Mr Tata is a fantastic guy,although I have not gone to bed with him: AirAsia’s Tony Fernandes

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Eight cars that Ford EcoSport SUV will challenge

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Ten interesting facts about Delhi’s Airport Express Metro

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Realtors seek change in stamp duty clauses

The Times of India

BHUBANESWAR:

Real estate developers have sought the abolition of stamp duty, while entering into agreements with land owners to execute various projects.
Though such a provision exists in the state since 2003, it was practically not affecting builders, as most of them never registered with such agreements. However, after banks recently started insisting on registration of such agreements before sanctioning loans, builders have now become jittery.

While the Confederation of Real Estate Developers Association of India (Credai) state unit has submitted a memorandum to revenue minister S N Patro recently, the Real Estate Developers Association (Reda) of Odisha is planning to make a similar representation soon.

“The government is taking stamp duty twice in case of real estate projects. First, when the builder signs an agreement with the land owner to construct a project. Second, when individual buyers purchase houses from the developer. This duplication should be avoided,” said Reda president Pradipta Biswasroy.
According to the Indian Stamp (Orissa Amendment) Act, 2001, as amended in 2003, an agreement to sell any immovable property or power of attorney shall be deemed to be sold and stamp duty will be chargeable just like in conveyance deed. Odisha charges stamp duty at the rate of seven per cent.

The act was not affecting the builders till recently when neither the government nor the housing loan providers insisted on registration of such agreements. However, after the Comptroller and Auditor General (CAG) pointed out in 2011 that the government was losing out revenue on non-registration of such agreements, government authorities tightened enforcement. Some banks, including biggest lender State Bank of India (SBI), have made registered agreements pre-condition for giving housing loans, forcing builders to register such agreements.

“We are not against registration, which is required to avoid future differences between the builder and land owner. However, full stamp duty like in case of sale is escalating project costs manifold. The government should change the stamp duty act to charge a nominal amount for such deals to boost the housing sector,” said Credai joint secretary D S Tripathy.

A senior officer said the government is examining the matter vis-a-vis provisions in other states. In neighbouring states such as Chhattisgarh and West Bengal, payment of stamp duty is not required in case of such agreements and power of attorney and the government charges a fixed amount.

RBI allows cash withdrawal at POS upto Rs 1,000 per day

The Reserve Bank of India (RBI) on Thursday allowed cash withdrawals of up to Rs 1,000 a day through prepaid cards, including gift cards, issued by banks from point of sale terminals (POS), a move aimed at enhancing customer convenience in using plastic money.

As of now, this facility was available only to debit cards issued by banks. The Reserve Bank said the open system prepaid payment instruments (PPIs) issued by banks is perceived to be a subset of debit cards. “Hence, on a review of the position, it has been decided that the facility of cash withdrawal at POS with debit cards may be extended to such open system prepaid payment instruments issued by banks in India,” an RBI notification said.

The limit of cash withdrawal will remain Rs 1,000 per day subject to the same conditions as applicable to debit cards, it said. Yesterday, RBI’s newly appointed Governor Raghuram Rajan said that holders of pre-paid instruments issued by non-bank entities are not allowed to withdraw cash from the outstanding balances in their pre-paid cards or electronic wallets.

“Given the vast potential of such instruments in meeting payments and remittance needs in remote areas, we intend to conduct a pilot enabling cash payments using such instruments and Aadhaar based identification,” he had said. In 2009, the RBI had permitted cash withdrawals at POS terminals through debit cards as a step towards enhancing the customer convenience in using the plastic money.

How Chanda Kochhar saved ICICI Bank from being engulfed by Lehman bankruptcy

http://economictimes.indiatimes.com/news/news-b…

Chidambaram calls for compulsory
digitisation of insurance policies

Digitisation of insurance policies should be made mandatory, Union Minister for Finance P. Chidambaram has said.
Speaking after formally launching the insurance repository system of Insurance Regulatory and Development Authority (IRDA) here on Monday, Chidambaram asked the regulator to have a time frame for mandatory digitisation. As of now, it is not mandatory.

“This should have been implemented long back,” he said adding that digitisation would help even in natural calamities as people tend to lose documents along with property.
Referring to the recent floods in Uttarakhand which claimed many lives, the Finance Minister asked Life Insurance Corporation and the public sector general insurance companies to open camp offices in Uttarakhand to facilitate speedy settlement of claims.

T.S. Vijayan, Chairman, IRDA, said repository services would significantly lower the cost of issuing policies and managing them while providing flexibility and speed of service. Five firms, including Karvy Insurance Repository, were given licence by IRDA for the purpose.

Insurance penetration in the country as of 2012 is only 3.96 per cent and there is huge potential for expansion, he said. The industry should design customised insurance policies with enhanced use of technology, he added.

