The jury in the high-profile insider trading trial of Rajat Gupta heard a 2008 wiretap in which now-jailed hedge fund founder Raj Rajaratnam apparently admitted he deceived Gupta over a $10 million investment and expected him to react like a "big boy" to the loss.The wiretap was the last evidence former Goldman Sachs director Gupta's defense team presented in US district court here yesterday before it rested its case.Closing arguments by both sides will be made later today after which the case will go to the jury.In the brief phone conversation on October 2, 2008, Galleon Group portfolio manager Sanjay Santhanam asks Rajaratnam about the Voyager Capital Partners fund, in which Gupta had invested about USD 10 million.Gupta alleges he lost all his investment in Voyager and that Rajaratnam took his money behind his back, which led to a falling out between the two.For the fund, Rajaratnam had borrowed USD 300 million from Lehman Brothers, which filed for bankruptcy in September 2008."Under the circumstances, how are you holding up?" Santhanam asks Rajaratnam in the phone conversation."Look it's part of the game. I mean, when you take leverage you, you know. My problem is I, I'm a big boy. I hope Rajat is a big boy. You know," Rajaratnam tells Santhanam, who was working on the portfolio at Galleon.Rajaratnam goes on to say, "And then I didn't, I, I, I didn't tell him that I took that equity out. Right."What I want to do is show him... and I might say things like this instead of 20 million, 30 million in Lehman that we put a claim against and we have to wait for it."(PTI)
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Life is uncertain. There are so many things that one likes to achieve at various stages of our lives, such as buying a new car, purchasing a new house, saving for a good education of children, annual vacations and of course ensuring a comfortable retirement. It would be an understatement to say that for the fulfillment of these aspirations, one needs to build a suitable corpus or accumulate appropriate wealth. So what is stopping us from achieving these goals or creating a corpus to fulfill these dreams? The answers are many. With each passing day, understanding the financial markets and their increasingly complex products have become necessary for individuals. Add to it the ever rising inflation, the inability of traditional saving sources to beat the inflation, increased cost of living, spiralling health costs, inability to create a sufficient corpus prior to retirement, the fear of being dependent on our children and living as per their whims and fancies in the sunset years of our lives! In such a scenario, financial planning has become necessary for attaining long-term financial security. But what is financial planning?Financial planning is the process of wisely managing your finances to achieve your dreams and goals, while at the same time helping you to negotiate the financial barriers that inevitably arise in every stage of life.In short, it is a roadmap to help you achieve your life's goals. For proper financial planning, tt helps you to answer certain basic questions regarding: Your current financial situation Where you want to get to? What are the implications? What is the best strategy that will take you there? Financial planning can help you: Set realistic financial and personal goals. Assess your current financial health by Examining your assets, liabilities, income, insurance, taxes, investments and estate plan. Develop a realistic, comprehensive plan to meet your financial goals by addressing financial weaknesses and building on financial strengths. Put your plan into action and monitor its progress. Stay on track to meet changing goals, changing personal circumstances, changing stages of your life, changing products, markets, and tax laws. Financial planning helps via Individual / Family Cash Flow analysis Personal Budgeting Investment Planning Retirement Planning Insurance Advisory Net worth Estimation Estate Planning advisory. The second question which now arises is who can do this for you? The answer is a Certified Financial Planner (CFP). A CFP uses the financial planning process to help you figure out how to meet your life's goals. The Planner takes a BIG PICTURE view of your financial situation and makes recommendations that are right for you. He is a practicing professional who has the ability to help people deal with their various personal financial issues. To sum it up, the concept of Personal Financial Planning is now slowly but surely being understood and adapted by individuals and families who have chosen the path of treading towards their Financial Freedom. (Kalpesh Ashar is proprietor – Full Circle Financial Planners and Advisors)
