in the auction for bidding up to the highest auction discount, within a period of five minutes allowed for each auction.

A customer who has taken his chit or to whom the chit amount is paid is called a prized subscriber.

A customer who has not lifted his chit or to whom the chit amount has not been paid yet is called a non-prized subscriber.

Auction is a procedure for identification of the non-prized subscriber who wants to take a chit amount at the highest permissible discount. All non-prized subscribers who have paid their installments up to date are allowed to participate in the auction for bidding up to the highest auction discount, within a period of five minutes allowed for each auction.

When there is no member in the chit group who is willing to receive the prized/bid amount at the maximum allowable discount, the bidding for the chit comes in for open bid auction. This is known as Open Bid.

Cash, cheques and bank transfer are accepted modes of payment.

All the dividends receivable till date of joining the group are earned by the member joining a vacant.