Advantage of Term Insurance over other types of Life Insurance

Term insurance plans are the simplest and most affordable form of life insurance.

Mr. Verma, aged 30 years, was investment savvy. He had a diverse financial portfolio to take care of his financial needs. When it came to life insurance, Mr. Verma was assured that the plan he had invested in was sufficient for his needs. He was paying a premium of Rs 58,362 every year for an endowment policy having a sum assured of Rs 10 lakh. The policy term was 20 years and he was happy with the fact that the policy also gave him bonus additions besides the guaranteed corpus of Rs 10 lakh on  death or maturity.

Mr. Verma had invested in an endowment plan which, he believed, was sufficient enough to provide a good insurance cover and also yield an investment return. Was he right in his beliefs?

Sadly, no. Do you know why?

Incomplete financial security for family
Though Mr. Verma had invested in life insurance, which is commendable, the plan does not provide him and his family the full financial security required in case of Mr. Verma's premature death.

If Mr. Verma were to die tomorrow, will his insurance policy prove sufficient in meeting his family's financial needs?

In today's economy, how long do you think Rs 10 lakh would suffice in meeting the Verma household's living expenses?

What about Mr. Verma's children's future education?

Would the death benefit of an endowment plan take care of possible future medical expenses?
Life insurance = financial security for nominees in case of death of policy holder
When it comes to life insurance, the primary motive of the policy is to provide financial security. Life insurance policies are unique with reference to the benefit they provide and the objective of financial security that they fulfil.

Financial security = fulfilment of the family's financial needs

Unlike regular investment avenues such as mutual funds or fixed deposits, only life insurance policies promise a benefit in case of premature death of the insured. This benefit helps take care of your family's living expenses as well as future financial goals in case you are not around to provide for them. Given this objective of the policy, having a sufficient sum assured becomes necessary. Only if the sum assured is optimal can the plan promise complete financial security This is where a term insurance plan becomes indispensable.

Let's understand how -

What are term insurance plans?

Term Insurance Plans are the simplest and most affordable form of Life Insurance.
Term insurance plans are life insurance plans which promise to pay a benefit only if the insured dies during the term of the policy. There is, usually, no maturity benefit payable under the plan. Term plans are, therefore, called pure protection plans.

Term plans versus other life insurance plans
Term plans are, in effect, a sub-set of life insurance plans.

Thus, they are a type of life insurance plan and have similarities with other plans. These similarities include the following -

Similarities between term plans and other life insurance plans

Like other life insurance plans, term plans give tax benefits under Section 80C of the Income Tax Act on the premiums paid.

The death benefit received under the plan is also tax-free under Section 10 (10D), subject to certain conditions, like in case of other life insurance plans

There are return of premium term plans which promise a maturity benefit like other life insurance plans

You can buy term plans online just like other life insurance plans.

Major differences between term insurance and other life insurance plans

Term plans have more affordable premiums
Given the nature of term plans, their premiums are much lower than other traditional insurance plans. In fact, among all life insurance plans, term plans have the lowest premium. This low premium allows you to afford an optimal sum assured so that you can ensure sufficient financial security for your family in your absence. Other life insurance plans, i.e., traditional plans such as endowment policies, on the contrary, have higher premiums. If you choose a high sum assured in a traditional insurance policy
Term plans allow affordable coverage
Given the huge difference in the premium rates, affording a high coverage under any life insurance plan, except term insurance, is difficult. The thumb rule states that you should have a minimum life insurance cover of 10 times your annual income or sufficient to meet future living expenses and value of financial goals after accounting for inflation. Only term plans can give you the sufficient coverage without burning a hole in your pocket.

Term plans can be used to get complete future financial security

High coverage at affordable premiums is the only important factor which differentiates a term insurance plan from other plans of life insurance. While other plans might give you guaranteed returns, periodic money backs or lifelong annuities, term plans offer you the option of getting a sufficiently large sum assured at a low cost. This would allow you to give your family a complete sense of financial security at an affordable price.

Term plans have no saving component

Other life insurance plans, like endowment or money back plan, have a saving element in them. They promise to pay either a death benefit in case of death during the term or a maturity benefit if you survive the term of the policy. Term plans, on the other hand, have no saving element (except for return of premium term plans). They pay a benefit only in case of death and the maturity value is, usually, nil.
Most of us buy insurance plans offering guaranteed benefits and overlook term insurance plans. When buying life insurance, term plans should be given priority. If you need life insurance, you should look at buying other plans only after you have taken a term insurance plan with a sufficient sum assured.

Stocks in News: SBI, Vodafone Idea, JK Tyre, Zee Entertainment, Central Bank

Here is a list of top stocks that are buzzing in early trade on Thursday
 SBI: The stock was among the top gainers in Nifty 50 companies after chairman Rajnish Kumar on Wednesday pitched analysts for a higher valuation of the bank’s enterprise value, asking them to take into account the growth prospects of its subsidiaries and better-than-expected performance in the fiscal ending March 2021. Share traded more than 4% higher.
Vodafone Idea: Shares slumped more than 7% in early deals after credit rating for some of its instruments was downgraded by Care Ratings Ltd. The agency downgraded its rating on long-term bank facilities and non-convertible debentures to CARE A-. News reports that the company may discontinue its India operations due to also weighed on investor sentiment.
JK Tyre: Shares of the tyre maker surged nearly 11% in early deals as it reported over a three-fold jump in consolidated net profit to ₹167.7 crore in the September quarter driven by gains from deferred tax liability following the government slashing corporate tax rate to 22% from 30%. The company had posted a net profit of ₹45.8 crore in the same period last fiscal.
Zee Entertainment: The stock was the top gainer among Nifty 50 companies and traded nearly 7% higher in early deals. This despite parent Essel Group promoters being pulled up for providing inadequate information about additional stake sale in Zee Entertainment Enterprise Ltd to lenders, according to a report by the Economic Times.
Central Bank: Shares extended gains and traded up nearly 13% as the public-sector bank on Tuesday said its board has approved allotting preferential shares to the government to raise ₹3,353 crore equity capital. The lender said the board approval is subject to the nod of shareholders, RBI and Securities and Exchange Board of India and other statutory authorities.
Tata Global Beverages: Shares rose more than 4% as the company said it is expecting the merger of consumer products business of Tata Chemicals Ltd with itself by the end of this fiscal. The stock was up despite the company having reporting a 17.1% fall in net profit to ₹152.5 crore in the quarter ended September a against a net profit of ₹183.9 crore a year ago.
United Bank: The stock soared more than 13% due to strong performance in the quarter-ended September. The state-owned bank reported a profit of ₹124 crore during July-September due to lower provisions and healthy growth in net interest income compared with a loss of ₹883.2 crore in the same period last year. Asset quality also improved sequentially.

Mukesh Ambani's RIL becomes sixth largest global energy firm by market cap

RIL hit a market cap of $130.76 billion on Wednesday compared with BP Plc’s $128 billion
In early deals today, shares of RIL traded at ₹1,466 on the BSE, having gained over 31% so far this year
 Mukesh Ambani led-Reliance Industries Ltd (RIL) has pipped British oil major BP Plc in terms of market capitalisation to become the world’s sixth largest energy entity. But the rise in market cap is largely thanks to Indian conglomerate’s retail and telecom businesses.
RIL hit a market cap of $130.76 billion on Wednesday compared with BP Plc’s $128 billion. In early deals today, shares of RIL traded at ₹1,466 on the BSE, having gained over 31% so far this year.
On Tuesday, shares of BP Plc, closed at $6.33, down 3.8%--the most in four weeks--in London trade, after dashing investor hopes of a higher dividend this year. The company’s market capitalization stood at $128.86 billion. Year to date, the BP Plc stock has declined 0.7%.
BP Plc reported adjusted net income of $2.25 billion for the September quarter, exceeding average analyst estimate of $1.77 billion. This compares with a profit of $3.84 billion a year earlier, when BP decided to buy a $10.5 billion package of US shale assets in cash rather than shares because it was confident oil prices would stay high.
Globally, in the listed universe, Exxon Mobil Corp is the biggest oil and gas firm, with a market cap of $290.42 billion, followed by Royal Dutch Shell Plc at $238.15 billion, Chevron Corp at $224.92 billion, Petrochina Co Ltd with $149.20 billion in market cap, and Total SA at $141.74 billion.
However, the world’s largest energy entity is Saudi Aramco, which pumps about 10% of the world's crude and emerged as the most profitable company in 2018. Saudi Aramco beat Exxon Mobil Corp in terms of earnings. The energy giant plans to launch its initial public offering in November.
BP is RIL's partner in its exploration and production ventures in India. Both companies also operate an equal joint venture called India Gas Solutions, and will partner to set up fuel retail outlets.

