Difference between CBSE & ICSE

Full form CBSE – ICSE

CBSE – Central Board Of Secondary Education

ICSE- Indian Certificate of Secondary Education

Advantages of CBSE

CBSE is more popular in India as compare to ICSE

CBSE being older more schools follows CBSE pattern syllabus and education methods. That is why CBSE pattern is more popular. This will help you to find a school for your kid in case you are switching to new city in India. If you want to travel abroad then you will find more CBSE pattern schools outside India than ICSE schools. CBSE is recognized by Indian government and ICSE is not. Popularity of ICSE is growing day by day though.

• CBSE is recommended for parents who have to move in different cities in India as part of their job profile. CBSE has more schools in India their children will not face any issue while switching schools.
• ICSE is recommended for parents who have to move in different countries as part of their job. ICSE is more compatible to the world as compare to CBSE. ICSE child will face less difficulty which changing his school internationally.

CBSE has less syllabus volume as compare to ICSE

Some students may find ICSE syllabus vast as ICSE have more syllabus and subjects. Sixth grade ICSE student will face 12-13 subject examinations while CBSE student will face on 5-6 subject examinations.

CBSE board helps more in engineering and medical field

CBSE is more focuses on maths and science. This helps students for engineering and medical entrance exams. Prior CBSE experience will be always helpful for students doing their medical and engineering.

CBSE has more Scholarships and talent search exams

ICSE being newer has got less numbers of scholarship exams. CBSE has lot of talent search examinations for the students. All major competitive examination in India are based on the CBSE syllabus. (IIT-JEE – Indian Institute Of Technology Joint Entrance Examination, AIEEE – All India Engineering Entrance Examination, AIPMT – All India Pre Medical Test).

Advantages of ICSE

ICSE has more balanced Syllabus for child’s overall growth

CBSE syllabus is easier as compare to ICSE. CBSE syllabus is focus more on Science and Maths. On the other hand syllabus followed by the ICSE board is more comprehensive and complete, which gives all fields with equal importance. (like – science, maths, language, arts, home science, agriculture, fashion design,cookery). By choosing ICSE you are giving opportunity for your child to work on his overall growth.

ICSE prefers to give more practical knowledge and teach better analytical skills

Compare to CBSE, ICSE is more towards giving practical knowledge to the students. They taught their syllabus theoretical a well as practical. This gives students effective understanding of subject and learn better analytical skills.

In ICSE student has more Subjects Flexibility

ICSE is having advantage here. Students in ICSE can choose different subjects. They could select vocational courses as per their interest. In CBSE students have to follow more pure academic subjects.

ICSE prefers more student Assessments

In ICSE (internal) assessments are very important. More practical tests are conducted with all the subjects and scores. ICSE gives more preference to lab work it is more practical oriented.

ICSE board helps more on management carriers

The way ICSE syllabus, its subjects and teaching methodology is designed it will be more helpful for students who wants to pursue their carriers in management streams.

ICSE certificate will be recognised around the world

Certificate given by ICSE to the students will be recognized more around the world as compare to CBSE. Overall syllabus (like languages) of ICSE will give slight upper hand in english to their students. This will help them some exams which are based on english.

Common factors between CBSE and ICSE

• CBSE and ICSE both recognised by colleges in India.
• Subjects taught in ICSE and CBSE are almost same.
• Quality of education provided by both boards is excellent.

CBSE and ICSE both follows learn through experience teaching method

CBSE & ICSE both education patterns follows way of learning through experience. To follow methods defined in respective pattern is always depend on school and teacher.This can be vary from school to school.

What parents should do

Both these boards CBSE and ICSE have their own advantages and disadvantages. Parents have to choose the board for their children based up on what future you aspires for your child.

Parents always have concern with quality of education. You should identify the best school for your child who will give him quality education. Which means for you selecting right school should be on priority instead of selecting right board for your child.

What is an IGCSE?

The International General Certificate of Secondary Education (IGCSE) is a globally recognised qualification, taken at the Class 10 level, similar to the Class 10 examinations of the CBSE and ICSE or the middle years Programme of the IB. IGCSE, formed in 1988, is a comprehensive two-year programme, spread over Class 9 and 10, and leads to the final examinations offered every year in May and November.IGCSE assessment is conducted by two UK assessment bodies: Edexcel (also known as London [ Images ] Examinations) and Cambridge International Examinations (CIE) (see below). A student who has passed IGCSE is eligible for any +2 level qualification, like Class 12 CBSE/ ICSE or any international pre-university programme, like the IB Diploma, Advanced Placement Diploma (US), and A/AS Level & AICE (UK).

