Buying a Life insurance

At the time of buying an insurance policy, you are required to nominate someone to whom the proceeds would go if you are no longer around. 


The whole purpose of buying insurance is to ensure that your loved ones face the minimum possible hardship if something happens to you.

Therefore, the purpose of buying a policy is defeated if you provide wrong or incomplete information. For starters, let’s assume that the policy holder doesn't assign a nominee. 


In the event of his death, his legal heirs would get the benefit of policy but not before furnishing a succession certificate or a probate of Will, which is a cumbersome process.

Again, assuming that the policyholder didn't mention the share of nominee (that is if there are multiple nominees who are heirs too), it may lead to dispute.

Another significant aspect can be choosing a nominee. While most people nominate their blood relatives, such as parents, wife, children and siblings, instance of nominating close friends aren’t rare.


 Insurers say that it is advisable to choose a nominee(s) in such a way that there’s least possible chance of a contest over the insurance proceeds.

A nominee should ideally be someone who has insurable interest in the life of insured, say a husband or a wife. As a part of risk assessment process, insurers may deny a policy if the relationship between them doesn’t have any insurable interest. Insurance is a long term contract and nominees can be changed over a policy term. 


For instance, boy before marriage may appoint his mother as a nominee but change it to his spouse after marriage.

Further the proposer can nominate more than one individual in which case he needs to specify the percentage share of each nominee in the payout.

For hassle-free and timely settlement of claims, make sure you avoid some common mistakes and some wrong notions:

Just one nominee: Many people, in a hurry to fill up the form, appoint just one nominee even if they have multiple options. 


This could lead to complications. Suppose, a person appoints just his mother as a nominee, even when he has the option of nominating his father too. 


Now if a mother dies before the policy holder, with no change in nomination, there would be unnecessary delays in settlement on the death of the policyholder.

To avoid this, you should appoint multiple people as nominees and should always mention the percentage paid out to each. Mention their full names, addresses, ages and relationships to you.

A minor as nominee: It is recommended that you appoint a major person as a nominee because in case of minor, you need to appoint an appointee too.

If you consider it important to appoint a minor as nominee, then you ensure that you provide complete details of the appointee, including his or her full name, complete address and relationship to the nominee. The appointee loses his status when nominee turns 18.

Not informing the nominee(s): All precautions who must have taken while filling up the proposal form could come to a naught if you fail to inform your nominees about the whereabouts of policy documents. Some people refrain from telling the nominees about the policy either out of a feeling of insecurity or ignorance.

To avoid such a situation, always tell your nominees about the policy documents. Often nominees aren’t aware of existence of a policy, depriving them of money they need the most.

Not updating nominee details: There may be need to update the nominee details time to time. This may be because of change in address, or in a worst case scenario, the nominee may no longer be there to back you up.

This problem can easily be avoided as insurance company gives you an option to change the nomination details as many times as you want and at any time of the year. You only need to inform the insurer about the update by filling up the requisite form.

Mistaken notion that the nominee has absolute rights: A nominee doesn’t have absolute rights. The proceeds from life insurer received by a nominee can be attached if a court passes an order to that effect. 


Legal heirs can claim the money form nominee(s) through a court settlement.

If the nominee and the person to whom the proceedings are bequeathed in a will are two different people, then the provisions of will supersede the rights of nominee.

If you want to pass absolute rights to the nominee, prepare the Will and mention the beneficiaries. You can also issue the policy under the Women’s property Act.


The MWP Act states that the proceeds under a life insurance policy bought by a husband , for the benefit of his wife , or children or any of them, shall be payable only to the wife or the children.

Checklist while appointing the nominee for your insurance policy:

Make sure you mention full name, address and relationship with the nominee in your proposal form.

Make sure you have appointed someone who has insurable interest in you.

Make sure you appoint an appointee for a minor nominee.

Evaluate a possibility wherein you can appoint more than one beneficiary.

