**Chit funds come under unorganised credit.**

**Definition of Chit Funds:**
Chit funds are a form of savings and borrowing scheme practiced in India, where a group of individuals come together to contribute a certain amount of money regularly. This collective pool of money is then given to one member of the group as a lump sum, decided through an auction or lottery system. This process continues until all the members of the group have received their turn to receive the lump sum amount.

**Explanation:**
Chit funds fall under the category of unorganised credit because they are not regulated by any formal financial institution or government body. Unlike banks or other formal financial institutions, chit funds operate through informal arrangements and are typically managed by chit fund companies or individuals.

**Characteristics of Unorganised Credit:**

1. **Informal Structure:** Unorganised credit refers to credit transactions that are not regulated or supervised by formal financial institutions. It involves informal arrangements between individuals or small groups.

2. **Lack of Regulation:** Unlike organized credit systems such as banks, chit funds do not have strict regulatory frameworks governing their operations. This lack of regulation can sometimes make chit funds susceptible to fraudulent practices.

3. **Flexible Terms:** Unorganised credit transactions often have more flexible terms compared to organized credit systems. In the case of chit funds, the members of the group can collectively decide on the amount and frequency of contributions, as well as the terms for receiving the lump sum.

4. **Lower Interest Rates:** Chit funds typically offer lower interest rates compared to traditional money lenders or other forms of unorganised credit. This makes them attractive to individuals who may not qualify for loans from formal financial institutions.

5. **Risk and Trust:** Unorganised credit systems like chit funds rely heavily on trust and relationships among the members. Since the funds are managed by the group itself, there is a certain level of risk involved in terms of default or mismanagement.

Given these characteristics, it is clear that chit funds fall under the category of unorganised credit as they operate outside the formal financial system and lack regulation.