ICICI Bank crosses ₹3 trillion market cap for the first time

At 2.16 pm, the stock traded at ₹464 on the BSE, up 2.1%, with a market capitalisation of ₹3.01 trillion
So far this October, ICICI Bank's stock has gained 6.6%, while year-to-date it has advanced 28%
 Shares of ICICI Bank Ltd crossed the ₹3 trillion market capitalisation for the first time on Friday, making it the country's fourth lender to achieve this milestone.
Intraday, the stock touched a fresh record high of ₹466 on the BSE, up 2.3% from its previous close. At 2.16pm, the scrip traded at ₹464 on the BSE, up 2.1%, with a market capitalisation of ₹3.01 trillion. The Sensex fell 0.51% to 38,833.22 points.
So far this October, ICICI Bank's stock has gained 6.6%, while year-to-date it has advanced 28%.
Earlier, HDFC Bank Ltd, State Bank of India and Kotak Mahindra Bank had achieved this landmark. HDFC Bank remains India's most valued bank with market cap of ₹6.70 trillion followed by Kotak Mahindra Bank with ₹3.02 trillion.
Foreign institutional investors’ (FII) holding in ICICI Bank has come down by 2.6% quarter on quarter, the latest shareholding pattern shows. “This can trigger its invisibility multiplier in index getting changed to 1 from 0.5. This will increase in doubling weight and could see inflows of $1.20 billion," Bloomberg quint reported quoting Motilal Oswal latest note.
Bloomberg quint also reported, quoting Morgan Stanley, that there was high probability of weight increase in ICICI Bank on MSCI which could see inflows of $900 mln.
ICICI Bank will announce its September quarter earnings on 26 October. According to 21 Bloomberg analyst estimates, the lender is expected to report a profit of ₹1270.40 crore.
Brokerage firm Kotak Institutional Equities research expects ICICI Bank to report a solid pre-provisional operating profit growth of 28% year-on-year led by healthy loan growth (15% YoY) and better net interest income growth (24% YoY). NIM will remain stable quarter-on-quarter.
"We expect reduction in gross NPLs on the back of write-offs and slippages at 2% levels. Credit costs will decline qoq. Below investment grade portfolio will remain stable. Higher DTA would impact reported earnings," the brokerage firm added in a 4 October report.
According to Motilal Oswal Research, the bank has delivered a steady performance at the pre-provision operating profit level and is showing healthy signs of earnings normalization. The bank is on track to achieve its 15% return on equity guidance, it added.
The brokerage firm maintained its buy rating on the shares of the lender and set a target price of ₹530 a share.

SBI Q2 net profit triples to ₹3012 crore, asset quality improves

A Bloomberg poll of 21 analysts had expected the state-owned lender to report a profit of ₹2292.8 crore
Gross NPAs were at 7.19% in the September quarter, compared with 7.53% in the June quarter
 Mumbai: State Bank of India (SBI) on Friday said its net profit for September quarter more than tripled on the back of higher net interest income and other income.
The bank reported a net profit ₹3011.73 crore for the three months ended September compared with ₹944.87 crore in the year-ago period. A Bloomberg poll of 21 analysts had expected the state-owned lender to report a profit of ₹2292.8 crore.
At 2:53pm, shares of SBI traded 7% higher at Rs281.90 apiece, while the benchmark Sensex was down 0.25% at 38,923.84 points.
The bank’s net interest income, or the difference between interest earned on loans and paid on deposits, rose 17.7% year-on-year to ₹24600.32 crore.
Other income, which includes core fee income, rose 9.26% to ₹8538.39 crore in the reporting quarter.
Provisions during the quarter increased 8.7% to ₹13138.93 crore. In the April-June quarter, the bank had set aside ₹9812.94 crore in provisions.
Gross non-performing assets (NPAs), as a percentage of total advances, were at 7.2% in the September quarter compared with 7.5% in the June quarter and 9.95% in the year-ago quarter.
Post provisions, net NPA ratio was at 2.79% against 3.07% in the April-June quarter and 4.84% in the year-ago quarter.

ITC earnings light up on tax cuts, but growth triggers still missing

ITC's stock is up 2.2% in early trade on the BSE
In its core business of cigarettes, revenues have improved by about 6.8% year-on-year to ₹5,842 crore
 ITC’s consolidated earnings were largely weaker than expected, but gains from the corporate tax rate cuts seem to be the saving grace. Reflecting this, the stock rose over 2% in trade on Friday.
Its core cigarettes business saw a decent growth with revenues improving 6.8% year-on-year to ₹5842 crore. While this also implies that cigarette volumes have increased about 3% on key operating metrics, the growth may have disappointed investors. Besides, competition is nipping at the heels of ITC and may limit its pricing power.
“The cigarette division’s sales growth was similar to Q1 at 6%, indicating 3% volume growth and continuing loss in market share. We note that after the steep price hikes in the deluxe filter segment (64mm filter sticks) and several brand exits from Rs5 per stick price point, ITC’s cigarette volume growth has been impacted," said Emkay Financial Services in a note to clients.
In its other important FMCG businesses, which account for about 26% of revenues, sales grew about 4% year on year. While this is comparable to other FMCG companies, operating margins are still quite low, implying that ITC has not been able to make the desired improvement in costs.
Its hotels business has seen a healthy revenue growth of 17% year-on-year. ITC’s new properties are beginning to pay off. However, operating performance here has been weak.
Overall, Ebitda margin has improved by about 110 basis points to 38.4% in Q2 largely due to better product mix and operating leverage in its cigarettes business. Ebitda is earnings before income, tax, depreciation and amortization.
Besides, its net profit was boosted as the firm switched to the new corporate tax rate structure, which has led to substantial savings in cash. Net profit increased by about 36% year-on-year. However, profit before tax grew about 10% year-on-year.
Investors looking for a bigger puff in the earnings story may not find many positives. However, as the stock undershot the broader market over the last one year, valuations may seem fair. Going ahead, much of the growth will have to come from its profitable cigarettes business, otherwise the stock may not have much room for improving its price-earnings multiple.
“The stock has underperformed significantly and at current valuations of 19x FY21EEPS (earnings estimate per share), downsides appear limited. However, growth triggers are still missing and a possible increase in cigarette taxes remains a near-term risk to earnings.

Infosys announces stock incentives for over 6,000 mid-level employees

Salil Parekh, its CEO, would be granted performance-based incentives in the form of RSU worth Rs 10 crore, which was opposed by close to 21 percent of public shareholders and came under scrutiny in light of the recent development
Infosys on October 24 announced stock incentive option to its mid-level 6,949 eligible employees in the form of restricted stock units (RSU).
"This is to inform that 2,298,020 stock incentives in the form of RSUs were granted to 6,949 mid-level eligible employees of the company/subsidiary companies under the 2015 Stock Incentive Compensation Plan," the company said in a statement to the stock exchanges.
“The date of grant for these stock incentives is November 1, in line with the company’s compensation calendar timelines. The exercise price will be par value of shares. These RSUs will generally vest in four equal instalments,” the company added.
In April, Infosys’ board had approved performance-based stock ownership programme for employees. Close to five crore shares were allocated to incentivise employees.
Salil Parekh, its CEO, would be granted performance-based incentives in the form of RSU worth Rs 10 crore, which was opposed by close to 21 percent of public shareholders and came under scrutiny in light of the recent development.
On October 24, Infosys also informed the stock exchanges that the SEC has started an investigation based on the complaint by the whistleblowers. The latter have bolstered their claim with emails and voice recordings that show that Parekh and CFO Nilanjan Roy violated corporate governance norms and window-dressed accounts.