Be aware of the fact that a nominee doesn’t have absolute rights and legal heirs of a decreased can sue the nominee

.

Be aware of the fact that if case there are creditors; they will have first right over policy proceeds.

Be aware of fact that changes in nomination can be done any time during the duration of the policy.

You can do so by sending a request to insurance company. For this, you shall be required to submit the change in nomination’ form, duly filled, signed and witnessed. You can make this change anytime and any number of times.

To sum up, a little bit of caution on your past could prevent a lot of heartburn for your near ones if you are no longer around.

International Day Against Drug Abuse and Illicit Trafficking' tomorrow: Steps taken to prevent the menace

Every Year 26th of June is observed as an “International Day Against Drug Abuse and Illicit Trafficking”.  

The Government recognizes Drug abuse as a psycho-socio-medical problem, which can be best handled by adoption of a family/community-based approach by active involvement of NGOs/Community Based Organisations (CBOs) and has been taking several initiatives to help say no to drugs.  

The Ministry of Social Justice and Empowerment, as the nodal ministry for drug demand reduction, coordinates and monitors all aspects of drug abuse prevention which include assessment of the extent of the problem, preventive action, treatment and rehabilitation of addicts, dissemination of information and public education. The Ministry provides community-based services for the identification, treatment and rehabilitation of addicts through voluntary organizations. 

 The strategy for demand reduction is three pronged:

a) Awareness Generation and educating people about ill effects of drug abuse.

b) Community based intervention for motivational counseling, identification, treatment and rehabilitation of drug addicts, and

c) Training of volunteers/service providers and other stakeholders with a view to build up a committed and skilled cadre.

National Consultative Committee on De-addiction and Rehabilitation

A National Consultative Committee on De-addiction and Rehabilitation (NCCDR) under the chairpersonship of Minister for Social Justice & Empowerment was constituted in July, 2008. The Committee has representation of various stakeholders, which also include agencies dealing with supply and demand reduction.   The Committee advises the Government on issues connected with drug demand reduction, education/awareness building, de-addiction and rehabilitation of drug-addicts. The first meeting of the Committee was held on 10.12.2008. Two major recommendations emerged in the meeting: 

§  To bring about further necessary changes in the Scheme for Prevention of Alcoholism and Substance (Drugs) Abuse and

§  To formulate a national policy on Prevention of Alcoholism and Substance Abuse and rehabilitation of its victims

  A sub-committee of the NCCDR was constituted on 28.02.2009 to take necessary steps in regard to both the above recommendations.

National Institute of Social Defence

Training is an important component for capacity building and skill development for the service providers. It is important to have exposure to the new trends regarding the kind of drugs abused, medical and psychiatric problems, new medicines/methodologies available for the treatment of addiction through participation in training programmes and conferences.  Updating and training through refresher courses also needs to be provided to existing staff. A National Centre for Drug Abuse Prevention   (NCDAP) was established in 1998, in the National Institute of Social Defence (NISD) at New Delhi to serve as an apex body for training, research and documentation in the field of alcoholism and drug demand reduction. The number of training programmes organized by NISD in collaboration with RRTCs on Drug Abuse Prevention during the eleventh Plan period areas under:-

.  Year                               Training Programmes

2007-08                                      98

2008-09                                      57

2009-10                                     76

2010-11                                     59

Total during first four years of eleventh Plan is  290

Regional Resource and Training Centres

       Eleven Non-Governmental Organizations (NGOs), with long years of experience and expertise in treatment, rehabilitation, training and research have been designated as Regional Resource and Training Centres(RRTCs) for different regions of the country. These serve as field training units of National Centre for Drug Abuse Prevention (NCDAP) on various aspects of demand reduction.  RRTCs provide the following services to the NGOs working the field of Drug Abuse Prevention:

• Documentation of all activities of the NGOs including preparation of Information Education Communication (IEC) material.

