In a big surprise for the markets, the Reserve Bank of India (RBI) cut its key repo rate by a bigger-than-expected 50 basis points to 6.75 per cent on Tuesday (29 September), with inflation running at record lows and the economy in danger of slowing down.Home and corporate loans will cost less as the central lowered the key interest rate by 0.50 per cent — the biggest cut in over three years — to bolster the economy A Reuters poll last week showed only one out of 51 economists had expected a 50 basis points rate cut, while 45 had expected a 25 bps cut. The central bank has also cut the FY16 gross domestic product (GDP) growth target to 7.4 per cent from 7.6 per cent earlier. The equity market which was in the red till the announcement was back in the black. The market was widely expecting the RBI to go only for a token 25 basis points cut in view of the deficit monsoon and expectation that the US Fed will raise interest rates by December. It has kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liability (NDTL). The RBI justified the bigger reduction, saying consumer inflation was likely be running at 5.8 per cent, below the 6 per cent target for January, thanks partly to the government's efforts to contain food prices. The RBI also drew comfort from US Federal Reserve delaying the first hike in US interest rates in nearly a decade, according to a statement written by Governor Raghuram Rajan. Once US rates rise, analysts expect some emerging market currencies to come under pressure. "Monetary policy action has to be accommodative to the extent possible, given its inflation goals, while recognising that continuing policy implementation, structural reforms and corporate actions leading to higher productivity will be the primary impetus for sustainable growth" the RBI said. The benchmark 10-year bond fell 9 basis points to 7.64 per cent after the news. An interest rate cut had been widely expected after India reported consumer inflation had fallen to a record low of 3.66 per cent in August, and there have been calls from within government and industry for the RBI to lower borrowing costs. Still, it is unusual for the RBI to lower interest rates in September, as it has tended to be on the defensive against food price pressures during the monsoon season running from mid-June through September, after enduring several years of weak rains. Since adopting the repo rate as its main policy tool in 2004, the central bank had never cut rates during this period. This is also the biggest single monetary policy move taken by Rajan and it takes the repo to its lowest since March 2011. Since taking the helm of the central bank in September 2013, Rajan has raised the repo rate three times and lowered it three times, all by a magnitude of 25 bps. Calls for lower rates first began to grow louder after the release of data showing the economy grew by a slower-than-expected annualised rate of 7 per cent in the April-June quarter — faster than China, but well below the government's target of 8 to 8.5 per cent for the year ending in March. A rate cut is being seen as a key trigger to boost investment demand in an economy where credit growth has dipped to a multi-year low.(Reuters also contributed to this story)
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Tarun Chugh, MD & CEO, PNB MetLife India explains why and how a claim may get rejected and what all needs to be done to ensure a smoother claim settlement. It is very common to hear people complaint about the insurance claim settlement process. “The insurer simply does not want to pay so is making excuses”, “my insurer took almost six months to settle my claim”, “it was really cumbersome and painful to claim insurance”, are some of those grievances expressed by policy holders when submitting a claim. But is claiming on your insurance policy really that mind-boggling? Tarun ChughIt doesn’t have to be. First and foremost, it is important to know what your policy covers and what documents are required when submitting a claim. For example, in cases involving accidental death, post mortem results and police reports are documents that you need to prepare. Whereas if you are submitting a claim for death due to illnesses, insurance companies will need hospital records and test results in order to process the claim. Knowing what needs to be submitted will help ensure a smoother claim process. Information on what you need to prepare when filing a claim are readily available on company websites. Call centres are also a great way to assist you throughout the claim submission. Making sure that you correctly declared your health information when filling up your insurance proposal form is another important point to note as it may result in a claim being rejected. Take for example Mrs. Sharma, who lost her life partner in a road accident 2 years after purchasing an insurance plan. Post mortem reports revealed that the cause of death was due to an existing heart condition. Even though she submitted all the necessary documents, her claim was rejected by the insurance company. Why was her claim rejected despite submitting all the necessary documents? Her husband had failed to mention his existing heart condition when filling up the insurance proposal form. As health declaration is one of the determining factors to insurance companies to assess an individual’s eligibility for a policy, it is crucial that health conditions, income status and other required information are accurately filled.