Various initiatives for consumer education are also being taken up by the regulator, he said.

Claimed to be the first-of-its-kind service in the world, insurance repository services will offer insurance policyholders option to access their insurance policies online by opening an insurance account in the electronic form, free of cost.

A log-in and personal identification number will be provided to the account holders. Interestingly, it is possible to open the account even if one does not have a life or non-life policy in his/her name as it can be linked later.

Banks, lend us your tweets!
Meeting Customers on their handles and timelines

Sanjay Pinto, The Hindu

A simple quiz. When you write a cheque and make a small mistake in the payee’s name or amount – in figures or words, will you (a) tear it up or (b) correct and countersign it? If your answer is (b) you are not alone. I did a spot poll on facebook before writing this column only to discover that twenty five percent of the respondents, most of them successful professionals and active on the social media, were not aware of the Reserve Bank of India ban on alterations in cheques. Almost fifty per cent were not informed about this important RBI circular by their banks. And forty per cent revealed that they get more promotional stuff rather than communication relevant to their banking transactions.

Now this is where high public interface organisations like banks can reach out to customers. The social media can be such a Godsend especially when the nuisance value of routine marketing mails ensures that they go right into spam folders, and the important guidelines get lost in the deluge.

The query I started this piece with, need not be hypothetical. It can be a very real scenario for many customers who availed loans before mid 2010. If you had, for a loan, issued bulk post dated cheques, some with minor corrections countersigned before the RBI directive came into force, will they be dishonoured? (When you write multiple cheques, the chances of making mistakes are not remote, right?) So will the customer be slapped with a fee when the cheques are returned? Such legitimate doubts will never arise in the first place if only banks believe in the power of twitter and facebook over their round robin mails and posters stuck at their counters.

Predictably, private banks have a much more robust presence on the social media than their nationalised counterparts.

I was happy to see State Bank of India’s handle on twitter. A footnote says it’s a beta test twitter account. The nation’s largest bank @SBIconnex however, last tweeted in January this year! A sizeable chunk of its 2055 tweets to its 5926 followers are marketing offers. The few important tweets like a caution on disclosing user IDs and passwords to persons claiming to be from the bank sadly have grammatical errors like “Please do not response to any email…”

The other big nationalised bank – IOB also shows up on the micro blogging site but although it has the bank logo, I wonder if it is the official handle. It hasn’t tweeted so far, follows no one and has 82 followers. IOB’s website only mentions a facebook presence, which incidentally was started only in June this year and at first brush seems replete with press release material and the Chairman’s Quote of the day. Now your facebook page should be interactive, not a one way street dotted with pictures of your organisation.

Contrast this with private banks. ICICIBank_Care has 14,768 tweets, follows 6018 people (presumably customers) and has 9439 followers. There is regular interaction and acknowledgement of customer grievances with requests to send Direct Messages with specific details. I do hope customers realise that a Direct Message is safer than tweeting their account numbers. HDFC has two separate handles – an official HDFC_Bank for finance tips and offers and one for complaints @HDFCBank_Cares to “listen, talk and resolve”. The 21,000 tweets and 9,000 plus followers are indicative of a regular interface. Ditto with @StanChart which promises escalation of complaints and has close to 21,000 followers.

It’s about time banks realised that robotic replies, online complaint forms and website icons for grievances are passé. Customers may not visit their sites, even if they showcase fancy numbers of visitors. Banks need to meet them on their handles and timelines. And learn to ping, tweet and DM.

The elephant experts didn’t see
S Gurumurthy, The Business Line

Not gold and oil, but the huge import of capital goods in the UPA years has triggered the current account deficit and rupee crises.

Normally a new government faults the previous dispensation of another party for leaving behind a bad economy. But when the UPA government took over in 2004, it had some good words for its predecessor, the NDA.

In his Budget speech in July 2004, Finance Minister P. Chidambaram noted that “the economic fundamentals appear strong” and “the balance of payments robust”. Yes, the current account surplus of $22 billion for the three years 2002-04 had broken the unbroken run of current account deficits for almost a quarter century — despite the average oil prices having doubled.

This coincided with the world taking serious notice of India’s rise. But how come that India, which was seen as a rising hope for the world when the UPA assumed office, now finds itself in a hopeless situation — with its rupee almost halving in value in the last 20 months and still losing? What led to this fall?

Like Six Blind Men

The national discourse on the present crisis is more like the story of the six blind men and the elephant. Most experts catch and hold out one aspect of the phenomenon as the cause of the crisis.

Everyone understands that the rupee fall has been caused by the galloping current account deficit since 2004. Many experts are blinded by the inevitable oil and unwanted gold imports as the culprits for the huge current account hole.

