Where some of the key Economic Indicators of India stand:
Inflation: 3.65% as on 8th December 2007
GDP growth rate: 8.9% for Q2 2007-08 (10.2% in Q2 2006-07)
Share of investment in GDP: 32.3% in Q2 2007
The savings rate of Indians is one thing that I appreciate the most. It is an indication of how much the Indians are concerned about saving for tomorrow.
A comprehensive view of various economic indicators of India can be found here; courtesy Business Standard.
Thursday, 20 December 2007
Wednesday, 19 December 2007
11th Five Year Plan
The eleventh five year plan of India, for the period 2007 ~ 2012, has been approved for implementation in the National Development Council meeting.
The reports and recommendations for the formulation of the five year plan given by working groups set up by the Planning Commission can be found here; based on which the final plan and budget will be decided.
With the elections round the corner, let’s hope that the suggestions in the plan which are selected for implementation are not meant to coax voters but to augment the economic growth of the nation.
The reports and recommendations for the formulation of the five year plan given by working groups set up by the Planning Commission can be found here; based on which the final plan and budget will be decided.
With the elections round the corner, let’s hope that the suggestions in the plan which are selected for implementation are not meant to coax voters but to augment the economic growth of the nation.
Tuesday, 18 December 2007
Educational Loans become more affordable
Currently, when a student avails an Educational Loan to pursue his/her studies; the interest amount charged during the period of study gets added to the principal amount or he/she can pay the interest amount during the studies. This makes the educational loan repayment a costly business. To ease this burden on students and to prevent brain drain from the country, the Government plans to take over interest on Educational Loans during the period students pursue their education and have not begun earning.
This is available to those students who come from families having an annual income less than 2.5 Lakh. Banks in general deny loans to students from the lower strata on the risk of repayment. With this move, banks will have more assurance on repayment and would give more loans to the needy, as the government is paying the interest amount during the education period which would otherwise get added to the principal, making it huge for repayment, leading to possible defaults. Donno whether it is applicable to online degree programs.
More details here.
This is available to those students who come from families having an annual income less than 2.5 Lakh. Banks in general deny loans to students from the lower strata on the risk of repayment. With this move, banks will have more assurance on repayment and would give more loans to the needy, as the government is paying the interest amount during the education period which would otherwise get added to the principal, making it huge for repayment, leading to possible defaults. Donno whether it is applicable to online degree programs.
More details here.
Tuesday, 11 December 2007
Have a business idea and need funding?
If you have a business idea and require money to start it, attend ‘Start-up Showcase’ during Manfest of IIM Lucknow. To encourage entrepreneurship in India, with other initiatives, IIM Lucknow has also come up with something solid.
You can present your business idea in front of a panel of judges and investors and the winner will secure funding up to 200K dollars. More details here and here.
You can present your business idea in front of a panel of judges and investors and the winner will secure funding up to 200K dollars. More details here and here.
Sunday, 9 December 2007
500% increase in complaints against banks
Reserve Bank of India says the number of customer complaints against banks (public and private) filed with them increased by over 500% in the 12 months between July 2006 and June 2007. The figure stands at 34,499 as compared to 5772 in the 12 months before.
Leading the pack are SBI and ICICI bank and the majority of the complaints are related to credit cards. I guess this is the result of customers becoming more aware about their rights. It also shows the need of huge improvements in the processes followed by banks. A bank official says, “People now complain at the drop of a hat”. But I feel if this was the case then the number of complaints would have seen no end.
Let’s hope that this would make the banks think a bit more about serving their customers in a customer-friendly manner.
Leading the pack are SBI and ICICI bank and the majority of the complaints are related to credit cards. I guess this is the result of customers becoming more aware about their rights. It also shows the need of huge improvements in the processes followed by banks. A bank official says, “People now complain at the drop of a hat”. But I feel if this was the case then the number of complaints would have seen no end.
Let’s hope that this would make the banks think a bit more about serving their customers in a customer-friendly manner.
Thursday, 6 December 2007
Income tax may come down in India
Riding on a buoyant economy and making the most out of it with respect to direct taxes, the revenue department may consider reviewing direct tax rates and structures (income tax slabs) in the coming annual budget. This move comes as an aftermath of a 45% growth rate in direct tax revenues due to tax administration improvements, increase in voluntary compliance etc.
A week back the Finance Minister was seen saying that the Rs. 10,000 increase in tax slabs last year didn’t give much of a relaxation to the tax payers of the country. The ministry will also seek inputs from public, tax experts and industry associations on this. Let’s hope that this welcome move shall come into effect and lower the burden of taxation on the working class.
A week back the Finance Minister was seen saying that the Rs. 10,000 increase in tax slabs last year didn’t give much of a relaxation to the tax payers of the country. The ministry will also seek inputs from public, tax experts and industry associations on this. Let’s hope that this welcome move shall come into effect and lower the burden of taxation on the working class.
Tuesday, 4 December 2007
Tax savings options on conveyance allowance
For salaried individuals, the conveyance allowance or transport allowance is exempt from taxation up to Rs. 800 per month while he earns in India. For physically handicapped persons, this limit is Rs. 1600 per month. This exemption is provided without furnishing any bills.
If one has a car and uses that to travel to the workplace, then a vehicle maintenance exemption can be claimed for the petrol/diesel cost and vehicle maintenance expenses incurred. The exemption limit is Rs. 1200 per month if the engine capacity is less than 1600 c.c. and Rs. 1600 per month if the engine capacity is greater than 1600 c.c. If you are keeping a driver, an additional exemption of Rs. 600 per month is also available. Please note that when you claim the vehicle maintenance exemption, the conveyance allowance exemption is not available.
Some companies have different components included in the Cost To Company of their employees through which fuel bills, driver wages etc. can be reimbursed and is considered as an expense, hence exempted from taxation. You may check with the finance department of your company to find out the options available to you regarding this.
If one has a car and uses that to travel to the workplace, then a vehicle maintenance exemption can be claimed for the petrol/diesel cost and vehicle maintenance expenses incurred. The exemption limit is Rs. 1200 per month if the engine capacity is less than 1600 c.c. and Rs. 1600 per month if the engine capacity is greater than 1600 c.c. If you are keeping a driver, an additional exemption of Rs. 600 per month is also available. Please note that when you claim the vehicle maintenance exemption, the conveyance allowance exemption is not available.
Some companies have different components included in the Cost To Company of their employees through which fuel bills, driver wages etc. can be reimbursed and is considered as an expense, hence exempted from taxation. You may check with the finance department of your company to find out the options available to you regarding this.
How is tax exemption on HRA calculated
It’s a common misconception that the tax exemption a person gets for paying house rent is equal to the HRA component of his/her salary. And usually we submit the receipt of house rent paid equal to the HRA component of our salary, even if it is more, to get the exemption on HRA.