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It's hard times again. With inflation rearing its head, widening fiscal and current account deficit splunging the rupee to unprecedented lows and the stock markets getting spooked by the euro zone crisis, the government is planning to administer some bitterpills. Replying to a debate on the Finance Bill in Parliament, finance minister Pranab Mukherjee indicated the government's intention to resort to some"austerity measures" soon. Mukherjee, however, did not elaborate on the plan. It was in September 2009 that thegovernment had last initiated such measures. Analysts say that the finance minister's announcement signals that the economy is not going to get back the desired momentum any time soon.Broadband BuyoutTelecom major Bharti Airtel is said to be in talks with Qualcomm India to buy its mobile broadband licence. Qualcomm has reportedly quoted a price of Rs 5,000 crore. Qualcomm holds licences for Mumbai, Delhi, Haryana and Kerala, which it bought in 2010 for Rs 4,900 crore. Bharti may purchase the unit over two years. It would initially buy a 26 per cent stake in Qualcomm India and Qualcomm will own 51 per cent of the division for at least two years after that, say reports. SALES DIP: India's demand for gold fell in Q1 FY2012 Losing SheenData from the World Gold Council shows India — one of the strongest gold markets in the world — has lost its prime position to China, where gold demand rose by 9 per cent from a year ago to 255.2 tonne in the first quarter of 2012. India's total gold demand was down 29 per cent at 207.6 tonne during this period. Lower GearBajaj Auto's net profit declined 45 per cent year on year for the quarter ended 31 March 2012; it fell from Rs 1,400 crore to Rs 772 crore. Bajaj says the Rs 1,400 crore profit a year ago was mainly due to the Rs 800 crore gain from the prepayment of debt. That said, the auto major's total income increased 11 per cent to Rs 4,791 crore from Rs 4,301 crore a year ago. Recharge TimeDespite the tax row, telecom major Vodafone is bullish on India. It is planning to list its Indian arm on the country's bourses, according to chief executive Marten Pieters. In April 2011, Vodafone Group CEO Vittorio Colao told media that an initial public offering for Vodafone India could beon the cards. Standing FirmTelecom regulator Trai has stuck to its recommended base price for 2G spectrum auction at Rs 3,622 crore per MHz in the 1800 MHz band. Telcos had said Trai's recommendations would jeopardise the sector and force them to raise tariffs 30-40 per cent. High On HardwareResearch firm Gartner says India's information technology infrastructure market, which includes servers, storage and networking equipment, will touch $3 billion by 2016. The market is likely to hit $2 billion in 2012, a 10.3 per cent increase over 2011. Revenues from servers, the largest segment of the Indian IT infrastructure market, will hit $754.5 million in 2012, and grow to $967.2 million in 2016. Curbs On Insurers SINGLE STOP: Google takes search to the next level Insurance regulator Irda has asked life insurers to stop selling highest net asset value (NAV)-guaranteed products, which contribute 20 per cent to their total premium collection. Highest NAV-guaranteed products are those that promise to pay the highest value the fund achieves during a certain period, say, five or seven years. Smarter SearchGoogle has announced a major revamp of its web dominating search engine just days after rival Microsoft's Bing service announced upgrades. The Knowledge Graph will be Google's latest attempt to provide direct answers in its results instead of just sending people elsewhere.Textile TraumaIn the past eight years, 215 cotton or man-made fibre textiles mills, which employed 69,774 workers, have been shut down in the country, says textiles minister Anand Sharma. (This story was published in Businessworld Issue Dated 28-05-2012)
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After a day's lull, the Sensex on Friday dipped again below the psychological 16,000 level as rupee tumbled to a new all-time low of Rs 54.89 amid escalating domestic inflation and weak global cues on deepening Greek crisis.The 30-stock BSE Sensex, which had a brief recovery on Thursday, rolled down to trade 260.77 points to trade at 15,809.71 at mid session as foreign funds intensified their selling.The rupee touched new low levels on concerns over slowing economic growth and widening trade deficit.The market received more beating as Asian peers fell with the regional benchmark indices lost over two per cent in morning trade after US economic data missed estimates and Moody's downgraded 16 Spanish banks rating and Greece as Europe?s debt crisis deepened.In a third straight falling session, the rupee touched a 54.89, surpassing Thursday's low of 54.60, as dollar strengthened against the Euro and basket of other foreign currencies.On similar lines, the broad-based National Stock Exchange index Nifty dipped below a crucial 4,800 level by falling 81.25 points, to 4,788.95 led by stocks of auto, capital goods and realty sectors.Brokers said the market remained under pressure as stocks and currencies world-wide weakened on Moody's downgraded 16 Spanish banks and a poor US manufacturing data heightened concerns over the global economy.They said the rupee was on free-fall mode on strong demand for American currencies on increased capital outflow from equity markets, even as the RBI's measures to curb the persistent fall has failed to have any major impact.Meanwhile, retail inflation shot up to double-digit mark at 10.32 per cent in April on account of substantial increase in vegetable, edible oils and milk prices.(PTI)
