What is a BC (Bachat Committee) or chit fund, and how does it work?

A rotating savings-and-credit arrangement used across India for generations. This page explains the mechanics, the vocabulary and the risks — neutrally, with a worked example.

The basic idea

A BC — Bachat Committee, also called a committee, chitti or chit fund — is a group of people who agree to contribute a fixed sum every month for a fixed number of months. Each month the collected money (the “pool” or “chit amount”) is handed to one member. Every member receives the pool exactly once during the cycle, so a group of 20 people runs for 20 months.

It is simultaneously a savings plan and a source of a lump sum. A member who takes the pool early is effectively borrowing from the group; a member who waits is effectively saving and earns the discounts given up by earlier takers.

How the monthly bid decides who gets the pool

In a bidding (auction) chit, members who want the money this month state the discount they are willing to accept. The member willing to give up the largest amount wins. That forgone amount is called the loss, discount or bid.

The winner receives the pool minus their discount. The discount is shared among all members, which is why everyone’s installment for that month falls. Some groups instead rotate by lots (a “lucky draw” chit) with no bidding at all.

A worked example

Twenty members, ₹25,000 pool, ₹1,250 nominal monthly installment. In September, one member bids a discount of ₹1,400.

The winner receives ₹25,000 − ₹1,400 = ₹23,600.
The ₹1,400 discount is spread across the members, so the installment for that month works out to roughly (₹25,000 − ₹1,400) ÷ 20 = ₹1,180 each.
Members who never bid, or who bid late in the cycle, pay these reduced installments month after month and still receive the full pool when their turn comes.

Organisers differ in how they round figures and whether they charge a separate commission, so always read your own group’s rules.

The words you will hear

Pool / chit amount — the total handed over each month.
Installment / kist — what each member pays that month.
Loss / discount / bid — the amount the winner gives up.
Sanchalak / foreman / organiser — the person who runs the group, collects money and keeps the record.
Cycle — the full run of the group, usually as many months as members.

Risks and things to check before joining

Default risk. If a member stops paying after taking the pool, the remaining members absorb the gap. Ask how the group handles defaults and whether there is any security.
Organiser risk. Money usually passes through the organiser. Ask to see the written record and how payments are receipted.
Cost of taking the pool early. A large discount is the price of getting cash sooner. Compare it against other borrowing options.
Liquidity. You are committing to pay every month for the whole cycle; exiting mid-way is usually difficult and may cost you.
Legal status. In India, registered chit funds are governed by the Chit Funds Act, 1982 and regulated by state Registrars of Chits. Many neighbourhood committees run informally on trust instead. An informal group is not automatically illegal, but it also carries no statutory protection — know which kind you are joining.

Where BC Manager fits

BC Manager is record-keeping software for organisers and members: it records the monthly bid, recalculates installments, tracks who has paid, shows late fees and keeps a bilingual notice board. It is not a bank, an NBFC or a SEBI-registered product, it does not hold your money, and it does not itself run a chit fund.