Tech Revolution Drives India’s Chit Fund Industry to 20% Annual Growth

Digital Overhaul Propels India’s Chit Fund Sector to 20% Growth

Bengaluru – India’s centuries-old chit fund industry, a cornerstone of the nation’s informal financial system, is undergoing a radical modernization. Driven by the integration of blockchain, mobile payments, and artificial intelligence, the organized sector is witnessing a growth surge of approximately 20% annually, aiming to rebuild trust and expand its reach in the digital era.

The organized chit fund market, comprising about 15,000 registered companies, accounts for an estimated ₹30,000 crore in annual turnover nationwide. However, this figure is dwarfed by the vast unregistered sector, which is projected to circulate a staggering ₹30 lakh crore annually—nearly 100 times the size of its formal counterpart.

Southern States Dominate Market Activity

The market is particularly robust in South India, with Tamil Nadu, Andhra Pradesh, Karnataka, and Kerala collectively contributing to nearly one-third of the industry’s total volume. Karnataka itself generates an approximate annual turnover of ₹6,000 crores. The state-run Kerala State Financial Enterprises (KSFE) exemplifies the scale of participation, achieving a volume of around ₹12,000 crore annually through its chit fund operations.

Technology as the Catalyst for Trust and Transparency

The sector’s rapid growth is fueled by fintech innovations that directly address historical challenges of transparency and operational inefficiency. Key advancements include blockchain for creating tamper-proof ledgers, digital onboarding with E-KYC, seamless transactions via UPI and mobile wallets, and AI-driven systems for fraud detection and regulatory compliance.

“The chit fund sector is now expanding at nearly 20% in recent years, buoyed by technology-driven initiatives,” stated Mr. T.C. Vijayakumar, President of the Karnataka Chitsters Association. “Fintech-driven solutions are modernizing chit fund operations. Mobile-first platforms with vernacular interfaces enable participation from rural and semi-urban users, fostering greater financial inclusion.”

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Summit to Chart the Digital Road Ahead

In response to this transformative shift, the Karnataka Chitsters Association is organizing the ‘All India Chit Funds Summit 2025’ in Bengaluru on September 13. The event will convene top chit fund companies, regulators, and technology experts to discuss strategies for navigating the future and accelerating the adoption of digital frameworks across the industry.

Poised for a Resilient Future

Despite past hurdles, the industry is poised to emerge stronger as digital adoption accelerates. By systematically addressing concerns over transparency and compliance, and by leveraging technology to reach previously untapped demographics, the chit fund sector is repositioning itself as a powerful and trusted driver of financial inclusion in India.