The Indian rural market has a great demand for saving schemes like chit funds which offers great alluring opportunities with great returns to the small investors. This paper explains the concept of chit fund in rural areas and the unethical practices by chit fund companies with customer money. To what extend these companies have penetrated in the rural market. The objective of this research is to safeguard the interest of small investors, as the literacy level in rural area is comparatively low and to create awareness among them about the other available options and schemes for small investors which are safer. This paper will also highlight some major issues related Saradha Chit Fund – West Bengal as a base of study. There is a question which needs to be answered that even after many cases of malpractices by these kinds of companies what is the reason behind their existence, expansion and growth in rural India.