A must-read with practical tips for all those seeking to buy a home of their ownMost men and women looking for a first time home loan are bogged down by multiple questions and confusions. Whether it is the right time, whether the property is suitable, which bank to seek loan from, etc. Yet, there are others who are almost cavalier when sealing a home loan deal and purchasing a property, and end up realizing later the mistake they made by not doing their homework well.One needs to be very careful when you decide to take the home plunge, because buying a house is much more than securing a home loan. When you decide on buying a home, make sure you know the long-term implications of your move and your capacity to make repayments.Here are a set of beginner’s tips for people looking for a first time home buy:1. Evaluate your monthly cash flow and assess ways to save moreBefore you decide what you can afford and invest in, you need to have your basic calculations right. Make sure you list out your income and expenditure details regularly for at least 3-4 months to assess some basic factors such as what extra expenditure you can cut, how much money you can save, and how large repayment installments you can afford. This is very basic calculation which an individual must be able to do before going for a house loan. It will not only make your accounts clear in your mind but also make it easier to plan your expenses well. Think about ways to save more cash, cut your superfluous expenses. Your rented apartment may be bigger than what you need right now, consider moving into a smaller apartment to save on rent. Move in with your parents for a year or two, if possible. Only when you are convinced that you are saving enough and to the best of your potential should you move ahead with a house and loan search.2. Select what you can really affordNow that you have a fair understanding of your buying capability, make an assessment of what you can afford. Do not take impetuous decisions while selecting property. Never select a house that will put more financial burden on you than you can carry in your present circumstances. Do not indulge in wishful thinking and assume promotions and appraisals down the years will help you tide in the payments. Apart from affordability, also take into account factors like safety, location, public transport accessibility, among other conveniences. Also factor in the cost potential of the property, whether it promises to surge in value with time.3. Save for down payment and seek help if neededIt is advisable to save as much you can to make a down payment for the purchase. The more you can pay without a bank loan help, the better it would be for you. Apart from saving some money, sell some assets if needed; or seek help from parents or other willing family members for making a substantial down payment. You won’t need to pay interest back to your family, just the principal some. The lesser loan you take from the bank, the shorter will be the payment course and the lesser the interest payment. The larger the down payment you make, the better it is for you because it reduces the remaining amount to be paid over the years.4. Check with multiple banksDo your homework well. Do not just plunge into a deal with the first bank you speak to. Make sure you go around and check the different deals different banks are offering. Then opt for the best deal available. Sometimes first-time home buyers hurry into a deal with a bank and realize later that another bank could have made a better and more profitable deal.5. Go for consolidation of loanOften when many people decide to buy a home, they are already having another running loan or liability. For example an auto loan which would now run parallel to the home loan. In such circumstances, consolidation of loans is a good option. Nobody likes to pay two EMIs simultaneously; a loan consolidation reduces the amount payable per month resulting in a single monthly payment instead of multiple payments. By consolidating two simultaneously running loans, one would not only reduce the installments per month but also reduce the rate of interest as compared to what one would be paying on multiple repayments.6. Have at least 3 months payments in your accountWhen you activate a loan, you must not be living from paycheck to paycheck. Make sure you have some cushion money in your account to fall back upon. You should have at last three months of payment equivalent money in your account even after making the down payment. 7. Have contingency funds:Some people buy a house, and do not immediately realise the liabilities it will bring. Many first-time home buyers end up forfeiting the buy, and this harms their credit score. Unforeseen events and exigencies can happen to anybody. One needs to be very careful and always have a Plan B. Make sure there is a contingency fund such as an FD that can be encashed on emergency or a PPF fund that can be relied upon in case an unfortunate incident like a pink slip happens. These emergency funds can come in the form of life insurance deposits, FDs, or mutual funds that you have invested in.The author, Brijesh Parnami, is CEO, Destimoney Advisors
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Asia Index Private Limited, a joint venture between S&P Dow Jones Indices and BSE, has announced the launch of the S&P BSE MidCap Select and SmallCap Select indices. The indices have been designed to measure the performance of the top 30 Indian mid-cap companies and the top 60 Indian small-cap companies that meet investability requirements, respectively.The constituents are selected from the S&P BSE MidCap Index and S&P BSE SmallCap Index respectively, both of which are sub-indices of the S&P BSE AllCap Index. Eligibility includes common stocks with a listing history of at least six-months. The maximum number of stocks, as per the BSE sector classification, is limited to ten stocks. All constituents in the indices are weighted based on its float adjusted market capitalisation.These indices are reconstituted semi-annually, in March and September. The index values for both Indices are calculated on an end of day basis and are available in Indian Rupees and United States Dollar. The first value date of each Index goes back to 16th September 2005.“The launch of these Indices comes as a result of investor demand for investable, rules based and transparent MidCap and SmallCap indices for India’s capital market. These Indices include a cross section of the top mid cap and small cap companies in the market that meet both liquidity and market capitalization criteria. They can serve as the basis for the creation of low cost products such as ETFs (exchange traded funds) and index funds tracking the index.” says Alka Banerjee, CEO of Asia Index Private Limited.“We are excited to launch the S&P BSE MidCap Select and S&P BSE SmallCap Select Indices at a time when mid-cap and small-cap segments of the market are witnessing a huge interest from the investors locally as well as globally,” says Ashishkumar Chauhan, MD & CEO, BSE.