Some say the hole is so big because inadequate Indian reforms have dried up the flow of foreign capital. Some others hold global slowdown as the cause for India’s current account woes. Others say that because of poor reforms the growth is slow and, therefore, exports haven’t picked up. In the anarchic debate, the real cause of the current account hole and the consequent rupee fall — the elephant — is totally missed out.

Almost everyone is blind to the fact that more than oil and gold, it is the unprecedented import of capital goods which has torpedoed the balance of payments and dented the current account with a huge deficit of $339 billion during the nine-year UPA rule.

The capital goods imports in this period aggregated $587 billion, almost a third of India’s nominal GDP — the elephant which the experts have missed.

Actually, oil imports after off-setting exports ($279 billion) were less, at $515 billion, and gold imports (net of exports of gems and jewellery) were $161 billion. It is the gargantuan capital goods import that has blown the current account to pieces. It also has damaged the Indian economy from within.

Capital Goods Import

Here is the pathetic story. During NDA rule, the average annual capital goods import was $10 billion. But in the very first year of UPA rule (2004-05) it jumped by one-and-a-half times, to $25.5 billion.

Thereafter it galloped year after year — to $38 billion in the second year, $47 billion (third), $70 billion (fourth), $72 billion (fifth), $66 billion (sixth), $79 billion (seventh) $99 billion (eighth), and $91.5 billion (ninth). In the first four years, the capital goods import totalled $180 billion. In the next five years, the total vaulted to $407 billion.

In theory, capital goods import signals economic boom, promising rise in industrial production, in GDP. But here? Even as capital goods import rose by 79 per cent in the five years, the growth in index of industrial production fell by 56 per cent (from 11.5 per cent earlier to 5 per cent in the latter five years). And directly hit by the imported capital goods tsunami, domestic capital goods manufacture nosedived by one-tenth in 2011-13.

Even if India had had enough dollars to pay for the capital goods import without running a current account deficit, the huge import of capital goods would have devastated the national manufacture. The story does not stop here. The current account deficit also exported the growth away.

It is fundamental economics that exports add to national wealth (GNP) and imports cut into it. The current account deficit year after year has cut the GNP by 0.8 per cent in 2007-08, by 1.5 per cent (2008-09) by 2.1 per cent (2009-10) by 1.4 per cent (2010-11) by 2.6 per cent (2011-12) and by 3.9 per cent (2012-13).

But for the current account deficit, the GNP of India could have been 10.8 per cent (not 9.3 per cent) in 2007-8, 8.2 per cent (not 6.7 per cent) in 2008-9, 10.7 (not 8.6 per cent) in 2001-11, 8.8 per cent (not 6.2 per cent) in 2011-12, and 8.9 per cent (not 5 per cent) in 2012-13.

Perhaps India could have been ahead of China. More. The UPA’s nine years saw the aggregate import of manufactured goods jump to $50 billion – up 20 times.

The surge in import of capital goods and manufactured goods put Indian manufacturing in the ICU. And note. Gold imports dent the current account yes; but they do not kill local manufacture. But capital and manufactured goods imports have achieved both!

And shockingly it is the Government that incentivises the huge capital goods import with a red carpet of tax waivers costing lakhs of crores of rupees. The Government cut the customs and excise tariffs in 2008 as fiscal stimulus to the economy in view of the global meltdown. For mega power plants the tariff was made ‘Nil’. The stimulus caused additional revenue loss of Rs 2.6 lakh crore each year. The result was the capital goods import tsunami, which rose by almost 80 per cent since 2008.

Lost Tax Revenue

The total tax revenue lost by tax cuts in four years from 2008-09 to 2011-12 was Rs 22.6 lakh crore. The ratio of customs duty to imports halved from 15.6 per cent in 2004-5 to 7 per cent — even as the imports rose six times from Rs 3.6 lakh crore to Rs 23.5 lakh crore — reducing the effective import-weighted tariff to almost one-eighth of its 2004 levels.

As far back as in January 2005, Prime Minister Manmohan Singh and Finance Minister P. Chidambaram had sworn in public to reduce the unnecessary tax waivers as the tax rates were reasonable.

Yet not a single rupee of tax waiver was rolled back in the 2005 Budget or in 2006 or in 2007 or in 2008. On the contrary, tax waivers were doubled from Rs 2.6 lakh crore to Rs 5.2 lakh crore a year, and year after year, from 2008-09 as the red-carpet welcome for the capital goods tsunami.

And capital goods imports stimulated by tax cuts, which trebled the fiscal deficit, rose by 79 per cent to $407 billion. But for the tax cuts, with the global meltdown in 2008, there would have been no great propensity to invest. Clearly, the huge rise in capital goods import is the direct effect of the tax stimulus — a case of tax-cut induced, not demand-led, investment.

