As WPI inflation rate edged up to (-)4.54 per cent in September, India Inc lon Wednesday (14 October) said there is scope for banks to slash interest rates further and the green shoots of economic recovery are "visible". Expressing concern on the rise in prices of food articles, industry bodies said the government must take steps to ensure the prices of essential commodities remain in check. "Following the cut in the policy rate by RBI, several banks have revised downwards their base rate. However, there is room for further cuts in the lending rate by banks. "As the gains of a lower interest rate regime get transferred to both consumers and investors, demand would pick up and we hope this brings pricing power back into the hands of producers," Ficci president Jyotsna Suri said. WPI inflation rate rose marginally to (-)4.54 per cent in September, with pulses, vegetables and onion turning costlier, even as the overall deflationary trend persisted for the 11th month in a row. Assocham president Rana Kapoor said WPI inflation and IIP data indicate that "green shoots of economic activity might finally be becoming more visible". Moreover, he said, swift policy action is desired for reviving investments and business confidence. "Continuous negative growth of WPI inflation is facilitating the businesses in terms of increased price cost margins vis- -vis decreased cost of raw materials. Also there are signs of revival in demand scenario," PHD Chamber president Alok B Shriram said. "With inflation remaining on a comfortable trajectory, easy monetary policy stance would expand further in terms of more repo rate cuts as there is a strong need to boost demand in the economy," he added. The wholesale price index-based inflation was (-)4.95 per cent in August. It has been in the negative zone since November. In September last year, inflation was 2.38 per cent. Inflation in food articles inched up to 0.69 per cent in September, from (-)1.13 per cent in August. "The central and state governments need to take proactive steps to contain any further rise in prices of essential commodities like pulses and onions," Kapoor said. Onion and pulses turned dearer, with inflation at 113.70 per cent and 38.56 per cent, respectively, in September, as per official data released today. The rate of price rise in vegetables was at (-)9.45 per cent as against (-)21.21 per cent in August. Besides pulses and onion, the food items which became dearer in September were eggs, meat and fish (2.02 per cent), milk (2.16 per cent) and wheat (3.34 per cent). The Reserve Bank mostly tracks the consumer price index- based inflation for its monetary policy decisions. CPI, or retail inflation, for September rose to 4.41 per cent, from 3.74 per cent in the previous month.(PTI)
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Not just stocks, hold your investments in gold, mutual funds, IPOs in your demat account to reach your goals in a more cost-effective way, writes Sunil Dhawan The number of demat accounts in the country is rising and had crossed 2.3 crore mark. If you think demat is only for investing stocks, there’s more to it. A demat account has its close cousin called the trading account, without which it’s merely a store for holding securities in digital form. So, there’s a trading account which get attached to the demat account. Through a trading account, one may invest in stocks, IPOs, mutual funds and even gold and hold them in demat account. There are two ways to go about it – Call up your banker else get in touch with a share broker. Both of them are known as depositary participant (DP) in demat parlance. They in turn have to be registered with either NSDL or CSDL. Ideally, open the demat account where demat, broking and savings account can be linked. This 3-in-1 account provides seamless transfer of funds and securities. Do not hold a demat account with one company and a trading account with another since it delays the settlement of shares and cash. Also, ensure if the transaction can be completed online through a website or will it be routed through software installed on your desktop. Website access can be had from any terminal and might just help. Get to know the additional formalities of you wish to trade through your mobile. KYC fulfilment could only be a part of the exercise, read all the agreement papers