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British lender Barclays has ousted Chief Executive Antony Jenkins after three years in the post, saying on Wednesday (8 July) it had decided new blood would help accelerate strategic change at the bank and boost shareholder returns.Shares in the bank jumped in early trade and were up 2.6 per cent at 258.80 pence by 0735 GMT.The surprise move comes weeks after John McFarlane took over as chairman of the bank and signalled his intention to speed up its turnaround plan. McFarlane is to take over executive duties until a permanent successor is appointed.Barclays said Jenkins, who had been promoted from head of retail at Barclays following the departure of Bob Diamond as the bank sought to scale back its investment banking activities, would receive a year's salary of 1.1 million pounds ($1.7 million) plus 950,000 pounds worth of shares, a pension allowance of 363,000 pounds and other benefits.He will also remain eligible for a pro-rata performance bonus for the current year.McFarlane, appointed from insurer Aviva having overseen a radical turnaround there, faces a host of challenges as the British bank sector grapples with regulatory pressures such as a demand to separate domestic retail banking operations from riskier investment banking operations.The decision to axe the CEO follows a period of lacklustre results and uncertainty about the bank's future structure."This announcement was not something that we have expected, but given John McFarlane’s history as a ‘hands-on’ chairman, it is perhaps not a big surprise," said analysts at brokerage Shore Capital in a note which repeated a "buy" rating on the stock."If this move does indeed act as a catalyst for an accelerated improvement in Barclays’ financial performance, then this can only be a good thing," the note added.While lauding Jenkins' role in steering the bank through a period of rapid change, Deputy Chairman Michael Rake said the board had decided Jenkins did not have the blend of skills required to take the company forward."We are leaving value on the table and a new approach is required. As a group, if we aspire to bring shareholder returns forward, we need to be much more focused on what is attractive, what we are good at, and where we are good at it," he said in a statement."We therefore need to improve revenue, costs and capital performance. We also need to become more externally focused and deal with the internal bureaucracy by becoming leaner and more agile," Rake added.In a statement Jenkins said: "It is easy to forget just how bad things were three years ago both for our industry and even more so for us. I am very proud of the significant progress we have made since then."($1 = 0.6487 pounds)(Reuters)
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MasterCard on Tuesday (7 July) announced the appointment of Porush Singh as Division President for South Asia while Julienne Loh has been appointed to the role of Senior Vice President and Group Head, Core Products, Global Products & Solutions for Asia Pacific, effective immediately.In his new role, Porush will lead the South Asia team to drive core business growth and execute on the nascent but fast growing emerging payments opportunities in the region. He will be based in Delhi and succeeds Ari Sarker who was recently appointed Co-President for the Asia Pacific region.Porush was most recently Senior Vice President and Group Head, Core Products, Global Products & Solutions, Asia Pacific, where he undertook the development and management of consumer and commercial products for Asia Pacific, including debit, credit, commercial, prepaid, and loyalty solutions. Porush started out his career with MasterCard in Dubai in 2005 before joining the Singapore office in 2010.Taking over as Senior Vice President and Group Head, Core Products, Global Products & Solutions for Asia Pacific is Julienne Loh, who was previously Group Head, Consumer Credit, Asia Pacific. In that role, Julienne led the strategic development and execution of consumer credit products in Asia Pacific as MasterCard looks to expand its customer base in this fast growing region. She has been with MasterCard since 2005 and has over 20 years of experience in business, marketing and financial sectors. In her new role, Julienne will oversee the development and management of all consumer and commercial payment solutions for Asia Pacific, based in Singapore.