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Two years ago, an oil spill in an offshore field of oil major British Petroleum (BP) triggered a much-debated retrospective tax amendment in the US. A move similar to what India's finance minister Pranab Mukherjee announced in the Union Budget recently.The reason for the US tax amendment was simple. BP, in order to reduce its tax liability, had earmarked huge expenses ($32 billion) towards oil spill-related clean-up exercises. This was permitted under US law but it would have cost the US $10 billion (Rs 53,700 crore) in tax revenue. "The Closing Oil Spill Tax Loopholes Act, 2010 retrospectively denied deduction for payment made for any claim for damages (or payment made in settlement of such a claim)," explains Manoj Kumar, managing partner of corporate law advisory firm Hammurabi & Solomon.The US move had been a matter of debate in that country. An even more vigorous debate followed Lok Sabha's approval of a retrospective amendment to the Indian Income Tax Act, 1961, allowing the government to tax overseas deals involving domestic assets. Telecom major Vodafone was seen to be the immediate target of this amendment. The company had just secured a favourable Supreme Court Order in a tax dispute involving a capital gains tax demand of Rs 11,000 crore against the central government. The retrospective amendment was seen as a move to nullify this and to make Vodafone pay the capital gains tax related to its acquisition of Hutchison's stake in Hutchison-Essar for $11.2 billion (Rs 60,000 crore) in 2007. Since the entire transaction had happened in the Cayman Islands, the government had lost its due share of revenue.Taking into account the tax demand, penalty and the interest, the amount sought by the government from Vodafone was Rs 20,300 crore, almost double the original demand. Global precedents had strengthened the government's resolve to legislate "retrospective tax amendments". It's not just the US; there are other examples too, including Australia, China and Britain. China introduced a general anti-avoidance law in 2008 to enforce anti-avoidance where a special purpose vehicle lacking any commercial or business purpose was set up.Britain has introduced retrospective tax amendments 11 times since 1945, the most recent one coming in April 2012. $10 billion was saved intax revenues by the US via a retrospective amendment International tax experts, however, feel that the similarity between the international cases and the Indian tax amendment is limited to its "retrospective" nature only. "These (retrospective amendments) are not commonplace. Typically, when you do this, you need to consider the context. The impact of such amendment on business should be explained to the industry and its views should be considered," says Rahul Garg, executive director at Pricewaterhouse-Coopers India.According to Garg, the Indian amendment is unique because it was meant to override the ruling of the country's apex court. "A 22-year-old law was (retrospectively) amended in Britian, but that was because the law was not clear. How many retrospective amendments were carried out to reverse the judgement of the highest court of the country? In China it was not done for this purpose", he explains.Mukherjee has, however, asserted that Parliament reserves the right to amend laws. "There cannot be a situation that somebody will make money on an asset located in India and will not pay tax either in India or to the country of its origin…because of making some arrangements through certain tax haven areas through a complicated setting up of a series of subsidiaries and having huge capital gains on the assets located in India," he said. Irrespective of Vodafone's protest, the government seems to be moving ahead with its plans.(This story was published in Businessworld Issue Dated 28-05-2012)
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Experiences of taxpayers reveal that once an assessment is made raising a demand, the tax officials insist for payment. In matters concerning collection of tax, the Assessing Officer rarely exercises the discretion in taxpayer's favour despite the fact that the law authorizes him to keep the demand in abeyance "as long as the appeal remains undisposed of". Orders are sometimes non-speaking, ignoring the CBDT circular and various judicial precedents. If demands are arbitrarily enforced by the tax officials rather than the requirements of law, it may add to the current adverse environment in which the industry is functioning.Recently, a communication from the CBDT inter alia stated that in area of parameters of performance of