Small savings

Finance minister Pranab Mukherjee today remained non-committal on reviewing the interest rates on central government sponsored small savings deposits.

The finance minister, who was here to inaugurate a three-day management development programme of MDI, Murshidabad, did not comment when he was asked if the government would review the interest rates on small savings, which were last revised in 2003.

Following the recommendations of the Thirteenth Finance Commission, the finance ministry had in July 2010 constituted a seven-member committee led by Reserve Bank deputy governor Shyamala Gopinath to review the administration of the National Small Savings Fund.

The committee submitted its report more than a month ago with suggestions to increase interest rates on post office savings deposits to 4 per cent. 

The report said interest rates on other small saving deposits should be linked to yields on government securities of similar maturity with some positive spread.

Had the finance ministry implemented the panel recommendations, interest rates on small savings would have increased to 8.5-9 per cent, and a lot of small investors particularly in the rural areas would have benefited.

Banks raising loan rates

A clutch of banks today raised their lending rates by hefty 50-75 basis points in response to the Reserve Bank of India (RBI) increasing the repo rate by half a percentage point earlier this week.

Both Bank of Baroda (BoB) and Allahabad Bank has raised the base rate by 50 basis points to 10.75 per cent and the benchmark prime lending rate (BPLR) by a similar margin to 15 per cent.

Punjab National Bank (PNB) raised its base rate and BPLR by a steeper 75 basis points to 10.75 per cent and 14.25 per cent, respectively.

Mumbai-based Central Bank of India also raised its base rate by 75 basis points to 10.75 per cent, while IDBI Bank raised its BPLR by the same margin to 15.25 per cent.

The interest rate hikes have been undertaken keeping in view the measures announced by the RBI, inflation and liquidity scenario.

On Thursday, Canara Bank and Bank of India raised their minimum lending rates by 50 and 75 basis points, respectively. The new rates will come into effect from August 1.

However, the RBI’s 50-basis-point increase in the repo rate has also brought good news to savers. PNB today said it would raise deposit rates by 75 basis points in select maturity buckets from August 1.

BoB hiked interest rates on term deposits by 50 basis points in maturity buckets of 7 to 14 days, 15 to 45 days, 46 to 90 days and 91 to 180 days to 4.75 per cent in the first 3 maturity points and 7 per cent in the 91 to 180 day maturity period.

The Central Bank of India raised its deposit rates by 40 basis points in the short term.

Possibility of more downfalls from the recent level on weak Asian stocks

The Indian stock market may extend three-day 3.5% losses on weak Asian stocks. Trading of S&P CNX Nifty on the Singapore stock exchange indicates a fall of 58 points at the opening bell. Asian stocks fell on Friday, 29 July 2011, as the US debt impasse kept broad market sentiment in check, with Japan also suffered from weak earnings and profit outlooks.

FIIs bought shares worth a net Rs. 64.66 crore on Thursday, 28 July 2011, as per provisional data from the stock exchanges. Domestic institutional investors (DIIs) bought shares worth Rs. 409.34 crore on that day.

Key benchmark indices sank to their lowest closing levels in five weeks on Thursday, 28 July 2011 on fears that higher interest rates will hurt corporate profit growth. The BSE Sensex was down 222.73 points or 1.21% to settle at 18,209.52, its lowest closing level since 23 June 2011.

ONGC's net profit rose 11.83% to Rs. 4094.90 crore on 18.7% rise in sales revenue to Rs.16268 crore in Q1 June 2011 over Q1 June 2010.

A sharp surge in the company's subsidy sharing burden restricted profit growth at the state-run oil exploration major. ONGC's subsidy burden swelled 118.4% to Rs. 12046 crore in Q1 June 2011 over Q1 June 2010. The result was announced after trading hours on Thursday, 28 July 2011.

ACC's consolidated net profit fell 6.11% to Rs. 328.12 crore on 17.17% rise in sales turnover to Rs. 2538.97 crore in Q2 June 2011 over Q2 June 2010. The result announced after trading hours on Thursday, 28 July 2011.

ACC said while market conditions are presently subdued, the overall cement demand will pick up post monsoon and ACC is well placed to benefit from this expected increase in demand in the coming months.

HCL Technologies announced after market hours on Thursday that it has been chosen by the Blue Cross and Blue Shield Association (BCBSA) to be part of a national purchasing arrangement for the ICD-10 transition.

Through this arrangement, HCL's products and service capabilities will be available to the 39 independent Blue Cross and Blue Shield companies across the country.

Investors' focus continues on Q1 corporate earnings. Investors are focusing on the post-Q1 June 2011 result management commentary to gauge the future earnings outlook at a time when Indian firms are witnessing cost pressures amid rising interest rates and staff costs.