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Low-cost way to participate in the equity market is through ETFs right from your demat account, writes Sunil DhawanExchange traded funds (ETFs) may soon become a popular investment option for investors. According to National Stock Exchange (NSE), India’s premier stock exchange, ETFs have already seen an increase of 25 per cent in retail participation by investors in the past one year.ETFs have been very much in existence here in India for long and certain recent developments around the product may give it the right boost. Of late, the ministry of Labour had already given the mandate to EPFO to put its corpus into equities. Starting 1st July, EPFO has decided to take the ETF route rather than putting money directly into the share in the secondary market. Around 1 lakh crore is the incremental corpus for EPFO and anywhere between 1-5 per cent of that could land up in ETFs in year’s time.NSE has recently started disseminating the value of NV20 live on its terminal. NV20 is an index representing 20 most liquid blue chip companies listed on NSE and provides exposure to eight broader sectors of the economy, with Infosys, ICICI Bank and RIL being the top three weighted companies in the index. Reliance Mutual Fund is about to launch ‘R*Shares NV 20’, an ETF that would track NV20. There are more ETF launches in the pipeline especially the GILT ETF’s from various fund houses. What Are They: Ever thought of buying into the Nifty Fifty index during the trading hours? Let’s say, you decide to invest in the index on the first of every month and to top it up on every big fall of the index. ETFs fits the bill and can be the instrument to ride on the wave of stock market.For starter, ETFs are mutual funds schemes that are bought or sold only on a stock exchange. So, what one needs to invest in ETFs would be a demat account through which unit can be bought anytime during the trading hours right from the comfort of your office or home. The cost that one incurs includes only the fund management cost and the charge for the demat account. ETFs are low cost investments with expense ratio between 0.30 to 1 per cent and so it costs less than investing in funds offline. One may even buy one single unit of ETF on any given day.What Is ETFs' Track: Unlike mutual funds schemes that can either be an index fund or diversified fund holding stocks of various sector, ETF’s are typically funds that tracks a specific index. In a way, ETF’s can be said to be index funds that can be traded online. So, an ETF would comprise of stocks that has the composition of an index such as S&P CNX Nifty or the BSE Sensex. If you are bullish on a specific sector and if there’s an ETF tracking that sector, you can invest in it. The various categories of ETF that are available can include index ETF’s, Gold ETF’s, Sectoral ETF’s, Thematic ETF’s or even the Liquid ETF’s.Return Potential: Before investing in ETFs, it’s important to understand its potential to generate returns. In ETFs, the role of fund manager is absent as the ETF would merely track the index. So, do not expect active fund management and thereby the potential for high returns. Returns would largely be in the line of the index or market. If over 12-year period, markets generate 12 per cent annualised return, the ETF would also generate around that. Remember, ETF’s (even index funds) will have a tracking error no matter how closely it tracks the index that it represents. Lower the tracking error, better is the fund.Watch Out: A word of caution for ETF investors. It’s not only easy to invest but also easy to sell ETF units at the click of the mouse. But, that should not be the reason to start timing and trading the markets through ETF. Stick to them for long term to reap the benefit of compounding over long term.What To Do: ETFs are the right product for beginners. If you wish to invest to invest through ETFs for your long term needs, here’s a strategic move for you. Build a portfolio of ETF comprising the NIFTY Index fund and even the ETFs representing large and mid-cap stocks (Nifty and junior Nifty). Add Gold ETF to your portfolio and there you have a diversified ETF portfolio for your long term goals such as children education, marriage and even own retirement at lowest possible cost.sunil@businessworld.in
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The Reserve Bank of India aims to drain money markets of excess liquidity to counter inflationary pressures arising from higher government spending, according to policymakers, though it could hamper chances of banks lowering lending rates. Commercial bankers say it would be easier to reduce lending rates, as the RBI has urged them to do, if surplus liquidity prevailed for some months. The liquidity surplus - now around 350 billion rupees - has dragged the average call money rate down to close to 7 percent this month. Some analysts expect it to reach 300 billion to 500 billion rupees ($4.7 billion to $7.88 billion) by August. A senior policymaker aware of central bank's thinking, who requested anonymity, said the RBI wanted to nudge the call rate up to nearer the 7.25 percent policy repo rate. "Overall the overnight rate has to be in alignment with the monetary policy stance," he told Reuters late on Friday. The policymaker said the RBI would stick with its current approach of