tax officials, achievement of the target revenue collection shall be given the highest weightage and will also be a major factor while considering future placements. The instructions contained in the communication carry the risk of miscarriage of justice and undue hardship to the taxpayers. The Gujarat High Court has issued a notice to the CBDT in a PIL challenging the CBDT's decision to link promotions and postings of officers with tax collection made by them.Several writ petitions are filed as tax officials adopt coercive measures to collect tax. In matters relating to stay of demand, various circulars / instructions are issued by the CBDT. In the process of tax recovery, various circulars / instructions and judicial precedents which have a binding effect are disregarded by the tax officials.The CBDT's communication dated 1 December 2009 clarified that in stay matters, Instruction No. 1914 dated 2 January 1993 holds the field which prescribes certain guidelines in relation thereto.In Maheshwari Agro Industries v. UOI1 the Rajasthan High Court urged the CBDT to issue appropriate guidelines for grant of stay in spirit of the 1969 Instruction and to clarify its uniform application all over the country.In KEC International Ltd. v. B.R. Balakrishnan2 the Bombay High Court observed that in a large number of matters, orders were being passed by the department only with the idea of effecting recovery before 31 March though such orders could have been passed earlier in detail and after recording proper reasons. The Court laid down parameters required to be followed by the tax officials when a stay application is made by the tax payer. Unfortunately, the guidelines are often breached by the tax officials.Recently, in UTI Mutual Fund v. ITO & Ors3 the Bombay High Court again laid down guidelines to be borne in mind for effecting recovery, relying on the decision of KEC International.In Lopamudra Misra v. ACIT4 the Orissa High Court held that the revenue authorities must act in a fair and legal manner in order to gain faith of the assessee and to create confidence in the tax payers' mind and for smooth administration of the law. In this case, the Assessing Officer informed the petitioner that in case the tax liability was not discharged, she would be charged with interest, penalty and prosecution. The Court observed that such an action on the Assessing Officer's part was not a healthy practice.The CBDT should consider that decisions of the Assessing Officers may be reversed by appellate forums and hence a Master Circular may be issued in matters concerning stay of demand, keeping in view the interests of the taxpayer. This would avoid cases of unjustified recovery and will also help in creating an environment of trust, co-operation and genuinely contributing to the exchequer.1. taxman.com 68 (Raj), 2. ITR 158 (Bom), 3. WPL No. 606 of 2012 (Bom) 4. WP(C) No. 2113 of 2011 (Orissa)(The author Jayesh Desai is Manager in Deloitte Haskins & Sells)
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Standard & Poor's said on Monday that India could become the first of the so-called BRIC economies to lose its investment-grade status, sending the rupee and stocks lower, less than two months after cutting its rating outlook for the country."Slowing GDP growth and political roadblocks to economic policymaking are just some of the factors pushing up the risk that India could lose its investment-grade rating," the ratings agency said in a statement issued Monday on a report dated June 8.India's sovereign rating is BBB-, the lowest investment grade rating, and in April S&P lowered its outlook on the rating for Asia's third-largest economy to negative from stable.S&P said the new report gave further detail as to why India's investment-grade rating could be at risk. The BSE Sensex cut gains after the S&P statement, while the rupee skidded to 55.55 to the dollar from 55.45 earlier after the S&P statement. The benchmark 10-year bond yield showed a more muted reaction, trading down 1 basis point at 8.34 percent from its previous close."While INR and bonds moved on this S&P headline, it may not have been warranted. While the report is new, the content in itself is probably not," said Kumar Rachapudi, fixed income strategist at Barclays Capital in Singapore."The discussion in this report has largely been covered in their previous report when S&P revised outlook in April."The two analysts who wrote the report could not immediately be reached for comment.India recently posted March quarter GDP growth of 5.3 per cent, its weakest in nine years and far below expectations."Failure to advance with more liberalization might reduce India's long-term growth potential and thus hurt its sovereign rating," the report said.The so-called BRIC economies consist of Brazil, Russia, India and China.India has the lowest rating from S&P of all the BRIC countries, and is the only one with a negative outlook from the rating agency, it said in the report.Markets DownStandard & Poor's said on Monday that India could become the first of the so-called BRIC economies to lose its investment-grade status, sending the rupee and stocks lower, less than two months after cutting its rating outlook for the country."Slowing GDP growth and political roadblocks to economic policymaking are just some of the factors pushing up the risk that India could lose its investment-grade rating," the ratings agency said in a statement issued Monday on a report dated June 8.India's sovereign rating is BBB-, the lowest investment grade rating, and in April S&P lowered its outlook on the rating for Asia's third-largest economy to negative from stable.S&P said the new report gave further detail as to why India's investment-grade rating could be at risk.(Reuters)