Had capital goods import not been tax-incentivised to rise (by a whopping 79 per cent) the current account deficit over the nine-year period of UPA rule ($339 billion) could have been less, perhaps by $182 billion — namely just $157 billion, had the imports been on the pre-stimulus levels. And consequently the forex reserves would have been more by $182 billion.

Don’t go that far. Imagine the capital goods import and therefore the current account had been less by just $100 billion. There would have been no crisis. Isn’t it stupid to invite the huge current account deficit via capital goods import by incurring huge fiscal deficits via tax cuts?

Real Culprit Ignored

The stupidity did not end there. The tax cuts were intended to be passed on by the corporates to consumers so that their buying power was not eroded and the economy did not get into recession.

But the corporates did not pass on the stimulus tax cuts to the consumer. This is evident from the rise in the ratio of corporate profits to GDP from 11 per cent in 2004-5 to 12.5 per cent after the stimulus. The current account deficit directly pulled down the rupee value. And the fiscal deficit incurred to invite the current account deficit indirectly knocked down the Indian rupee.

Yet the real culprit — the tax-cut induced capital goods import — is virtually unnoticed in the national discourse. Ignoring (suppressing?) the real cause, the Government is applying the usual ointment of soliciting external commercial borrowing and stock market investments as cure for the cancerous growth in current account deficits.

On top of it, the UPA is proposing an additional Rs 1.50 lakh crore spend on the Food Security Bill to buy votes. A government interested in the nation and the rupee would have deferred the Bill to better times. Why then will the rupee not fall, and continue to fall?

Saying that the intrinsic value of the rupee is three times its market value, The Economist magazine ([January 2013) lists the rupee as the most undervalued currency in the world.

Yet it is getting valued less and less. It does not need a seer to say that reckless management of the external sector is the real reason for the rupee fall. Will the establishment thinkers realise the truth — which is the precondition for remedy?

(The author is a commentator on political and
economic affairs, and a corporate advisor.)

Air India, SBI Cards launch co-branded credit card
The Business Line

The new Air India SBI card allows a customer spending Rs 5 lakh in a year to earn up to three Delhi-Mumbai return tickets on Air India. The launch of this credit card marks the beginning of a new collaboration between the two major public sector entities (Air India and SBI), Nandan added. He expressed confidence that both Air India and SBI Cards will live up to the promises being made in their new collaborative journey. “The challenge lies in the delivery”. State Bank of India is also the leader of a consortium of banks that have helped Air India in its financial restructuring exercise. SBI Cards is a joint venture between SBI and GE Capital.

Speaking at the launch event of the card, SBI Chairman Pratip Chaudhuri said the days of monopoly in various businesses are over in India and both SBI Cards and Air India need to focus on customer delight. Outlining the rationale for this tie-up, Chaudhuri said that Air India is bringing to the table a great travel product and SBI the widest distribution network (about 15,000 branches). “We are extremely pleased to partner with Air India and hope that our combined synergies ensure a rewarding experience to our customers in the travel segment”, Chaudhuri said.

Common Service Centres to take Insurance to Rural pockets
The Business Line

People in the rural areas will now have more access to insurance, thanks to a new initiative to sell polices in villages through common service centres (CSCs). CSC e-Governance Services India Ltd, the special purpose vehicle floated by the Government to operate the centres, expects to begin marketing insurance products in about two months.

“We are working on enlisting at least 10,000 agents to sell insurance to and collect premium from over 1.20 lakh centres in rural areas. The transactions should begin in about two months from now,” Dinesh Kumar Tyagi, Chief Executive Officer, CSC e-Governance, told Business Line on the sidelines of an event here earlier this week. In the first eight days after receiving licence from the Insurance Regulatory and Development Authority (IRDA) to act as intermediaries, the services centres collected Rs 30 lakh in premium for Life Insurance Corporation of India.

A facility to market insurance products and offer services near to homes would significantly expand insurance penetration in rural areas in both life and non-life areas, Tyagi said, adding: “This will also generate rural employment as we progressively scale up agent recruitment.”

Guidelines issued

“We have already issued guidelines for utilisation of CSCs by insurers as channels of distribution in rural areas for greater financial inclusion,” said IRDA Chairman T.S. Vijayan. IRDA’s move assumes significance given the fact that the number of life insurance offices has been declining across the country, which may adversely impact access to insurance in rural areas.

For example, there was a net reduction of 463 offices by private insurers in the last financial year compared to the previous year. Though LIC’s offices went up by 84, the overall scenario has been bleak. Insurance penetration in India was just 3.96 per cent in 2012.