draining excess cash largely through variable reverse repos. "As long as the market is able to come and give the funds back to the RBI, it should not be a problem," he said. The policymaker did not rule out the RBI selling bonds through open market operations if a longer-lasting approach was needed. The last time the RBI sold bonds on the open market was in December. Another official aware of the developments concurred with those views. Hesitant BanksThe RBI has lowered its policy rate by a total 75 basis points with three cuts this year, hoping that banks would do more to pass on the benefits to the broader economy. But banks say tight liquidity had stayed their hand earlier, and want liquidity to remain ample before making further moves. "The longer this cash surplus stays, the greater will be our confidence to bring down long-term deposit and lending rates," said a senior official at a large state-run bank. RBI Governor Raghuram Rajan said in April that hopes of a sustained surplus were "just nuts", given the inflation outlook. Consumer inflation rose to 5.01 percent in May from 4.87 percent in April. The RBI has targeted 6 percent inflation by January and 4 percent by March 2018. The RBI's priority is meeting those targets, and a seasonal surge in government spending - expected to total $45 billion in the September quarter along with the RBI's annual dividend payout to the government of around $8 billion at least - will add to inflationary pressures unless cash is drained. "If rates fall below where they are intended then that will hinder RBI's inflation target," said A. Prasanna, economist at ICICI Securities Primary Dealership, who expects cash conditions to remain broadly in surplus until September. "It will have to use instruments other than reverse repo if the surplus liquidity persists," he said. (Reuters)
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Sutanu Guru looks at how "emerging" economies are dismantling the American dominated global financial architecture In 1944, America officially replaced Britain as the global financial superpower at Bretton Woods when the formalities to launch the World Bank and the International Monetary Fund were finalized. This week, that monopoly of Western powers will get another jolt when finance ministers of the five BRICS (Brazil, Russia, India, China and South Africa) countries along with their central bank heads will complete all formalities to launch the New Development Bank. Earlier christened as the BRICS Bank, the new name is designed to expand the ambit of the bank to other nations. One of the best known Indian bankers, K.V. Kamath is the designated head of NDB. This comes just a week or so after a glittering ceremony in Beijing where 49 nations joined China to announce the launch of the Asian Infrastructure Investment Bank. China will provide 30% of the paid up capital of $100 billion and control 26.6% of the vote with a clear veto power. India will be the second largest shareholder in AIIB with a stake of 8.52%. Incidentally, both USA and Japan are not members of the AIIB. And by definition, the G-7 nations cannot be members of BRICS. For decades, there has been a clamor from "emerging" nations to end the virtual stranglehold of traditional global powers over global institutions. For example, there have been persistent calls to reform the United Nations and add more countries as permanent members of the currently five-member UN Security Council. Simultaneously, there have been demands to ease the complete dominance of financial institutions like IMF, World Bank and Asian Development Bank by the G-7 nations. For more than two decades, there has been talk without any substantive change on the ground. But the recent launch of two brand new global financial institutions in the form of AIIB and NDB indicate that emerging economies are no longer willing to wait for crumbs from the traditional powers. This has been articulated clearly in an interview given to the newspaper Mint by Malose W Mogale, the deputy High Commissioner of South Africa to India when he said, "Our argument is that the world can't remain the same after 70 years...The West has realized that if they don't change, there will be an alternative". Geopolitical considerations aside, it is the financial implications that will have resonance. Under what is now famous (or notorious) as the Washington Consensus, institutions like IMF and World Bank have been accused of trying to impose their own version of capitalism on countries while providing financial assistance. More often than not, it has led to economic mayhem and financial ruin for local populations. In unusual gestures of mea culpa, both the IMF and the World Bank have admitted in recent times that their priorities were perhaps skewed. The AIIB and the NDB promise to provide financial assistance to countries in a manner that suits their infrastructure needs and long term goals rather than imposing uniform conditions on everyone. As the latest fiasco in Greece shows, going to the IMF with a hat in hand means adopting "austerity" measures that might lead local populations to revolt. Sure, the dominance of the western powers is not going to vanish. Definitely not in the near future. But the monopoly that was established by America and the Second World War allies at Bretton Woods in 1944 is gone. That is definitely good news.