Among prominent companies, ICICI Bank, Power Finance Corporation, Bhushan Steel, Idea Cellular and TVS Motor unveil Q1 results today, 29 July 2011.

Sun TV announces Q1 results on 1 August 2011. Power Grid Corporation unveils Q1 results on 2 August 2011. Bharti Airtel and United Spirits unveil Q1 results on 3 August 2011. Adani Power, Mundra Port And Special Economic Zone and Indian Hotels announce Q1 results on 4 August 2011. Cipla and IL&FS Transportation Networks are set to announce Q1 results on 5 August 2011.

M&M announces Q1 results on 8 August 2011. ABB, Tata Communications, Mahindra Satyam and GMR Infrastructure announce quarterly results on 9 August 2011.

Tata Power and Rural Electrification Corporation unveil Q1 results on 10 August 2011. Tata Motors and Castrol India unveil quarterly results on 11 August 2011. Hindalco and Coal India unveil Q1 results on 12 August 2011. Aditya Birla Nuvo unveils Q1 results on 13 August 2011.

The stock market regulator Securities and Exchange Board of India (Sebi) on Thursday made sweeping changes to the takeover code, including raising the threshold that triggers an open offer to 25% from 15%.

Sebi also changed the minimum open offer size, saying that when a company acquires at least 25% of another listed company, it must make a mandatory open offer for another 26%. Under current regulations, a company needs to make a mandatory offer for only an additional 20% stake.

Partly accepting the recommendations of a Sebi-appointed panel on the matter, Sebi also decided to abolish the non- compete fees that acquirers generally pay to the sellers in merger and acquisition deals.

The government on Thursday approved draft legislation to create an anti-corruption ombudsman, an office that has come to define the debate over what India needs to do to try to stamp out graft. 

For the past several months, a handful of anti-corruption campaigners have been negotiating with the government over the creation of the office and the extent of the power of the Lokpal, or ombudsman.

The government's proposed legislation would give the office the power to probe graft in the upper echelons of India's bureaucracy, in Parliament and in ministries, but would exempt the office of the serving prime minister and the judiciary.

On the macroeconomic front, food prices rose in the week ended 16 July 2011 due to costlier vegetables and fruits, the latest data showed. The wholesale price index for food articles rose 0.8% to 193.3 from 191.7 in the previous week, data from the Ministry of Commerce and Industry showed Thursday.

The index has risen three out of four weeks ending July 16. Data also showed the index for primary articles, which includes food and non-food articles, was little changed at 198 in the week ended July 16, compared with 197.7 a week earlier.

The Reserve Bank of India (RBI) raised its key lending rates by 50 basis points at a policy review on Tuesday, 26 July 2011, to tame high inflation. The RBI has raised its end March 2012 inflation target to 7% as against the previous estimate of 6%, saying inflation has been higher than its expectations.

It kept its economic growth forecast of 8% for this fiscal year. The RBI revised downwards non-food bank credit growth projection to 18% for the year ending March 2012 (FY 2012) from 19% earlier.

Although the impact of past monetary policy actions is still getting transmitted, considering the overall growth and inflation scenario, there is a need to persevere with the anti-inflationary stance, the RBI said. 

Going forward, the monetary policy stance will depend on the evolving inflation trajectory, which, in turn, will be determined by trends in domestic growth and global commodity prices, the RBI said. A change in stance will be motivated by signs of a sustainable downturn in inflation, it added.

The uncertain global macro-economic environment poses a challenge for the domestic economy from the perspective of financing the current account deficit, RBI said. In this context, the composition of capital flows remains a concern. In recent months, some shift in composition of capital flows towards foreign direct investment (FDI) has been observed.

This trend needs to be reinforced through policy actions to improve the quality of financing of the current account deficit, RBI said.

Finance Minister Pranab Mukherjee on Wednesday, 27 July 2011, said food inflation at 8% around the current level, is not acceptable. He added that the government would take steps to support the RBI's battle against stubbornly high inflation, which is likely to see further rate rises. 

I don't think we have reached the end of tunnel, Mukherjee said referring to the RBI's rate tightening cycle. Appropriate measures will be taken, Mukherjee said, referring to government support of the central bank's policy action, without giving specifics.

Mukherjee said the government would keep its spending in check to meet its deficit target but did not give details. We are looking at ways to compress expenditure. There is revenue buoyancy and together I think they will help us in reaching fiscal deficit target, he said.