How does the IGCSE compare to other programmes like CBSE, ICSE or the Middle Years Programme of the IB?

Like other modern programmes, IGCSE offers a wider range of subjects and encourages high academic standards through a practical approach to teaching and learning. Assessment is not limited to conventional written papers and they consist of a variety of tests e.g. oral and listening tests. The assessment is aimed at a wide ability range of students, with an eight-point grading scale, from A+ to G, with A+ being the highest. IGCSE is a balanced curriculum and a flexible course of study. Most subjects offer a choice between core curriculum and extended curriculum. This gives students of all ability levels the freedom to choose subjects that are right for them and, thereby, the opportunity to score good grades. The core curriculum is an overview of the subject and is suitable for students who are expected to achieve grades C to G. The extended curriculum is, sort of, a specialisation in that subject.


It is more challenging and designed for students who are expected to achieve grades A+ to C. While the syllabi and curricula of both IB MYP and IGCSE have an international outlook, IGCSE appears to be slightly better, in that it is tailored for a more multi-cultural and more multi-lingual audience. Does the IGCSE start only in Class 9? What about the primary years? Can a student do IGCSE after completing his/ her earlier schooling through a different board? Currently, IGCSE is a two-year programme starting at the Class 9 level. A student who has done his/ her early schooling from any other board can join the IGCSE programme at the Class 9 level. CIE has declared the launch of its new Cambridge International Primary Programme in June this year. The introduction of this programme means students will be able to study the IGCSE from age five through age18.

What are the subjects in the IGCSE curriculum?

There are five Subject Groups in IGCSE with several subjects to choose from, in each group:

Group 1: Languages (First Language, Second Language, Foreign Language, etc)
Group 2: Humanities and Social Sciences (Geography, English Literature, History, etc)
Group 3: Sciences (Biology, Chemistry, Physics, etc)
Group 4: Mathematics (Mathematics, Additional Mathematics, etc)
Group 5: Creative, Technical & Vocational (Accounting, Business Studies, Computer Studies, Music, etc)

For each subject, the certificate merely indicates the grades scored, and not pass or fail. Five scores of 'C' or higher indicates a students readiness to pursue +2 level qualifications, like the Class 12 CBSE, IB Diploma, Advanced Placement Diploma (US), etc.

What is the International Certificate of Education (ICE) that is awarded to some IGCSE students?

The ICE is more prestigious than the standard IGCSE. Instead of the five papers needed to obtain the IGCSE, if a student attempts and passes seven or more papers, s/he is awarded the ICE. The seven subjects must be as follows: Two subjects from the language group One from each of the other four groups One more from any of the five groups

Why should I select IGCSE for my child?

1. IGCSE is one of the most sought-after and recognised qualifications in the world. It develops and encourages vital educational skills, including oral skills, investigative skills, problem solving, team work, recall of knowledge, and initiative.

2. The IGCSE programme has worldwide status and credibility. In India [ Images ], the course is delivered in over 130 schools with the number expected to touch 600 by 2008. It is recognised by the Association of Indian Universities (AIU) as being at par with CBSE, ICSE, etc. Worldwide, it is delivered in schools in over 140 countries and is recognised by colleges and universities everywhere, more so in the UK and other Commonwealth countries.

3. The IGCSE curriculum is balanced and lends an international perspective to studies. It also takes account of differing abilities of students. 

4. IGCSE students can take advantage of the Cambridge Checkpoint, a diagnostic service comprising of standardised tests, that pin-points a student's strengths and weaknesses in key curriculum areas. What are Edexcel and CIE? Edexcel is the UK's largest academic qualifications awarding body. It was formed in 1996 by the merger of two well-respected bodies, BTEC (the Business & Technology Education Council), and ULEAC (the University of London Examinations and Assessment Council). In 2003, Edexcel merged with the education giant, Pearson PLC, to set up a new company called Edexcel Limited, which is 75% owned by Pearson and 25% by the Edexcel Foundation. CIE is the international division of University of Cambridge Local Examinations Syndicate (UCLES). UCLES is another UK-based academic qualifications awarding body, known for its professional, rigorous and high standard assessments. UCLES is a department of the University of Cambridge, which was formed in the year 1207, and is one of the oldest and most reputed universities in the world.

