Banks Vis-a-vis Chits
Chit schemes are suggested and organised on a personal basis and involve financial planning for your life at Chandra Lakshmi.
1. Chits have lesser requirements and conditions as compared to banking schemes.
2. Decision making is made easier and faster with flexible chit plans.
3. The income from chit schemes is also favourable as compared with the income from bank schemes in most cases. The prize amount is always more than the amount of deposits made in the chit. Liquidity is compromised when you make a Fixed Deposit with bank or join a recurring deposit scheme which is not the case with chits.
Bank schemes and Chit schemes are two absolutely different financial instruments offering benefits in their own different ways. Banks were born to keep your money for you. That is it! A bank needs to safeguard your money. Banks make money from your capital and as an incentive, it offers to pay an interest to the people for parking funds with their bank. What they save in the middle is their profit.
Chit schemes are unique, Chits were designed to help the ones in need, somewhat similar to Insurance. But unlike bank schemes or insurance in chits you are completely in control of your money and you are charged nothing for keeping this control in your hands. It is only fair to govern your money, Banks dont give you interest over the money you can control.
You are crowdsourcing help when you need it and paying a little extra for the help you were given. Sometimes you participate by giving help when others need it, getting the little extra for the help you gave. Therefore, Chits promote a healthy economy with the appetite to absorb any kind of external shocks. From the outset, bank deposit schemes may look comparable to Chits, but they are not. Banks give incentive to save and invest.
Chits can be a saving instrument, a loan scheme, a capital building exercise, a discipline inducing device, and a contingency buffer fund in the nature of an insurance against event uncertainty.