periodic payments. One analysis of data from two chit fund companies found that 35% of subscribers have defaulted at least once during their tenure at one of the companies and 24% of them have defaulted after winning an auction for the pot. Chit fund companies can sue defaulters in court but the procedure is time-consuming and is unlikely to produce a timely settlement. It's up to the chit fund organizers to vet the credit-worthiness of subscribers. To reduce the risk of default, some organizers also require subscribers who win auctions to submit sureties for their future liabilities. Since chit fund payments are not insured by the government, the system is a riskier method of saving than using a bank savings account. Legal framework Organised chit fund schemes are required to register with the Registrar of Firms, Societies and Chits. A chit fund company is a company that manages, conducts, or supervises such a chit fund, as defined in Section of the Chit Funds Act, 1982. According to Section 2(b) of the Chit Funds Act, 1982: "Chit means a transaction whether called chit, chit fund, chitty, kuree or by any other name by or under which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical installments over a definite period and that each such subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be specified in the chit agreement, be entitled to the prize amount". Though they are not required to be registered under the RBI Act, chit funds are regulated as Miscellaneous Non-Banking Companies (MNBCs). Their activities relating to soliciting deposits are governed by the Non-Banking Financial Companies and Miscellaneous Non-Banking Companies (Advertisement) Rules (1977) framed by the Government of India under Section 58A of the Companies Act 1956. The following laws govern chit funds: Union Government - Chit Fund Act, 1982 (except the State of Jammu and Kashmir) Kerala: Kerala Chit Fund Rules 2012 & Amendment 2016 Tamil Nadu: Tamil Nadu Chit Funds Act, 1961 Karnataka: The Chit Funds (Karnataka) Rules, 1983 Andhra Pradesh: The Andhra Pradesh Chit Funds Act, 1971 New Delhi: The Chit Funds Act, 1982 and Delhi Chit Funds Rules, 2007 Maharashtra: Maharashtra Chit Fund Act 1975