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It’s a subject that’s infrequently highlighted: the quality of manpower and ‘capacity building’ – be it in banking or other parts of India Inc. It’s of a particular import to banks, but given the state-run nature of the industry, the issue gets conflated: unions, pay and lateral recruitment. Reserve Bank of India’s deputy governor R. Gandhi correctly observes that “finance is primarily a knowledge-oriented activity. The chief capital and inputs required for this sector all relate to ‘information’ and knowledge’… the paradigm changes (in the sector) has very wide ramifications; the sector is highly interconnected; happenings in this sector has high visibility”. With 72 per cent of assets under them, state-run banks have witnessed a number of younger officers at top levels over a short period of time. “While this can bring fresh perspectives, it is also a fact that given the strategic importance of leadership at the top, it is important to understand the training requirements and fulfil the same,” notes Gandhi. Cynics may say the realisation has been late in coming, but then, it’s better late than never.— Raghu MohanA Move In The Right DirectionIt is well known that there is no consistency in the structure, power and functioning of the regulatory bodies in key infrastructure sectors. While the port sector regulator’s only job is to set tariffs, his counterparts in the electricity sector have much wider powers of rule-making, licensing, power market development, imposing penalties, etc. The telecom sector regulator is tasked with promoting competition. The tenure of regulators varies from 3 to 5 years; there are different terms and conditions for reappointment of members of regulatory commissions and appellate tribunals. Some sectors like electricity and telecom have appellate tribunals, whereas others like port do not have such tribunals. Even the degree of independence of regulators varies from sector to sector. Some level of parity or uniformity is required across all such regulators. Hence, the government move to revive the Regulatory Reforms Bill, 2013, to look at these aspects, should be welcomed. An overarching law to bring uniformity to India’s regulatory architecture is the need of the hour.— Joe C. MathewNot So Wise DecisionThe market regulator’s decision to ease the listing norms for startups is tilted heavily in favour of such companies. Not only will a lot of home-grown startups be tempted to raise money from the Indian market over the next year, the move is also likely to stop their flight to foreign markets. But SEBI’s decision to allow startups to disclose less in their draft red herring prospectus puts investors at a great deal of risk. Here’s why: Through 2008, 2009 and 2010, of the IPOs that listed, 81 per cent, 50 per cent and 82 per cent of them, respectively, gave negative returns within a year. In 2014, things improved slightly due to the stricter disclosure norms brought in by SEBI. However, with the latest relaxation of disclosure norms, the percentage of IPOs giving negative returns may begin to soar once again.— Neeraj ThakurCan't Blame Banks AnymoreThe Reserve Bank of India’s Financial Stability Report says that stress tests at end-March 2015 suggests that the current deterioration in banks’ asset quality may continue for a few quarters. That state-run banks, in particular, may have to provide more for bad-loans to meet the ‘expected losses’ if the macroeconomic environment deteriorates. Stress tests have revealed that shocks to the infrastructure sector, mainly power and transport sub-sectors, would significantly impact the system. Before you blame banks over poor credit appraisal, the truth is that policy paralysis is the biggest driver of the bad-loan mess. Next is the political patronage extended to the bigger defaulters. Think about it: why is that the bulk of bad-loans are in the bellies of state-run banks? It’s because they are forced to be all things to all companies; it’s due to factors outside!— Raghu MohanTo An Inordinate DegreeWere college degrees to be any guarantee of the effective handling of a ministerial portfolio, life would have been much easier. The fuss over ministers misrepresenting their educational backgrounds is valid up to a point. But the inordinate attention being given to the degrees of Jitender Singh Tomar and Smriti Irani is outlandish because there is so much else politicians falsify. It is strange that we give less importance to the fact that politicians have uncountable police sentences and prison time on their records compared to their degrees. Certainly, they have no ‘moral right’ to falsify those, but the more serious issue is that of having no moral right to be corrupt or criminal. Surely, the time to have minutely examined educational qualifications is before not after individuals take up portfolios and positions of power.— Mala BhargavaMonsoon MantraThe Indian Meteorological Department (IMD) has forecast a deficient rainfall during July-August and advised the agriculture ministry to keep a contingency plan ready. In contrast, India’s lone private weather forecasting company Skymet Weather Services has predicted a normal rainfall. Incidentally, IMD’s projection of insufficient rainfall in June was proved wrong; in fact, the rainfall was 20 per cent above the forecast. Skymet claims that it has fared better than IMD in predicting rainfall ever since it began operations three years ago. We will soon know which is better. But right now, the smart thing for the farmers and the government to do is to be prepared for the worse. As for IMD, if there is something it can learn from Skymet, it should be open enough to do that.— Joe C. MathewModi Shows The Way Once AgainThat Prime Minister Modi is eminently fond of selfies has been evident from the start, but recently he put the hobby to good use by creating a hashtag for a Twitter campaign in support of safety and education for young girls, represented by the government’s Beti Bachao, Beti Padao slogan. The SelfieWithDaughter was quite a hit and led to a surge of photographs of parents with their daughters including from the sarpanch of a village in Haryana. Although many grumbled that the PM should become a social media manager, it is for the first time that the country has actually seen a top leader take steps to communicate with citizens in their style. Sadly, the Twitter campaign was marred, partly by the PM’s own supporters, called Modi Bhakts on the network. A defiant remark by CPM member Kavita Krishnan and abusive reaction by actor Alok Nath unleashed a flood of unsavoury tweets that completely detracted from the original aim of the campaign. The PM also received much flak for staying silent on other matters, but left to itself, the SelfieWithDaughter was a warm campaign, even if just a drop in the ocean.— Mala Bhargava(This story was published in BW | Businessworld Issue Dated 27-07-2015)
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