But, do you know that the exemption limit on HRA is calculated in a different way by the tax man?
HRA exemption given is the minimum of the following,
a) HRA received
b) 40% of basic salary
c) Total HRA claimed – 10% of basic salary during the claim
For example, if your basic salary is 10,175 per month and the HRA component of the salary is 4,070 per month and you are claiming it for a period of one year then,
HRA received = 4,070 x 12 = Rs. 48,840
40% of basic salary = Rs. 48,840
If you are claiming HRA of Rs. 4,070 per month (48,840 per year), thinking that this is the upper limit, the third component (c) of HRA calculation becomes,
Total HRA claimed – 10% of Basic salary during the claim = 48,840 – 12,210 = Rs. 47,790, which makes the minimum of the three as 47,790.
Which means instead of Rs. 48,840 you will get an exemption for only Rs. 47,790!
Thus, you may have to work around with this a bit to get the maximum savings on HRA.
But, do you know that the exemption limit on HRA is calculated in a different way by the tax man?
HRA exemption given is the minimum of the following,
a) HRA received
b) 40% of basic salary
c) Total HRA claimed – 10% of basic salary during the claim
For example, if your basic salary is 10,175 per month and the HRA component of the salary is 4,070 per month and you are claiming it for a period of one year then,
HRA received = 4,070 x 12 = Rs. 48,840
40% of basic salary = Rs. 48,840
If you are claiming HRA of Rs. 4,070 per month (48,840 per year), thinking that this is the upper limit, the third component (c) of HRA calculation becomes,
Total HRA claimed – 10% of Basic salary during the claim = 48,840 – 12,210 = Rs. 47,790, which makes the minimum of the three as 47,790.
Which means instead of Rs. 48,840 you will get an exemption for only Rs. 47,790!
Thus, you may have to work around with this a bit to get the maximum savings on HRA.
Sunday, 2 December 2007
Inflation Rate might be understated in India
India’s inflation rate based on Wholesale Price Index currently runs at 3.01%; a five year low. But experts say that the real rate of inflation is understated in India.
Fuel prices are a major contributor of inflation in India. And the government hasn’t raised fuel prices even though the global oil prices have reached close to $100 a barrel. The rise not being transferred to the economy means we are riding on an unreal inflation rate which would have increased otherwise or ideally should have.
Liquidity (supply of money) in the market is another factor that affects inflation rate in India. Due to foreign inflows (money from outside) and a subsequent appreciation of rupee, liquidity should have moved upwards, contributing to inflation. But the RBI is adopting CRR hike and other similar measures that suck liquidity out from the economy which could have increased inflation otherwise.
It seems the Finance Ministry is concerned only about reducing inflation, as have been repeatedly talked off by the FM. This would add to the woes on an already criticized method of inflation calculation, which is based on WPI with respect to the more accurate CPI.
Related Articles
- How is WPI inflation rate calculated in India?
- Inflation rates of India (2009)
- Inflation rates of India (2008)
- Commodities and their weightages in WPI calculation of India, Part I
Fuel prices are a major contributor of inflation in India. And the government hasn’t raised fuel prices even though the global oil prices have reached close to $100 a barrel. The rise not being transferred to the economy means we are riding on an unreal inflation rate which would have increased otherwise or ideally should have.
Liquidity (supply of money) in the market is another factor that affects inflation rate in India. Due to foreign inflows (money from outside) and a subsequent appreciation of rupee, liquidity should have moved upwards, contributing to inflation. But the RBI is adopting CRR hike and other similar measures that suck liquidity out from the economy which could have increased inflation otherwise.
It seems the Finance Ministry is concerned only about reducing inflation, as have been repeatedly talked off by the FM. This would add to the woes on an already criticized method of inflation calculation, which is based on WPI with respect to the more accurate CPI.
Related Articles
- How is WPI inflation rate calculated in India?
- Inflation rates of India (2009)
- Inflation rates of India (2008)
- Commodities and their weightages in WPI calculation of India, Part I
Tuesday, 30 October 2007
Markets come of age?
From its teen ages, the SENSEX had nibbled the 20K mark yesterday and much of today’s opening was above the same though at present it’s trading slightly below 20K. By not creating hurdles for overseas investors when the market was precariously booming and making the flow of money into the Indian economy go through a transparent route, SEBI, the regulatory body of Indian securities market has proved that the Indian Securities Market is indeed strong in its fundamentals and is the best place in the world to invest.
Apart from Mukesh Ambani who has been rumored to top the list of billionaires in the world due to the current Bull Run in the market, small scale investors have also supposedly made money out of it. Some of the investors say that the current tide will take the market to the 25K levels; some foresee a small fall due to profit booking by investors that might happen in December. But let’s hope that the market won’t succumb to such things and continue its upward momentum for years to come. After all, I too am an investor :-)
Apart from Mukesh Ambani who has been rumored to top the list of billionaires in the world due to the current Bull Run in the market, small scale investors have also supposedly made money out of it. Some of the investors say that the current tide will take the market to the 25K levels; some foresee a small fall due to profit booking by investors that might happen in December. But let’s hope that the market won’t succumb to such things and continue its upward momentum for years to come. After all, I too am an investor :-)
Thursday, 20 September 2007
A strengthening Indian Rupee
For the first time in more than 9 years, the Indian Rupee crossed Rs. 40 mark against US Dollar!
The Indian Rupee has been on a rally that had put many a companies, especially IT and other export oriented ones, on fire. The Big Four of Indian IT industry (TCS, Wipro, Infosys, Satyam) had already lost almost 75,000 crore of market capitalization. So is the story of textile, jewellery and drugs sectors. This article which came on rediff.com explains the side effects of Rupee appreciation.
While an appreciating Rupee is the sign of a strong economy, it may not be good for one that depends heavily on exports and outsourcing. As far as exports go, the back firing happened because they charge clients in dollar terms. Had they charged foreign clients in Rupee terms, they wouldn’t have been affected by Rupee strengthening. But India needs dollars and exporters need margins. So there is no option but to get dollars from foreigners. I was wondering, what if we had charged them in Rupee terms? When will we become strong enough to do that? One’s wildest dream may be, but it’s sweet to think about such a situation. May be, its not too far...
The Indian Rupee has been on a rally that had put many a companies, especially IT and other export oriented ones, on fire. The Big Four of Indian IT industry (TCS, Wipro, Infosys, Satyam) had already lost almost 75,000 crore of market capitalization. So is the story of textile, jewellery and drugs sectors. This article which came on rediff.com explains the side effects of Rupee appreciation.