carefully. Discuss with the banker on important concerns related to investing, holding and selling of securities to get a fair amount of ide on how the process works. Cost is an important factor while opening demat account. There is a cost attached to opening and maintaining the demat account and also cost related to brokerage charges when you buy, sell securities. Even when there is no transaction, you end up paying annual fees. Therefore, be careful of costs. Brokerage cost varies as per volume transacted. So, check on costs of the DP accordingly. Many might waive joining fees and even maintenance fees for first year. Get to know from friends, colleagues about such accounts on the website's reliability, ease of fund transfer and transaction, and the customer service. The brokerage i.e. the cost that you pay to buy and sell securities is a recurring cost and can potentially draw down returns. The brokerage differs from company to company based on the volumes. To give an indicative figure, one may charge 0.75 per cent for a quarterly volume of less than Rs 10 lakh (Rs 1 million) and 0.25 per cent for an amount in excess of Rs 5 crore (Rs 50 million). Some online brokers insist on a minimum transaction volume for which they charge their lowest brokerage. The brokerage also varies depending on the type of the trade. While one may offer a low rate of 0.25 per cent on delivery, another may offer even lesser rate of 0.02 per cent on intra-day trading. Therefore select brokerage house based on your requirements, the kind of trade you would do and the amount of transactions. Not just stocks, one may invest in mutual funds too from the online broker’s trading platform and get the units transferred to the demat account. One may even start SIP in any of the mutual funds scheme. Also, buying gold is easier and less costly than acquiring it in physical form. Invest in Gold ETF’s from the same account. To give you an example, how cost-effective your demat/trading account can be, here’s a gold buying example. Today, on the 14th October, bank is charging Rs 2,900 for 1 gram of gold as against the gold price of Rs 2,700. Compared to them, gold ETF is available at Rs 2,400 through stock exchanges. More than 7 per cent savings right up front, it saves you from the burden of security, safety and purity.
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Suchetana RayThe mess is getting bigger for Bank of Baroda with two agencies -- CBI and Enforcement Directorate (ED) -- swooping down on the Bank on Tuesday (13 October): .While ED has arrested 4 people in connection with the illegal remittance of foreign exchange from the Ashok Vihar branch of Bank of Baroda, CBI arrested 2 people. CBI’s probe so far shows that Rs 6,172 crore was laundered to Hong Kong using newly opened 59 current accounts of alleged shell companies masquerading as export-import entities. And based on this investigation, ED today arrested Kamal Kalra, Chandan Bhatia, Gurcharan Singh Dhawan and Sanjay Aggarwal. Top sources in the Directorate allege that Kalra allegedly works for HDFC Bank and all these individuals have been arrested for helping and abetting laundering of money. While CBI today arrested AGM and branch head of BoB in Ashok Vihar, SK Garg and foreign exchange division head, Jainis Dubey. CBI sleuths point out that this small branch in New Delhi has witnessed a surge in forex transactions, which continued for a year. The bank report claimed that forex business increased to Rs 21,528 crore in the 2014-15 fiscal as against Rs 44.98 crore in the year 2013-14. Sources in the investigating agency say that despite the huge increase in foreign exchange being remitted to alleged suppliers based out of Hong Kong, the Bank failed to obtain any report on these foreign suppliers. CBI raided the Ashok Vihar branch of Bank of Baroda in New Delhi last Saturday after the investigating agency decided to launch a probe into certain foreign remittances by the Bank. Sources allege that Rs 6172 crore has been illegally remitted to Hong Kong from Bank of Baroda. “This is a case of black money being siphoned out”, said a source in CBI on conditions of anonymity. Several private companies are also being probed in this connection. The Bank of Baroda stock has been reeling in trade for two consecutive days following these probes by agencies.