• Undertaking Advocacy, Research and Monitoring of drug abuse programmes.

• Technical support to the NGOs, Community Based Organisations and Enterprises.

           To implement its three pronged strategy for Drug Demand Reduction, the Ministry is implementing a Central Sector Scheme of ‘Assistance for the Prevention of Alcoholism & Substance (Drugs) Abuse and for Social Defence Services’. This is the flagship scheme of the Ministry in the field of drug demand reduction.  The Scheme has two parts viz. (i) 'Assistance for the Prevention of Alcoholism & Substance (Drugs) Abuse' and (ii) 'Financial Assistance in the Field of Social Defence' .

Observing 26th June as International Day Against Drug Abuse

To mark the International Day Against Drug Abuse, every year the Ministry of Social Justice and Empowerment launches a national level awareness campaign. Appropriate awareness generation programmes are also organized  by the State Governments, related central Ministries, all the Regional Resource and TrainingCentres (RRTCs) and Delhi based NGOs. The main programme is organized in New Delhi every year where Minister for Social Justice & Empowerment chairs the function. 

Awareness through NYKS and Bal Bhavans

The Ministry of Social Justice and Empowerment in collaboration with Nehru Yuva Kendra Sangathanhas started an awareness generation programme in the States of Punjab and Manipur. This programme will cover 3000 villages covering 15 Districts in the State of Punjab and 750 villages covering 9 Districts in the State of Manipur. Nehru Yuva Kendra Sangathan through its network of volunteers at village level will create awareness about the ill affects of alcoholism and Substance (Drug) abuse among the rural masses, identify the addicts and organize de-addiction camps for these addicts. The whole programme will be completed in one year time. 

The Ministry in collaboration with National Bal Bhavan has also started an awareness generationprogramme among the children of the age group of 12-16 years. It will be implemented through a series of activities like poster making, creative writing, lectures, rallies, nukkad nataks etc at local, zonal and national levels.

Community Based Intervention

    Under the Community based intervention financial assistance is provided for identification, counseling, treatment and rehabilitation of addicts through voluntary and other eligible organizations. Under this scheme, financial assistance up to 90% of the approved expenditure is given to the voluntary organizations and other eligible agencies for setting up/running Integrated Rehabilitation Centre for Addicts (IRCAs), Regional Resource and Training Centres (RRTCs), for holding Awareness-cum-deaddiction camps (ACDC) and Workplace Prevention Programmes etc.  In case of North-Eastern States, Sikkim and Jammu & Kashmir, the quantum of assistance is 95% of the total admissible expenditure. The balance has to be borne by the implementing agency.  The Scheme was last revised in October 2008. Some of the important features of the revised scheme are:

• honorarium rates for service providers of the Integrated Rehabilitation Centres for Addicts (IRCA) projects have been enhanced

• provision for food for inmates who are below poverty line (BPL) has been introduced at the rate of Rs. 900/- per month per inmate

• Panchayati Raj Institutions/Urban Local Bodies have been included under the organizations/institutions eligible for receiving assistance under the scheme and

• 15 and 30 bed IRCAs can be upgraded to 20 and 40 beds respectively, in the urban areas and the North-East.

Financial Assistance in the field of Social Defence

      Second Part of the Central Sector Scheme of ‘Assistance for the Prevention of Alcoholism & Substance (Drugs) Abuse and for Social Defence Services’ provides for financial assistance in the field of social defence.The objective of the scheme is as to meet urgent needs falling within the mandate of the Ministry which cannot be met under its regular schemes and to support such initiatives of an innovative/pilot nature in the area of welfare and empowerment of the Ministry’s target groups, as cannot be supported under its regular schemes.

     Financial assistance is given up to 90% of the approved expenditure to the voluntary and other eligible organizations. In case of an organization working in a relatively new area where both voluntary and Government effort is very limited but the need for the service is very great the Government may bear up to 100% of the cost.