What is a Cambridge International Centre? What is an Edexcel Centre or a London Examinations Centre?

 Schools that are accredited to Edexcel or CIE for the conduct of the IGCSE programme are known as Edexcel Centres or Cambridge International Centres. From parents' or students' perspective, there is little difference between the two. Some schools are accredited to Edexcel and some to CIE. For example, DPS International in Delhi [ Images ] is an Edexcel IGCSE centre, while the Pathways World School in Gurgaon is a CIE IGCSE centre. Then there are some like Calcutta International School in Kolkata [ Images ] and British School in Delhi, which are centres of both Edexcel and CIE. More than the assessment body, parents need to think about which school is better for their child.

* source rediff.com

Chit funds

These are challenging times for chit fund operators. A scam involving the Saradha group allegedly conning customers under the guise of a chit fund, has raised serious questions for the industry. With a reported 10,000 chit funds in the country handling over Rs 30,000 crore annually, chit fund proponents maintain that these funds are an important financial tool. The scam has also sparked responses from both the centre and states: the Finance Ministry, Ministry of Corporate Affairs and SEBI have all promised to act and the West Bengal Assembly has passed The West Bengal Protection of Interest of Depositors in Financial Establishments Bill, 2013, with Odisha and Haryana considering similar legislation.

What is a chit fund?

A chit fund is a type of saving scheme where a specified number of subscribers contribute payments in instalment over a defined period.  Each subscriber is entitled to a prize amount determined by lot, auction or tender depending on the nature of the chit fund.   Typically the prize amount is the entire pool of contribution minus a discount which is redistributed to subscribers as a dividend.

For example, consider an auction-type chit fund with 50 subscribers contributing Rs 100 every month. The monthly pool is Rs 5,000 and this is auctioned out every month.  The winning bid, say Rs 1000, would be the discount and be distributed among the subscribers. The winning bidder would then receive Rs 4,000 (Rs 5,000 – 1,000) while the rest of subscribers would receive Rs 20 (1000/50).  Winners cannot enter the auction again and will be liable for the monthly subscription as the process is repeated for the duration of the scheme.  The company managing the chit fund (foreman) would retain a commission from the prize amount every month.  Collectively, the subscribers to a chit fund are referred to as a chit group and a chit fund company may run many such groups.

What are the laws governing chit funds?

Classifying them as contracts, the Supreme Court has read chit funds as being part of the Concurrent List of the Indian Constitution; hence both the centre and state can frame legislation regarding chit funds.  States like Tamil Nadu, Andhra Pradesh and Kerala had enacted legislation (e.g The Kerala Chitties Act, 1975 and The Tamil Nadu Chit Funds Act, 1961) for regulating chit funds.

Chit Funds Act, 1982

In 1982, the Ministry of Finance enacted the Chit Funds Act to regulate the sector.  Under the Act, the central government can choose to notify the Act in different states on different dates; if the Act is notified in a state, then the state act would be repealed[i].  States are responsible for notifying rules and have the power to exempt certain chit funds from the provisions of the Act.  Last year the central government, notified the Act in Arunachal Pradesh, Gujarat, Haryana, Kerala and Nagaland.

Under the Act, all chit funds require previous sanction from the state government.  The capital requirement for establishing chit funds is Rs 1 lakh and at least 10% of profits should be transferred to a reserve fund.  The amount of discount (i.e. the bid) is capped at 40% of the total chit fund value.    States may appoint a Registrar who would be responsible for regulation, inspection and dispute settlement in the sector. Any grievances over decisions made by the Registrar can be subject to appeals directed to the state government. Chit fund managers are required to deposit the entire value of the chit fund (can be done in 50% cash and 50% bank guarantee) with the Registrar for the duration of the chit cycle.

Prize Chits and Money Circulation Schemes (Banning) Act, 1978

The Prize Chits and Money Circulation Schemes (Banning) Act, 1978 defines and prohibits any illegal chit fund schemes (e.g. schemes where auction winners are not liable to future payments).  Again, the responsibility for enforcing the provisions of this Act lies with the state government. Reports suggest that the government is discussing amendments to this Bill in the wake of the chit fund scam.