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RBI circular on non-promoter directors in `defaulter’ firms to be challenged, writes Raghu MohanExecutive directors (ED), managing directors and chairmen at state-run banks may well find life turning difficult. A raft of enquiries made by the Central Bureau of Investigation (CBI) into dodgy credit decisions at these banks have emboldened unions who are set to move court to bring the top personnel at these banks under “codified service rules". On the anvil is also a legal challenge to Reserve Bank of India (RBI) on its decision to exclude non-promoter directors from the list of wilful defaulters “except in the rarest of the rare” cases. As of now, unlike bank staffers up to the level of chief general managers who come under departmental rules, the top three in a state-run bank face no such scrutiny. It is partially explained by the fact that when someone is posted to the level of ED and above, he or she becomes an employee of the Government of India; until then, you are an employee of the bank you work for. “You may be enquired for acts of omission or commission under the IPC, by the Central Bureau of Investigation (even after retirement), but from within the bank, there are no checks and balances once you are posted as ED or higher”, explains Vishwas Utagi, general secretary-All India Bank Employees Federation (AIBEA). The issue has now come under sharp relief because of the feeling that junior officers at state-run banks are being harassed for acts done by their seniors who may have since moved up to ED and higher positions at other such banks (and who may have since retired). That junior officers (CGMs and below) and the bank are now left holding the can. Do You Believe This?The P J Nayak Report Committee to Review Governance of Boards of Banks in India (13th May 2014) refers to a working paper: `Are the Monitors Over-Monitored? Evidence from Corruption, Vigilance, and Lending in Indian Banks' (A. Banerjee, S. Cole and E. Duflo, per, Harvard Business School; 2007). It argues lending decisions of loan officers of state-run banks are impacted by fear of prosecution for corruption. The analysis is based on a standard event methodology to assess the impact of actions taken by the Central Vigilance Commission (CVC) on lending. It encompasses all commercial banks in India and covers the period between 1981 and 2003. What are the conclusions? Overall lending reduces dramatically in the branches that face CVC action; there is also a contagion effect as lending in branches located in close proximity to the affected branch also goes down; unlike many other transitory 'shocks', the impact of CVC action on lending is persistent; it takes slightly more than two years from the time of CVC action for lending to recover; and the impact of the consequent loan officer conservatism is predominantly felt by small borrowers, who are traditionally considered by banks as opaque and risky.For details click hereWhose Line Is It Anyway? A vast majority of the non-performing assets (NPAs) in the system and those referred to the Corporate Debt Restructuring Cell (CDR) did not become what they became overnight, but have festered around. Take the case of Kingfisher Airlines’ Rs 7,000-crore plus debt (it varies on who you seek out to know the truth!) -- the writing on the wall has been around for four years now, but till date save for United Bank of India (United Bank), not a single bank has moved to nail it as a wilful defaulter. Now it’s a different matter that the Calcutta High Court had observed that United Bank’s empowered committee which decides on who is a “wilful defaulter” had four members instead of three as per RBI norms. But that should not have stopped United Bank (they could have reconstituted the said Committee) or other banks’ (whose Committees were in compliance with Mint Road’s norms) from pressing ahead with their legal options. We now get to the legal challenge from the unions on RBI’s decision to exclude directors from the list of wilful defaulters. The directive (of 1st July 2014 and updated up to 7th January 2015) which came as an amendment to the central bank's master circular on wilful defaulters had said: “In view of the limited role of non-promoter and non-whole time directors (nominee and independent directors) in the management of a company's debt contracts, their names shall now be excluded from the list of wilful defaulters, except in the rarest circumstances which also have been specified in the master circular”. Mint Road had pointed to Section 2(60) of the Companies Act (2013) which defines an officer who is in default to mean only the following categories of directors: · Whole-time director· Where there is no key managerial personnel, such director or directors as specified by the Board in this behalf and who has or have given his or their consent in writing to the Board to such specification, or all the directors, if no director is so specified;· Every director, in