  The major funding under the scheme has been to the Jammu & Kashmir Rehabilitation Council for Rehabilitation of Widows, Orphans, Handicapped and Older Persons affected with terrorism. During 2007-08 to 2010-11, an amount of Rs.300 lakhs was released every year to the Council.

Other Ministries

In addition to the Integrated Rehabilitation Centres for Addicts (IRCAs), which are financially supported by the Ministry of Social Justice and Empowerment, Ministry of Health and Family Welfare also supports 122 de-addiction centres in District Hospitals.

http://pib.nic.in/newsite/efeatures.aspx?relid=72856

Courtesy-http://www.facebook.com/notes/dr-manmohan-singh/international-day-against-drug-abuse-and-illicit-trafficking-tomorrow-steps-take/10150225284700636

India Signs Protocol Amending DTAA with Singapore, To help in matters of Tax Evasions and Black Money

The Government of India signed a Protocol, amending Double Taxation Avoidance Agreement (DTAA) with Government of Singapore for effective exchange of information in tax matters today. The Protocol was signed by Shri Prakash Chandra, Chairman, Central Board of Direct Taxes (CBDT) on behalf of the Government of India and Ms. Karen Anne Tan Ping Ming, High Commissioner of Singapore to India, on behalf of the Republic of Singapore.

The negotiations for entering into an amending Protocol was completed in one round at Singapore. Both India and Singapore have adopted internationally agreed standard for exchange of information in tax matters. This standard includes the principles incorporated in the new paragraphs 4 and 5 of OECD Model Article on ‘Exchange of Information’ and requires exchange of information on request in all tax matters for the administration and enforcement of domestic tax law without regard to a domestic tax interest requirement or bank secrecy for tax purposes.

In the aftermath of the global financial crisis, there is increased recognition on part of Governments that improvements in exchange of information in tax matters are a part of a broader agenda to improve transparency and global governance. There is recognition that effective and comprehensive exchange of information in tax matters is a vital part of the ongoing efforts of revenue authorities to tackle international tax avoidance and evasion. Towards that end, India and Singapore joined hands for effective exchange of information including banking information.

This amending Protocol will go a long way in strengthening relationship between India and Singapore and facilitate mutual co-operation by effective exchange of information in tax matters between two countries.

Courtesy-http://www.facebook.com/notes/dr-manmohan-singh/india-signs-protocol-amending-dtaa-with-singapore-to-help-in-matters-of-tax-evas/10150225272100636

Bid to put US ties on fast track

India and the US are keen on quickly thrashing out the prickly issues relating to investment and other economic matters that are coming in the way of a closer relationship between the two countries.

Top finance officials of the two countries are meeting next week to work out ways to improve economic co-operation and tackle investment curbs.

India and the US have agreed to fast-track technical negotiations for an early bilateral investment agreement and discuss Washington’s demands that New Delhi opens up foreign direct investment in retail, defence industries and financial services.

India has also been demanding US support for a bigger role for itself in global financial institutions such as the World Bank and IMF.

Finance minister Pranab Mukherjee will hold talks with US treasury secretary Timothy Geithner as part of the India-US economic partnership dialogue.

Indian officials are likely to agree to demands for greater investment opportunities in insurance and banking in a calibrated manner, so as to give large Indian banks and other financial entities time to consolidate their positions.

India may also increase foreign voting stake in its banks beyond 10 per cent but will tie this up with greater opportunities for them in setting up branches abroad.

Another major demand of the US and EU negotiators is their banks should be accorded the same treatment as given to those from Singapore.

India treats Singapore banks on a par with its own banks, giving them easy access to retail customers and the financial sector.

“Virtually every nation wants us to extend national treatment to their banks. We have not agreed to anyone’s request except for Singapore’s two designated banks,” said an official. National treatment is a euphemism for allowing level playing field to foreign banks.

