Management of
Financial
Services(MFS)
Contents of Today’s
Session
• Chit Funds & Nidhis: Issues and Legal framework.
• Mutual fund services- Mutual Funds- Concept, Need and Scope
• Group Projects- Minimum Requirements, Team Formation, Projects
allocation and Timeline
Chit Fund and Nidhis
• Chit Funds
• Definition: chit funds are a type of financial arrangement that allows a group of
individuals to pool their resources and save money together for a specific period,
with the option of borrowing funds through an auction-like process
• Features:
• Form of traditional Finance Intermediation
• Have been a form of Indian Financial Culture for many decades
Chit Fund and Nidhis
• Chit Funds Regulations:
• Regulated through Chit Funds Act, 1982
• Registration of Chit Funds Mandatory
• Name Restrictions
• Prohibits invitation for subscription
• Specifies form of Chit agreement & needs filing with Registrar of Chits
• Minimum capital requirement for commencement of chit and creation of reserve
• Rights & Duties of Foremen, Prized subscribers and Non- Prized subscribers specified
• Specifies provision for meeting of subscribers, termination of chits, Inspection of documents, winding of chits
etc.
Chit Fund and Nidhis
• Chit Funds
• Process:
• Formation of a Chit group
• Chit Agreement
• Chit Fund Auctions
• Payout to Winner
• Borrowing Options
• Final Payment
Chit Fund and Nidhis
• Chit Funds
• Issues:
• Lack of Regulation
• Opaque Practices
• Default and Delay
• Unrealistic Promises
• Legal and Regulatory Issues
Chit Fund and Nidhis
• Five big chit funds operational in India
presently:
• Margdarshi Chit Fund
• Shriram Chits
• Govt. of Kerala linked Chitty
• Mysore Sales International
• Pursawalkam Santhatha Sanga Nidhi Limited
Chit Fund and Nidhis
• Nidhi
• Definition: Nidhi Company is a type of Non-Banking Financial Company (NBFC) that
belongs to the category of Mutual Benefit Societies
• Features:
• Nidhi Companies are primarily formed with the objective of cultivating the habit of
thrift and savings among its members and receiving deposits from them
• Member Focus
• Limited Activities: Nidhi Companies are restricted from engaging in activities that
are typically associated with regular NBFCs, such as chit fund schemes, hire-
purchase finance, leasing, and acquisition of securities issued by other companies.
Chit Fund and Nidhis
• Nidhi
• Features…Cont’d:
• Deposits and Lending only from and to members
• Mutual Benefit
• Membership and Ownership
• Minimum Requirements: Nidhi Companies must have a minimum of 200 members and
a net-owned fund of at least Rs. 10 lakh
• Regulatory Oversight: Regulated by the Ministry of Corporate Affairs (MCA) and
are governed by the Nidhi Rules, 2014
Chit Fund and Nidhis
• Nidhi
• Issues:
• Lack of Investor Protection
• Risk of Mismanagement
• Inadequate Financial Education
• Dependency on member contributions
• Lack of Clarity
• Insufficient Regulatory Oversight
Chit Fund and Nidhis
• Nidhi- Five biggest Nidhi’s in India
• Maben Nidhi Limited
• Muthoothu Nidhi Kerala Limited
• Mini Muthoothu Nidhi Kerala Limited
• Kalayil Nancy Nidhi Limited
• Jayant India Nidhi Limited
Mutual Funds Services
• Concept, Need and Scope
• Concept:
• A Mutual fund is a special type of investment that acts as investment conduit. It
pools the savings, particularly of small investors and invests them in a well
diversified portfolio of sound Investments
• Components of a Mutual Fund
• Sponsors
• Trustees
• AMC
• Custodian
Mutual Funds Services
• Concept, Need and Scope
• Need for Mutual Funds:
• Diversification
• Professional Management
• Accessibility
• Liquidity
• Flexibility
• Cost Efficiency
Mutual Funds Services
• Concept, Need and Scope
• Need for Mutual Funds:
• Regular Income
• Tax Benefits
• Transparency
• Long Term Investment
• Risk Management
• Regulation and Oversight by SEBI
Thank You