West Bengal Protection of Interest of Depositors in Financial Establishments Bill, 2013

Last month the West Bengal Assembly passed the West Bengal Protection of Interest of Depositors in Financial Establishments Bill, 2013. This was a direct response to the chit fund scam in West Bengal. While not regulating chit funds directly, the Act regulates and restricts financial establishments to curb any unscrupulous activity with regards to deposits.  Chit funds are specifically included under the definition of deposits. The state government will appoint a competent authority to conduct investigations.

What is the role of RBI and SEBI?

The Reserve Bank of India (RBI) is the regulator for banks and other non banking financial companies (NBFCs) but does not regulate the chit fund business. While chit funds accept deposits, the term ‘deposit’ as defined under the Reserve Bank of India Act, 1934 does not include subscriptions to chits. However the RBI can provide guidance to state governments on regulatory aspects like creating rules or exempting certain chit funds.

As the regulator of the securities market, SEBI regulates collective investment schemes.  But the SEBI Act, 1992 specifically excludes chit funds from their definition of collective investment schemes. In the recent case with Sarada Group, the SEBI investigation discovered that Sarada were, in effect, operating a collective investment scheme without SEBI’s approval.

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[i] The central act repeals the Andhra Pradesh Chit Funds Act, 1971; the Kerala Chitties Act, 1975, the Maharashtra Chit Funds Act, 1974’, the Tamil Nadu Chit Funds Act, 1961 (applicable in Chandiragh and Delhi), the Uttar Pradesh Chit Funds Act, 1975,  Goa, Daman and Diu Chit Funds Act, 1973 and Pondicheery Funds Act, 1966.

Chit Funds In India

There is nothing wrong with chit funds per se; if chosen with care, they can be a good place to park your funds

Chit funds, a savings avenue that is as popular with housewives as it is with businessmen, have earned a bad name. The reason is the scores of scams in the name of chit funds, the latest being allegedly perpetrated by the Saradha Group in West Bengal.

Promoters put up a stern defence and say chit funds are the only financial product that gives people the option to both save and borrow, and the scams are giving them a reputation that is undeserved.

For instance, the Saradha Group fraud was perpetrated through a Ponzi scheme , though the group had named it chit fund to avoid scrutiny. In a Ponzi scheme, money from new investors is used to pay the old investors.

India has nearly 10,000 registered chit fund companies, the largest one being run by the Kerala government which has been in existence since 1969. Financial advisers also say that chit funds can be a good investment, provided the promoters follow the strict rules that have been laid down for them.

HOW CHIT FUNDS WORK

The investor pays an amount at specific intervals, usually a month, up to a fixed period. The money goes into a common fund. The amount collected is given to one person, usually selected in a lucky draw.

There is also the auction system for allotment in which the person who gets the money is selected on the basis of the lowest bid (he agrees to claim the least amount among the bidders). The difference between that and the full amount due is distributed among the other members. However, even after this, the winner has to continue investing.

Chit fund is a good savings instrument for small investors. It can be a reliable source of funds in an emergency.

ADHIL SHETTY

CEO, bankbazaar.com

One can also claim the amount without a draw through reverse auctioning. In this, subscribers come together for the auction. For instance, under the Kerala Chit Fund Act, the minimum prize money is 70% of the gross amount. Let's assume that the gross sum assured is Rs 50,000; 70% of it comes to Rs 35,000. If more than one person is willing to take this minimum sum, lots are conducted to select the winner. If no one is willing to take the minimum sum, a reverse auction is conducted, where subscribers bid for lower amounts; they start from Rs 50,000, Rs 49,000, Rs 48,000, and so on. The person bidding the lowest sum gets the money. Whatever money is accrued by way of discount is passed on to the remaining members after deducting the fee of promoters. There is no promoter fee in unregistered chit funds.

FUND MATHS

In chit funds, the number of instalments (months) is equal to the number of members. 

Let's assume that 10 people decide to invest Rs 2,000 for 10 months. So, every month, the collection is Rs 20,000 (Rs 2000 x 10 members). Now, let's say two members are willing to bid for getting this amount in a given month. Mr A agrees to accept Rs 17,000 while Mr B bids for Rs 16,000. This means Mr A is willing to take a cut of Rs 3,000 while Mr B is agreeing to a Rs 4,000 discount (he, of course, will win the bid). If both bid the same amount, the winner will be selected in a lottery.