As part of the National e-Governance Plan, the inclusion of CSCs in insurance distribution would help, say experts. They can function as the front-end delivery points for the government, private and social sectors to provide services to citizens.

Godfather Offer

An irrefutable takeover offer made to a target company by an acquiring company. Typically, the acquisition price’s premium is extemely generous compared to the prevailing market price. Therefore, if the target company’s management refuses the offer, shareholders may initiate lawsuits or other forms of revolt against the target company for not performing their fidiciary duty of looking out for the best interests of the shareholders.

10 Financial Mistakes You Should Never Repeat
James LeGrand

There have been a number of financial mistakes that we’ve all been living with for the past several years. During economic downturns, those mistakes become apparent, and our options become limited. It’s important for us to understand what got us here so that we don’t end up here again. Here are The 10 Financial Mistakes You Should Never Repeat.

1. Living Above Your Means

We routinely live 20% or more above our means. That means we spend all of our money, and then live on borrowed money from credit cards, equity in our homes and loans for the rest. For a while, it seems as if we are able to survive this way, as we pay the minimum due for each creditor. However, when interest rates increase and our amount due likewise increases, we find ourselves “underwater” and unable to afford our payments anymore.

Return to the days where you spend only what you have. A squirrel stores nuts so he has food for the winter. He knows he can’t borrow more. Once his store is depleted, he knows he has no more. He must then either try to find more at the worst possible time or starve. Let’s take this queue from nature as a model for how to live within our means.

2. Buying High & Selling Low

As prices increased for houses & cars, stocks and other investment vehicles, we bought more and more. Credit was flowing and we were living high. We bought high, but we thought that prices would continue to move up so it wasn’t a big deal. Then, when credit seized up and prices began to fall, we sold at a lower price in order to protect the little bit of money we had left. The loss we suffered was “unrealised”, meaning, we still held the asset, so it was a devaluing verses a true money loss. The moment we sold the asset for less than we bought it for, we suffered a “realized” financial loss. That loss was locked in with the sale of the asset.

The rule of thumb needs to be that we make money, not lose money. Panic over the cycle we are in caused a lot of people to lock in major losses. During these times, remember that you still own the asset (the stock, the house, the investment program). When prices rise again, the value will return. It may take some time, but the experts believe that the market is going to rebound.

Now, image what the people who sold before this crisis are doing? They have cash on hand to invest in anything they want, and everything is on sale right now. They will once again buy low, and sell when they hit their investment goals. They will not try to ride gains until it is too late and they suffer a loss. Remember to buy low and sell high. If you are poised to do so, do so now. If not, prepare yourself to be able to do so after this crisis has abated.

3. Little To No Savings

There are very few families that have taken the advice of saving 6 months to a year of salary for “just in case”. The families that have sacrificed a little each month over the course of years are well prepared to hunker down and weather this storm. The families that spent everything they earned, and then some are in a very different position.

If there was ever a time to understand why saving 6 months to a year of salary is important, it is now. Change your mentality and put money away for a rainy day. It may take years to develop a large savings account that can be blown during a bad year. However, right now, everyone can see the value in doing so. Save. Save enough so that you the ones you love will not have to struggle when the next recession comes about. Just as the good years will return, so will another dip. Prepare for it.

4. Determining Affordability on Minimums

Basing whether or not we can afford something by our ability to pay the bear minimum on the loan or credit card is a mistake. Many credit card companies are announcing the increase of their interest rates. It will now cost you more to borrow the same amount of money as you did before. That means your payments will be bigger. Paying off only the minimums was always a losing strategy. Now, it’s a losing strategy on a fast track.

Never make this mistake again by always paying more than the minimums or better yet, pay off the balance at the end of the month. If you don’t borrow or charge a lot, there won’t be much to pay off at month’s end.

5. Investing What You Can’t Afford to Lose

There is always the chance of loss whenever you invest in anything. The higher the potential return usually equates to the higher the risk. However, if you need the money you are investing in the short term, you must re-think where it is invested. Money needed for short term needs should be held in low risk or no risk accounts. Higher risk investing should be saved for the long term. The danger is that during a dip, the value of your account drops to below the level that you require in the short term. This could mean working instead of retiring, delaying the start of college, and putting off plans to purchase a dream house.

Before investing money in any vehicle with risk, ask yourself if you will be ok if you lose it all. If the answer is no, then you should consider adjusting your investment amount downwards.

6. Lack of Financial Goals

Many of us don’t have a plan. We work, we spend, and then we find ourselves working to pay off what we spent.

When you have a financial goal, you know what you are targeting to earn. Those that set modest and well balanced financial goals were able to get out of the risky investment after they hit those goals. They then waited for prices to decrease before putting their money back into the market again. Those are the people you read about in the news that are waiting for “the market to bottom out.” They already set their “buy in” price and are just waiting for the investment vehicles they’ve identified to reach those target goals. Then, they’ll repeat the cycle.

