Most of the banks charge a considerable amount to its customers when they use ATM facilities of a different bank to do transactions on their accounts. I myself have paid amounts to the tune of Rs. 61.80 (Usage Fee: Rs. 55.00, Service Tax: Rs. 6.60, Education Cess: Rs. 0.20) for such usages I have made. Part of this usage fee is paid to the bank whose ATM is been used. Considering the costs involved, I always felt that this is an obscene amount.
The irony is even if one withdraws Rs. 100, he has to pay Rs. 61.80 as usage charge. I wonder why the banks are not charging the usage charge as a percentage of the money being withdrawn, while they charge based on percentage for various other services. For example, processing fee for a service such as Balance Transfer on credit card is a percentage of the amount being transferred. The bank would say that despite the quantity of money being withdrawn from an ATM, the service is used anyway, which involves the same set of procedures and that’s why it’s a fixed charge. But here, my question is, how is it different for the processing fee on balance transfer? Isn’t the service being used and the efforts involved are same for various balance transfer amounts? But then one doesn't need to think too much to understand why the banks charge in percentage for services involving higher amounts!
Thus, reading the minds of millions of bank users of India, the RBI has directed the banks to allow free access to ATMs by April 2009. By March 2008 banks that are charging more than Rs. 20 for using a different banks' ATM will have to bring down the charge to Rs. 20. Also, balance enquiry has to be made available free of cost across all ATMs. In order to bring in transparency to the banking system, RBI has also urged the banks to inform their customers before hand, the amount they shall pay for withdrawing money from a different bank's ATM, which would discourage the customers from using a different bank's ATM.
The RBI has also pointed out that in other countries such as UK, Germany and France, customers can access all ATMs in the country, other than the ones managed by non-banks, free of charge. With this move, the Indian banking system is set for a revolution and importantly more customer focussed, it seems.
Thursday, 27 March 2008
Thursday, 28 February 2008
New Tax Slabs
In the union budget for financial year 2008-09, the Finance Minister has announced the new tax slabs.
General
Till 1,50,000 – 0%
1,50,000 – 3,00,000 – 10%
3,00,000 – 5,00,000 – 20%
Above 5,00,000 – 30%
Women
Till 1,80,000 – 0%
1,80,000 – 3,00,000 – 10%
Remaining tax rates are same as general
Senior Citizen
Till 2,25,000 – 0%
2,25,000 – 3,00,000 – 10%
Remaining tax rates are same as general
This would be a welcome relief to crores of tax payers in the country who are caught under inflation woes.
General
Till 1,50,000 – 0%
1,50,000 – 3,00,000 – 10%
3,00,000 – 5,00,000 – 20%
Above 5,00,000 – 30%
Women
Till 1,80,000 – 0%
1,80,000 – 3,00,000 – 10%
Remaining tax rates are same as general
Senior Citizen
Till 2,25,000 – 0%
2,25,000 – 3,00,000 – 10%
Remaining tax rates are same as general
This would be a welcome relief to crores of tax payers in the country who are caught under inflation woes.
Tuesday, 1 January 2008
Why Mutual Funds Entry Load scrapping by SEBI is justified
Starting January 4 2008, mutual fund investors wouldn’t need to pay the existing entry load of 2.25% while investing in a fund directly through the fund house’s website or through its own customer desk. This is applicable to further investments in existing portfolios, schemes and to new schemes launched henceforth; basically, for any new investment made on existing or new mutual fund schemes.
Initially, when mutual funds were sold through brokers, the entry load was used to pay commission to the brokers. When fund houses started selling their funds online and directly through their channels, the role of a broker ceased to exist. Still, the fund houses were charging entry load, which was questionable.
For an amount of Rs. 100000 (one Lakh) invested in a mutual fund, the entry load took Rs. 2250 away from the investment amount. Considering a one time investment of Rs 100000 made on a mutual fund having a yearly return of 30% for an investment period of 15 years, Rs. 2250 alone could get a potential return of Rs. 115168 (more than one Lakh), which the investor stand to lose.
The set motive of mutual funds was to allow small investors with small chunks of money to invest and get the benefit of scale from the stock market. But if you look at the entry load, it’s waived for investments greater than Rs. 5 Crore in most cases, thoroughly favoring large investors, which is contrary to its purpose. The irony is investors who are able to invest more than 5 Crore would normally be companies, who take the benefit of mutual funds, that are primarily meant for small investors. Also, normally companies won’t invest for longer time periods as compared to small investors. Thus, the entry load of a mutual fund was a deterrent factor for small investments.
The process behind this move from SEBI started in August 2007. And now, when it comes to effect on the start of the year, it has become nothing less than a great new year gift to the small investors.
Initially, when mutual funds were sold through brokers, the entry load was used to pay commission to the brokers. When fund houses started selling their funds online and directly through their channels, the role of a broker ceased to exist. Still, the fund houses were charging entry load, which was questionable.
For an amount of Rs. 100000 (one Lakh) invested in a mutual fund, the entry load took Rs. 2250 away from the investment amount. Considering a one time investment of Rs 100000 made on a mutual fund having a yearly return of 30% for an investment period of 15 years, Rs. 2250 alone could get a potential return of Rs. 115168 (more than one Lakh), which the investor stand to lose.
The set motive of mutual funds was to allow small investors with small chunks of money to invest and get the benefit of scale from the stock market. But if you look at the entry load, it’s waived for investments greater than Rs. 5 Crore in most cases, thoroughly favoring large investors, which is contrary to its purpose. The irony is investors who are able to invest more than 5 Crore would normally be companies, who take the benefit of mutual funds, that are primarily meant for small investors. Also, normally companies won’t invest for longer time periods as compared to small investors. Thus, the entry load of a mutual fund was a deterrent factor for small investments.
The process behind this move from SEBI started in August 2007. And now, when it comes to effect on the start of the year, it has become nothing less than a great new year gift to the small investors.
Thursday, 20 December 2007
Latest Economic Indicators of India
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.
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.
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.
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