respect of a contravention of any of the provisions of this Act, who is aware of such contravention by virtue of the receipt by him of any proceedings of the Board or participation in such proceedings and who has not objected to the same, or where such contravention had taken place with his consent or connivance. “Therefore, except in very rare cases, a non-whole time director should not be considered as a wilful defaulter unless it is conclusively established that (i) he was aware of the fact of wilful default by the borrower by virtue of any proceedings recorded in the Minutes of the Board or a Committee of the Board and has not recorded his objection to the same in the Minutes, or (ii) the wilful default had taken place with his consent or connivance”. The unions’ contend that given the state of the dud-loan problem, all concerned on the board must be put under scrutiny, “more so as some wax eloquent on corporate governance”. The quality of deliberations at state-run banks is an eye-opener. The P J Nayak Committee to Review Governance of Boards of Banks in India (13th May 2014) noted a detailed scrutiny of board notes suggests that state-run banks’ boards focus inadequately on discussing long-term strategy. “The focus is more tactical and less strategic, such as the location of branches and ATMs. Moreover, the deliberations are driven from the vantage-point of compliance rather than business economics. There is generally weak evidence of the monitoring of measurable disaggregated business goals in relation to targets” In one bank, the taxi-fare reimbursement policy got the same coverage as its NPA recovery policy! Other non-strategic issues discussed include purchase of office premises at Bhopal and provision of leased residential accommodation to officers in six locations (their inclusion in board deliberation - absent in private sector banks - probably reflecting vigilance enforcement concerns). Other non-strategic issues discussed include the details of a lecture by a bank's boss at a college; and extensive coverage of the Finance Minister's visit to the bank! And given the pile of dud-loans, there should be extensive coverage of the Finance Minister's visit to these banks!!
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By Sumit Sharma In the single biggest foreign direct investment in a local mutual fund, Nippon Life Insurance has decided to increase its stake in Reliance Capital Asset Management to 49 per cent from 35 per cent. Nippon life will thus invest Rs 1,196 crores for the additional 14 percent stake in Reliance Capital Asset Management. Following the investment by Japanese financial services company, Reliance Capital Asset Management gets a valuation of Rs 8542 crores. The mutual fund company will thus be renamed as Reliance Nippon Life Asset Management. ``Together we (Reliance Capital and Nippon Life Insurance) are determined to grow our businesses multifold and have stronger footprint in India and abroad,’’ Anil Ambani, chairman of Reliance Group said. ``Both Reliance Capital and Nippon Life have enjoyed an extraordinary relationship in the last few years and we see this mutual respect and commitment growing stronger with time.’’ This transaction is expected to be completed within the current financial year, subject to regulatory approvals. As of June 2015, Reliance Capital Asset Management was the country’s largest asset manager with Rs 243,162 crores of funds under mutual funds, pension funds, managed accounts and offshore funds under management. Investors in India are steadily increasing their exposure to mutual funds on optimism that the Narendra Modi led government will be able to speed up economic growth. Local stocks had flared up from before Modi led the Bharatiya Janata Party to a historic victory in May 2014. Funds under management with mutual funds have grown rapidly to Rs 13.16 lakh crores as of quarter ended September 2015 from Rs 10.6 lakh crores a year earlier. The rapid increase in funds under management is also prompting mutual funds to increase their size as also number of products and the marketing teams. This is a far cry from the time when several foreign mutual funds actually exited local partners especially after the 2008 global financial crisis. Among those that moved out of India include Allianz Capital, Morgan Stanley, ING, Daiwa, Pinebridge, Fidelity and Deutsche Bank mutual fund. India has at present 44 mutual funds. Analysts say the industry and investors would be better served with fewer funds. Of the 44 mutual funds with Rs 13.16 lakh crores, the top 10 funds account for Rs 10.4 lakh crores. The remaining 34 mutual funds may need to increase size to reap better benefits of economies of scale. Nippon Life Insurance is an over 125 years old insurer and a global Fortune 500 company that manages over US$520 billion (Rs 33.8 Lakh crore) in assets -- amongst the largest total assets in the world for any life insurer. The company is one of the largest life insurers in the world.