RBI Deputy Governor Subir Gokarn on Wednesday said the decision to go for a 50 basis point increase in the policy rate, instead of the baby steps of 25 basis points that the RBI mostly has taken, was influenced by strong demand in the economy, which was partially unaffected by the interest-rate moves. The government's high spending was also fueling demand pressures, he said on a conference call with analysts.

Gokarn said the downside risks to growth from the rate increases would be fairly bounded and that a milder hike could have been perceived as inadequate. We thought that the stronger action was essentially consistent with the new stance that we had signaled in May, he added.

Asian stocks fell on Friday, 29 July 2011, as the US debt impasse kept broad market sentiment in check, with Japan also suffered from weak earnings and profit outlooks. Stock losses deepened in several markets after Thursday's voting on a Republican bill to lift the US debt ceiling was cancelled.

Only days remained before the August 2 deadline, when the US government is expected to run out of money to pay all of its bills. The key benchmark indices in South Korea, Singapore, Indonesia, Hong Kong, China, Japan, and Taiwan fell by between 0. 2% to 1.26%.

Japan's jobless rate ticked higher in June and industrial output was softer than expected, while consumer prices rose less than forecast, according to data released Friday.

Weak earnings pulled US stocks lower on Thursday, 28 July 2011. The latest data showed first-time applications for unemployment benefits declined 24,000 to 298,000 last week, marking the first time in four months that the number came in below 400,000. 

The National Association of Realtors's count of Americans signing contracts to purchase homes climbed for a second month in June, although the trade group also said a growing number of would-be buyers have been canceling contracts ahead of closings.

Couple on top in trade

A couple who have family ties to Somnath Chatterjee and run a business called the Mamata Group have taken the reins of Gujarat’s top trade body. Mahendra Patel, 62, took over as president of the Gujarat Chamber of Commerce and Industry earlier this month and his wife Nayana, 59, became chairperson of the GCCI’s Business Women Committee — the first time a husband-wife team is at the helm. “We are a unique couple. Our grandfathers were friends and even started school together, our fathers studied together and we were childhood friends,” says Mahendra, chairperson and managing director of the Rs 600-crore Mamata Group. Their daughter Tarana is married to Shashwat, grandson of Somnath. The two had met in the US as students, married in 2005 and are now settled in Los Angeles. Mahendra recalls his first meeting with the Marxist leader, who was himself head of the West Bengal Industrial Development Corporation till he became Speaker. It was in Delhi, before the wedding. “When he saw my business card and Mamata Group printed on it, he asked, ‘Why did you choose this silly name? I don’t like Mamata Banerjee,’” Mahendra says. But when Somnath learnt that Mamata was not a name but an acronym — for Mahendra, Manish, the couple’s son who died in a car accident in 2007, and Tarana — he was happy, the Ahmedabad businessman said. Chatterjee often pulled his leg, addressing him as “You rich people”. But this changed after he got to know them better, Mahendra said. The Patels have donated a large sum for a 100-bed hospital, a dental college and an MBA institute on a 100-acre campus at Visnagar in north Gujarat, where Nayana comes from.  They have also given endowment funds to various institutes. The annual lecture organised by the Mamata centre of the Ahmedabad Management Association is a much awaited event. Nayana, who manages Mamata Airwings, one of the nine group companies, is a trustee in various social organisations the group funds. These are mainly education and health services — Mamata does not make any religious donations. Nayana has also designed the bungalow the couple lives in, which runs on solar energy. “We generate our own electricity, 40-odd units every day, through solar power,” her husband says. In 1965, when Mahendra turned 16, his father had borrowed Rs 10,000 to send him to England to study. “I went by ship as it was cheaper. It took 21 days. In England, for seven years I worked as apprentice during the day and attended classes in the evening,” he said. On return, he worked briefly in Mumbai before moving to Ahmedabad to set up Patel Filters, a joint venture with a US-based company. The husband-wife team, who took over on July 16, has actionable ideas for the chamber of commerce. While Nayana’s priority is to reach out to rural women — to train them in entrepreneurial skills, Mahendra want to develop better co-ordination between the apex trade body and the 300-odd chambers in the state. Since Mahendra shares a good rapport with chief minister Narendra Modi and has accompanied him abroad to promote Gujarat, he expects co-operation from the state government as president of GCCI. Courtesy- http://www.telegraphindia.com/1110729/jsp/nation/story_14304831.jsp

Many options for home loan

Today, home loans are available for many needs of homebuyers. With the keen competition among lenders, more innovative schemes can be expected.

The home buying exercise has never been as flexible as it is now thanks to a plethora of home loan options, quick processing, instant approvals and faster disbursements. That is not all.

