What is the definition of a "Chit Fund"?

A "Chit Fund" is best defined as a group savings scheme with a lucky draw mechanism. In this system, members contribute a certain amount of money at regular intervals, and at each interval, a portion of the total collected amount is given to one of the members through a lucky draw or auction process. This allows participants not only to save collectively but also to access a larger sum of money at different points in time, depending on when they win the draw.

In a Chit Fund, the mechanism is primarily designed for saving and providing liquidity to members rather than for speculation or investment. This stands in contrast to the other options. For example, a high-stakes investment scheme usually involves high risk and does not emphasize collective savings among group members. Similarly, while insurance contracts relate to risk management and payouts upon certain events, they do not involve collective savings or the lucky draw feature. A competitive lottery system focuses on chance-based outcomes without the intent of providing savings for its participants. Thus, the unique saving and collection aspects of the Chit Fund define it clearly as a group savings scheme with a lucky draw mechanism.