Until 1969, Chit business in Kerala was under Private Monopoly. Since its very inception, the business of ‘chit’ had been wide-open to an eclectic variety of mismanagements and corruption. The needy and the downtrodden were exploited by the private chit firms. Lack of Government control left open many opportunities for new competitors in this beneficial field of business. The Government wanted to introduce some restrictions on the rampant growth of such Chit institutions and to protect the interests of the subscribers and to channelize the savings for productive purposes. Furthermore, the State intervention would also cease the concentration of wealth and power among a few. Besides, if the State participated in Chit business directly, the profit generated would flow back the public in the form of utility services.
In 1967 the then EMS Ministry took a policy decision to the effect that Chitties should be conducted under state auspices as a means for the collection of small savings. The then Finance Minister, PK Kunju in his budget speech for the financial year 1967-68 made the following announcement on the floor of the Kerala Assembly, “I view this decision as a bold step forward along the path towards socialism, aimed at bringing banks and other financial institutions under social control.”
The Government of Kerala in 1967 appointed a Special Officer, to look into the possibility and desirability of starting Chit Funds in the public sector and also to prepare an all-inclusive scheme for starting Chits under government control. The Special Officer, presented his Report on 7th October 1967, he strongly vouched for the entry of the Government into the field of Chits. As a result, the Government decided to organize a public sector undertaking with the name “The Kerala State Financial Enterprises Ltd” (KSFE) for the purpose of conducting Chits, hire purchase and insurance business under the control of the Government. Apart from this, the Government of Kerala had a progressive vision for generating non-revenue income through such public sector ventures. Thus, KSFE Ltd. was incorporated as a Government Company on 6th November 1969 with its Head Office at Trichur with the objective of serving as a discipline factor to private Chit Funds”. The first Board of Directors was constituted as per G.O. (Rt.) 4876/69/Fin dated 26th November 1969.
KSFE is a Miscellaneous Non-Banking Company fully owned by the Government of Kerala. KSFE has the unique status of being the only public sector undertaking in India, which runs Chits and also one of the few profit-making companies owned by the Government of Kerala. KSFE pays to the Government of Kerala crores of rupees every year by way of – Guarantee Commission, Service Charges, and Dividend. Over the years, until the end of 2016, an amount of Rs.706 Crores has been paid by KSFE to the Government on the above head of accounts. Therefore, financially and service wise, KSFE contributes immensely towards the Kerala economy.