The fierce competition among various housing finance companies and banks has brought in its wake transparency, bargain deals and festival offers to enable borrowers strike bargain deals.

There is no dearth of festivals in India and each festival brings discount offers in one form or the other to lure home loan borrowers.
    

Loans are available not only for salaried but self-employed, agriculturists and businessmen. The new entrants to the home loan industry are keen to remain flexible, especially among self-employed and businessmen, when the latter is also not reluctant to pay a higher lending rate.

 Home loans are available to buy under-construction or ready built units, furnish existing homes, and build additional floors on an existing home.

There are loans available to buy developed plots and then construct a house. Plot loans are also available to bid for units offered by State housing boards.
    

With an increase in family size, the requirement for a larger sized house is felt and there are institutions that assist homeowners in looking for a new home while simultaneously working on the resale of the existing one.

Today, there are institutions which assist sellers in getting a better deal for their properties through a property services division.
   

 If both a husband and wife are employed, the joint income enables them to seek a higher loan and both are eligible for the tax sops while investing in property.

Tax experts advise that even if one has savings, it is advisable to seek a home loan while investing in property due to the sops associated with the home buying exercise through home loans.
    

Loans up to Rs 20 lakhs are treated as priority sector. There is an interest concession of half percent for those seeking loans below Rs 10 lakhs and houses whose value does not exceed Rs 20 lakhs.
    

Home loans are also available to buy additional homes to rent out and earn rental income. The government offers tax sops for those who are keen on investing in housing primarily to boost the rental housing stock.

 Residential property leased for a minimum of 300 days in a calendar year is exempt from wealth tax. So, a home loan comes in handy to acquire an additional house.
    

Home loans are available even for senior citizens who can show recurring income even after retirement. There are institutions that consider offering home loans even after the retirement age and so there is no age restriction on going in for a home loan.
    

NRIs are invariably faced with a dilemma as to what would happen when they avail a home loan during their sojourn abroad and thereafter are compelled to return home during the home loan repayment period.

Housing finance institutions are flexible in that they reschedule the loan repayment period depending on their qualification, family size, savings, re-employment potential and other incomes in India. 

Varied options
    

It makes better sense to seek a home loan while investing in property. Home loan borrowers can avail of top-up loans offered by several institutions to tide over contingencies.

Similarly, mortgage loans go a long way in raising that much-needed capital for any exigencies. 

Those who have let-out their residential or commercial properties to corporate or public limited companies can get the rentals for the unexpired period of the lease upfront and plough back the money to more profitable avenues.
    

Those who are aspiring for higher education abroad can use property as a security while seeking an education loan. This is irrespective of the fact whether there is an existing home loan liability attached to the property.
    

Gone are the days when a self-employed or budding entrepreneur had to accumulate savings to commence his operation in his own premises.

Today, he could own commercial premises by seeking specific loans and commence his business instantly.

Loans are also available for upgrading existing office premises or extension of the premises.
    

Even during later years, the asset acquired through a home loan comes in handy to meet any contingencies. This is because reverse mortgage allows senior citizens to remain in the house and also retain their ownership.

The money they get from reverse mortgage can be used for anything like meeting day-to-day expenses, home improvements or for healthcare.

In a reverse mortgage, the borrower can choose to receive the money in one lump sum or by way of monthly, quarterly, or annual payments. 

QUICK BYTES 

·        Working couples may go for higher loan if they apply as co-borrowers. 

·        Property can be used as security for an education loan.

What to do and not to do in the case of motor vehicle Insurance claims

If you are involved in a motor vehicle accident somehow, it is important that you maintain appropriate communication with your insurance company. Following are some "do's and don'ts" to remember throughout the insurance claims process.

THE DO'S

DO call your agent as soon as an accident or injury takes place. As soon as you get home from the car accident, or even before you go to the doctor, call your agent.

DO review and understand your coverage before talking to your insurer or your agent. Read the "Coverage" and "Exclusion" sections of you policy in particular.

DO take and keep detailed notes of all conversations with insurance company representatives, and get names, phone numbers, and job titles of people you speak with, including their supervisor's name.

DO consider whether you might have insurance coverage under some other insurance policy as well. Many people have more than one policy that might cover a claim.

DO take pictures, if possible, of damage to your vehicle, the accident scene, and your injuries.

DO be honest and forthcoming with your insurer. Even if it is embarrassing, it is better if your insurer knows all the facts. Failing to be candid with your insurer might invalidate your policy or cause a denial of coverage.

DO understand the difference between replacement coverage and depreciated or actual cash value. If your policy provides replacement coverage, don't settle a personal property loss for "actual cash value."