If the promoter charges Rs 1,000 for his services, Mr B can take Rs 15,000 (Rs 16,000 minus the organiser fee of Rs 1,000). The remaining Rs 4,000 (Rs 20,000-Rs 16,000) will be distributed among the members. The winner cannot bid the next time.

RISK INVOLVED

The biggest risk is misuse of pooled funds by promoters. The other is default by subscribers, affecting the promised fund distribution.

Various state and central laws regulate chit funds. The centre has the Chit Funds Act 1982. Remember that these laws govern only the registered chit funds. There is no redress if you fall prey to a fund that is not regulated.

"It is not advisable to invest in unregistered chit funds. Further, one should not put money in a chit fund whose other members are unknown to you. The key is investing in the right fund," says Adhil Shetty, chief executive officer, bankbazaar.com.

Hiren Dhakan, associate fund manager, Bonanza Portfolio, says, "The other risks are default by the promoter or if the promoter is running a Ponzi scheme in the garb of chit fund. One must invest only in chit funds which are well-known or managed by known promoters."

MONEY CIRCULATION

10,000
IS THE APPROXIMATE NUMBER OF REGISTERED CHIT FUNDS IN THE COUNTRY.

Organised chit fund schemes are required to register with the Registrar or Firms, Societies and Chits. Unlike in money circulation schemes, the subscription amount, tenor and drawable limit are fixed in chit funds. There are no incentives for subscribers to bring in more people to the scheme.

"Money circulation schemes work via a referral system, paving the way for frauds and schemes which cannot sustain themselves in the long run," says Shetty of bankbazaar.com.

SHOULD YOU INVEST?

It is not possible to calculate the exact returns as they depend upon the level of urgency of members (which decides the discount that they bid for and so the amount that will be distributed among the other members), which is highly variable. 

"A chit fund is a good savings instrument for small investors and brings discipline in investments. It can be a reliable source of funds in an emergency. As chit funds are essentially not investment products, you must consider investing only if you see a need for funds in the near future that you may not be able to get from your bank," says Shetty.

Praveen PA, vice president-NBFC, JRG Fincorp, seconds Shetty. "It is a good product, especially where comparable institutional savings and loan products are not available. However, the credibility and creditworthiness of the company and its promoters should be a key consideration. One may opt for state-run chit companies and go with firms with a long record and financially sound promoters," he says.

How Chit Funds Works

What are Chit funds and how do Chit funds work ? There are lots of chit funds in india like shriram chit funds , margadarsi chit funds and I would like to show you how chit funds exactly work and what are pros and cons in Chit funds. Over the past many years there has been large scale frauds and scams done by large chit fund companies. However, a lot of people do not understand the working and wonder how chit fund works.

What are Chit Funds & How they work !

Let’s say there are 20 people who come together and form a group. Each one will contribute Rs 1,000 per month and this will continue for next 20 months (equal to number of people in the group). In this group there will be one organiser, who will take the pain of fixing the meetings, collecting money from each other and then doing other procedures.

So each month all these 20 people will meet on a particular day and deposit Rs 1,000 each. That will make a total of Rs 20,000 every month. Now there will be a bid on who will take this money. Naturally there will be few people who are in need of big amount because of some reason like some big expenses, liquidity crunch, business problem, Beti ki Shaadi etc etc … Out of all the people who are in need of money, someone will bid the lowest amount, depending on how desperate he is for this money. The person who bids for lowest amount wins. Suppose out of total 3 people who bid for 18,000, 17,000 and Rs 16,000, the one who bids the lowest will win. In this case it’s the person who has bid Rs 16,000.

There will also be “organiser charges” which are around 5% (standard) of the total amount, so in this case its 5% of Rs 20,000 , which is Rs 1,000. So out of the total 16,000 which this winner was going to get, Rs 1,000 will be deducted and the winner will get only Rs 15,000, Rs 1,000 will be organiser charges and Rs 4,000 is the profit, which will be shared by each and every member (all 20 people), it comes out to be Rs 200 per person, and it will be given back to all 20 members. So here you can see that the main winner took a big loss because of his desperate need of getting the money and others benefitted by it. So each person actually paid just 800, not 1,000 in this case (they got 200 back). Note that when a person takes the money after bidding, he can’t bid from next time, only 19 people will be eligible for bidding.