India jumps to 63rd position in World Bank’s Ease of Doing Business rankings

The country’s ranking has improved 79 notches in the last six years as the World Bank recognised India as one of the top 10 improvers for the third successive time; ranking could rise more next year after factoring in corporate income tax changes
India jumped into the 63rd rank in the World Bank’s latest Ease of Doing Business rankings, soaring 14 notches from last year, as the multilateral body endorsed a string of reforms—from the signature 'Make in India' initiative to insolvency resolutions — that the Narendra Modi government has launched over the last few years.
The improvement in rankings will likely bring cheer to the government that is battling to engineer a quick turnaround in the economy buffeted by weak consumer demand and muted investment activity.
With gross domestic product (GDP) growth slumping to 5 percent in April-June, the Indian economy, hailed as global growth engine and darling of foreign investors until recently, was now seen by many as falling off a cliff.
The World Bank report also recognises India as one of the top 10 improvers in this year’s assessment, for the third successive time. India is the only large country this year to have achieved such a significant shift.
“India, which has conducted a remarkable reform effort, joins the list for the third year in a row (of top 10 improvers). Given the size of India’s economy, these reform efforts are particularly commendable,” the World Bank said in its report.
The jump is significant, as it comes after last year’s 23-rung jump when India’s rank improved to 77 among 190 countries. It has improved its rank by 67 positions in the last three years, and 79 positions in the last six years (2014-19).
In 2015 the government had set a goal was to join the 50 top economies on the ease of doing business ranking by 2020.
India’s ranking could rise even further next year after factoring in the corporate income tax changes that the government announced last month. The annual report, which ranks countries on business-friendliness, procedural ease, regulatory architecture and absence of bureaucratic red tape, takes into account reform measures implemented between June-May in any given year.
On September 20, 2019, the government slashed the corporate income tax rate from 30 percent to 22 percent for all companies. Inclusive of cess and surcharges the effective corporate tax rate in India now comes down to corporate tax to 25.17 per cent.
Newer companies, which are set up after October 1, 2019, will be subjected to an even lower effective tax rate of 17 percent.
The new rates brings India closer, in some cases lower, to the rates prevalent in many of the emerging and industrialised countries. The new corporate income tax rates in India will be lower than USA (27 percent), Japan (30.62 percent), Brazil (34 percent), Germany (30 percent) and is similar to China (25 percent) and Korea (25 percent). New companies in India with an effective tax rate of 17 percent is equivalent what corporates pay in Singapore (17 percent).
The World Bank report said that Prime Minister Narendra Modi’s “Make in India” campaign focused on attracting foreign investment, boosting the private sector—manufacturing in particular—and enhancing the country’s overall competitiveness.
“The government turned to the Doing Business indicators to show investors India’s commitment to reform and to demonstrate tangible progress,” it said.
“The administration’s reform efforts targeted all of the areas measured by Doing Business, with a focus on paying taxes, trading across borders, and resolving insolvency,” the World Bank said.
In a strong commendation of the Modi-government’s policies, the World Bank said that the case of India provides an example of successful implementation of reorganisation procedures, including the enactment of the Insolvency and Bankruptcy Code in 2016.
“Before the implementation of the reform, it was very burdensome for secured creditors to seize companies in default of their loans. The most common way for secured creditors to recover the debt was through very lengthy and burdensome foreclosure proceedings that lasted almost five years, making efficient recovery almost impossible” it said.
The new law introduced the option of reorganisation (corporate resolution insolvency process) for commercial entities as an alternative to liquidation or other mechanisms of debt enforcement, reshaping the way insolvent firms could restore their financial well-being or close down.
The multi-lateral body said that with the reorganization procedure available, companies have effective tools to restore financial viability, and creditors have access to better tools to successfully negotiate and have greater chances to revert the money loaned at the end of insolvency proceedings.
Since its implementation, more than 2,000 companies have used the new law. Of these, about 470 have commenced liquidation and more than 120 have approved reorganisation plans, with the remaining cases still pending.
Despite some challenges in the implementation of the reform—particularly regarding court operations and the application of the law by multiple stakeholders—the number of reorganizations in India has been gradually increasing.
Reorganisation has now become the most likely procedure for viable companies as measured by Doing Business, increasing the overall recovery rate from 27 to 72 cents on the dollar.
This increase in the recovery rate is based on the standardised methodology and underlying assumptions of the resolving insolvency indicator set, which measures domestic limited liability companies only.
India made starting a business easier by abolishing filing fees for the company incorporation form, electronic memorandum of association, and articles of association.
The World Bank has also acknowledged the rapid reforms in dealing with construction permits, which has streamlined the process, reduced the time and cost of obtaining construction permits, and improved building quality control by strengthening professional certification requirements.
India has also made trading across borders easier by enabling post clearance audits, integrating trade stakeholders in a single electronic platform, upgrading port infrastructures, and enhancing the electronic submission of documents.

Yes Bank is on the roll; what should you do?

Market participants say a volatile stock price is a challenge to fundraising, even though the bank has been claimed that it is on track to raise funds.
The shares of YES Bank are seeing a sharp rise. Any idea why?
Could it be media reports of industrialists showing interest in the bank or the fundraising plans of the private lender or promoters paring their stakes?
Or, is it because the time of YES Bank has finally come?It may be too early to say—the bank is yet to come out with its September quarter earnings and its fundraising plans are also facing hurdles.
Experts, however, say the fundamentals of the bank are showing signs of improvement.
"Fundamentals are definitely looking improved as the cost of money is low and the bank is looking to raise capital. The weakness of the leverage players is out and the ownership of some of the FIIs is reduced," said Sanjiv Bhasin, Executive VP-Markets & Corporate Affairs at IIFL.
"Since the broader market is looking to outperform, there will be more risk-on trade. If you are in the stock, stay put because the worst may be in the price. We don't rule out the target price of Rs 75 for the stock for the coming six months
."In the recent past, the rally in the broader market was underpinned by 20-odd stocks such as HDFC Bank and Bajaj Finance. With signs of better fundamentals, investors want to bet on beaten-down stocks that can outperform the market.
"People want to bet on stocks that are underperforming the broader market such as RBL Bank and YES Bank who have seen drubbings of late. YES Bank will have some truth, some false," Bhasin said.
A day after logging a strong gain of 15 percent, shares of YES Bank continued their ascent on October 18, rising as much as 9 percent in intraday trade on BSE.
The stock has been in the green since October 14 and looked on course to extend its winning spree into the fifth consecutive session on October 18.
The gain has come after sharp losses in September, driven by one of the bank’s promoters selling his stake.
Market participants say a volatile stock price is a challenge to fundraising, even though the bank has been claiming it is on track to raise funds.
Analysts point out that the bank needs money almost equal to its current market capitalisation over the next two-three years and such a raising would happen at well below book value that will hurt minority shareholders.
Uncertainty on this front still surrounds the bank.
Media reports are suggesting industrialists Sunil Mittal and Sunil Munjal have envisaged interest in acquiring a stake in the private lender.
The bank, however, denied any such development, refusing to comment on it, but at first glance, it appears that the market is happy with this speculation as the stock has been witnessing healthy gains after the reports surfaced.
Promoter Rana Kapoor’s holding in the bank declined to 3.92 percent in the September quarter against 4.31 percent in the June quarter.
Is it good for the bank?
"It is positive as the overhang of selling is done. However, now there are two important triggers to be watched—Q2 results and progress on fundraising," said Sameer Kalra, Founder, Target Investing, who has a buy call on the stock.
In the long run, what plays in favour of a company is the faith of its investors. YES Bank has managed to keep the faith of retail investors in the quarter gone by.
The latest data shows, mutual fund houses increased their holding to 9.26 percent in the September quarter from 6.59 percent.
Moreover, with promoters selling their stake, retail investors have bought about 7.6 lakh shares of the company over the past year.
While there are some bright spots, a clear picture will emerge after the September quarter results are announced.
"The September quarter result is important to see the stress on the company's book. That will tell us whether the fundamentals are improving or deteriorating further," said Jaikishan Parmar, Equity Analyst at Angel Broking.
The stock is the high beta one. There is a larger pattern that has completed around Rs 40 which makes it attractive at lower levels at present.
"The kind of pullback after that drop to Rs 30 level has completely trapped the short-sellers at lower levels. This is a good momentum building up in the stock and as well it is fuelled by short-covering. We may see this momentum further moving up with the next level of resistance around Rs 58 and Rs 72," said Mustafa Nadeem, CEO, Epic Research.