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It had started to hurt. And the Reserve Bank of India (RBI) felt it was time to do something drastic about it. The medicine -- a large 50 basis points (bps) cut in the repo rate to 8 per cent, much more than the anticipated 25 bps.Growth had slumped to 6.1 per cent in the third quarter of 2011-12 from 8.3 per cent in the corresponding quarter of the last fiscal. On the brighter side, headline wholesale price index (WPI) inflation, which had held firm at above 9 per cent during April-November 2011, had moderated to 6.9 per cent by end-March 2012, in line with the central's bank's projection of 7 per cent. It was a good time as any to cut the repo rate."The rate cut is a substantial and meaningful measure. It should give banks the confidence to bring down wholesale deposit rates, which in turn would reflect in a reduction in lending rates. This would ease the interest costs of the corporate sector, as also give a boost to retail demand. The impetus that this would provide to the economy should see us achieve the projected pick-up in GDP growth towards the 7.3 per cent level indicated by RBI in its policy statement", says Chanda Kochhar, Managing Director & CEO at ICICI Bank.Can We Expect More Rate Cuts?The higher-than-expected rate cut resulted in the 10-year benchmark bond yield quoting 10 bps lower on the day at 8.35 per cent right after the policy announcement. But before you sniff further rate cuts, what is important to note is that inflation softened despite the rise in global crude oil prices."It implies an absence of commensurate pass-through to domestic prices. Fuel prices are expected to remain elevated in the near future", notes out Madan Sabnavis, chief economist at CARE Ratings.The RBI makes a mention of this pressure point. "Going by the recent burden-sharing arrangements with the oil marketing companies (OMCs), the budget estimate of compensation for under-recoveries of OMCs at the present level of international crude prices is likely to fall significantly short of the required amount. Any slippage in the fiscal deficit will have implications for inflation"."A major factor affecting our growth and inflation prospects would be the exchange rate. The rupee has been volatile and the depreciation witnessed in 2011-12 has impacted the bottom lines of companies", points out Sabnavis. According to him, 25-30 per cent of our WPI could be influenced by exchange rate movement. "We expect upside risks on inflation to remain and therefore room available for further rate cuts is limited".Another factor that limits further rate cuts by RBI is the economy's trend rate of growth -- the rate that can be sustained over longer periods without engendering demand-side inflationary pressures. "Even though growth has fallen significantly in the past three quarters, our projections suggest that the economy will revert close to its post-crisis trend growth in 2012-13, which does not leave much room for monetary policy easing without aggravating inflation risks", says RBI. It goes to explain the main reason for the apparent decline in the trend rate of growth relative to the pre-crisis period -- the emergence of significant supply bottlenecks in infrastructure, energy, minerals and labour.Abheek Barua, Chief economist, HDFC Bank, has a different view on this issue. While the central bank has highlighted risk factors such as firm global commodity prices, possible hikes in administered prices of items such as fuel, power and coal and structural pressures from food prices, he feels there is a crucial difference between the central banks's reading of inflation now and its assessment of price pressures a month ago. "The central bank now seems more certain that pricing power of domestic producers has weakened considerably a fact that is of course reflected in the trajectory of core inflation", says Baruah. Core inflation has come off to below 5 per cent in end-March 2012, down from the high of 8.3 per cent in November 2011.Liquidity Will Be Under StrainThe central bank has left the cash reserve ratio (CRR) -- the proportion of deposits required to be held in cash by banks with the RBI -- unchanged at 4.75 per cent. But the Marginal Standing Facility which allows banks to borrow overnight to the tune of two per cent