Now next month the same thing happens and suppose the best bid was Rs 18,000 , then winner will get 17,000 (after deducting the organiser fees) and the rest 2,000 will be divided back to people (Rs 100 each) . So each person is paying effectively Rs 900. This way each month all the people contribute the money, someone takes the money by bidding lowest, organiser gets his charges and the rest money is divided back to members. You will realise that the person who takes the money at the end will get all the money except organiser fee, as there is no one else to bid now. So the person will get around Rs 19,000 in the end, if you try to find out the returns which he got out of the whole deal, it will depend on two things, how much lower bids were each month and the fees paid to organiser, if bids and charges are very low, then a person will make more money at the cost of other situations.

So this is pretty much how a chit fund works, there are various versions of chit funds and how they work , but the idea was to communicate the basic model and how it works.

Trusted and untrusted Chit Funds & Some experience

A big question which is in every one mind is “Should I invest in Chit funds?“. Chit funds are not some investment products in which someone invests! By design you can see that it’s only a support structure for needy people who are unsure of their cash flows or some big expenses coming on the way. It’s only for those who can’t get loans from banks or some lender. In which case chit funds provide that structure where one can take the benefit of it. But beware!  Whenever someone says “Chit funds”, the only thing which comes to the remind is “Fraud”, “Scam” and “Something Fishy” and its true to great extent as there many chit fund companies which come in market and run with the money. The only condition where I feel one can go for it is if all the participants of the chit fund are known to each other properly and there is high level of trust between them. For example, you can do it with your colleagues at office whom you trust and are friends with for long. But if you dont have liquidity issue and can get loan from a bank, then I dont see any need of doing this.

Good experience

In smaller cities, you can see your father, grandfather and even many housewives form these groups with friends with whom they are from last many years. A lot of people on this blog might have experienced how their father used these networks to get huge cash at the time of need. One of the readers Jagadees shared his experience with me on mail

The great advantage for the village people would be availability of immediate funds in the times urgent need. My father would say that he met all his life obligations like his sister’s marriage, his marriage expenses, my grandpa’s medical emergencies, our education expenses were met solely through this type of monthly chit fund investment.

Bad experience

Greed has no limit. What was created for help to each other under a trusted network is now converted as a business and many people have started opening Chit fund shops where they become the main organiser and pocket the organiser fee. Investors have started looking at these chit fund companies from investments point of view and in greed of high returns, they invest their hard earned money with these chit fund companies and at times there are frauds and scams. Chit fund companies are regulated in most of the states by Central Chit Funds act,1982 and they come under the purview of state governements. RBI has no role in regulating them. But still you know how easy it is to do frauds and scams in India (don’t forget commonwealth & 2G and 3G and 4G scams, wah !  I am futuristic). Let me share with you a horrible experience how an old man lost his 40 yrs of earning in chit fund

My father-in-law when he retired, without telling any of us he put all his money in a chit fund. nobody knows how much & in which chit fund he deposited. That was the time when a series of chit funds went bust in chennai. Pity the chit fund in which he deposited also went bust. he had a mild heart attack. The pain he underwent other than the heart attack was terrible. He was in an ordinary job & after 40 years of hard work he had earned that money.

More than the loss of the money, it’s the shame, foolishness and the iyalaamai to take any action by us, the government kills.we supported him, but he wanted to be independent even after retirement. that objective was defeated by his shear foolishness. none of us ever asked him anything about it. but every day he must have been repenting for that . (via)

Easy & MicroFinance Tool

Can you believe that as high as 5-10% families are associated with chit funds in South India ? For example – The share of households participating in Chit Funds increased by 9% in Andhra Pradesh, 89% in Delhi, 15% in Tamil Nadu and 4% in Kerala between 2003 and 2006. You can see below graph that shows Kerala having 9%+ penetration in Chit funds which means 1 out of every 10 family is in some chit fund.

Source : IFMR research

As per a report from IFMR on Chit Funds , most of the people in smaller places are attracted to chit funds, because of easy availability of easy credit and simplicity of chit funds. In small places banks are not much interested in lending to poor people and poor people see chit funds as perfect way of getting a loan, though at a high cost. So you can also look at them as microfinance tools. All of south India and Delhi is deeply flooded with chit fund companies (thousands of them) and its reach is much above what you are thinking right now.