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Mountain Trail Foods Pvt Ltd, that owns Chai Point network of tea stores, has raised $10 million from Fidelity’s proprietary investment arm Eight Roads Ventures – that was earlier known as Fidelity Growth Partners India. This is the second round of funding for the Bangalore-based company. Existing investors Saama Capital and DSG Consumer Partners have also participated in this round, as per a press statement. Investment bank o3 Capital acted as the exclusive advisor on the transaction. Established in 2010 by Amuleek Singh Bijral, Chai Point is a tea retail chain operating in Delhi-NCR, Bengaluru, Pune and Mumbai. It works through a network of service stores, delivery-only hubs and also has 'Chai on Call' and 'Chai at Work' businesses. As per the company, it receives orders for 1.5 lakh glasses of chai per day, including 40 per cent of delivery orders from the mobile app. The money raised will be used to expand its geographic reach to 7 cities, to grow the delivery component of business - Chai on Call as well as Chai at Work that caters to the corporate clientele, as per a release issued by the investment bank. Chai Point is focused on serving the tea market in India that consumes roughly 20 per cent of the world's tea. The market in India is estimated to be worth Rs 33,000 crore and has been growing at 15 per cent annually. Tea consumption in India is 8-9 times that of coffee. As more Indians with higher disposable income take to dining out, the hitherto-fragmented food and beverages market is becoming an attractive investment area for risk capital investors, say analysts. “With the culture of dining out picking up in India with changing lifestyle and increased disposable income, this is one space which is definitely garnering a lot of investor attention,” says Raja Lahiri, partner at advisory services firm Grant Thornton. According to consultancy firm Technopak Advisors, the Indian food-service industry is estimated to grow to $78 billion by 2018 from its current level of $48 billion, registering a compounded annual growth rate of 11 per cent. The latest data available from research firm Venture Intelligence probably explains the rush of investor money into restaurant chains. In the last seven and a half months (Jan-August) in the current calendar year, as many as 13 investments have been sealed in the sector, more than double of what was in the corresponding period last year. In the Jan-August period in 2014, there were a mere 5 deals worth $45 million. In terms of deal size, the total amount that private equity and venture capital funds have invested so far in 2015 amounts up to $123 million, as per research firm Venture Intelligence.
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Manish Shah, Co-founder & CEO, BigDecisions, in an interview with Businessworld's Sunil Dhawan, talks about why their goal is to be the ideal starting point of people’s big financial decisions Is BigDecisions a robo-advisory firm? When we started out, we had no idea that we will be going into a space that will be called robo-advising. It’s more of a blanket term and conjures up images that seem to suggest that suddenly people are going to be eliminated and machines taking over. It’s nothing near that. There are various models across the globe with companies like Wealthfront and Betterment based in the US being some of the better known who work on an algorithm based trading reducing dependence on advisors or fund managers. While business models might differ, essentially it’s about putting the control back into the consumer’s hands. At BigDecisions, we have served close to a million users over the last year and a half. What form of robo-advisory is BigDecisions? It’s a stepped up version. Robo-advisory typically starts with an assumption that you’ve already made your mind up about the amount you want to invest. So, we are stepped-up in the sense that we help users understand things (like how much to invest in order to meet particular goals) better before executing the purchase decision. In our case, when the decision ends in product sale, we have partners, who will facilitate the next step. Imagine a goal like planning for your daughter’s education. We focus on helping the user first arrive at (using data and mathematics) how much he / she should be saving every month to reach that goal based on certain assumptions. Let’s say it comes to Rs 40,000 a month. The next step is to figure out which investment instruments this amount should go into. We believe that the first part (of estimating more accurately) is not always done correctly. We have chosen the more elementary, the more basic areas because if you don’t know where to start, the ease and the niceness of the transaction is not what you are looking at. For example, what’s the point of using a very convenient platform where you end up saving Rs 10,000 every month when you should be setting aside Rs. 40,000 instead? Our goal is to be the ideal starting point of people’s big financial decisions to help people better understand the basics before they move forward. How is the present state of advice that Indian investors get? You have a huge number of middle level income people in India who haven’t necessarily been served adequately either in the form of advice or by aggregator platforms that help consumers compare and buy products. Let me just flip it and address the reason we really exist, when there were always people to help with financial decisions. I think there is a clear shortfall in the quality of advice people get especially if you are not a high net worth individual. So, If you draw a 2x2 matrix and look at advisor knowledge, with low-high on one axis and advisor integrity on the other, you will have advisors who tick on the top right, i.e. have integrity and knowledge with investor interest. However, in our experience, 90 per cent of the country (advisor community) falls in the other boxes. Sometimes, lack of advisor knowledge is an issue. More often that not, incentives are misaligned i.e. not always in the consumers’ best interest. All this combined has necessitated consumers wanting to be more in control of their financial decisions. Where does BigDecisions fit in? So, the whole idea of BigDecisions is to help Indian consumers that neither know enough to make their own decisions nor trust entirely the advice that they are getting, by making available data that they don’t normally have, combined with algorithms and research backed content, helping them to be more in control of their financial decisions. Are Indian investors Internet savvy and financially inclined enough to use online advisory platforms? This is improving constantly. There is a whole eco-system built around saying, “figure your own stuff now’. We defined our consumer as someone who is not financially savvy but is tech savvy enough, to know that there are ways to get online and do one’s own research. Two years back, 70 per cent of all financial decisions were taken by seeking help in