of their net demand and time liabilities (current, savings and fixed accounts) from the earlier 1 per cent.Liquidity has been tight since November 2011 with the borrowing approximately Rs 1,22,785 crore from the RBI's repo window. The RBI also upped its open market operations (OMO) -- it purchased Rs 1,42,500 crore of securities up to end-March 2012 compared with Rs 78,800 crore up to end-March 2011. This is over and above the cut in the CRR by 125 bps to 4.75 per cent.Let us look at the liquidity math now. The 17 per cent increase in bank non-food credit estimated by the RBI implies an increment of Rs 7.99 lakh crore in bank credit during 2012-13; the 16 per cent increase in bank deposits implies Rs 9.78 lakh crore increment in bank deposit during 2012-13. If you were to adjust the bank deposit for 4.75 per cent CRR and subtractg bank credit (food and non-food) from the same, banks would have surplus of Rs 1.16 lakh crore (Rs 9.32 lakh crore minus Rs 8.15 lakh crore)Further, net government borrowings stand at Rs 4.79 lakh crore, of which approximately Rs 1.92 lakh crore (40 per cent) would probably be held by banks based on RBI's data on present holding pattern of central government securities. Therefore, there could be a short fall of around Rs 80,000 crore, which would have to be supported by further OMO purchases by the RBI or another CRR cut, assuming the government meets its borrowing targets.
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Credit Cards and Debit Cards have become synonymous with money in one's pocket, at least in the urban setup. Their penetration is increasing at a pace one couldn't have possibly imagined a couple of years ago. Age-old institutions like the Indian Railways are now asking travelers to pay by card, if not for anything else, but ease of use.Harsh Roongta, Chief Executive Officer at Apnapaisa.com, a comparative personal finance portal, and Suresh Sadagopan, founder of Ladder 7 Financial Advisories discuss with Tanushree Pillai the advantages and pitfalls of credit and debit cards and how to use them wisely.What are credit cards and debit cards in layman's terms?Sadagopan: One can buy things on credit up to the pre-approved limit in a credit card. Basically, you are spending money you may not have now. A debit card, on the other hand, is linked to the bank account and one can spend up only what is available in one's account. This is equivalent to buying with one's cash. One does not have a chance to spend beyond what one has.Roongta: Carrying cash can be cumbersome and dangerous at times. But, plastic cash or credit cards / debit cards make life a lot simpler. These cards can be swiped at almost any listed merchant establishment around the globe for purchasing any product or services. You can also withdraw cash from ATM on your credit / debit card. You can get a credit card from any issuer without any banking relationship with them but debit card is issued only against your bank account. Some secured credit card requires the user to have a fixed deposit with the card-issuing bank.What are the plus points for using credit/debit cards?As far as credit cards are concerned, the advantages are • Purchase products or services possible whenever and wherever you want, without ready cash and one can pay for them at a later date.• Have the option of paying only a part of the total expense. The balance amount can be carried forward, with an interest charged (though the interest rate is very high)• Enjoy a credit limit without any charges for a limited period (mostly 20 to 55 days). If you do not pay the full amount on due date, you are likely to lose free credit period• Convenient for very short duration loan where convenience not cost is the consideration• Only if one does not have the capacity to pay at the end of the cycle and goes into revolving credit, that the problems startAs far as Debit Cards are concerned the advantages are:• Purchase products or services whenever and wherever you want, without the need for carrying cash. The amount gets directly debited to your bank account.• Controls unwanted impulsive buying habits, as the user cannot buy anything above his saving account's amount.• No interest has to be paid as the amount is directly debited from the account at the time of purchase. Hence, no worries about delayed payment and being penalized.There must be a lot of disadvantages as well. Why don't you spell these out?Of course, there are a lot of disadvantages . As far as credit cards are concerned• User may become an impulsive buyer and tend to overspend because of the ease of using credit cards. Cards can encourage the purchasing of goods and services you cannot really afford.• Credit cards are a relatively expensive way of obtaining credit if you don't use them carefully, especially because of high interest rates and other costs.• Lost or stolen cards may result in some unwanted expense and inconvenience.• The use of a large number of credit cards can get you even further into debt.