At present, foreign banks are restricted in many ways. They are not allowed to enter retail banking on a large scale. There are also fetters on the number of branches they can set up as well as on the areas they can enter.

However, the government is unwilling to give in at this point as it feels this will jeopardise its own plans for banking reforms.

Top finance ministry officials said India would not open up its banking market completely but instead allow more foreign bank branches to be set up along with some concessions in retail banking.

The finance ministry wants state-run banks to morph into mega-corporations capable of meeting the challenge of global banks, before agreeing to finally open up the market.

Besides Geithner, Federal Reserve chairman Ben S Bernanke, Securities and Exchange Commission chairman Mary Schapiro and Commodity Futures Trading Commission chairman Gary Gensler would take part in the discussion.

Impressed by the economic growth of India, Washington has said it wants closer economic co-operation and greater market access, which will help to make India one of Washington’s top 10 trading partners.

The talks will focus on infrastructure development, capital markets reforms, co-operation on the Group of 20 efforts to reduce trade imbalances and combating money laundering.

Commerce minister Anand Sharma yesterday met US trade representative Ron Kirk as part of his US trip. Sharma said the two countries had agreed to speed up a bilateral investment agreement.

Curtsey- http://www.telegraphindia.com/1110624/jsp/business/story_14154050.jsp

Super rich Indians soar

India had the 12th largest millionaire population in the world in 2010. The country for the first time entered the Top 12 league of high net worth individuals (HNWIs) on the back of a robust economy and strength in key wealth drivers such as equities.

According to the World Wealth Report released by Merrill Lynch Wealth Management and Capgemini today, the number of HNWIs in India soared to 153,000 in 2010. India took over Spain, which dropped to the 14th position.

HNWIs are individuals with investible assets of $1 million or more, excluding primary residence, collectibles, consumables and consumer durables.

The growth in HNWIs was nearly 20.8 per cent from 126,700 in 2009, the highest among the top 12 countries, and more than that of China where the number grew to 535,000 from 477,000.

“India with a GDP growth rate of 9.1 per cent in 2010 and an increase in market capitalisation by 24.9 per cent presents a great opportunity and continues to remain an important market for wealth management providers worldwide,” said Atul Singh, managing director and head of Merrill Lynch Global Wealth Management, India.

According to the report, the Asia-Pacific region continues to contribute the greatest year-on-year additions to global HNWI ranks. During 2010, the millionaire population in the Asia-Pacific rose 9.7 per cent to 3.3 million, overtaking that of Europe where the growth at 6.3 per cent saw the total number of HNWIs at 3.1 million. The wealth of Asia-Pacific HNWIs’ rose 12.1 per cent to $10.8 trillion, more than the $10.2 trillion held by their peers in Europe.

Asia’s growth has been led by India and China and it is being felt that the Asia-Pacific will soon overtake North America (3.4 million) in terms of the number of high net worth individuals.

The millionaire population remained concentrated in the US, Japan and Germany, which together accounted for 53 per cent of the world’s HNWIs.

The US had the single-largest population of millionaires (3.1 million) accounting for 28.6 per cent of the global HNWI population.

General insurance IPO

The insurance regulator will come out with a separate set of guidelines for general insurance (non-life) companies that are looking to tap the capital market with initial public offerings. The regulator is waiting for Sebi’s recommendations on the disclosure requirements.

According to R.K. Nair, member (finance and investment) of the IRDA, the disclosure requirement for non-life insurance companies will be different from those of life insurance firms given the nature of cash flows and risks underwritten by them.

“We are awaiting the recommendations of SCODA (Sebi Committee on Disclosures and Accounting Standards) which is still working on the disclosure requirements for non-life insurance companies. Once we get these recommendations, we’ll come out with the IPO guidelines,” Nair said on the sidelines of an insurance summit of the Indian Chamber of Commerce here today.

He declined to give any time frame for releasing the guidelines.

