From modest beginnings here in the 1800's to provide loans to traders and merchants to tide over financial problems, chits funds or kuri companies have grown by leaps and bounds in Kerala, with an estimated annual turnover of Rs 70,000 crore, covering a gamut of activities.
Numbering 5000 in Kerala,with Thrissur district accounting for the maximum of 3,000,these companies provide employment to about 35000 persons directly and an equal number indirectly.
MK Antony, general secretary of the All Kerala kuri foremen's association said that chit fund companies have prospered, despite difficulties in running them due to enactment of 'unhealthy legislations' over the years.
The banking industry in the state has also acknowleged the contribution of chit funds to the development of Kerala.
The concept of Chit funds came into being in the 1800's when Raja Rama Varma, ruler of erstwhile Cochin state gave a loan to a Syrian Christian trader, keeping a certain portion of it to himself for administrative and other expenses.
Later, to manage the increasing numbers of those seeking loans, he ordered a cast of lots and gave the accumulated amount to those who drew the lot on the principle of equity, association president AP George said.
Gradually the practice spread to other parts of the country and even abroad, including Myanmar and Sri Lanka, he said.
But real streamlining of operations was somewhere between 1830 and 1835, when the Chaldean Syrian church started Kuries under its name and issued passbooks to subscribers as evidence of enrolment, he said.
Another interesting version of the origin of chits is linked with Portuguese missionaries from China, who visited Muziris (Kodungalloor) off and on for evangelization and established a seminary at Vypeencotta village in 1577. They reportedly encouraged promotion of chits in Kodungaloor.
The practice of holding chits was also in vogue in China in the 14th century, to meet the financial needs of the poor and downtrodden.
Traders and merchants in Thrissur, the nerve centre of the chit fund companies, participate in the auction and bid at 50% or more discount. If the 'sala' (aggregate amount) of a chit works out to Rs one lakh with a monthly instalment of Rs 1000 for 100 months, the successful bidder is eligible for only Rs50,000.
By convention when they purchase goods worth Rs50,000 by cash from the wholesaler, they get additional merchandise worth Rs50,000 on credit.
An established merchant here said the discount of Rs50,000 would be offset easily when one year transaction of goods worth Rs one lakh (Rs50,000 cash purchase and Rs50,000 on credit) was completed.
Besides,subscribers would also be eligible for reduction of monthly instalment due to apportioning the discount among them and bonus to remit chit amount on time. Earlier, almost all churches here had held kuries,maintaining utmost 'credibility' under the control of parish vicars.
Prior to 1975, leading Thrissur headquarted scheduled banks like Catholic Syrian Bank Limited, South Indian Bank, Dhanalakshmi Bank Limited and ersthile Kodungalloor-based Lord Krishna Bank conducted chits for subscribers, whose contribution to banks' stability was commendable, George said
According to RBI, Thrissur in the 1930's boasted of head offices of 58 banks and was recognised by RBI as 'Banking town. Banking experts here said chit companies had contributed much to the development of the industry.
The rapid growth in the business saw enactment of Cochin Kuries Act, 1932 and Travancore Kuries Act, 1945, besides a uniform law for the state -- Kerala Chitties Act, 1975, being enforced since August 25, 1975.
George said several provisions of the 1975 Act like auction discount not to exceed 50 per cent of net assets of the company and security to be furnished by foremen were stringent and difficult to comply with as they were tantamount to 'stifling' the smooth running of chit companies.
However, the Kerala Government has exempted state-owned Kerala State Financial Enterprised Limited,the only government owned chit company in India, from the purview of this act.
George said their main demand is enforcement of the Central Chit Fund Act, 1982, in Kerala,permission to start kuries with unlimited discount, which was not possible under the state act, besides withdrawal of exemption to KSFEL.
Viewing the success in Kerala, some states have tried to replicate it, but this has largely failed due to malpractices and manipulations in auction and drawing of lots and in the absence of subscribers.