While an appreciating Rupee is the sign of a strong economy, it may not be good for one that depends heavily on exports and outsourcing. As far as exports go, the back firing happened because they charge clients in dollar terms. Had they charged foreign clients in Rupee terms, they wouldn’t have been affected by Rupee strengthening. But India needs dollars and exporters need margins. So there is no option but to get dollars from foreigners. I was wondering, what if we had charged them in Rupee terms? When will we become strong enough to do that? One’s wildest dream may be, but it’s sweet to think about such a situation. May be, its not too far...
Friday, 14 September 2007
Endowment Policies – when it comes to maximizing returns
“Back in July 2002, I took an endowment policy. I was in my first job and for the first time in my life I was submitting investment proof to claim the munificent tax rebate. I had heard from someone that taking an endowment policy would be a better option as the higher premiums I pay would take me near the magical, tax rebate figure of One Lakh and to top it, I would get good returns on policy maturity! I didn’t think twice; called up an insurance agent. All he told me was about endowment policies. Finally, for an annual premium of around Rs. 21,000, I took an endowment policy with a policy term of 25 years. The rest I managed with National Savings Certificate.”
“It’s been three years and having diligently paid all the premiums, now I am a loyal customer of the insurance company. But some of my colleagues who had invested in stock markets that time, directly or through Mutual Funds, have already tripled or quadrupled their savings. Some had made even more. That’s when I started thinking about my endowment policy and the kind of returns it gave me with respect to the investment I made in the form of premiums. Is my endowment policy actually giving me good returns?”
I’m sure most of us who own an endowment policy would have thought like this at least once. This post succinctly examines the same. In the due course, we will find out how endowment policies don’t give much returns or insurance cover vis-Ã -vis some of the other investment opportunities.
Let’s have a closer look at Endowment Policies. Endowment Policies by definition agree to pay a lump sum on maturity while giving a small insurance cover during the policy term. Thus it’s a combination of both insurance and investment. The policy holder pays premium (this is the investment) reasonably higher than a term-insurance policy and gets yearly bonuses from the insurance company that get accrued and added to the lump sum. On the event of death or on maturity he gets the sum assured plus the accrued bonus (both constitutes the return on investment), which according the insurance company or the agent, is a formidable amount.
Thus, on policy maturity, the policy holder gets money in two ways.
Every year,
a) Reversionary Bonus: Distributed from company profits, based on plan, term and sum assured.
b) Terminal Bonus: Distributed from company profits for customer loyalty, based on plan, term and sum assured.
On maturity
a) Sum assured
So that the Total Amount on maturity = Sum Assured + Accrued Annual Bonuses.
Now let’s study an endowment policy in detail to calculate the returns from it. The policy under study has the following parameters.
Annual Premium = Rs. 21,000
Policy Term = 25 years
Premium Paying Term = 25 years
Sum Assured = 5 Lakh
Bonus declared by the insurance company for this particular policy during the years 2003-04, 2004-05 and 2005-06 were Rs. 53, Rs. 47 and Rs. 44 respectively, for every thousand rupees sum assured, i.e., an average of Rs. 48. Though I understand that the bonus amount would vary from year to year and may increase in the coming years, I take this average value for the calculations. Also, please to note the decreasing trend in bonus amount.
Thus for a sum assured of Rs. 5 Lakh, the bonus would come out to be Rs. 24,000 per year which is Rs. 6 Lakh for 25 years.
The terminal bonus is usually not made public by the insurance company. Hence we have no other way but to assume it to be on the range of Rs. 4 Lakh.
That makes the total amount the above policy holder would get after 25 years to be Rs. 15 Lakh. And the total premium he would have paid during the policy term would be Rs. 5 Lakh [21,000 X 25]. Thus the policy gives him an annualized return of 12%. [((15 / 5) X 100) / 25]
In this way you can calculate the returns you get from your endowment policy.
Now we got an idea about the returns from an endowment policy. Going ahead, let’s think about the next question. Is there any other way for us to get more returns and more insurance cover from the same investment amount? Is there a way to maximize our investments without compromising on the insurance cover?
So, let’s look at another investment option; say Mutual Funds. Over the years, mutual funds have been giving very good returns, in the range of 40% per year. But if we assume an average return of even 15%, an investment of Rs. 21,000 per year for 25 years would give the above person a return of Rs. 51 Lakh, had he invested the same amount in Mutual Funds every year! Quite amazed?
Unlike endowment policies, mutual funds don’t give any insurance cover. So how do we take care of the insurance part? Well, one way to do that would be to cut down the investment amount a bit and take a term insurance using that. Just to give you a hint, for an annual premium of around 6,000 rupees you will get a term insurance of about Rs. 25 Lakh for the same time period of 25 years! Hence splitting the endowment policy into term insurance + mutual fund combination would be an intelligent way to get more returns and insurance cover. When you play around with such a combination, probably you would end up with a better investment, having more returns and more insurance cover for the same investment amount.
Now one may ask, with endowment policies he will get a return for sure but if he invests in mutual funds, isn’t there a risk of losing money? Well yes, since the mutual funds invest in shares there is a risk of losing money. But mutual fund companies maintain a portfolio of shares to reduce this risk, due to which the downfall may be less. Also, for the less risky, there are balanced funds which invest only half the amount in shares. By the way, the bonus amount of an endowment policy is based on the insurance company’s profit. What if the company made a loss?
Thus there are better ways to invest than taking an endowment policy. Though I haven’t told you how to plan your investment or what to take, I hope that this post would have helped you to think a bit before going for an endowment policy.
Back Slash: An insurance agent gets commission for every premium you pay. For an endowment policy, you will pay premium for longer time periods; 25 years may be, possibly the reason why he may persuade you to go for an endowment policy and may not tell you about the more essential, term-insurance policies.
“It’s been three years and having diligently paid all the premiums, now I am a loyal customer of the insurance company. But some of my colleagues who had invested in stock markets that time, directly or through Mutual Funds, have already tripled or quadrupled their savings. Some had made even more. That’s when I started thinking about my endowment policy and the kind of returns it gave me with respect to the investment I made in the form of premiums. Is my endowment policy actually giving me good returns?”
I’m sure most of us who own an endowment policy would have thought like this at least once. This post succinctly examines the same. In the due course, we will find out how endowment policies don’t give much returns or insurance cover vis-Ã -vis some of the other investment opportunities.
Let’s have a closer look at Endowment Policies. Endowment Policies by definition agree to pay a lump sum on maturity while giving a small insurance cover during the policy term. Thus it’s a combination of both insurance and investment. The policy holder pays premium (this is the investment) reasonably higher than a term-insurance policy and gets yearly bonuses from the insurance company that get accrued and added to the lump sum. On the event of death or on maturity he gets the sum assured plus the accrued bonus (both constitutes the return on investment), which according the insurance company or the agent, is a formidable amount.