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Fullerton India, non-banking financial company, announced a new personal loan product 'Nari Shakti’, offering at a special rate of interest, exclusive to salaried women customers.Women applicants from metropolitan, urban as well as semi urban areas can now avail unsecured personal loans from Fullerton India at a special interest rate, which is 200 bps below its normal applicable personal loan rate. One person can avail loan amount upto Rs 10 lakh and laon tenure has been fixed till 48 months.Shantanu Mitra, Managing Director & CEO, Fullerton India said, “Nari Shakti is a step towards empowering women and enabling them to be financially independent. Indian women with limited credit history often find it difficult to get access to personal loans, we therefore believe that this loan offering will encourage more women to realize their dreams and better their socio-economic status within the society.”Fullerton India offers loan against property, sme and business loans, commercial vehicle and two-wheeler loans, personal loans, rural livelihood loans and rural mortgage.Also, the company has its rural presence as Gramshakti, which has touched the villagers across India through initiatives such as ‘Cattle Care’ camps and ‘Save the Eye’ camps since January, 2008.(BW Online Bureau)
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Sunil Dhawan on how to make financial plan the starting point to navigate through various life stages to reach your goals no matter how uncertain the journey isWhen markets swirl, most investors get worried about their investments. Lately, there has been tremendous volatility in the markets and different indices are experiencing a fight between the bulls and the bears. Macroeconomic factors may still be fine but global headwinds are keeping the FII investors largely away from the markets. Indian corporate sector results, expected to be out soon after the Infosys results, may not be encouraging too and the consumption story doesn’t look to be promising either.Does all this market action require you and me to rejig our investments? Should one consider selling or buying, stocks, mutual funds or bonds because of such movements in the market? Yes, if you are a trader, there are always opportunities especially when volatility is high.But, for most of those who are into chasing their goals, markets and its movements are irrelevant. The fear of losing money comes to mind if there is no financial plan in place. For all others who have a financial plan in place, the uncertainty and volatility attached with market are immaterial and largely accounted for.Most of us treat investments as an all-inclusive deal to meet their goals. However, investment planning is only a part of the larger process called the financial planning. Financial planning may be defined as, “The process of meeting life’s goals through proper management of finances.” Without a proper financial plan in place, one should not venture out in searching and investing in different products.The right start: A financial plan will tell you what you need to achieve in terms of your financial goals. Therefore, identifying the goals mark the beginning of any financial plan. Life goals can include buying a home, saving for your child’s education, marriage or planning for retirement. With goals identified and estimated, one gets a control of their finances. The temptation to time the market or meet short-term goals and wait for longer term goals doesn’t arise.Prioritize: Once the goals are written down, you need to prioritise them. Prioritizing helps in allocating existing resources and future investments towards a more important goal. For example, saving for retirement may be more important than buying a luxury car or going on an overseas vacation. Or, for instance, you might like to acquire a house in the next three years. This could mean an expense of around Rs 10 lakh as down payment. This being a high-priority goal, your investments should ideally be focused more on this rather than, say, on retirement.Therefore, the basis hinges most importantly on the criticality of the target goal and also occurrence of that event. So, for someone with small kids, children needs and retirement may be equally important and adequately taken care of. However, with teenage kids, children education or marriage attains importance over say retirement. Also, children needs are met largely around a standard age and hence targeting it initially is imperative. Goals like vacation, buying a second home could then be postponed. Therefore, early planning helps in provisioning for all goals arising at various stages of life by prioritizing them.Get the Link Right: Once you have linked your investments to your goals, it’s time to relax. For long term goals, make use of equities ideally through equity mutual funds. Similarly, balanced fund or debt funds can be used for medium to short-term goals.Choose well-performing equity MF schemes and start saving regularly through them, preferably through SIP’s.Studies done in the past have suggested that equity delivers the highest inflation-adjusted returns among all asset classes over the long term. The underlying message here is the time horizon--the longer you remain invested in equity, the higher the returns you earn. Irrespective of the risk profile, therefore it becomes a compelling case for one to save through equity either directly through stocks or equity mutual funds.How much to invest: Once the goal is set and prioritized, it’s time to see how much one needs to invest to meet it. To achieve the specific goal it is important to initially calculate the potential future value of the corpus required after adjusting for inflation. This helps in exactly saving the right amount and not more or less. Illustratively, a marriage that costs Rs 25 lakh at today’s cost would make you shell out nearly Rs 70 lakh after 21 years at an assumed inflation of 5 percent. Now, assuming equities could generate a conservative return of 12 percent growth over the next 21 years, estimate the amount of monthly savings required to meet the need. For short-to medium term, accordingly, find out how much to save at a much conservative growth rate.End note: The reason to stay invested in a scheme, or to exit it, should not be based on sentiments. An investor who has seen the ups and down of markets remains poised for the long haul and is largely undisturbed by such frequent fluctuations. And, most importantly, mistakes made during the initial days of investing can help you master its basics. They will be of great help in the later stages of your life. With three years away from goal, one needs to de-risk by moving out of equity into less volatile debt assets. If you have a plan in place, market movements will no more be relevant to you.