Senior Citizens Savings Scheme offers 8.6% when FD rates are falling: Key points

Any individual who is 60 or above the age of 60 can avail the benefits of Senior Citizens Savings Scheme
One can open an account under this scheme with a minimum deposit of ₹1,000
 With high returns, Senior Citizens Savings Scheme (SCSS) is the simplest investment options for those who are above the age of 60. Designed to benefit the senior citizens, the scheme was launched in 2004. Available through several public and private sector banks and India Post offices, Senior Citizens Savings Scheme offers an interest rate of 8.6% per annum for July to September 2019 quarter.
Eligibility: Any individual who is 60 or above the age of 60 can avail the benefits of Senior Citizens Savings Scheme. Those who have attained the age of 55 years or more but less than 60 years can also open their accounts under this scheme if they have opted for voluntary retirement. Defence personnel who are above the age 50 can also avail this benefit.
Minimum amount: One can open an account under this scheme with a minimum deposit of ₹1,000. The limit can go up to ₹15 lakh. The deposit in the account should be in the multiples of ₹1,000. Other than the individual accounts, banks also provide the option of opening accounts jointly with the spouse under the Senior Citizens Savings Scheme.
Interest rate: Among the various small savings scheme, Senior Citizens Savings Scheme offers the highest rate of interest. Currently, the interest rate is set at 8.6% for July to September quarter, 2019. Finance Ministry review the interest rate in every quarter. Interests are paid on a quarterly basis — the first working day of April, July, October and January.
Maturity: Accounts opened under Senior Citizens Savings Scheme has a tenure of five years. One can extend the account for another three years after it matures.
Premature closure: In case anyone closes the account after one year and before the completion of two years, 1.5% of the deposit shall be deducted as penalty. If the account is closed after two years, 1% penalty will be charged.
Investments of up to ₹1.5 lakh is eligible for deduction under section 80C of the Income Tax Act. However, interest earned from the scheme is fully taxable. In case, the interest earned is more than ₹40,000 in a financial year, tax deducted at source (TDS) is applicable to the interest earned.

Bank fixed deposit (FD) rates above 8%. Check interest rates of 4 banks here

Bank FDs are considered safer as compared to investments in mutual funds
Here is a list of four banks which offer more than 8% interest on select maturities
 Fixed deposit (FD) is one of the most common financial instrument for investment. Bank FD is the most preferred investment tool because it is considered safer as compared to mutual funds. Recently, after the Reserve Bank of India (RBI) cut the repo rate in its Monetary Policy Review meet, all top lenders including the State Bank of India, ICICI Bank, HDFC Bank, Axis Bank and others started reducing their FD rates. Generally, banks offer FDs ranging from 7 days to 10 years. Here is a list of four banks which offer more than 8% interest on select maturities.
IDFC First Bank latest FD interest rates (below ₹2 crore) for general public
IDFC First Bank offers interest on FDs ranging from 4-8%. For deposits with maturity one year, IDFC Bank gives 8.00% interest. For 1 year and 1 day to 2 years maturities, the bank gives the same 8 % interest. So deposits with one and two years maturity period will fetch the highest rate of interest in IDFC First Bank.
DCB Bank latest FD interest rates (below ₹2 crore) for general public
FD interest rates in DCB Bank ranges from 5.40% to 8.00% for deposits maturing in 7 days and 10 years. For deposits maturing in 3 years, DCB Bank offers the highest interest rate. These deposits will fetch you an interest rate of 8.00%.
Equitas Small Finance Bank latest FD interest rates (below ₹2 crore) for general public
Chennai-based Equitas Small Finance Bank offers interest rate ranging from 5% to 8.3% to general public. Senior citizens get 0.60% extra over and above the normal FD rates. The bank gives more than 8% interest on deposits maturing in 1 year to 3 years. For FDs maturing in 1 year to 18 months, Equitas Small Finance Bank gives 8% interest and for term deposits maturing in 18 months 1 day to 2 years, the bank gives 8.20% interest. Deposits with maturities 2 years 1 day to 3 years will fetch highest interest at the rate of 8.30% in Equitas Small Finance Bank.
Jana Small Finance Bank latest FD interest rates (below ₹2 crore) for general public
Jana Small Finance Bank or Janalakshmi Financial Services Bank offers interest on fixed deposits ranging from 4.50% to 8.40%. Deposits maturing in 1 year will fetch you an interest of 8.00%. FDs with maturity period of more than 1 year to less than 2 years will give 8.25% interest. Jana Small Finance Bank will give you the highest interest on deposits maturing in 3 years, i.e. 8.40%. For deposits maturing in 2 years to less than 3 years and more than 3 years to 5 years will fetch you an interest of 8.25%.

IMF says India still the fastest-growing economy despite grim global projections

Globally, India stood in contrast to IMF’s gloomy economic projection of a 'synchronised slowdown'
India maintained its 'world’s fastest-growing economy' tag with a projected 6.1 percent growth rate for 2019, even as the International Monetary Fund (IMF) cut its growth projection by a percent.

The IMF released its report titled: World Economic Outlook, October 2019: Global Manufacturing Downturn, Rising Trade Barriers on October 15, which pegs India’s 2020 GDP growth at seven percent.
Globally, India stood in contrast to IMF’s gloomy economic projection of a 'synchronised slowdown'. This despite it trimming India’s prospects to 7.3 percent in April and seven percent in July.
Cumulative global growth has been projected at three percent this year and 3.4 percent next year.
IMF’s projected growth rate for India coincides with the Monetary Policy Committee’s 6.1 percent estimate as well.
As per the report, the country's growth going forward will be supported by the lagged effects of monetary policy easing, reduction in corporate income tax rates, recent measures to address corporate and environmental regulatory uncertainty, and government programmes to support rural consumption.
In the medium term, IMF expects India's growth to stabilise around 7.3 percent and bases this assumption on continued implementation of structural reforms.
IMF suggested that India use monetary policy and broad-based structural reforms to address cyclical weakness and strengthen confidence. Other measures include reducing the public sector's role in the financial system, reforming hiring and dismissal regulations, and land reforms to expedite infrastructure development.

SEBI notifies exit load on redemptions from liquid funds within 7 days of investment

The move is aimed at deterring corporates from using liquid funds to park their money for very short periods
Big purchases and redemptions from corporates can amplify the risk in these funds for retail investors
 The Securities and Exchange Board of India has accepted the graded exit load recommendations prepared by the Association of Mutual Funds of India (AMFI) for redemptions in liquid funds within 7 days of investment. The regulator had previously tasked AMFI formulating the exit load in its September 20th circular. The move is aimed at deterring corporates from using liquid funds to park their money for very short periods. Big purchases and redemptions from corporates can amplify the risk in these funds for retail investors, especially in times of poor liquidity or credit concerns in the debt market. The graded exit load has been set at 0.0070% on redemption on day 1 after the investment, 0.0065% on day 2, 0.0060% on day 3, 0.0055% on day 4, 0.0050% on day 5, 0.0045% on day 6 and 0.00% from day 7 onwards. In other words, the exit load would be ₹700 on a redemption of ₹1 crore after 1 day, ₹650 on a redemption of ₹1 crore after 2 days and so on.However AMFI is required to review the exit load structure on an annual basis.
Large institutional investors can instead move their money to overnight funds where there will be no graded exit load. Overnight funds were a category created by SEBI in its October 2017 circular regarding categorization and rationalisation of mutual funds. They can invest in securities that have a maturity of 1 day. As of September 2019, liquid funds had Assets under Management (AUM) of ₹3.88 lakh crore compared to just ₹13,851 in overnight fund indicating that a shift from them to overnight funds has not yet happened in a big way.
The graded exit load will also have some impact on liquid funds which were offering ‘insta-redemption’ such as Axis Liquid Fund, HDFC Liquid Fund, IDFC Liquid Fund, Nippon India Liquid Fund, DSP Liquidity Fund, ICICI Prudential Liquid Fund and Kotak Liquid Fund which offered redemption within 30 minutes of giving the request up to ₹50,000 or 90% of the amount in the fund, whichever is lower. Such redemptions would have to pay the exit load if made within the first 7 days of investment.