Early this week, the Insurance Regulatory and Development Authority (IRDA) unveiled draft IPO guidelines for life insurance companies. In the draft, the requirement that an IPO applicant should be profit-making has been replaced by the condition that the embedded value of a life insurer must be twice the paid-up equity capital of the company. The embedded value is the value of all in-force policies plus the net worth of a life insurance company.

Tax returns relief for salary Person

If you are salaried and your gross annual income is Rs 6.55 lakh or less, you need not file income tax returns for the assessment year 2011-12.

The Central Board of Direct Taxes (CBDT) today notified that salaried individuals having a total income up to Rs 5 lakh after allowable deductions, including salary from one employer and interest income from deposits in a savings bank account of up to Rs 10,000, need not file income tax returns.

Under current tax exemption rules, a person with gross annual income of Rs 6.55 lakh can be left with Rs 5 lakh after the allowable deductions.

This means those with Rs 6.55 lakh gross annual income in 2010-11 need not file tax returns in the assessment year 2011-12 if they don’t earn salary from more than one employer, they don’t have additional income from sources other than bank accounts and they don’t have any tax refund claims.

However, they should get from their employer Form 16 — the certificate of tax deducted at source. The returns-exempt salaried will also have to give details of their interest income from bank deposits to their employer for deduction of income tax at source.

If the new rule had not come into force, salaried persons earning more than Rs 3.15 lakh a year would have had to file returns by July 31 this year.

Filing returns is a hassle that involves seeking the services of a tax consultant for a fee ranging between Rs 250 and Rs 500, though it can be done by individuals on their own either manually or through an online process which requires the purchase of a digital signature.

According to CBDT officials, the revised rule, which was announced in the budget, will benefit 85 lakh income tax assessees. The notification mentions only the assessment year 2011-12 but the government is expected to extend the relief.

Tatas vs ‘people in power’ Gloves off but no stay on Day One

The Tata Motors legal team today drew a distinction between the State and governments and pointed out that the “very people who created the lawless situation are now in power”. But the high court did not issue an interim order following an assurance by the administration that peace would be maintained at the Singur site taken over last night. The hearing on the Tata petition against the new government’s law that was invoked to reclaim the Singur factory land will resume tomorrow afternoon. The company lawyers blamed politics and held both the Left Front and the current dispensation — without naming either — responsible for the exit of the Nano plant from Bengal. The lawyers said the project was relocated to Gujarat after the “previous government” failed to maintain law and order. Barrister Samaraditya Pal, appearing for Tata Motors, added that the “very people who created the lawless situation (at Singur) are now in power”. “Politics should be behind economics but sadly it is ahead today and the common people are the sufferer,” Samaraditya Pal said during his three-hour argument that would continue tomorrow before Justice Saumitra Pal. Justice Pal did not pass any interim order today to enforce status quo on the Singur land or stay the Singur land act. The court was assured by the state advocate-general, Anindya Mitra, that enough police and security personnel have been mobilised at the site, 45km from Calcutta on Durgapur Expressway in Hooghly district. Justice Pal said law and order should be maintained and peace and tranquillity ensured at the site to protect the assets of Tata Motors and its associates on 997 acres. Around 500 security personnel, including a wing called “special strike force”, have been deployed at the Singur site. The factory has several shells of the Nano, wheels and accessories, besides cables, air conditioners, generators and huge containers. Some villagers stood in queues and sneaked into the factory though gaps in the walls and took away broken iron rods, plastic pipes and window frames. Officials said such “pilfering of junk” has been a regular occurrence, adding that the incidents could not be classified as “looting” or “vandalism”. In the court, Tata Motors said it came to invest in Singur at the invitation of the State and not the government, making a distinction between the two. It pointed out that the State was a continuation and the government, which acted as an arm of the State, changes every five years following elections that reflect the people’s verdict. “The verdict (in Bengal) was in favour of a party which is responsible for the Tatas to leave,” barrister Samaraditya Pal said. The counsel’s contention directly linked the Tata departure to chief minister  Mamata Banerjee’s party, unlike the company statement last week. The statement issued by Tata Motors on the day the bill was passed had referred to “violent agitation” and “hostilities” at the site but had not explicitly held anyone responsible. “India is a confederation of the states, not of governments,” Samaraditya Pal said in order to drive home the point that State policy should not be made subservient to the whims of political parties. The company said the Singur Act was bad in law and against the tenets of the Constitution. It also countered an assertion in the Singur Act that the company had abandoned the site. “The land remained unutilised. Who is responsible? Is it the State or is it my (Tata Motors) fault?” Samaraditya Pal asked. He said the land was acquired under a central act (the land acquisition act of 1894) and leased to the company. While taking the land back, the central act was not amended and a state law could not bypass the mother law. The company said it had offered two options to the previous government: an alternative project on the same land or move out if compensated for the loss but it did not respond to the communication. The company pointed out that no termination notice was sent as was required under the lease deed agreement. Tata Motors said that in the lease deed of March 2007, the State had promised to provide peaceful possession of land and also pledged to indemnify the company from any losses that would arise if any court held that the acquisition was bad in law. The courtroom witnessed some heated exchanges between the two sides. Tata Motors was represented by Samaraditya Pal and his associate Siddhartha Mitra and the government by Anindya Mitra, counsel and MP Kalyan Bandopadhyay and government pleader Ashok Banerjee. When Samaraditya Pal prayed that the State must protect the company’s assets, Bandopadhyay quoted a Tata letter to suggest no “plant or machinery” were left at the site after the relocation. Samaraditya Pal spoke of contempt of court following a remark by Bandopadhyay about the chief justice. Bandopadhyay said he did not insult the chief justice. Courtesy- The Telegraph,Kolkata,23rd June 2011