 You may be required to replace the lost items before getting your full reimbursement if you have replacement cost coverage.

DO keep all receipts of meals, lodging, and purchases made in connection with time spent pursuing your claim or recovering from your injuries from the time of the covered event until final settlement with your insurance company.

THE DON'TS

DON'T give any recorded or written statements to your insurer until you are sure you understand your coverage. Remember you are not required to allow the insurance company to record your telephone conversation. If you have doubts, do consult an attorney.

Do not automatically accept the estimate or appraisal of your losses given to you by the insurer. Insurance companies will often try to get you to accept their estimator's or contractor's repair or replacement estimates, which might be a bit low.

DON'T sign any releases or waivers of any kind until you obtain legal advice. A bad financial situation after a major loss may make it seem necessary for you accept a premature, inadequate settlement from your insurer.

But you may remember destroyed items after you have signed a release as to payment for your personal property inventory or other claims.

For these reasons, it is advisable to consult an attorney before signing a release or waiver. Be sure to read the fine print on any payment from the insurance company.

DON'T accept any check that says "final payment" unless you are ready to do so.

DON'T ignore time limits set by your policy. Most policies require a signed proof of loss within a certain time limit. Be sure you comply with this requirement unless you obtain a written waiver from your insurance company.

Many policies allow you only one year from the date of loss in which to bring a legal action if your claim has not been adjusted fairly. 

If your claim has not been settled to your satisfaction eleven months after your loss, consult an attorney immediately. A failure to do so could result in the loss of your right to sue.

DON'T forget that you have a contract with your insurer. Your insurer has a legal obligation to provide the coverage it promised to you. Be insistent about enforcing that obligation.

 I sincerely  wish NONE OF MY READERS face a motor vehicle accident in life. 

Wealth Creation

The amount of wealth a person owns becomes the subject of envy or discussion amongst his peer group, friends and relatives.   There are only a lucky few who have become millionaires overnight or are actually born with a silver spoon. Rest of the affluent lot that we see around us have actually made it big for themselves by working hard and smart. They had plans clear while saving & investing for them over consumption and this is how over the years, they were able to amass wealth and become, what we in common parlance call, ‘Rich and Wealthy’. It is a truth universally acknowledged that wealth cannot be accumulated through addition but is created through multiplication.  This means that you can create wealth by judiciously investing your savings across different asset classes and not by adding cash to your Savings Bank A/c. As you embark on this goal to create wealth, first decide how much amount you want to accumulate and in how many years. Based on these details, calculate the amount that you should be saving / investing periodically and carry out the feasibility analysis of the result so attained. Thereafter, invest the amount in a suitable asset allocation towards the achievement of your goal of wealth creation. As you decide on the avenues to invest in, make sure that you consider the following factors towards making an informed decision:   Time Horizon:  It means the tenure for which you will invest your savings. The time horizon of your investments should match the time horizon of your goal.     Asset Allocation:           Choosing the right mix of asset classes, while keeping in mind your risk appetite is very important.   Power of Compounding:      As you invest systematically and regularly towards the achievement of your goals, you tend to benefit from the Power of Compounding, thereby improving the overall return on your investment.           How it works: By investing Rs.5000 per month for 5 years at an expected return of 15%, you can accumulate a corpus of Rs.4.05 lac and this same amount invested per month at same return expectation will grow to Rs.12.20 lac over a term of 10 years.  Also, the rate of return that you earn has a great bearing on the overall portfolio growth. Simply stated, if your goal is to create a significant amount of wealth, you should start investing for long period of time, in a variety of investment avenues, suiting your risk profile Prudent Asset Allocation is very significant to reach the desired goal.  It involves dividing an investment portfolio across different asset categories, such as stocks, bonds, cash and real estate, gold, etc. The process of determining the correct asset mix is completely dependent on how much risk you are able to take as well as the time horizon that you have in view. By including asset classes that are have low correlation or negative correlation; the investor can stabilize his overall portfolio return, thereby reducing the overall risk.  Historically, the returns of the major asset categories have not moved in the same direction at the same time.  So when equities are not faring well, you can find opportunity in debt instruments and if you have proportionately invested in both these asset classes, you are able to shield yourself against extreme movements in your portfolio. Finally, it is important to assess the performance of the investments at least once a year and if you see one investment option that is consistently under-performing, transfer your money to another one that performs consistently better.  However you must also remember that even the best investment options can sometimes undergo a period of underperformance. So even if you are advised to weed out the under-performers, don’t be too rash in your decisions.  At the least, re-evaluate your portfolio every year or two to give a better picture of their long-term performance and wealth creation. Plan now, before it is too late!