Thus, on policy maturity, the policy holder gets money in two ways.
Every year,
a) Reversionary Bonus: Distributed from company profits, based on plan, term and sum assured.
b) Terminal Bonus: Distributed from company profits for customer loyalty, based on plan, term and sum assured.
On maturity
a) Sum assured
So that the Total Amount on maturity = Sum Assured + Accrued Annual Bonuses.
Now let’s study an endowment policy in detail to calculate the returns from it. The policy under study has the following parameters.
Annual Premium = Rs. 21,000
Policy Term = 25 years
Premium Paying Term = 25 years
Sum Assured = 5 Lakh
Bonus declared by the insurance company for this particular policy during the years 2003-04, 2004-05 and 2005-06 were Rs. 53, Rs. 47 and Rs. 44 respectively, for every thousand rupees sum assured, i.e., an average of Rs. 48. Though I understand that the bonus amount would vary from year to year and may increase in the coming years, I take this average value for the calculations. Also, please to note the decreasing trend in bonus amount.
Thus for a sum assured of Rs. 5 Lakh, the bonus would come out to be Rs. 24,000 per year which is Rs. 6 Lakh for 25 years.
The terminal bonus is usually not made public by the insurance company. Hence we have no other way but to assume it to be on the range of Rs. 4 Lakh.
That makes the total amount the above policy holder would get after 25 years to be Rs. 15 Lakh. And the total premium he would have paid during the policy term would be Rs. 5 Lakh [21,000 X 25]. Thus the policy gives him an annualized return of 12%. [((15 / 5) X 100) / 25]
In this way you can calculate the returns you get from your endowment policy.
Now we got an idea about the returns from an endowment policy. Going ahead, let’s think about the next question. Is there any other way for us to get more returns and more insurance cover from the same investment amount? Is there a way to maximize our investments without compromising on the insurance cover?
So, let’s look at another investment option; say Mutual Funds. Over the years, mutual funds have been giving very good returns, in the range of 40% per year. But if we assume an average return of even 15%, an investment of Rs. 21,000 per year for 25 years would give the above person a return of Rs. 51 Lakh, had he invested the same amount in Mutual Funds every year! Quite amazed?
Unlike endowment policies, mutual funds don’t give any insurance cover. So how do we take care of the insurance part? Well, one way to do that would be to cut down the investment amount a bit and take a term insurance using that. Just to give you a hint, for an annual premium of around 6,000 rupees you will get a term insurance of about Rs. 25 Lakh for the same time period of 25 years! Hence splitting the endowment policy into term insurance + mutual fund combination would be an intelligent way to get more returns and insurance cover. When you play around with such a combination, probably you would end up with a better investment, having more returns and more insurance cover for the same investment amount.
Now one may ask, with endowment policies he will get a return for sure but if he invests in mutual funds, isn’t there a risk of losing money? Well yes, since the mutual funds invest in shares there is a risk of losing money. But mutual fund companies maintain a portfolio of shares to reduce this risk, due to which the downfall may be less. Also, for the less risky, there are balanced funds which invest only half the amount in shares. By the way, the bonus amount of an endowment policy is based on the insurance company’s profit. What if the company made a loss?
Thus there are better ways to invest than taking an endowment policy. Though I haven’t told you how to plan your investment or what to take, I hope that this post would have helped you to think a bit before going for an endowment policy.
Back Slash: An insurance agent gets commission for every premium you pay. For an endowment policy, you will pay premium for longer time periods; 25 years may be, possibly the reason why he may persuade you to go for an endowment policy and may not tell you about the more essential, term-insurance policies.
Tuesday, 11 September 2007
Entrepreneurship, the next Indian way?
I was reading an article that came on rediff which talked about a few young entrepreneurs who started something that they were passionate about and then succeeded in it. A techie who started a restuarant, a gamer who started a gaming company, another techie who started a resort; great and inspiring stories!
I have always felt that India is a land of family owned businesses. Almost all the big business names in India have the same story behind it. I know, there are a few Infosyses out there, but then, when you take the larger picture the names you would hear would be nothing but the Tatas, Birlas, Ambanis, Wadias, Bajajs, etc. Okay, when they all started they did it through the entrepreneurship way, but the point is there isn't enough entrepreneurial ventures in India being started these days, not to the extent that the country can produce.
Is it because of the lack of availability of funds? If it was 10 years ago I would have definitely considered this sentence, but now, with a lot of Venture Capital Funds operating in India, I would not agree to that. During this year's placement at IIMA, along with companies, a few VC Funds also visited the campus to hear whether the bright minds in the country have got any bright ideas with them so that they can pour the required money to let those ideas see the light of the day. Now, that was a welcome change. Hmm.. India is not only shining but changing too!
I hope the talents in our country would get inspired by the stories such as those posted by rediff and do some thing substantial to take our country towards the next era.
I have always felt that India is a land of family owned businesses. Almost all the big business names in India have the same story behind it. I know, there are a few Infosyses out there, but then, when you take the larger picture the names you would hear would be nothing but the Tatas, Birlas, Ambanis, Wadias, Bajajs, etc. Okay, when they all started they did it through the entrepreneurship way, but the point is there isn't enough entrepreneurial ventures in India being started these days, not to the extent that the country can produce.
Is it because of the lack of availability of funds? If it was 10 years ago I would have definitely considered this sentence, but now, with a lot of Venture Capital Funds operating in India, I would not agree to that. During this year's placement at IIMA, along with companies, a few VC Funds also visited the campus to hear whether the bright minds in the country have got any bright ideas with them so that they can pour the required money to let those ideas see the light of the day. Now, that was a welcome change. Hmm.. India is not only shining but changing too!
I hope the talents in our country would get inspired by the stories such as those posted by rediff and do some thing substantial to take our country towards the next era.
Monday, 10 September 2007
India and her perpetual debt
I read this on Economic Times and I couldn’t but write a post on it.
The piece says, India was by far the largest borrower from two World Bank institutions, accounting for $3.75 billion, or 15 percent of their total lending as the bank group globally committed $34.3 billion in fiscal year 2007.
It’s not under my proficiency to criticize and say why India is the largest borrower despite showing a tremendous economic growth rate, surging capital inflows and increased earnings through taxes. At least from the taxes front, I know for sure that it’s more streamlined than ever. In such a situation, I thought India have had reduced her borrowings in the recent times and would have been making it to zero over a period of time; 2020 may be!
But one may not forget that due to the trickling effect (!) only less of these funds reach the needy poor, for eradicating poverty, for providing basic infrastructure, education etc. Majority of which end up in the deep and ravenous pockets of the needy rich, politicians, middlemen! Well, that could be one of the reasons why more such funds are encouraged to flow from organizations such as World Bank to India every year, even today.