Explained: The concept of co-operative banking in India

The co-operative banking system came into being with the aim to promote saving and investment habits among people, especially in rural parts of the country.
In India, co-operative banks play a crucial role in rural financing, with funding of areas under agriculture, livestock, milk, personal finance, self-employment, setting up of small-scale units among the few focus points for both urban and rural cooperative banks.
They provide a much-needed alternative to the age-old exploitative practice of people approaching the village moneylender, most often getting into a debt-trap that they struggle to pull themselves out of.
The cooperative banking system came into being with the aim to promote saving and investment habits among people, especially in rural parts of the country.
What are co-operative banks?
Co-operative banks are financial entities established on a co-operative basis and belonging to their members. This means that the customers of a co-operative bank are also its owners. These banks provide a wide range of regular banking and financial services. However, there are some points where they differ from other banks.
Structure of co-operative banks in India
Broadly, co-operative banks in India are divided into two categories - urban and rural.
Rural cooperative credit institutions could either be short-term or long-term in nature. Further, short-term cooperative credit institutions are further sub-divided into State Co-operative Banks, District Central Co-operative Banks, Primary Agricultural Credit Societies.
Meanwhile, the long-term institutions are either State Cooperative Agriculture and Rural Development Banks (SCARDBs) or Primary Cooperative Agriculture and Rural Development Banks (PCARDBs).
On the other hand, Urban Co-operative Banks (UBBs) are either scheduled or non-scheduled. Scheduled and non-scheduled UCBs are again of two kinds- multi-state and those operating in single state.
Who oversees these banks?
In India, co-operative banks are registered under the States Cooperative Societies Act. They also come under the regulatory ambit of the Reserve Bank of India (RBI) under two laws, namely, the Banking Regulations Act, 1949, and the Banking Laws (Co-operative Societies) Act, 1955.
They were brought under the RBI's watch in 1966, a move which brought the problem of dual regulation along with it.
Brief history
The problem of rural credit was the key reason behind the advent of the co-operative movement in India, which began with the passage of the Co-operative Societies Act in 1904.
The next addition was the Co-operative Societies Act, 1912, which focussed on the need for regulation of such societies and hence the establishment of appropriate bodies to oversee their functioning.

4 steps for mutual fund investors to get started

It's a misconception that you need a lot of money to start investing
The funny thing about financial education is that it's almost never formally imparted to most people. We learn everything from algebra to geometry, but most of us never get to know how to save money or invest money or grow our wealth.
Therefore, it’s no surprise that most new investors find themselves in a tricky situation when it comes to investing money. We’re thrown face-first into a whirlpool of financial jargon and, more often than not, our Google-based research tempts us into investing in mutual funds. But, we all know that mutual funds are subject to market risks and that we should read the offer documents carefully before investing.
But what does that really mean? How exactly should you approach mutual funds? Which are the best mutual funds to invest in? And how many mutual funds should you invest in any way?
I am often faced with such questions and these are all undoubtedly crucial questions. Especially because we work hard for our money and it’s only wise to invest it smartly. I say this because, in the case of mutual funds, half knowledge can do more harm than good.
So, here is how you as a new investor should approach mutual fund investments.
Get a good wealth coach
A wealth coach is more than just an investment advisor; he/she is someone who will look at your overall financial well-being. Understand that most people have little knowledge about mutual funds and bank wealth managers are often biased. You need to talk to a wealth coach you can trust. This is usually an independent third party who is an expert and a person who is motivated to enhance your returns. The person will give you guidance and prepare you for your financial goals beyond just investments. Professional wealth coaches are usually someone who is not affiliated to any one bank or fund. They can help you set up an emergency fund, identify the right financial advisors etc.
Consult a qualified investment advisor
While wealth coaches give general life guidance of how to first prepare for emergency funds etc., an investment advisors are regulated entities. They give specific advice on which funds to buy and when to sell. There are over 3000 mutual fund options, and many people pretend to be good advisors, but only a few have the track record to prove it. Find advisors who can direct you towards quality funds because picking the right scheme is equivalent to winning half the battle. You can identify good advisors by looking at their past experience, track record and speaking with those they have worked with earlier.
Start small and automate
Don't think of investing a big amount. It's a misconception that you need a lot of money to start investing. You can start out with a simple SIP (Systematic Investment Plan). These plans will allow you to invest in mutual funds with as little as Rs 500 a month. You can set an amount that seems reasonable, but ensure that it's not inconsequential. The exact amount depends on your risk appetite, income, financial goals etc. Don't rush into things and keep in mind how compound interest works. A simple SIP calculator can help you on this front.
Second, if you rely on your memory and proactive nature to invest, you're doomed. The best of us fall prey to investing during market highs and panic selling close to market lows. It's not something you can always control and you simply cannot time the market. Therefore you shouldn't leave investments to emotions. Automate your investments through an ECS (electronic clearance service) mandate that auto-debits a fixed amount every month/quarter. Use technology and mathematics to guide your gut instinct.
Be patient and don't think too hard
Investing is a long-term process. To put things in perspective, in the world of investments, three years is short term. So, keep that in mind when you start out. You'll have to sit back and ride quite a few ups and downs. Prepare yourself for the journey and don't overthink a simple SIP. Everyday market changes have little changes on your mutual fund returns in the long term, unless something dramatic or drastic happens. So, keep yourself educated without getting anxious or nervous at every small rise and fall. Mutual Funds will teach you that patience is indeed a virtue that pays. I highly recommend you learn this lesson at the start instead of having to learn it the hard way later.

Paytm Payments Bank deposit scheme: Key things to know

The new fixed deposit scheme will be launched in early November

The new scheme will also enable savings account customers to create a fixed deposit with their partner bank

Paytm Payments Bank has announced a new fixed deposit scheme for its customers. India's largest payments bank is offering an interest of up to 7.5% on their fixed deposits (FDs) through Paytm Payments Bank's partner bank IndusInd Bank Ltd. The new fixed deposit scheme will be launched in early November. The new scheme will also enable savings account customers to create a fixed deposit with Paytm Payments Bank's partner bank, irrespective of the quantum of their investment, Satish Kumar Gupta, managing director and chief executive officer of Paytm Payments Bank, said.
Customers can instantly redeem the partial/complete amount from their fixed deposit at any time free of charge, added Gupta.

Paytm Payments Bank has also reduced interest rate on savings account deposits by 50 basis points to 3.5%. The new rate will be effective from November 9. "The RBI (Reserve Bank of India) recently cut the repo-rate by 25 basis points (bps) to 5.15%, which takes its cumulative cuts so far in the last 12 months to 135 basis points, which has prompted this move," said Gupta.

According to Paytm's official website, FDs will be booked with a maturity period that provides the highest interest rate. In case your FD is closed prematurely, before completion of the minimum period of 7 days, no interest shall be paid for the said FD, said Paytm. If your fixed deposit is closed prematurely before completion of the minimum period of 7 days, no interest shall be paid. The fixed deposit rate will be automatically renewed on maturity. The maturity period is mentioned as 13 months, according to the official website. There will be no penalty if you redeem the amount before maturity.

Customers can create fixed deposits starting from as low as Re 1 in Paytm Payments Bank's partner banks. According to the RBI's licensing and operative guidelines, the customer's aggregate balance in their payments bank account at the end of the day can not exceed ₹1 lakh.