Retail bonds offerings

 Risk-averse investors can now hope to earn 11 to 12 per cent interest a year as non-banking finance companies (NBFCs) make a beeline to tap the retail non-convertible debenture (NCD) market.

At least three such NBFCs are planning to come out with retail NCD issues during the current financial year to diversify their funding sources.

Shriram Transport Finance Company (STFC), a Reserve Bank-registered deposit-taking NBFC, will be the first to hit the market on June 27, offering a maximum of 11.6 per cent interest to investors who invest less than Rs 5 lakh for five years. 

Higher net-worth investors will, however, get a lower interest rate of between 11 per cent and 11.35 per cent depending on the investment tenure.

Shriram’s NCD offer has two options — one for five years and the other for three years.

The debentures will be later listed on the National Stock Exchange to provide liquidity. 

Besides, the issue has a put and call option, which can be exercised at the end of four years.

However, an investor must have a demat account to apply for these debentures. Each debenture is priced at Rs 100, and the minimum application amount is Rs 10,000.

Manappuram Finance and Muthoot Finance are also planning to come out with their NCD offerings soon.

As per Karvy Stock Broking, “NBFCs have so far depended mostly on institutional funding, including banks. But as fund-raising from these sources have become a challenge under the current environment, NBFCs are looking to diversify their lender’s portfolio and turn to the retail debt market.”

Retail investors will be benefited because these NCD issuers will have to offer a higher interest rate than bank fixed deposit rates to attract investors.

Shriram Transport’s offer of a maximum of 11.6 per cent interest rate per annum is a case in point.

In fact, the company had offered an 11 per cent interest for its NCD offering last year, which was listed on the stock exchanges at a premium; the debentures still attract a premium despite a rise in interest rates since then. Debenture price generally comes down when interest rates go up. STFC hopes to mop up Rs 1,000 crore from the forthcoming issue.

STFC is engaged in the financing of new and old commercial vehicles of small road transport operators. The company has more than Rs 36,000 crore assets under management as at the end of 2010-11.