I also read experts saying 15% GDP growth will eradicate poverty in India.
Which one India should adopt to eradicate poverty? Working hard to make the GDP grow 15% or working hard to borrow from World Bank and make our debt a perpetual one?
The piece says, India was by far the largest borrower from two World Bank institutions, accounting for $3.75 billion, or 15 percent of their total lending as the bank group globally committed $34.3 billion in fiscal year 2007.
It’s not under my proficiency to criticize and say why India is the largest borrower despite showing a tremendous economic growth rate, surging capital inflows and increased earnings through taxes. At least from the taxes front, I know for sure that it’s more streamlined than ever. In such a situation, I thought India have had reduced her borrowings in the recent times and would have been making it to zero over a period of time; 2020 may be!
But one may not forget that due to the trickling effect (!) only less of these funds reach the needy poor, for eradicating poverty, for providing basic infrastructure, education etc. Majority of which end up in the deep and ravenous pockets of the needy rich, politicians, middlemen! Well, that could be one of the reasons why more such funds are encouraged to flow from organizations such as World Bank to India every year, even today.
I also read experts saying 15% GDP growth will eradicate poverty in India.
Which one India should adopt to eradicate poverty? Working hard to make the GDP grow 15% or working hard to borrow from World Bank and make our debt a perpetual one?
Friday, 7 September 2007
The magic of Inflation
Business Standard reported, “Inflation based on the Wholesale Price Index (WPI) dropped to 3.79% for the week ended August 25 from 3.94% in the previous week. Inflation close to 7% few months back to 3.79% is more welcomed than ever. As one won’t be having any doubts regarding the importance of inflation to an economy and how it affects the economy, let’s see how it is calculated in India.
But before that, there are two methods to calculate inflation rate; Wholesale Price Index (WPI, introduced in 1902) and Consumer Price Index (CPI, introduced in the 1970s). In WPI, the calculation of inflation is done on the basis of the average rate of change in prices of a set of commodities in the wholesale market. Where as CPI is a statistical time-series value based on the weighted average of rate of change in prices of a set of goods and services purchased by consumers. Thus the CPI is much more comprehensive and it catches the inflation value from the end-consumer's side rather than from the wholesale seller's side. CPI is published on a monthly basis while WPI is available every week and has the shortest possible time lag of 2 weeks. India uses WPI while most of the developed countries use CPI to calculate the inflation rate.
The prices of a set of 435 commodities (such as onion, rice, dal etc.) are used for calculating WPI in India. Economists say that India should adopt CPI for inflation calculation as it is the one that shows price rise an end-consumer would experience. Finance Ministry counters it saying that in India there are 4 CPI indices (CPI Industrial Workers, CPI Urban Non-manual Employees, CPI Agricultural Labourers and CPI Rural Labour) in existence which makes switching over to CPI riskier and complex and also CPI has too much lag time in reporting. But then, the question remains how the United States, the United Kingdom, Japan, France, Canada, Singapore and China use CPI for inflation calculation?
The way in which WPI inflation rate is calculated in India can be found out in the article, How is WPI inflation rate calculated in India?.
Related Articles
- How is WPI inflation rate calculated in India?
- Commodities and their weight-ages in WPI calculation of India
- Inflation rates of India (2009)
- Inflation rates of India (2008)
- Base year and number of commodities used for inflation calculation in India
But before that, there are two methods to calculate inflation rate; Wholesale Price Index (WPI, introduced in 1902) and Consumer Price Index (CPI, introduced in the 1970s). In WPI, the calculation of inflation is done on the basis of the average rate of change in prices of a set of commodities in the wholesale market. Where as CPI is a statistical time-series value based on the weighted average of rate of change in prices of a set of goods and services purchased by consumers. Thus the CPI is much more comprehensive and it catches the inflation value from the end-consumer's side rather than from the wholesale seller's side. CPI is published on a monthly basis while WPI is available every week and has the shortest possible time lag of 2 weeks. India uses WPI while most of the developed countries use CPI to calculate the inflation rate.
The prices of a set of 435 commodities (such as onion, rice, dal etc.) are used for calculating WPI in India. Economists say that India should adopt CPI for inflation calculation as it is the one that shows price rise an end-consumer would experience. Finance Ministry counters it saying that in India there are 4 CPI indices (CPI Industrial Workers, CPI Urban Non-manual Employees, CPI Agricultural Labourers and CPI Rural Labour) in existence which makes switching over to CPI riskier and complex and also CPI has too much lag time in reporting. But then, the question remains how the United States, the United Kingdom, Japan, France, Canada, Singapore and China use CPI for inflation calculation?
The way in which WPI inflation rate is calculated in India can be found out in the article, How is WPI inflation rate calculated in India?.
Related Articles
- How is WPI inflation rate calculated in India?
- Commodities and their weight-ages in WPI calculation of India
- Inflation rates of India (2009)
- Inflation rates of India (2008)
- Base year and number of commodities used for inflation calculation in India
Wednesday, 5 September 2007
Bullion; much unnoticed
I was never in favor of yellow/white metals. Long past, I lost a chain and a ring to a crook during my summer internship days and that was the end of my story towards owning gold. Nonetheless, it surfaced two months back, owing to the occasion of my marriage and voila, I own a few sovereigns now!
Now coming to the point, I bought the gold at a price of Rs. 801 per gram on the 1st of July 2007 and today on the 6th of September 2007; the price of gold have gone up to Rs. 905 per gram. That translates to an out of the blue return of about 13 percent (approximate yearly return of 78 percent) in just two months! It may not be as lucrative a return as you get while investing in stock markets, but it’s not that small either.
I know that I shouldn’t go by the numbers as gold prices won’t increase like this round the year. There are times when the price falls as well. But the point is bullion also makes a great investment, provided you track the market well and put your money at the right time. While I don’t think I have done the same, like tracking and timing the market, this was an eye-opener and now I am going to track the bullion market too.
Now coming to the point, I bought the gold at a price of Rs. 801 per gram on the 1st of July 2007 and today on the 6th of September 2007; the price of gold have gone up to Rs. 905 per gram. That translates to an out of the blue return of about 13 percent (approximate yearly return of 78 percent) in just two months! It may not be as lucrative a return as you get while investing in stock markets, but it’s not that small either.
I know that I shouldn’t go by the numbers as gold prices won’t increase like this round the year. There are times when the price falls as well. But the point is bullion also makes a great investment, provided you track the market well and put your money at the right time. While I don’t think I have done the same, like tracking and timing the market, this was an eye-opener and now I am going to track the bullion market too.
