e l c o m e t o K S F E ...........Govt.
of Kerala Owned Miscellaneous Non-Banking Company
BID YOUR CHITTY & SCORE HIGH RETURNS
OF KSFE CHITTY AS A CREDIT &
INVESTMENT INSTRUMENT OVER OTHER FINANCIAL INSTRUMENTS : -
Better Returns to Investors.
$ Lowest Cost to borrowers.
$ Easy liquidity through advances under
Pass Book Loan (PBL),
...New Chitty Loan (NCL) schemes.
$ CSDT- facility.
$ Investor protection through Chitty
$ Public trust, credit worthiness and
$ Door collection and service of agents.
$ Acceptance of gold as security and
wide array of securities.
$ Convenient duration and subscription
$ Easy and transparent operation &
inter branch facility
even point in chitty - Interest v/s Discount foregone
Bidding Thump Rule
No:1 [As a borrower]
Bid the chitty at the maximum rate, since cost of chitty is always
much less than the borrowing cost.
No.2 [As an Investor] In the continuous bidding
process, if the discount foregone/available on each month is less
than or equal to the proportionate of the gross /maximum discount
for the month, bid the ticket immediately and invest the proceeds
in CSDT or other secured investment/deposits.
I. Per unit (in % terms) of discount foregone correspond
to interest earned on the prize money should be arrived to maximize
the return from chitty.
II. Discount forgone in auction should be suitably compensated
with the interest/return earned by prize money receipt during the
course of the chitty.
*Cash flow based computation
:- (for investors)
Ex : - [ Rs 2000 X 50 months = sala (Rs) 100000]
i) If the chitty is auctioned at the 18th month \ instalment at
a total discount of 11%. prize money payable is 100000-11000= Rs
ii) Interest accrued on PM deposit for the balance period of (50-19)
= 31 months @ 10%.
Therefore total interest for Rs 89000 @ 10% for 31 months is = Rs
Total prize money at the end of chitty Rs 89000.
Total receipt/ inflow from chitty = 23733+ 89000 = Rs 112733
iii) If the total dividend earned is Rs 6000 during the entire chitty
period, The net outflow of the chitty is Rs100000 - 6000 = Rs 94000.
IV) Net Surplus in chitty Rs 112733 - 94000 = 18733
Annualized average Return % = 37 / 150 *100 = 24.5%
Note:- Here the return is high since the matching investment period
selected is lower in the case of chit scheme ie, we took only 50
months duration in chitty. If chitty duration is 60 months the return
will further jump to a higher percentage level )
i) If the chitty is auctioned at the 18th month/ instalment at a
total discount of 5. 5% (including F. C), then the prize money payable
is [Rs 100000 - 5500 = Rs 94500].
ii) Interest accrued on PM deposit for the balance period of [50-19]
= 31 months. Therefore total interest for prize money for the balance
duration of the chitty @ 10% is = Rs 24412.
iii) Total inflow from the chitty (i) + (ii) above = 94500 + 24412
iv) If the dividend earned in the chitty is very less ie, only to
an extend of Rs 5000. Therefore, net outflow of the chitty is Rs
100000 - 5000 = 95000.
v) Net surplus in the chitty is (iii) - (iv) = Rs 118912 - Rs 95000
= Rs 23912.
vi) Annualised average return in the chitty is 23912/50 = 478.
vii) Return (%) = 478/2000*100 = 23. 9%
Chitty as a Loan Product.
Cost of Chitty :- [Loan V/s Chitty]
i) Chitty Rs 2000 X 50 months = Rs 100000
ii) If the chitty is auctioned at maximum rate the cost is Rs 30000
for 50 months.
Hence, annualized cost is = 30000/50*12=7200 = 7. 2 %
iii) If there is an auction discount of Rs 6000 accrued for the entire
course of chitty .
Net cost of chitty is = Rs 30000 - 6000 = 24000
Hence annualized cost /year = 24000/50000*12 = 5.76 %.
iv) Cost of funds will further come down, if duration of chitty is
higher at 60 to 100 months duration. Hence, for long term borrowings
chitty is most attractive/preferred source/route.
FINANCIAL AND INVESTMENT PLANNING THROUGH KSFE
$Chitty can be used as
a best medium of savings for all types of individuals, traders,
business class, self- employed persons, etc and any desired asset/portfolio
can be created within the duration of the chitty.
$ Chitty can be best used as a low-cost source of fund by
all individuals, compared to any other source of funds/ loans in
the debt market.
$ All future financial requirements / objectives can easily
be planned and met through chitty.
$ Traders can use chit funds as the cheapest cost of funds
for commercial use and net outflow in chitty is a deductible business
expenditure as per Indian tax laws.
$ Chitty can be used as a medium of investment. The prize
money can be utilized for other investment/productive purposes.
$ Effect of inflation will be almost zero in chitty as the
corpus of the chitty is received back well before the termination
date of the chitty compared to any other banking/financial products.
$ Tenure/duration and denomination is flexible in chitty
$ Enrollment in chitty of appropriate duration / time span
ensures fulfilling each of the future financial needs/objective
such as House Construction / acquiring immovable properties, vehicles,
furniture, house-hold equipments, foreign tours, marriage of daughters,
children's education, retirement planning, hospitalization/treatment
$ Tax planning can be made through chitty.
*The calculations shown in this sheet are based on situations
usually observed in the conduct of KSFE chitties.
There can be variations under actual circumstances.