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Finance Minister Arun Jaitley has made a strong case for raising shareholding of developing nations including India in the World Bank Group to reflect their share in the global economy and demanded a significant hike in the capital to meet growing financing needs. Stating that the demand for development finance continues to be very strong, he quoted a bank's report admitting inability to support elevated levels of lending beyond 2018. IFC - an arm of the World Bank - is already capital constrained. Also, there is the additional challenge of mobilising over USD 100 billion per year for climate finance. Speaking at the Plenary Meeting of the Development Committee here, he emphasised the need for bigger financing and implementation plans by the World Bank Group to achieve the Sustainable Development Goals (SDGs). India, he said, expects a dynamic formula for shareholding of World Bank to be finalised by Annual Meeting 2016. The formula should incorporate "elements which help enhance the voice, role and voting share of the developing countries and reflect their increased share in global GDP and their contribution to building the bank's reserves," he said. Jaitley said as the share of the developing and transitioning countries in the world GDP increases from 39 per cent in 2008-2010 to 49 per cent in 2013-15, "the shareholding realignment should reflect the same and be completed by 2017." Development Committee is the ministerial-level forum of the World Bank Group and the IMF for intergovernmental consensus-building on development issues. Jaitley represented the constituency consisting of the countries -- Sri Lanka, Bangladesh, Bhutan and India. India, Bangladesh and Bhutan are early dividend countries and are taking steps to leverage their demographic transition to achieve SDGs, he said. "The Executive Directors and the Bank should make an objective assessment of the financing needs of the SDGs. I am sure such assessment would call for a significant increase in the capital of the World Bank Group to meet the developmental objectives," he said. "I would like these resources to be mobilised from new and additional sources and not at the cost of ODA for poverty and shared prosperity goals. The IBRD financing which is non-concessional and does not flow from the donor resources should not get accounted for in 100 billion flow," he said. Economic Affairs Secretary Shaktikanta Das, who also attended the IMF-World Bank annual meeting here tweeted, "India called for governance reforms in both institutions to reflect growing share of developing countries in global GDP." Jaitley said that the country is firmly on the path of fiscal discipline and has contained the fiscal deficit at 4 per cent (lower than targeted) last year. Jaitley said that the FDI flows into the country have been robust. He cited reports in foreign media that during the last six months, India was the leading destination for investments in greenfield projects, demonstrating the high degree of confidence of the global investors. The financial and forex markets in the country are also stable, notwithstanding recent global volatility, the minister added. Other panelists included Joaquim Levy, Brazilian Finance Minister, and Martin Wolfe, a noted economic commentator. Wolfe complimented India on the management of public finances and the ability to continue with structural reforms, the statement said. The finance minister elaborated that the environment for reforms in the country is positive. He said that from cooperative federalism, the country is now moving towards competitive federalism, with various States undertaking key reforms to improve business climate, expedite clearances and promote investments. Jaitley explained that a few of the key reforms such as Goods and Services Tax and Bankruptcy law are high on the government's agenda. (PTI)
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