• Use of credit card, introduces an element of risk as the card details may fall into the wrong hands resulting in fraudulent purchases on the card. Fraudulent or unauthorized charges may take months to dispute, investigate, and resolve.• Any delays in payment results in hefty late payment charges along with high interest rate on amount due and also being reported as default in CIBIL As far as Debit Cards are concerned• No revolving credits facility. The entire amount gets debited from the bank account at one go. Hence user cannot buy now and pay later. • Lost or stolen cards may result in some unwanted expense and inconvenience.• Using a debit card, introduces an element of risk as the card details may fall into the wrong hands resulting in fraudulent purchases on the card.What are the biggest misconceptions people have about credit cards?People are completely mistaken about the concept of revolving credit. It is believed that one pays interest only on the outstanding bill amount. But the truth is whatever new purchases one make during revolving credit facility, the new purchases gets added to old dues and the interest is charged on the entire amount (i.e. old dues + new purchases) • Cash withdrawal on credit card is about the same as using a debit card at an ATM – cash withdrawal on credit card can cost the card holder minimum Rs. 300 per transaction or up to 2.5 per cent of amount withdrawn, whichever is higher.• Paying minimum amount due on your credit card each month is okay – it will save the day temporarily, but will grow into a big debt one day with a very high interest rate.• Transferring the balance of one credit card to another is an effective way to manage debt – it will certainly save the user from higher interest rates on revolving credit, but having multiple cards with higher debt will ultimately become unmanageable for most people.What's the typical payment process involving- interest rates, grace period (if any), late fees etc like?Maximum credit period usually varies from card to card between 20 and 55 days. Interest rate on revolving credit facility can go as high as 3. 5 per cent per month or 42 per cent per annum (3.93 per cent per month or 47.19 per cent per annum including service tax). Late payment fees varies between R s 100 to Rs 700 per month plus service tax.What is the right way of using credit cards?• Use debit card instead of credit card for everyday shopping like groceries, clothes, etc. • Using credit card excessively in lieu of cash can lead to debt. Always remember credit card is an alternate to money but not money, so use it wisely.• Don't get into the habit of paying minimum due as the outstanding amount will pile up into large debt and one can end up paying very high interest rate. Stay within the credit limit. Lower balances are easier to manage. • Having large credit card dues will also have a significant impact on your home loan eligibility if required in future. Lenders determine the borrowers ability to take on additional EMI burden vis-à-vis his current net income. Larger the burden, lower the loan eligibility amount.• Persistent delays or defaults can affect your credit rating. Defaulting on your credit card dues jeopardizes your ability to get loans or credit cards in future. Even a bad credit history of a co-borrower can ruin your chances of getting a loan.How does one ensure proper safety of both credit and debit cards?• Go for a photo identity credit card. When your photo is imprinted on a card it can double as an identity card as well.• Sign your card immediately after receiving it and do not write PIN on the card jacket.• Do not lend your card to anybody.• Preferably carry your card separately from your wallet• While buying a product over the phone or mail order, be sure to note all the details carefully including postal address. Note down the name of the person who spoke to you as well as exact amounts, as these will be necessary in case of a disputed billing statement.• While using your credit / debit card at an ATM, make sure nobody sees you punch in your PIN number.• If you lose your card, call and inform the card issuing authorities and make a police complaint as well.• Check your card when a merchant returns it and make sure that it is your card that he has returned.• As far as possible, try and be present when the card is swiped / the dial-up is taking place to ensure that there is no misuse of the card.• Verify the amount before signing the charge–slip.• Always verify purchases with your billing statement. Any discrepancies should be informed immediately in writing.• Notify any changes in your address / telephone number to the card issuer immediately.• Watch out for mobile alerts of spends on your cards and promptly dispute if the debt is unauthorized.