Monday, 3 September 2007
US Sub-prime Crisis
The US sub-prime mortgage lending crisis or simply sub-prime crisis has been the catchphrase in various media over the last few weeks. In this entire hullabaloo, one may want to know what this episode is all about and how it will affect the Indian economy or rather the world economy as a whole. Let’s have a look.
Sub-prime borrower
In US almost everything, right from getting a credit card to receiving various banking services, is dependent on the credit history of a person. A good credit history can be directly attributed to making payments on time, less revolving credit on credit cards, fewer payment defaults and check bounces etc. and is denoted by the FICO score or credit score of a person set by few credit rating agencies. It is easy for a person with a good credit history to get loans and other services while it’s exceedingly difficult for a person with a not so good credit history or low FICO score to avail banks’ services, let alone loans. Such poor credit history borrowers are called sub-prime borrowers. Since there is a risk of default on loans to sub-prime borrowers, US banks usually charge a higher rate of interest to them for the risk they are taking. From the bank’s side, a higher interest means a higher return, well with a risk. As a result, some banks had seen lending money to sub-prime borrowers as an opportunity.
Sub-prime boom
For a crisis to happen, first there has to be a boom. There were a few things that led to the sub-prime boom. I better quote Christian Stracke of Financial Times who had explained the situation quite nicely. “It all originated with a global imbalance between the supply of credit and the demand for credit. Global Central Bank let monetary policy move to a nearly unprecedented accommodative stance, pumping money into the system. At the same time, corporate, the traditional mainstays in terms of borrowing funds to invest moved to a defensive stance, having grown much more conservative in the wake of the Enron and WorldCom fiascos. Finally, the major developed countries began to gain a measure of fiscal discipline, with budget deficits shrinking, which further reduced the demand for credit on a global basis. That imbalance between investors flush with cash and the traditional borrowers not really needing or wanting that cash meant that investors had to look for new markets to invest in. As the Asset Backed Securities (ABS) market had been taking off and coming into the mainstream, a natural target was the sub-prime borrower - borrowers who in the past had wanted to borrow but who had been locked out of credit markets. Eager lenders met eager borrowers, with the mortgage originators, ABS underwriters, and credit ratings agencies playing the role of matchmaker, and the sub-prime boom was born.” Now, let's see what the banks or mortgage originators did to target the sub-prime borrowers’ market.
Role of Banks and Hedge Funds
So there was an opportunity among sub-prime borrowers and there has to be someone who could take the money from investors and give it to the borrowers. Who could do this better than the banks? Banks gave money to sub-prime borrowers and then they bundle the loans to a package and sold securities whose value was linked to the performance of the package of mortgage loans. Investors bought these securities and thus indirectly provided the money required for sub-prime lending. These derivative instruments are called Collateralized Debt Obligations (CDOs), which is one form of Asset Backed Securities. Thus, banks did away with the role of playing a financial intermediary. The total volume of CDOs in the US market is around $900 billion and only 17% of the CDOs were created out of sub-prime mortgages. Hedge Funds hold majority of these sub-prime related securities due to the inherent nature of their business making them extremely vulnerable to sub-prime related issues. So everything was set and now let’s find out what triggered the crisis.
Sub-prime crisis
Quite obviously the sub-prime crisis occurred when the sub-prime borrowers defaulted in their mortgage loans, which affected the returns of CDOs. The main reason was the inability of sub-prime borrowers to pay back the money. Another catalyst was the rising segment of credits like Home Equity Loans through which the borrowers could take a second credit on the same mortgage. These added to their inability to payback the money. As a result, some defaulted. Some started force selling their houses due to which property prices came down, which made it more difficult for other sub-prime borrowers to refinance their mortgages into loans with lower rates. The result, more and more defaults!
Now at the securities side, the highly leveraged hedge funds, found themselves in distress due to the rising defaults by sub-prime borrowers. Investors who had put their money in these funds wanted their money back which forced these funds to liquidate their assets. And thus started a vicious spiral of forced selling of sub-prime securities! This reduced the price of these securities in the market and thus the crisis grew new bounds. Since hedge funds are highly leveraged, a small decrease in their asset values is enough to make them bankrupt. As a result several funds filed for bankruptcy. Thus the sub-prime crisis showed its red face!
Effect on global and Indian economies
Few companies in the US filed for bankruptcy which led to the loss of thousands of jobs. People who invested through hedge funds lost their money. UK and Japanese economies were affected a lot as there were a lot of money from investors belonging to these geographies that had been put into sub-prime securities through the hedge funds.
In other economies, hedge funds faced selling pressure to meet margin calls which led to the fall of various non-US stock indices, Sensex, Nifty being few of them!
Though not severe, Indian economy got affected by this in the following ways. A reduction in the investments in Indian securities/major selling of Indian stocks by foreign investors (foreign funds having CDOs created out of sub-prime loans and had selling pressure) and a subsequent melt down of Indian stock markets, IT companies losing few of their clients belonging to US mortgage industry & Hedge Funds due to cost cutting or bankruptcy are some of these.
Analysts say that the US sub-prime crisis is not over yet. Let’s see what more this disaster has in its store in the days to come. In the hindsight, one might think, had the banks been not greedy enough to put their money in riskier sub-prime borrowers and made securities out of it!
Related Articles
- Lessons from the sub-prime crisis
Sub-prime borrower
In US almost everything, right from getting a credit card to receiving various banking services, is dependent on the credit history of a person. A good credit history can be directly attributed to making payments on time, less revolving credit on credit cards, fewer payment defaults and check bounces etc. and is denoted by the FICO score or credit score of a person set by few credit rating agencies. It is easy for a person with a good credit history to get loans and other services while it’s exceedingly difficult for a person with a not so good credit history or low FICO score to avail banks’ services, let alone loans. Such poor credit history borrowers are called sub-prime borrowers. Since there is a risk of default on loans to sub-prime borrowers, US banks usually charge a higher rate of interest to them for the risk they are taking. From the bank’s side, a higher interest means a higher return, well with a risk. As a result, some banks had seen lending money to sub-prime borrowers as an opportunity.
Sub-prime boom
For a crisis to happen, first there has to be a boom. There were a few things that led to the sub-prime boom. I better quote Christian Stracke of Financial Times who had explained the situation quite nicely. “It all originated with a global imbalance between the supply of credit and the demand for credit. Global Central Bank let monetary policy move to a nearly unprecedented accommodative stance, pumping money into the system. At the same time, corporate, the traditional mainstays in terms of borrowing funds to invest moved to a defensive stance, having grown much more conservative in the wake of the Enron and WorldCom fiascos. Finally, the major developed countries began to gain a measure of fiscal discipline, with budget deficits shrinking, which further reduced the demand for credit on a global basis. That imbalance between investors flush with cash and the traditional borrowers not really needing or wanting that cash meant that investors had to look for new markets to invest in. As the Asset Backed Securities (ABS) market had been taking off and coming into the mainstream, a natural target was the sub-prime borrower - borrowers who in the past had wanted to borrow but who had been locked out of credit markets. Eager lenders met eager borrowers, with the mortgage originators, ABS underwriters, and credit ratings agencies playing the role of matchmaker, and the sub-prime boom was born.” Now, let's see what the banks or mortgage originators did to target the sub-prime borrowers’ market.
