Chit Fund Loans

Chits (vs) Recurring deposits

Recurring Deposit scheme is offered by almost all banks in one form or the other. Recurring Deposit is very popular among the salaried class, especially who can afford to save only few hundred or say few thousand rupees per month. This scheme is a boon for people who do not have a large amount of savings and thus cannot use the Fixed Deposit scheme of the banks.

Under this scheme, the customer deposits a minimum amount (normally fixed) every month and bank pays the interest at the pre-determined rates (which is usually lower than that for fixed deposits). At the end of the period i.e. on maturity date, the customer is paid the maturity value i.e. principle deposited and the interest payable. The current rate offered by banks is around 8.5%. This is subject to government regulation. The same money can be invested in a chits and the investor can earn 12-16%. He can also borrow against the chit which is not possible with a recurring deposit.

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