As of April 2019, the Paytm Payments Bank have over ₹500 crore deposits in savings accounts, making it the largest payments bank in India in terms of deposits.

Monsoon ends at 25-year high; these 7 stocks look poised to gain most

At this juncture, when most macroeconomic indicators are showing signs of distress, surplus monsoon is manna from heaven as it will boost agri-sector income in the near future.
The distress in the rural economy may ease in the coming months as expectations for a good Rabi crop has grown stronger, thanks to a bumper southwest monsoon this year, which officially ended at a 25-year high.

India Meteorological Department (IMD) said that the country has recorded the highest monsoon rains since 1994, terming it as 'above normal' as the season officially ended on September 30.
"Quantitatively monsoon seasonal rainfall was 110 percent of its Long Period Average (LPA)," the IMD said.

LPA is the average rainfall between 1961 and 2010, which is 88 cm.

Monsoon is still active in several parts of the country and its withdrawal is likely to begin from northwest India around October 10, IMD said, adding that this is the longest recorded delay in withdrawal of the monsoon. Usually, monsoon starts withdrawing beginning September 1 from west Rajasthan.

Monsoon's strong show has raised the expectations of a good Rabi crop next year. This, along with the government's increased spending in rural India, is expected to ease the distress in the rural economy.

At this juncture, when most macroeconomic indicators are showing signs of distress, surplus monsoon is manna from heaven as it will boost agri-sector income in the near future.
"The revival in government spending in rural India from July as well as the settlement of major dues to the private sector (Rs 50,000 crore of Rs 70,000 crore) amid expected good Rabi crop are likely to help relieve some stress in the rural economy in coming months," said Elara Securities in a report.
Moreover, the renewed push for increasing PM Kisan transfers is also expected to provide much needed reflation in rural economy.

For the market, nothing can be more important than a healthy economy. There are some stocks that look in a sweet spot because of the increased prospects of easing rural distress. Let's take a look at some of them.

Rallis India | Buy | Target price: Rs 206

A subsidiary of Tata Chemicals that covers 80 percent of the districts in the country, it has a wide reach for its pesticides, seed treatment and other agri products and services.
"We believe a better than expected monsoon will have a positive effect on the stock and at present
levels, it is looking attractive as per risk and reward," said the brokerage.

Mahindra & Mahindra | Buy | Target price: Rs 715

A lot of steps have been taken by the government to improve the demand in rural and urban areas while at the same time various policies like Kisan Samman Nidhi, boosting the agricultural income to double in coming years is going to improve the demand in the long-term.
Also, the low-interest-rate environment should revive the demand in the coming months. M&M, country's largest tractor manufacturer, foraying in farm machinery ecosystem, should benefit from this.

"The stock is available at 50 percent of its long-term uptrend and has an attractive risk-reward at present levels. We believe the stock is a buy around Rs 550 - 500 for an upside move to Rs 640 - 715," said the brokerage.

UPL | Buy | Target price: Rs 740

One of the leaders in the industry with total crop solutions with a major presence in domestic as well as international market. It has its solutions from seeds to crop protection to post-harvest services.
There was a drop in profit due to higher input cost and acquisition of Arysta Life, making UPL one of the top 5 agricultural solutions providers with $5 billion in revenue.

ITC | Buy | Target price: Rs 352

"With strong operating cash flows, continuous capacity expansions across businesses and a healthy balance sheet, we have a positive view on the company over medium to long-term," said the brokerage.

Finolex Cables | Buy | Target price: Rs 478

Finolex looks attractive due to its leading position in electrical cables and debt-free status. However, success in its FMEG division and significant improvement in JVs are key monitories.
FY19 revenue and EBITDA grew 9 percent and 7 percent, respectively. In terms of valuations, the brokerage said it finds the stock reasonably valued.

Swaraj Engines | Buy | Target price: Rs 2,139

"We continue to expect positive growth for the tractor industry in FY20 driven by government subsidies and expect Swaraj Engines to benefit from expected state subsidy schemes also," said the brokerage.

The brokerage expects a 10 percent volume growth for Swaraj Engines and a stable margin. It also expects a 10 percent CAGR in earnings over FY19-21 to Rs 99.8 crore. "With the company's lean cost structure and strong balance sheet, we recommend a buy," said the brokerage.

Voltamp Transformers | Buy | Target price: Rs 1,846

On the strong order book, the brokerage expects the company's sales to register a 29 percent CAGR over FY19-21. The order book registered a strong growth of about 56 percent year-on-year (YoY), with order inflows growing 81 percent in Q1.

"With the plants operating at nearly 90 percent capacity, better utilisations would pave the way to higher operating leverage. Hence, softening commodity costs,  coupled with higher operating leverage assure of further margin improvement in FY20 and FY21.

"We expect margins to expand. This should result in a strong, 31 percent, earnings CAGR over FY19-21. With greater revenue assurance as well as the strengthening balance-sheet, we maintain our buy recommendation," said the brokerage.

Banking in India- Types of Banks

Banking is no new term to anyone be it homemakers, salaried people, businessmen, farmers, students or any other profession. Especially the Indian homes are well connected with banks and banking. The banking industry takes care of the finances of a country which includes credit and cash.
Banks are the backbone of the economy in a country and hence strict rules and regulations are imposed on the modus-operandi of banks. The major transactions that happen at banks are granting credits and accepting deposits from various entities.
RBI is the apex body that governs and monitors bank across India. It is responsible for regulating the monetary policy in the country.
BANK CLASSIFICATION IN INDIA
 There are two broad categories under which banks are classified in India- SCHEDULED AND NON-SCHEDULED BANKS.
 The scheduled banks include COMMERCIAL BANKS AND COOPERATIVE BANKS. The commercial banks include REGIONAL RURAL BANKS, SMALL FINANCE BANK, FOREIGN BANKS, PRIVATE SECTOR BANKS, and PUBLIC SECTOR BANKS. PAYMENTS BANK is a new introduction to the category.
 Cooperative banks include URBAN AND RURAL BANKS.
Let us understand the nomenclature better;
SCHEDULED BANKS are the banks which are covered under the second schedule of the Reserve Bank of India Act, 1934. To qualify for being a scheduled bank, a minimum of 5 lakh paid-up capital is required on the bank’s behalf. The RBI lends loan to these banks at bank rate as and when required.
 COMMERCIAL BANKS are regulated and managed under the Banking Regulation Act, 1949. These are profit making banks based on their business model. Granting loans to the government, general public, and corporate and accepting deposits counts as the primary function.
There are four types of commercial banks:
PUBLIC SECTOR BANKS
 These banks for more than 75% of the total banking business in the nation. They are called nationalized banks. The government holds the majority stakes at these banks. Post-merger, SBI is the largest public sector banks by volume. It also ranks amongst the top 50 banks in the world.
There are 21 nationalized banks in India, they are:
1. STATE BANK OF INDIA
2. BANK OF INDIA
3. ALLAHABAD BANK
4. BANK OF MAHARASHTRA
5. CANARA BANK
6. INDIAN OVERSEAS BANK
7. IDBI BANK
8. ORIENTAL BANK OF COMMERCE
9. CENTRAL BANK OF INDIA
10. CORPORATION BANK
11. ANDHRA BANK
12. UCO BANK
13. BANK OF BARODA
14. UNION BANK OF INDIA
15. UNITED BANK OF INDIA
16. VIJAYA BANK
17. DENA BANK
18. INDIAN BANK
19. PUNJAB & SIND BANK
20. PUNJAB NATIONAL BANK
21. SYNDICATE BANK
19. PUNJAB & SIND BANK
20. PUNJAB NATIONAL BANK
21. SYNDICATE BANK
PRIVATE SECTOR BANKS
 Private shareholders hold majority stakes in private sector banks. Reserve Bank of India lays down all the rules and regulations. Following are the private sector banks in India:
 1. HDFC BANK
2. ICICI BANK
3. AXIS BANK
4. YES BANK
5. INDUSIND BANK
6. KOTAK MAHINDRA BANK
7. DCB BANK
8. BANDHAN BANK
9. IDFC BANK
10. CITY UNION BANK
11. TAMILNAD MERCANTILE BANK
12. NAINITAL BANK
13. CATHOLIC SYRIAN BANK
14. FEDERAL BANK
15. JAMMU AND KASHMIR BANK
16. KARNATAKA BANK
17. DHANALAXMI BANK
18. SOUTH INDIAN BANK
19. LAKSHMI VILAS BANK
20. RBL BANK
21. KARUR VYSYA BANK
FOREIGN BANKS
 A bank operating as a private entity in India but headquartered in a Foreign country is a foreign bank. They are governed by both the country they are located in as well the country they have headquarters in. Some of these are:
 1. CITI BANK
2. STANDARD CHARTERED BANK
3. HSBC BANK
REGIONAL RURAL BANKS
 These banks were established mainly to support the weaker and lesser fortunate section of the society like marginal farmers, laborers, small enterprises etc. they mainly operate at regional levels at different states and may have branches in urban areas as well. Their main features are:
 1. Supporting rural and semi-urban region financially
2. Pension distribution and Wage disbursement of MGNREGA workers
3. Added banking facilities like locker, cards-debit, and credit
SMALL FINANCE BANKS
 These banks cater to a niche segment in the society and help with financial inclusion of sections which are not taken care of by other leading banks. They look after micro industries, unorganized sector, small farmers etc. RBI and FEMA are the governing bodies of these banks.
 These are:
1. AU SMALL FINANCE BANK
2. CAPITAL SMALL FINANCE BANK
3. FINCARE SMALL FINANCE BANK
4. EQUITAS SMALL FINANCE BANK
5. ESAF SMALL FINANCE BANK
6. SURYODAY SMALL FINANCE BANK
7. UJJIVAN SMALL FINANCE BANK
8. UTKARSH SMALL FINANCE BANK
9. NORTHEAST SMALL FINANCE BANK
10. JANA SMALL FINANCE BANK
COOPERATIVE BANKS
 Run by the elected members of a managing committee and registered under the Cooperative Societies Act, 1912 are the cooperative banks. These are no-profit, no-loss banks and mainly serve entrepreneurs, industries, small businesses, and self-employment.
PAYMENTS BANK
 This is a new and upcoming model of banking in India. It has been conceptualized and signed-off by RBI with restricted operations. Maximum of Rs. One Lakh is acceptable per customer by these banks. Like other banks, they also offer para-banking services like ATM cards, Debit- Credit cards, net-banking, mobile banking etc.