Role of Banks and Hedge Funds
So there was an opportunity among sub-prime borrowers and there has to be someone who could take the money from investors and give it to the borrowers. Who could do this better than the banks? Banks gave money to sub-prime borrowers and then they bundle the loans to a package and sold securities whose value was linked to the performance of the package of mortgage loans. Investors bought these securities and thus indirectly provided the money required for sub-prime lending. These derivative instruments are called Collateralized Debt Obligations (CDOs), which is one form of Asset Backed Securities. Thus, banks did away with the role of playing a financial intermediary. The total volume of CDOs in the US market is around $900 billion and only 17% of the CDOs were created out of sub-prime mortgages. Hedge Funds hold majority of these sub-prime related securities due to the inherent nature of their business making them extremely vulnerable to sub-prime related issues. So everything was set and now let’s find out what triggered the crisis.
Sub-prime crisis
Quite obviously the sub-prime crisis occurred when the sub-prime borrowers defaulted in their mortgage loans, which affected the returns of CDOs. The main reason was the inability of sub-prime borrowers to pay back the money. Another catalyst was the rising segment of credits like Home Equity Loans through which the borrowers could take a second credit on the same mortgage. These added to their inability to payback the money. As a result, some defaulted. Some started force selling their houses due to which property prices came down, which made it more difficult for other sub-prime borrowers to refinance their mortgages into loans with lower rates. The result, more and more defaults!
Now at the securities side, the highly leveraged hedge funds, found themselves in distress due to the rising defaults by sub-prime borrowers. Investors who had put their money in these funds wanted their money back which forced these funds to liquidate their assets. And thus started a vicious spiral of forced selling of sub-prime securities! This reduced the price of these securities in the market and thus the crisis grew new bounds. Since hedge funds are highly leveraged, a small decrease in their asset values is enough to make them bankrupt. As a result several funds filed for bankruptcy. Thus the sub-prime crisis showed its red face!
Effect on global and Indian economies
Few companies in the US filed for bankruptcy which led to the loss of thousands of jobs. People who invested through hedge funds lost their money. UK and Japanese economies were affected a lot as there were a lot of money from investors belonging to these geographies that had been put into sub-prime securities through the hedge funds.
In other economies, hedge funds faced selling pressure to meet margin calls which led to the fall of various non-US stock indices, Sensex, Nifty being few of them!
Though not severe, Indian economy got affected by this in the following ways. A reduction in the investments in Indian securities/major selling of Indian stocks by foreign investors (foreign funds having CDOs created out of sub-prime loans and had selling pressure) and a subsequent melt down of Indian stock markets, IT companies losing few of their clients belonging to US mortgage industry & Hedge Funds due to cost cutting or bankruptcy are some of these.
Analysts say that the US sub-prime crisis is not over yet. Let’s see what more this disaster has in its store in the days to come. In the hindsight, one might think, had the banks been not greedy enough to put their money in riskier sub-prime borrowers and made securities out of it!
Related Articles
- Lessons from the sub-prime crisis
Sunday, 2 September 2007
NFOs and expansion of AMCs
Once again Mutual Fund Houses have entered into the New Fund Offer (NFO) bandwagon. With Asset Management Companies (AMC) such as Fidelity, SBI, HDFC, HSBC etc releasing their NFOs for various sectors, Reliance has also entered into the foray with their Reliance Equity Advantage Fund.
But what interests me is that Reliance MF is about to double their branch network from 300, due to an expected 25% increase in their Assets Under Management to Rs. 75,000 crore. Quite in line with the tradition of Reliance, ‘when doing something, do it big’.
Well, these are private matters pertaining to Fund houses. But, did you happen to think about the huge amount of money that would go into the hands of various mutual funds in the next few years? No wonder why the stock market is expected to touch more heights and create more records!
But what interests me is that Reliance MF is about to double their branch network from 300, due to an expected 25% increase in their Assets Under Management to Rs. 75,000 crore. Quite in line with the tradition of Reliance, ‘when doing something, do it big’.
Well, these are private matters pertaining to Fund houses. But, did you happen to think about the huge amount of money that would go into the hands of various mutual funds in the next few years? No wonder why the stock market is expected to touch more heights and create more records!
Thursday, 30 August 2007
Micro-Finance for Rural Empowerment
Ever since the Grameen Bank of Bangladesh pioneered and succeeded in the concept of Micro-Finance, a lot of NGOs and other organizations across the world started implementing it in their countries. The waves of this occurred in India too.
In Micro-Finance, loans of lower denominations (Rs. 500, Rs. 1000 etc.) are given to people for a short term (3 months, 6 months, 1 year etc.) and the payment frequency is typically in weeks. These loans have an astounding repayment rate of more than 98% which even front-line banks aren’t able to match. Such loans are similar to the normal village lending we see in local markets and mandis.
A lot of organizations in India work towards giving micro-credits to rural entrepreneurs. Vikram Akula's SKS Micro-Finance has made its niche in the Indian sub-continent and has shown a phenomenal growth rate, changing lives of millions. A lot of NGOs are also in the foray. While there are criticisms against Micro-finance saying that it will take the rural entrepreneur to a perpetual debt trap, the interest rates charged are very high etc., the positives of Micro-finance can’t be ignored. It gives a villager the money he requires at the time he wants for starting his own small business or buy a cow and things like that. Some banks are even giving micro-loans to rural entrepreneurs considering it as part of CSR (Corporate Social Responsibility). This is indeed a commendable effort.
India, as a developing nation, needs to up-bring people in the rural areas. This is because, though India is growing at an amazing growth rate of 9% and about to touch a two digit one, the facts remain that more than 70% of the population lives in villages, depending primarily on agriculture, and the growth rate shown by agricultural sector was only 2.77% in the last financial year. The growth rate of India is majorily contributed by Services and Manufacturing sectors and this suppresses the insufficient growth rate of agricultural sector and the huge majority depending on that from coming to the limelight. This is definitely not a good situation. Because, a nation can be considered to be ‘developed’ only when it’s entire population achieves economic stability, not just the urban population or just lone sectors! Let’s hope that these small efforts done by Micro-finance institutions and banks would mark the beginning of a new economic revolution in India.