some form or the other online. Regardless of what you are doing offline, there is a certain influence it is having in doing the much needed ground work in terms of research. People whom we thought would find us useful for their needs were those who’d be, tech savvy enough to be net banking customers. When we started nearly 2 years ago, there were about 27-28 million internet banking customers, Today it’s well over 50 million. There are 600 million bank account holders, so we still have a long way to go. And while we’re too small to bring about a big change by ourselves, I think it’s clearly happening on its own and we are only facilitating that. Our objective is to make users feel more in control of their financial decision making process rather than just easing the purchase process. Is BigDecisions helping consumers in asking the right question? We have several tools and calculators on the site that help users with some of life’s big financial situations. Our Rent or Buy a house calculator is one of them. After using such tools we help people ask the right questions and start a conversation with the broker, advisor or the agent. So, rather than ask general, more open ended questions whether or not he / she should buy the property, our tool helps consumers seek answers to more specific questions like reasons for expected double digit appreciation that could be a bigger driver of the buying decision rather than a general recommendation. What has changed since Newscorp taking stake in BigDecisions? Post the NewsCorp stake, the focus is to add several elements that customers need to take for better financial decisions. This is achieved through strengthening our content be it in the form of topical blog entries and engaging video content pertinent to decisions related to retirement planning, education, insurance and housing. Very often there are several more elements to the decision than just the money. The strength of effective content backed by News Corp’s digital expertise is what gives us the edge in a market like India. Let’s take the example of your child’s higher education, for instance. A better starting point is to get a sense of how much you’d need to set aside depending upon the choice of discipline and geography your child might choose and you should be able to create several ‘what ifs’ such as how much you’d need to save for an MBA programme in the US or an engineering degree in India. Once you’ve got a sense of building the requisite corpus however, there are several other aspects to this decision. For instance, you’d like to better understand payoffs in terms of job prospects after particular course to judge if it’s worth the spend. It would also be worthwhile to get a better sense of what other parents like you are considering and possibly to even connect with such people. At BigDecisions, we’d like to help people with the entirety to the decision and that’s where a lot of work will go into and having News Corp’s support is a big plus. People have focused too much on the product and transaction sides of the decision. In the education example above, the bigger and often tougher decisions are about knowing how much of a corpus is likely to be required and where to start. Which products to buy and from whom in order to build that corpus come next and if the math is done right upfront, these become relatively easier decisions.
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RBI’s commentary more critical than a token cut of 25 bp, says Ind-RaFocus on Tone of RBI: India Ratings and Research (Ind-Ra) expects the Reserve Bank of India (RBI) to take a gradual route of repo rate moderation (by 25bp to 7%) and sound cautious in its tone. This is because global headwinds can test the resilience of the rupee in the short term. We thus believe that the RBI will be less inclined towards suggesting aggressive accommodation. Nonetheless, any affirmative announcement on the medium-term framework for foreign portfolio investment limits in debt securities might spell cheer. All Measures of Inflation Down Sharply: In Ind-Ra’s view, a sharp decline in inflation particularly the GDP deflator should pave way for the repo rate cut. Retail inflation was down sharply to below 3.7 per cent (core inflation 4.1per cent) in August from 5.4 per cent (4.8 per cent core) at the time of RBI’s previous policy announcement. Wholesale prices have been falling in absolute terms and GDP deflator is negligible (GDP deflator is at its lowest in 16 years). Capacity utilisation for corporates is at a decade low according to a study by Ind-Ra (refer: Study of Capex Cycle of Top 500 Indian Corporates) and the slack should keep core inflation low. Commodity prices should also remain subdued given concerns on the global growth outlook and finally as exports continue to shrink, the onus of growth recovery remains with government spending and consumption. Bracing for US Rate Hike in 2015: We noted in the last edition of DebtFx that uncertainty will likely prevail in global markets on the delayed normalisation of rates in the US. We also opined that US dollar (USD) might be stronger than the majors and emerging market currencies in the medium-term. This has happened, but clearly earlier than we expected. "Cyclical" factors, notably rising US interest rate expectations, are once again supporting the USD. US Fed Chair Janet Yellen recently indicated that the central bank is poised for rate normalisation in 2015 just a week after keeping rates steady, citing global concerns. A slowing China, soft commodity prices and worsening financial market conditions also pose a risk to the growth outlook for several countries which have strong trade linkages with China. Widening credit default spreads for some of these countries suggest “Structural” concerns as well. Emerging market currencies and equity price movements are thus clearly reflecting risk aversion. Tactical Caution on Rupee: Ind-Ra believes RBI will have limited headroom for a significant rate reduction in the coming policy. Near-term outlook on the rupee might be clouded by a perception of risk. Hence, capital flows may flicker in response to the degree of global developments which could keep market edgy. While the broader theme of relative resilience of the rupee is intact, and the performance of the rupee relative to that of other currencies (down only 4.9% year to date, versus sharper cuts elsewhere in the EM space) is an indication of that, there still remains a case for rupee weakness on an absolute basis in such an environment. Gilts Supported Ahead of Policy: Ind-Ra believes a potential rate cut by RBI as also the likelihood of an announcement of a Foreign Portfolio Investment gilt limit hike (current: $30 billion) should keep gilts supported ahead of policy. Crucially, investors’ expectations of a further policy room for accommodation will be shaped by RBI’s assessment and further guidance, if any. Domestic government bonds have stayed in a broad consolidation phase over the past week, despite choppy currency movements.
