A Cheeti, also known as a chit fund, is a financial arrangement where a group of individuals, known as subscribers, come together to save and borrow money. Navamoshi Digital India Finance and Chits, as the foreman, facilitates this process. The foreman organizes the subscribers, collects their monthly contributions, presides over auctions, and maintains records. For these services, the foreman receives a fixed fee, typically around 5% of the total chitty amount, but has no additional privileges beyond those of a regular subscriber.
The operation of a chitty is straightforward. The formula used to calculate the total amount is: Monthly Premium × Duration in Months = Gross Amount
For instance, if the monthly premium is ₹5,000 and the duration is 20 months, the gross amount would be ₹1,00,000. The number of subscribers matches the duration, ensuring that each member receives the chitty amount once during the cycle.
The chitty begins on a specified date, and each month, subscribers gather for an auction. If multiple subscribers want the minimum sum available, a lot is conducted, and the lucky subscriber receives the prize money. If no one wants the minimum sum, a reverse auction is held, where subscribers bid for a lower amount. The lowest bidder wins the bid amount, which is less than the gross amount.
The difference between the gross sum and the auctioned amount, known as the auction discount, is either equally distributed among all subscribers or deducted from their future contributions. For example, if the auction settles at ₹75,000, the auction discount is ₹25,000. Dividing this by 20 (the total number of subscribers), each subscriber gets a discount of ₹1,000. This process repeats monthly, ensuring that all subscribers have the opportunity to receive a substantial sum at least once during the chitty’s duration.