“

We are aiming at a 15-20 per cent growth in business in the current financial year and to support this business growth we may need to borrow Rs 12,000 crore,” said R. Sridhar, managing director, STFC.

However, he added that the company would not offer any more retail NCD issues in the current financial year.

A Great quote

If you steal from one author, it is a plagiarism,
if you steal from many it is a research.
.............. Wilson Mizner.

Indian IT industry concerned over global economic crisis

The resurgent Indian IT industry Monday expressed concern over the fragile global economy plunging into crisis again due to sovereign debt defaults in Europe, sluggish growth in the US and emerging economies overheating.

'The economic crisis is not just in India, but the world over. This is a period of concern. If the situation becomes worse, I don't think anybody can predict what will happen,' a top industry executive said here.

Though the Indian IT industry had not seen any impact of the crisis brewing, especially in Europe, Infosys chief executive S. Gopalakrishnan hoped that the lessons learnt from the 2008 global financial crisis would help in tackling the present crisis.

'I am hopeful that the coordinated efforts by the European Economic Forum and the IMF (International Monetary Fund) to address the debt-ridden crisis would get a right response as they did two years ago,' Gopalakrishnan said on the margins of an ICT function.

Admitting that the present crisis was a matter of concern for everybody, including the Indian IT industry, Gopalakrishnan said though economists projected that the post-2008 recovery would be a long drawn out downturn, the situation changed in a short time for better, especially for the developing countries.

'Hopefully, this time also, such concerted effort across nations will happen and we will be able to sustain this recovery. Though we (Indian IT industry) have not seen any impact yet, we don't know the future,' the IT honcho quipped.

 Courtesy-Indo Asian News Service, On Monday 20 June 2011, 11:01 PM

Inflation haunts growth drivers

Inflation is proving to be a huge bugbear for both India and China — the two fastest growing economies in the world.

Data released on Tuesday showed that inflation had spurted to 9.06 per cent in India in May, which came on top of an 8.66 per cent jump in April.

The inflation number was higher than the consensus estimate of 8.74 per cent and immediately sparked worries about another round of rate increases on Thursday when the RBI meets to review its monetary policy. The Street is expecting a 25 basis point increase. The RBI has already forecast that inflation will ease to 6.5 per cent by March next year.

In China, inflation accelerated to 5.5 per cent in May, the fastest pace in almost three years, and industrial output grew more than the economists’ forecasts. China has raised interest rates four times since September, increased banks’ reserve requirements to a record and allowed the Yuan to gain about 1.6 per cent against the dollar this year.

Finance minister Pranab Mukherjee said appropriate steps would be taken to rein in inflation. Economists expect another rate hike by the RBI on Thursday.

Costlier fruits, petrol and manufactured goods were behind higher inflation in May compared with April.

“We would keep a close watch on developments, both domestic as well as international, in the coming months and make appropriate adjustments as we go along,” Mr. Finance minister said. He said inflation was actually lower compared with May 2010 when it was at 10.48 per cent.

Economists said the RBI could take a cue from Beijing to continue with its rate tightening policy. The RBI has raised key policy rates nine times since March 2010.

While the consistent rate hikes have affected investments and led to a fall in growth numbers, inflation still remains the RBI’s major focus.

In May, prices of manufactured products, which have a weight of around 65 per cent in the wholesale price index, went up 7.27 per cent year-on-year. Inflation in fuel and power, with a weight of almost 15 per cent, stood at 12.32 per cent during the period.

With rising core inflation, the focus will remain on inflation rather than on growth. Therefore, we expect the RBI to hike policy rates by 25 basis points on June 16 and another 25 basis points in the third quarter.

OECD view

The Paris-based think tank OECD said the Indian economy was likely to expand at over 8 per cent this fiscal and had the potential to witness double digit growth in the medium term, provided right policies were in place and demographic developments pushed savings rate higher.

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