In Micro-Finance, loans of lower denominations (Rs. 500, Rs. 1000 etc.) are given to people for a short term (3 months, 6 months, 1 year etc.) and the payment frequency is typically in weeks. These loans have an astounding repayment rate of more than 98% which even front-line banks aren’t able to match. Such loans are similar to the normal village lending we see in local markets and mandis.
A lot of organizations in India work towards giving micro-credits to rural entrepreneurs. Vikram Akula's SKS Micro-Finance has made its niche in the Indian sub-continent and has shown a phenomenal growth rate, changing lives of millions. A lot of NGOs are also in the foray. While there are criticisms against Micro-finance saying that it will take the rural entrepreneur to a perpetual debt trap, the interest rates charged are very high etc., the positives of Micro-finance can’t be ignored. It gives a villager the money he requires at the time he wants for starting his own small business or buy a cow and things like that. Some banks are even giving micro-loans to rural entrepreneurs considering it as part of CSR (Corporate Social Responsibility). This is indeed a commendable effort.
India, as a developing nation, needs to up-bring people in the rural areas. This is because, though India is growing at an amazing growth rate of 9% and about to touch a two digit one, the facts remain that more than 70% of the population lives in villages, depending primarily on agriculture, and the growth rate shown by agricultural sector was only 2.77% in the last financial year. The growth rate of India is majorily contributed by Services and Manufacturing sectors and this suppresses the insufficient growth rate of agricultural sector and the huge majority depending on that from coming to the limelight. This is definitely not a good situation. Because, a nation can be considered to be ‘developed’ only when it’s entire population achieves economic stability, not just the urban population or just lone sectors! Let’s hope that these small efforts done by Micro-finance institutions and banks would mark the beginning of a new economic revolution in India.
Wednesday, 29 August 2007
Reverse Mortgage; a boon to the old
This year's Union Budget recommended to implement Reverse Mortgage in India. Reverse mortgage makes it possible for a senior citizen to lend his house to a bank for which he will get monthly payments from the bank till he dies. He can live in the house till his death and on the event of his death the bank will get the ownership of the house. In a way Reverse Mortgage is the selling of a house to a financial institution for which the financial institution will pay the estimated value of the house in monthly installments. Thus it could be considered converse of a housing loan, hence the name Reverse Mortgage.
The monthly payments are based on the estimated value of the house (considering the age, locality etc. of the house) and the expected age of death of the person. For old people who own a house and don’t have anyone to take care of them or don’t have sufficient income of their own for their living, this is indeed a boon.
On the other side, banks will get to sell the house after the person’s death by which they will get their money back. Thus it’s a very good opportunity for them too. And we can already see banks running for the pie.
Few days back, I saw a cartoon in Mathrubhumi, the Malayalam daily, on which the daughter-in-law and grandchildren of an old couple is taking good care of them for fear that the old couple might reverse mortgage their house and hence there is a chance that the daughter-in-law would lose the house! Guess this would decrease the number of old-age homes in India. And the saas-bahu serials in TV channels would also come to an end soon.
The monthly payments are based on the estimated value of the house (considering the age, locality etc. of the house) and the expected age of death of the person. For old people who own a house and don’t have anyone to take care of them or don’t have sufficient income of their own for their living, this is indeed a boon.
On the other side, banks will get to sell the house after the person’s death by which they will get their money back. Thus it’s a very good opportunity for them too. And we can already see banks running for the pie.
Few days back, I saw a cartoon in Mathrubhumi, the Malayalam daily, on which the daughter-in-law and grandchildren of an old couple is taking good care of them for fear that the old couple might reverse mortgage their house and hence there is a chance that the daughter-in-law would lose the house! Guess this would decrease the number of old-age homes in India. And the saas-bahu serials in TV channels would also come to an end soon.
Tuesday, 28 August 2007
MF Entry Load
A sum equal to 2.25% of the investment amount is taken by Mutual Fund Houses of India as an entry fee for the investment made by investors. Majority, or even whole, of this amount is given as commission to brokers who act between investors and fund houses. The brokers market the fund, provide financial advisory services to investors and do the required paper work.
Possibility of making investments online eliminated the need of a broker. Still, the entry load is levied by fund houses, which seem kind of illogical. SEBI (Securities and Exchange board of India), the regulatory authority of securities market came out with a welcome move in this regard.
Business Standard says, “The SEBI on Wednesday brought out a concept paper proposing to do away with the entry load charged by mutual funds through direct route. If the current proposal is accepted, mutual fund investors will not need to pay entry load for applications filed online or through AMC collection centers. The proposal is open for public comments till September 12, 2007.”
This is indeed a great proposal from SEBI as investors are paying for nothing, when they make an investment online. But yes, this would be a major blow to the broker houses as they stand to lose a lot of money when people prefer online investments for saving the entry fee. Public comments can be send to SEBI on this proposal. More details here.
Possibility of making investments online eliminated the need of a broker. Still, the entry load is levied by fund houses, which seem kind of illogical. SEBI (Securities and Exchange board of India), the regulatory authority of securities market came out with a welcome move in this regard.
Business Standard says, “The SEBI on Wednesday brought out a concept paper proposing to do away with the entry load charged by mutual funds through direct route. If the current proposal is accepted, mutual fund investors will not need to pay entry load for applications filed online or through AMC collection centers. The proposal is open for public comments till September 12, 2007.”
This is indeed a great proposal from SEBI as investors are paying for nothing, when they make an investment online. But yes, this would be a major blow to the broker houses as they stand to lose a lot of money when people prefer online investments for saving the entry fee. Public comments can be send to SEBI on this proposal. More details here.
Monday, 27 August 2007
Mobile Bank
I was bit surprised when I saw this van on the by-pass in Thiruvananthapuram with 'Mobile Bank - District Co-operative Bank' written on its side.
The van, like other Mobile services such as Mobile Hospital, Mobile Shops etc., travels to the nuke and corners of the city and its suburbs to give banking services to the common lot. Felt it as a great concept as this would be really useful for people who can't access a bank's services due to various reasons; may be lack of accessibility or time. It also shows the customer focus of the bank.
Wonder when one such van from the bank that holds my salary account would come to my office so that I could do transactions without spending much time on travel and all. Indeed, to be copied by the great banks of India.
The van, like other Mobile services such as Mobile Hospital, Mobile Shops etc., travels to the nuke and corners of the city and its suburbs to give banking services to the common lot. Felt it as a great concept as this would be really useful for people who can't access a bank's services due to various reasons; may be lack of accessibility or time. It also shows the customer focus of the bank.
Wonder when one such van from the bank that holds my salary account would come to my office so that I could do transactions without spending much time on travel and all. Indeed, to be copied by the great banks of India.
Subscribe to:
Posts (Atom)