• Mask the CVV number as this can be misused to transact by someone who knows one's card no. Ideally, CVV numbers should be committed to memory ideally.How does the process of balance transfer work?It is a facility where an outstanding balance on one credit card is transferred to another at a small fee or at a lesser interest rate for a pre-determined period . This is an introductory incentive offered to customers by credit card companies who want to acquire customers by weaning them away from their present credit card companies. A new credit card company may be willing to take over up to 75 per cent of the amount outstanding on the customers' old card to his new credit card account with them at a lower rate of interest. Normally the user is given a time limit of six months at a lower rate of interest to clear his transferred amount. However, user could possibly be charged a higher rate of interest for new purchases. If the user is unable to clear his balance transfer amount within six months, he will end up paying a higher rate of interest with the new credit card company also.How can one have multiple credit cards without getting trapped into a web of unending debt?Roongta: Different credit card companies have different monthly billing cycles. Therefore, if you have access to different credit cards, you are in a position to make full use of the interest-free grace period provided by the respective card companies.Whenever one applies for a credit card, the card issuer pulls his credit history from the CIBIL, which gets registered as an enquiry in his credit report. Excessive numbers of such enquiries indicates that he is "Credit Hungry" and in an urgent need of money. This makes the providers more cautious while evaluating his application for credit cards or any loans. Sadagopan: It is better to have one credit card and use it and pay off the amounts on time. Going for another credit card just to borrow to pay off a third credit card will be a dumb thing to do. It may be a better idea to take a personal loan and payoff the credit card debt as personal loans come at lesser interest rate as compared to credit card debt.
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At eighteen you get a vote. The Ahmedabad-based Madhavpura Mercantile Cooperative Bank (MMCB) got one on Thursday -- a big vote of no confidence from Mint Road. Twelve years after it was taken on a joyride by former Big Bull, Ketan Parekh, the Reserve Bank of India (RBI) blew the whistle -- its license to carry on banking activities was annulled.In the case of MMCB, it was a question of when it will be asked to down its shutters. The central bank's inspection report showed as on end-March 2011, MMCB had a negative net worth of Rs 1,316.50 crore, negative capital adequacy of 1,941.1 per cent, gross bad-loans of Rs 1,126.55 crore (at almost 99.99 per cent of gross advances) and accumulated losses of Rs 1,357.41 crore.The End GameOn March 16 this year, a show-cause notice was issued to MMCB as to why its banking license should not be revoked. Two days later, the bank replied its financial mess was due to the Rs 1,200-crore fraud perpetrated on it by share brokers (including Ketan Parekh and his associates) in collusion with the then members of its Board of Directors. The bank said a sum of Rs 803.00 crore or 72 per cent of the total amount "were unsecured due to unenforceable securities, defective documentation and hence not recoverable". It conceded that the reconstruction scheme for the bank failed due to non-fulfillment of commitment of UCBs (urban co-operative banks) to contribute as they feared for the safety of their monies.An attempt to salvage the bank with the help of a new set of investors failed to pass muster with the central bank. MMCB came up with a revival plan — a loan of Rs 1,000 crore sourced by a non-resident Indian from the World Bank and a few European banks. This unnamed NRI was to put in Rs 500 crore of his own funds for the next ten years. It was later found MMCB had no clue about the antecedents of the NRI or the source of funding. Worse the bank was also not sure if all this will help it to get back on its feet. Shakeout in UCBs on CardsMMCB is a warning to other UCBs – they have to be relevant or the game's over. Few have a strategic vision or financial products worth a name. The shakeout has started. At end-March 2011, there were 1,645 UCBs. The RBI has received 158 merger proposals for merger, no objection certificates have been issued to 95 of these proposals. Out of the 95 mergers reported so far, 59 comprised of UCBs having negative net worth. The maximum number of mergers took place in the State of Maharashtra (58), followed by Gujarat (16) and Andhra Pradesh (10).The RBI Report on the Trend and Progress of Banking in India for 2010-11 (the latest available) shows the fragmented nature of UCBs. As on end-March 2011, only six UCBs had assets of more than Rs 500 crore, but accounted for 59 per cent of the total assets of the sector. UCBs with assets between Rs 100 crore and Rs 500 crore had 27 per cent of total assets. The remaining share of 14 per cent of total assets was attributable to UCBs with smaller asset size (Rs 15 crore-100 crore), but which accounted for almost 73 per cent of total number of UCBs.
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