When you set your goals for what price points to buy and sell, stick with them. Don’t get greedy and try to push the envelop more and more. When you do, you risk losing it all.

7. Advice From the Wrong Sources

There are 3 kinds of advisors. First, there are those that don’t know what they are talking about. These are the people that tell you about what they heard others did, but are at the same level of success as you are. Second, there are those that know what they are talking about, but that have their own interest at heart. These are the fund managers that are paid to sell a certain stock or fund, regardless of whether or not it will benefit you long term. Their success is not tied to your success. Therefore, after they get you involved in what they are pushing, they can care less about your results.

Lastly, there are those whose success is tied to your success. They have a vested interest in making you as much money as possible because their income depends on it. Triple check that they also know what they are doing. Ensure they have a track record of success. Test them out with a little to see how they perform first. Then, you know you can trust their advice.

8. Lack of Diversification

If you put all of your money into your house, and then the value of your house declines, what do you have left? If you own a whole lot of shares of one particular stock, and then that company goes bankrupt, what do you have left? If you only have one source of income, and it is removed, what income are you left with? This has been a big problem in the market today. You must diversify.

Talk to your financial planner about ways to balance your portfolio so that you have steady increase in market value rather than major spikes and dips. Create multiple streams of income by turning your hobby into an income producing home business. Make sure you are getting all of the tax write offs you are eligible for. Assume the mantra, “never pay full price” and don’t forget to safely invest your savings.

9. Valuing Short Term over Long Term Thinking

Adjustable Rate Mortgages (ARMs) cause people a world of hurt. When rates were low, these mortgages were very attractive. The problem is that over the short term, they were great bargains. However, over the long term, rates were bound to increase, thus causing payments to sharply increase, double or triple. Those with a long term mindset avoided these ARMs like the plague and opted instead for a fixed rate mortgage, which was much more predictable.

A long term thinking mentality will also ensure that you put some money aside for savings before paying your first bill. Pay yourself first. We always seem to run out of money if we pay our bills first and then look at what’s left for savings. If you pay yourself first, and then your bills, you’ll find a way to make it to your next pay period. Make sure the amount you choose to save is reasonable and fits within your budget. Then, treat your savings or investment account like a high priority bill that must be paid.

Long-term and short-term strategies always conflict. Choose the long-term every time.

10. Spending Instead of Investing

When you spend money, you receive equal value in exchange for what you bought. The money is now forever gone and the transaction is complete. When you invest though, you earn money on that investment over and over again in time. $25,000 can buy you a car. It can also help you to start a business that one day earns $25,000 per year. When you spend the $25,000, you have a depreciating asset you can drive. When you invest the $25,000 into a business with time and wise decision making, you have an asset that is income producing. You could buy the equivalent of a new car each year with that income.

When there is something that you want to buy, give some thought into what asset you could invest in to produce the money needed for what you want to buy. The asset will continue to produce income for you long after you made the purchase. It will take time to get the money you need to buy what you want when you do it this way. But as was explained in #9, long term thinking strategy is preferable to short term whims.

RBI into a multitasking innovator
Saurabh Tripathi

Raghuram Rajan’s appointment as governor of the Reserve Bank of India (RBI) has elicited exuberant response ranging from plain optimism to wishful thinking. His brilliant opening speech has further fuelled positive sentiments.
Rajan’s first policy move, on Friday, a small hike in policy rates, surprised markets. However, overall liquidity will go up because some of the steps to prop up the rupee have been rolled back. And banks now need to hold slightly lower reserves for prudence.
Expectations, bordering on irrational, could set some commentators up for disappointment. We should calibrate our hopes. Let’s not expect a revolution in monetary management. The critical dependence on fiscal management by the government is evident to all. That should help us rein in our dreams.

THE CHANGEMEISTER

But one does dream of a new paradigm in the regulatory and supervisory role of RBI. It is here that RBI is in full control of what it does and Rajan can bring a revolution. It will not be easy. The proud and traditionally conservative RBI has to be transformed by the new governor to deliver in a short time-span.
First, some background on a new paradigm in regulation. What is the biggest weakness of Indian banking, we recently asked the corporate sector in a survey. Innovation stood out as the single, resoundingly prominent, gap. Discerning companies were echoing a sentiment often discussed in the context of development in Indian banking.
We need innovative solutions for some complex issues like the massive extent of financial exclusion, perennially underfunded and poorly supported small enterprises, or the slow uptake of electronic banking, especially on mobile phones.