Bank deposits: Care as much about risk as you do about returns

The singularity of returns as an investment objective is the cause of most misery
"Yeh dil mange more" is not just the slogan of a popular soft drink. It is as much the money mantra of most Indian savers. Our outlook towards savings and investing is driven by singularity.
Obsession with returns
Only one thing really matters to us and we should be honest to admit it. Indian savers are obsessed by the singularity of returns. Be it retirees, senior citizens, housewives or even young millennials, we are all taught from childhood to get that little extra out of our money. We are constantly told that we are conservative and yet smart. And, taking that belief forward, we think that our chutzpah will get us that extra returns all the time.
The singularity of returns as an investment objective is the cause of most misery. Every investor knows it too well. But, everybody thinks it won’t happen to them. So, when my phone rang even during a vacation and the callers were family elders – dad's friends and my older clients who do their own thing – the singularity returned to touch my life too. The questions were on their fixed deposits in two private banks. They were worried as hell and wanted me to advise them if they should close those fixed deposits. The value of the deposits was very large. And, they all said they could not afford to lose the amount. "Why on earth did they not ask me when they deposited the money?" Some questions remained stuck in my mind voice. I could not even ask them.
The advice was simple. "Steer clear of trouble. Settle for less. Your job is not to save a bank from going under. That is the equity investor's job. And, if the equity investor fails to do her job, you get reduced to receiving just Rs 1 lakh, no matter how much money you deposited. The downside is as much yours. That would place you almost at par with the equity investor of a badly managed bank. Is that what you want to be? Would you buy the shares of that bank?"
Nothing is risk-free
They still wanted me to say that "All is well" and that things would settle. Truth be told, there was an outside chance of everything being well. But, after the IL&FS crisis, we are a very different country. And, I am not be willing to believe that what RBI did with GTB (Global Trust Bank) and Nedungadi Bank would be the default option. The law does not bestow absolute rights of protection on a depositor's money. It is limited to Rs 1 lakh. So, we simply can’t take the return of our capital for granted. There are definite attendant risks involved.
And, an investor in a bank deposit needs to rise above the singularity driven investment approach. One must think of return of capital as much as we think of return on capital. The primary investment driver must be risk and returns should be seen as a function of risk. The need for duality is urgent and wanting in our investment approach.
We must prioritise suitably. While this duality driven approach is far superior to a singularity driven one, investors collectively forget this as public memory fades quickly. Every crisis is seen in isolation, and lessons are rarely carried forward. It is important to note that the two HFCs (housing finance companies) that are presently troubled, raised money within an hour through their public debt issues just a few years ago. Singularity of returns was the clear driver.
Nobody even thought about the risks – the probability of losing capital and potential insolvency. It would not be out of place to say that most investors in those issues did not even know of the asset-liability mismatch rampant in the two companies. But the problems with the troubled banks are an entirely different story. Here, the problems have been more openly stated in the public domain for the past few years. Their stock prices were clearly ringing the warning bells like a Tsunami alert. But, depositors were clearly not bothering enough to follow these events.
The time has come for depositors to think beyond the singularity of returns. Lower returns are a better choice if they offer better certainty on return of capital. The extra one per cent is simply not worth being the primary investment driver. Choosing to earn less with better certainty and peace of mind are more holistic and sensible. I am reminded of the ad slogan for the fixed deposits of a now defunct south-based NBFC, "Life is too wonderful to be spent worrying". How I wish investors respect and value their peace of mind above their returns!

Explained: All you need to know about WhatsApp banking services

While you can ask and get details relating to your account via WhatsApp, you can’t carry out any transactions

You’ve chatted with friends and relatives for hours together using the app. As an added sweetener, you can now use WhatsApp  to reach out to banks for basic queries. Your requests are addressed on a real-time basis.

WhatsApp banking services are now offered by Kotak Mahindra Bank, Saraswat Bank, HDFC Bank, AU Small Finance Bank, etc. They help their customers receive updates and avail services via the messaging platform.

Here we seek to address some common queries about WhatsApp banking services.

Getting started with WhatsApp banking

To avail WhatsApp banking services, you first need to give a missed call to the relevant number provided by the bank on its website. This number would be different from the phone banking number of the bank. It is mandatory to give a missed call from the registered mobile number with the bank to avail banking services.

By giving a missed call, you basically provide your consent to the bank for using this service. Then, you will receive a welcome text message from the bank’s WhatsApp number. You should save this WhatsApp number of the bank in your contact list. To initiate a chat through WhatsApp for any banking service, you need to send a message typing ‘Hi’. Further, as per the on-screen instruction, you may type ‘1’ or ‘2’ and so on as per your requirement.

Yes Bank seeks to arrest further decline in stock prices, affirms strong financials

The private sector lender's share price had plunged by nearly 30 percent during intra-day trade on October 1, before closing the session down by 22.8 percent at Rs 32.
A day after a sharp fall in its stock price, Yes Bank on October 2 said the decline was mainly due to forced sale of 10 crore equity shares on the back of invocation of pledged shares by a large stakeholder.

Yes Bank also said its financials are strong, with the liquidity position well in excess of regulatory requirements.

The private sector lender's share price had plunged by nearly 30 percent during intra-day trade on October 1, before closing the session down by 22.8 percent at Rs 32.

"This fall was primarily on account of the forced sale of 10 crores equity shares (3.92 percent of the bank's equity share capital) triggered by an invocation of pledge on the equity shares of a large stakeholder," it said in a filing to the stock exchanges.