Should you invest ?

Overall, chit funds are not recommended unless it’s a person group formed by friends and relatives whom you trust a lot. I don’t think one should put money with chit funds which are not among their social circle. It might make sense for people in smaller cities to look up to them. As the last note, these chit funds are not investment vehicles where you park your hard earned money, So please avoid them unless you want to exactly take that kind of risk.

Please share your personal experiences about chit funds , I am sure all the readers who are from smaller places , they have seen it and for sure there father or grandfather had used chit funds at some point of time to fund a financial goal  .

Chit funds or cheat funds?

  

There are innumerable instances of unregistered chit operators duping investors but registered operators are considered to be safe. File Photo

Legal chit funds safer but many risk the illegal route. In other words, they are sitting on a powder keg

Every once in a way, the media reports about unregistered chit fund operators fleeing with crores of rupees belonging to gullible investors. But that does not seem to deter people who continue on the same path of risky investment.

In Bangalore, there are 193 registered chit fund operations under the Chit Funds Act 1982, with a turnover of about Rs. 4,000 crore per annum. However, the number of unregistered chit operators is estimated to be at least 100 times that. In other words, investors are sitting on a powder keg that can blow up any time.

What is a chit fund?

Chit fund is a traditional financial scheme carried out based on trust between operators and members, which prevailed even before formal banking began. Unregistered chit funds, whose chit value exceeds Rs. 100, are illegal in India.

Why do people risk dealing with unregistered operators? There are three main reasons: there is no need for any document to participate in chit fund schemes, unlike in the case of registered companies; flexibility in borrowing, and an easy way to invest unaccounted for money.

And how do unregistered chit operators flourish despite cases of cheating against many of them? The main reasons are: non-implementation of preventive measures as prescribed in the Chit Funds Act to prosecute unregistered chit operators; lack of stringent provisions in law to check their operations and third, many unregistered operators adopt dubious methodology to ensure that their schemes are slightly different from the chit fund scheme as defined in the Act, to avoid registration.

Overregulation and the multilayered procedures to get a chit fund registered under the Act also are a deterrent for people to go the legal way.

Relatively safe

While there are innumerable instances of unregistered chit operators duping investors, there has been no such instance involving a registered chit fund operator in Bangalore in the recent times.

Both Karnataka Chitsters’ Association president B. Shivalingappa and Registrar of Cooperative Societies and Chits N.S. Chinnappa point out that except for minor cases of non-payment of the instalment by a member and delay in payment of the chit fund amount or prize money, there have been no complaints against registered chit fund operators in the State.

The 1982 Act prohibits operators from utilisation or appropriation of the money collected as chit fund subscription, says Mr. Shivalingappa, pointing out that chit fund companies are barred from accepting deposits.

“Chit funds are overregulated but less governed, and regulations on chit funds are more stringent than banking regulations. Simplification of the Act will solve many hurdles and prevent people from being attracted towards unregistered chit fund operators,” says T.S. Sivaramakrishnan, general secretary of All Indian Association of Chit Funds, while pointing out that Saradha Group of West Bengal, which is still making news following the collapse of its ponzi scheme, was not registered to operate chit funds.

Why they are popular

Shivakumar, an advocate, says that less stringent documentation and easy investment of unaccounted for money drive people towards unregistered chit fund operators. Penal provisions for operating an unregistered chit fund are too soft. They should be changed to ensure longer imprisonment with higher penalty amount of at least Rs. 5 lakh from the Rs. 5,000 now, he said and added that that the Registrar of Chits has, perhaps, never used his power to raid an illegally operated chit fund firm/operator in Bangalore.

‘Vehicle for the poor’

A study by the Institute for Financial Management and Research, Chennai, found that 96 per cent of chit fund members surveyed had commented that participation in registered chit fund operations as “safe”.

“The results from this study underscore the importance of chit funds as a savings and borrowing vehicle for the poor and lower income households in India. The data we collected from the Chit Fund Registrars of Andhra Pradesh, Tamil Nadu, Karnataka, Kerala and Delhi for the first time allows us to estimate the size of the registered chit fund industry. We find that the total amount of capital lent per year through registered chit funds is between 10 per cent and 50 per cent of all priority-sector lending which is extended by regular banks in these same States,” stated the IFMR report.