DAMNED IF YOU DO…

Innovation is a tricky topic in banking across the world. Banks are heavily regulated. It is argued that conservative regulations come in the way of innovation or, at least, offer a very convenient excuse to banks for not innovating. Regulators do not have much incentive to pitch for innovation. They are often held publicly accountable if things go wrong.
But they hardly get any appreciation for development and innovation in the banks they supervise. Rajan aspires to change this. In his report A Hundred Small Steps published in 2009, Rajan wrote, “…we need skilled regulators who encourage growth and innovation even while working harder to contain risks. The shift in paradigm, if implemented, could usher in a revolution in the financial sector…” His opening speech on September 4 is true to this vision.
The shift in paradigm is no easy task. RBI is justifiably a proud institution. Its prudent policies ensured that Indian banking was unscathed even as many banks the world over got singed in the financial crisis.
It has a strong institutional memory of past failures. And it has to its credit significant advancements in banking sector health, in our payment system’s quality and customer service. However, RBI has to reset from just being a respected and clean institution that has managed system stability at the cost of some innovation and inclusion. It has to open up to digital technology, create new capabilities in its staff and change mindsets.
An innovative banking system will need lots of competition and many more players. It will need more banks and more non-banks to be encouraged to participate in a controlled manner.
This will require RBI to be able to supervise many more and varied set of institutions than it does today. It will need a significant expansion in its supervisory resources.

BINARY VISION

The RBI will also need new skills and capabilities. New technology and business models would underpin any innovation. The resources at RBI need to develop deeper appreciation of technology’s potential, costs and limitations.
They also need to appreciate the economics of business models and softer aspects of human resources and organisational dynamics that make a business successful. Apart from spotting violations of rules during supervision, the RBI needs to be able to spot promising innovations. All such ideas need to be collated from the field and they should inform continuous fine-tuning of regulations. This may require, among other bold measures, mechanisms like lateral inductions into RBI and rotation of RBI resources in and out of operational banking roles.
A lot of innovation is hinged on the telecom and banking industries working together. The RBI needs to go beyond its turf and collaborate with other regulators — especially Trai — to allow partnerships between banks and telecom companies.
Much of this will be out of the comfort zone for a conservative institution. Rajan has said change is risky, but worth it. Change is also always more difficult than expected. But on this front, we are not doing wishful thinking.

Indian credit card consumers are no longer revolving their credit dues, with most customers repaying fully. This is due to the fact that banks are improving their credit card sourcing, as well as increased awareness among customers about the importance of a good credit record, bankers say.

This was a healthy trend, Jairam Sridharan, president and head (consumer lending and payments), Axis Bank, said at the launch of the bank’s new co-branded credit cards.

“The revolvement rate has come down over the years – from around 50 per cent in 2005 to 15 per cent now. The credit card base has eroded sharply and a lot of customers who revolved payments have left the industry. Now, cardholders are also more aware of the importance of a good credit history and many of them prefer to pay their dues before expiry of the interest-free credit period,” Sridharan said.

Axis Bank’s new credit card, co-branded with Lufthansa’s Miles & More, would allow customers to use the points on the card to buy tickets on airlines that are part of the Miles & More programme.
According to Pallav Mohapatra, chief executive, SBI Cards, many customers who revolved dues are now converting these into equated monthly instalments.

“The percentage of customers who revolve their dues to total customers is declining. It is good from the issuer’s point of view, as risks are reduced,” he said.

It is estimated Indian customers who revolve their credit card payments account for 26 per cent of the total customer base. In terms of the amount, credit card dues were estimated at 52 per cent, with the rest being carried forward, said an industry official.

Mohan Jayaraman, managing director, Experian Credit Information Company, said the improvement in customer behaviour had resulted from the fact that now, the sourcing of customers by banks was of a very high quality.

“Banks have become more choosy about issuing credit cards. New customers are low-risk ones who are conservative with their credit and pay on time,” he said.
He also cited increased awareness among customers about a good credit record.

While banks see a decline in interest income, owing to the fall in revolving credit, revenues from higher volumes compensate for this. Now, there are very few free credit cards available in the market; most banks charge an annual fee.

Another source of revenue for banks was the commission on spends, Sridharan said.

He added banks were also seeing a rise in spending per card, though the number of cards issued hadn’t risen much. While the overall industry recorded a rise was 30 per cent in credit card spends, for Axis Bank, the increase was about 100 per cent.

According to Reserve Bank of India data, in April, though the number of credit cards rose only about one per cent compared to the previous month, the number of transactions increased 12 per cent.
The number of credit cards as of April-end was 19.5 million, almost unchanged compared to March. The transaction amount stood at about Rs 12,400 crore, against Rs 11,100 crore in March.