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The Reserve Bank of India (RBI) is expected to cut its key repo rate to a four-year low on Tuesday (29 September) to help support the domestic economy at a time when consumer inflation is at a record low, but may express caution about easing further as price risks still loom. A Reuters poll last week showed 45 of 51 economists expect the RBI to cut the repo rate by 25 basis points to 7 per cent, its lowest since May 2011. The RBI has already eased the policy rate by 75 bps so far this year. But another rate cut may depend on how food prices impact consumer inflation starting in September, given India could be facing its driest year since 2009 as monsoon rains have fallen below their long-term average. A favourable base effect seen in the previous two months is also expected to wane. The RBI is also likely to err on the side of caution as US interest rates are expected to rise by the end of this year for the first time since 2006, potentially putting pressure on emerging market currencies, including the rupee. RBI Governor Raghuram Rajan is expected to express that cautiousness as he looks to manage expectations, and counterbalance the calls for aggressive easing from government officials and corporate executives. "I expect the RBI to cut the repo rate and sound a cautionary tone on the deficient monsoon's impact on food prices and the Fed," Soumya Kanti Ghosh, chief economic adviser at State Bank of India, said. Expectations for a rate cut surged after the release of data showing consumer inflation at a record low of 3.66 per cent in August. Inflation looks set to undershoot the government's projection of 6 per cent inflation by January 2016. The economy expanded at a slower-than-expected annualised rate of 7 per cent in the April-June quarter. That is faster than China, but well below the government's target of 8 to 8.5 per cent for the year ending in March. The stuttering recovery in the growth rate lies behind the calls for the central bank to lower interest rates, but the RBI is worried about the potential for inflation to flare up again. Rajan this month pointed out that without a favourable base effect, August inflation would have been around "mid five per cent." Looking ahead, analysts expect Rajan to set a new target to bring consumer inflation down to 5 per cent by January 2017, as part of his longer-term objective to keep inflation at around 4 per cent.(Reuters)
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The CBDT on Monday (28 September) warned taxpayers against a "fraudulent" order which states that the last date to file audit reports by various entities has been extended beyond the deadline of September 30 by government."It has been brought to the notice of the government that a fake order dated September 26, 2015 supposedly under section 119 of the Income-Tax Act 1961 under the signature of one Upmanyu Reddy, Under Secretary to the Government of India is in circulation."The fake order extends the due date for filing of audit report under section 119 of the Income-Tax Act to October 15, 2015," a statement from the Central Board of Direct Taxes said."It is clarified the order is fraudulent.The Government has not extended the due date for filing of returns and audit report due by September 30, 2015. Taxpayers and practitioners are advised not to give any credence to the fraudulent order purportedly signed by one Upmanyu Reddy," it said.The CBDT is the apex policy-making body of the I-T department.(PTI)
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The Reserve Bank of India (RBI) said on Thursday (24 September) it would allow banks to convert the status of their "stressed" loans to a company into "standard" ones if the entity is sold to a new major stakeholder, although certain conditions would apply. The change is important, given that in India a loan deemed as "stressed" must follow strict recovery rules, while "standard" ones offer much more flexibility in how companies repay their debt. Among the conditions that must be met, the RBI said the new so-called promoter, or major stakeholder, must buy at least 51 per cent of the paid-up equity capital of the company. The new promoter can also not have any ties to the existing stakeholder. India's banking sector, dominated by more than two-dozen state-run lenders, has been hobbled by its highest bad-loan ratio in a decade as slower economic expansion hurt companies' abilities to service debt.(Reuters)
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