The study pointed out that though chit funds are an important source of finance for small businesses and low-income households, there has been a general exodus of low value chit fund schemes from the registered chit fund market. “This is mainly because registered chit funds find it less lucrative to serve the poor due to the increased cost of operating such schemes imposed by the regulators. Most registered chit funds have moved away from smaller chit fund schemes and mainly offer large schemes. These developments make it very difficult for the poor to participate in chit fund schemes and often leave them without any institutional savings options,” said the report
.

Why India changed law on foreign donations

The Union Cabinet has approved a draft Bill seeking replacement of the Foreign Contributions Regulation Act, 1976 (FCRA).

Foreign contributions and donations to scores of Indian voluntary organisations, religious groups and charitable institutions every year touch nearly Rs 5,000 crore (Rs 50 billion).

What are the laws that govern foreign donations? Which are the Indian non-governmental organisations that receive the biggest chunk of foreign donations? Why is the government replacing the FCRA?

rediff.com finds out:

What is FCRA?

The provisions of the Foreign Contribution (Regulation) Act, 1976 regulate the receipt of foreign donations in India. The Foreign Contribution (Regulation) Rules, 1976 contain the various forms prescribed for this purpose. According to the rules, only an association having a definite cultural, economic, educational, religious or social programme -- after it obtains the prior permission of the Central government -- can receive foreign contribution.

What has prompted the government to propose a new law in place of the FCRA?

Loopholes in the nearly 30-year-old law. The ministry of home affairs says that scores of NGOs, religious groups and charitable agencies are receiving foreign funds for humanitarian purposes in India. But some of them are allegedly diverting funds for profit-making enterprises.

The government says that the new legislation to replace the existing FCRA, 1976 will facilitate inflow of foreign contribution for genuine activities without compromising concerns over national security.

Has the government banned any NGO from receiving foreign funds?

Yes, in June 2005, the government banned nine organisations from receiving foreign donations saying that there are serious gaps in their audit reports.

What are the salient features in the proposed new FCRA rules?

The main feature of the amendments is the decentralisation of the administrative structure. There will be four or five regional offices in place of the existing Central office located at New Delhi.

These offices will help associations located at different parts of the country easy access to the department for registration and other purposes. These associations need not depend on the special consultants who charge hefty fee for such services.

What are the other key amendments to the law?

The amendment proposed allows voluntary groups and associations to open multiple bank accounts to disburse the funds received from abroad.

However, they can receive foreign contributions only through the designated bank account. After receiving the funds through that bank, the groups can transfer the money to a number of Imprest bank accounts to meet the requirements of their various projects.

The Imprest system controls small cash disbursements by establishing a fund at a fixed amount and periodically reimbursing the fund by the amount necessary to restore its original cash balance.

What was the main drawback of the existing FCRA?

The present law does not contain any provisions for the de-recognition of an association that violates the provisions of the Act. It simply gives power to the Central government to debar the association from receiving the foreign contributions.

The new enactment contains provisions for de-recognition of defaulting associations.

How much money have Indian voluntary groups and religious organisations received last year from abroad?

Figures with the Ministry of Home Affairs during the year 2003-04 says that as many as 14,700 groups in India have received foreign funds worth Rs 4,856 crore (Rs 48.56 billion).

How many associations are registered under FCRA?

Nearly 30,000. But not all of them receive foreign donations.

Who are the biggest recipients of foreign funds?

The Andhra Pradesh-based Sri Sathya Sai Central Trust is the largest recipient of foreign contributions. The Sathya Sai Trust received Rs 95 crore (Rs 950 million) during 2003-04.

Which is the biggest foreign donor?

World Vision International, a United States-based Christian relief and development organisation, is the biggest donor agency for many Indian voluntary groups.

World Vision released nearly Rs 95 crore for charitable purposes for Indian agencies last year. Other big donors are Foster Parents Plan International, USA and Watch Tower Bible and Tract Society, USA.

So is the US the biggest foreign donor for the Indian NGOs?

Yes. As per the latest available data with the Union home ministry, the US heads the list of donor countries to India with Rs 1,492.62 crore (Rs 14.926 billion), followed by the United Kingdom (Rs 677.59 crore), and Germany (Rs 664.51 crore).

Which are the Indian states that receive the largest foreign donations?

Among the states and Union Territories, Delhi is the leading recipient following by Tamil Nadu, Andhra Pradesh and Kerala.