With this sale, the entire pledge stands extinguished and all sale under the same duly completed, it added.

Stock markets were closed on October 2 on account of 'Gandhi Jayanti'.
Meanwhile, Reliance Nippon Asset Management Company (RNAM) had on October 1 directed its trustees to sell the remaining shares pledged by Rana Kapoor, co-founder of Yes Bank, as a collateral with the mutual fund house, sources said.

Kapoor, who is also a promoter of Yes Bank, has less than 5 percent stake left in the private lender, and the same has been pledged with RNAM.

"RNAM has given instruction to its trustees to sell entire holding of Kapoor in Yes Bank," a source had said on October 1.

In its filing on October 2, Yes Bank also asserted that its financial and operating metrics remain intrinsically stable.

"Over the past few days, unfounded speculations regarding the bank's deposits/liquidity have been brought to its notice. In this regard, kindly note that the bank had a Liquidity Coverage Ratio in excess of 125 percent as on September 30, 2019, which is well above the minimum regulatory requirement of 100 percent," it said.

The bank's gross advances as on September 30, 2019 stood at Rs 2.32 lakh crore, as against Rs 2.42 lakh crore by June-end 2019, with a higher share of retail advances compared to June, it added.
The reduction in advances was effected to enhance capital efficiency, Yes Bank said.

"Further, deposits aggregated to Rs 2.09 lakh crore as on September 30, 2019. CASA Ratio improved to nearly 30.8 percent as compared to 30.2 percent as on June 30, 2019," it said.

Kapoor and his group entities had sold 2.16 percent of their stake in the bank worth Rs 510 crore through open market transaction on September 26-27.

After this, Kapoor and his group entities' stake in the bank came down to 4.72 percent.
Earlier last week, Yes Capital, one of the promoter entities of Yes Bank, sold 1.8 percent stake in the private sector lender.

The stake sale helped the promoter group entity mop up around Rs 240 crore.
Last month, another promoter Morgan Credits had sold 2.3 percent stake in Yes Bank for Rs 337 crore to prepay a certain part of its outstanding dues to Reliance Nippon Life AMC.

Modi’s plastic ban plan nearly doubled these stocks even before Oct 2 proclamation

Analysts are advising investors to stay stock-specific after the recent spike in this sector.
As Prime Minister Narendra Modi readies to unveil his drive to eliminate single-use plastic by 2022, marking the 150th birth anniversary of Mahatma Gandhi, investors on Dalal Street have made good use of the trigger to make some cool money.

As shops and business establishments readied to get rid of single-use plastic bags from October 2, most paper stocks rallied in double digits through September, with Malu Paper Mills  climbing the most at 95 per cent from Rs 20 on August 30 to Rs 38.90 on September 30.
Star Paper Mills, Pudumjee Paper Products, Balkrishna Paper Mills, Hi-Tech Winding Systems and Genus Paper & Boards advanced 50-85 per cent during this period.
Odhisha, Madhya Pradesh, Maharashtra and Tamil Nadu have already banned plastic products with hefty fines.

Analysts are advising investors to stay stock-specific after the recent spike on the paper counters. “Reports of plastic ban from October 2 supported paper stocks in September. The government is trying to implement the ban on a pan-India basis, which will increase usage of paper,” said Rusmik Oza, Head of Fundamental Research, Kotak Securities.

However, he advised investors to look for companies that are going to benefit directly from the ban. “Papers stocks were very cheap before the announcement of plastics ban on the Independence Day. Now, they trade at fair values. One should be stock-specific right now and accumulate quality paper stocks on correction. JK Paper  has told us it will not get the maximum benefit, because it is more into normal paper and stuff like that,” he said.

Shares of JK Paper, Emami Paper, South India Paper Mills and Tamil Nadu Newsprint have gained over 10 per cent in last one month.

Others like Ballarpur Industries  (down 27 per cent), International Paper APPM (down 17 per cent), Bio Green Paper (down 15 per cent), Cella Space (down 13 per cent) and Shree Karthik Papers (down 10 per cent) have, however, missed the bus and disappointed investors.
“Paper demand has gone up due to government plan to ban plastics. Paper can be one of the best commodities that can rise more. Paper companies are seeing better margins. We are very bullish on paper price for next one year. Diversified firms ITC and Trident, as well as JK Paper, are our top picks in the paper segment,” said Sanjiv Basin, EVP-Markets, IIFL.

Shares of ITC and Trident gained 5.76 per cent and 4.88 per cent, respectively, in September, while the benchmark BSE Sensex rose 3.57 per cent.

How to build a recession proof portfolio

Any mismatch with the need, goal or timeline of your investment is a primary lacunae to building a portfolio

Recession is a business cycle slowdown with weak economic activity for at least six months. It generally occurs when there is a widespread drop in consumption and is typically associated with a gloomy market sentiment over an extended period. Spending cuts, drop in assets prices, overall roll back in many expansion activities are some tell-tale signs of recession.

For most of us, recession is not something new. The global financial crisis of 2008 is still fresh in the memory for many of us. However, what’s interesting to note is that the economy and markets have recovered globally. All asset classes have bounced back and made life-time highs with enormous wealth being created for investors.

Recessions, though not welcome, are periods of great learning opportunities. Even the harshest of recessions will eventually pass by and lead to higher economic activity, with resilience built-in to
mitigate probable future shocks.

Recession is imminent during one's lifetime. Regular investors would have built up significant assets in the years leading up to the recession. An impending recession typically presents two options: retain your investment, but risk significant erosion of the asset value in the short term, or make large withdrawals to move your assets out of the market. But are those the only options for investors? Is it possible to instead build a portfolio that is recession-proof and hence obviate the need for such panic moves?  It definitely is if you get a few fundamental aspects right.

Here’s how you can build a recession-proof portfolio

Desired Outcome

Be clear about the needs and goals of your investment and the timelines for them. This is easier said than done. Even before you start investing, you must, with near clinical precision, have clarity about the needs and goals associated with your investment. Attach clearly differentiated timelines for withdrawal of the monies. Any mismatch with the need, goal or timeline of your investment is a primary lacunae to building a portfolio and more so one that is recession proof.

Asset Allocation

Diversify your investments and have the right asset allocation. Diversification is essential to ensure the risk from overexposure to one asset class is minimized. Make sure you do not put all your eggs in one basket. Saving or investing all your money in one asset is not prudent.  We have seen it in the past and in recent times that all asset prices don’t deliver consistently or predictably. There will be fluctuations over time. But, through a cycle, the returns will even out. In 2019, equites have had a rough patch, whereas gold has had a great run. So, it’s imperative to build a portfolio with diverse assets, yet with a concise and precise measure to the portfolio objective.

Says American economist Harry Markowitz, “There’s no such thing as the perfect investment, but crafting a blueprint that offers high returns and relatively low risk is a priority for most investors”. This approach led to the Modern portfolio theory on how risk-averse investors can construct portfolios to optimize or maximize expected return based on a given level of market risk. It emphasizes that risk is an inherent part of higher reward. According to the theory, it's possible to construct an "efficient frontier" of optimal portfolios offering the maximum possible expected return for a given level of risk. This research and study by economist Harry Markowitz transformed the landscape of portfolio management—a paper earned him the Nobel Prize in Economics nearly four decades later and is still relevant today.

Patience

Even well-thought-out investment plans and portfolios need sufficient time to play out and deliver the expected outcome and objective. All sound investments require ample holding time to deliver optimal returns. Patience is the new intelligence. Time is your greatest strategy and tactic. Great results are achieved with long term, disciplined and patient investing. One may miss out on the opportunity to make big money due to lack of patience. Therefore, one can’t stress the fact that being patient is of great importance to ensure successful investing outcomes.

Tough Portfolios last

It takes a strong resolve to keep faith in your investments and let them appreciate and grow over time to yield maximum gains. Remember, fluctuations are part and parcel of your investment cycle. Sometimes, the best theories, analysis and good-quality portfolios do take a beating in the very short term, since we live in an extremely connected world. News flows can change outlook and situations can change drastically on a real-time basis.