Knowledge Economy

A system of consumption and production that is based on intellectual capital. The knowledge economy commonly makes up a large share of all economic activity in developed countries. In a knowledge economy, a significant part of a company’s value may consist of intangible assets, such as the value of its workers’ knowledge (intellectual capital). However, generally accepted accounting principles do not allow companies to include these assets on balance sheets.

Use the free-look period to your advantage
If you want to surrender the policy, do so. It is better
to pay underwriting charges than let the policy lapse in future

Business Standard

Insurance buyers, often, realise too late the policy that they have bought is either too expensive or does not give them adequate cover. And while the Insurance Regulatory and Development Authority (Irda) has mandated a 15-day ‘free-look period’, many customers find it quite harrowing to go through the process.

But as the saying goes, ‘nothing comes for free’. So, if you want to give up the policy within the first 15 days, you will have to forego the underwriting costs that includes, proportionate risk premium for the period on cover, expenses incurred for medical examination and stamp duty charges. If it is a unit-linked policy, the customer will have to bear additional losses in the value of the units during the period.

Worse still, many times policyholders receive the policy after the mandated 15 days, which renders them helpless. Or, the insurance company seeks concrete reasons for rejection of policies.
“Often requests for cancelling are associated with pricing. Sometimes an agent may sell a particular policy to a customer without explaining all the details. And if another agent promises a similar product at a lower premium, the customer may ask for the policy to be cancelled. That is why insurance companies make it slightly difficult for customers to cancel or return the policy,” says Ashvin Parekh, partner-national leader, global financial services, Ernst & Young.

While some insurance companies have worked out mechanisms where they call the customer to verify if they have understood the details, the mechanism is still not foolproof. Says Says Sanjay Tiwari, vice-president, products, HDFC Life, "Requests for cancelling are seen when there is a drive by a company to sell a particular policy, or during tax season when companies push sales aggressively.
Financial planner Gaurav Mashruwala feels insurance buyers should read the entire policy document when they receive it. “Use the 15-day period to read the entire document and chew the agent’s brains, if required. Whatever you do not understand, get in writing from the agent,” he says.

Of course, it is not an easy task to read the policy document. Often, it is 10-15 pages or longer. The details are in small font size, making it very difficult for the reader.
Under such circumstances, many prefer to keep on servicing (paying the premiums) it for some time and then let it lapse. As Irda 2011-12 data (the latest available) shows, 16 million traditional policies worth Rs 1.9 lakh crore (sum assured) were not renewed. In 2010-11, 14 million traditional policies lapsed. And the data is only for traditional policies and does not include unit-linked insurance plans. For some private sector companies, the lapsed policies were 30-50 per cent of the total number of policies.

This number itself is quite telling. It implies that a huge number of people are buying policies and just not renewing them. Better utilisation of the ‘free-look period’ and good servicing will help matters.

Net banking: How it helps you save time and money
The Times of India

Did you know that approaching a bank branch to get a duplicate account statement can cost you around Rs 100, while the same could be had at half the price through online banking? Similarly, a stop payment request that costs upwards of Rs 50 through traditional banking channels is a free service for those who opt for net banking.

There are many other banking services where you can save money by opting for net banking. However, most people, especially those who prefer branch banking, don’t even realise they are paying for these services or that their costs are adding up unless they peruse their quarterly bank statements carefully.

Why is net banking cheaper?
According to Ram Sangapure, general manager, Central Bank of India, facilities like online and mobile banking drastically cut down the cost of providing a service. This saving is passed on to customers who are willing to go beyond the traditional banking channels. “A bank branch has to employ people, incur cost for stationery and in setting up the office. Moreover, paperwork eats up valuable man hours. If the customer uses the online option, a bank hardly incurs any cost, which benefits the former,” he adds.

According to industry experts, a bank spends an average of Rs 40 for each transaction conducted at a branch. If a customer uses the ATM facility, the cost drops to Rs 18-20 per transaction, but it is still much higher than the cost involved in online banking. “In order to promote Net banking, the financial institutions offer certain services for free or charge a nominal amount,” says Sangapure.

Why the cost differential
According to Harsh Roongta, chief executive officer of Apnapaisa.com, banks across the world are within their rights to charge for any service for which they incur a cost. Now, this is being practised by Indian banks as well. Says Rajiv Raj, co-founder and director at CreditVidya.com: “Only if a bank doesn’t incur any cost in completing a transaction will it refrain from charging the customer,” he adds.
In fact, the RBI has not restricted any bank from charging a fee for such transactions. “If you deposit a physical cheque from another bank and it is credited to your account, both banks incur a cost, but you are not charged anything. In the long run, the banks need to recover this amount to sustain themselves,” explains Roongta. “The RBI restricts unreasonable charges. If the fee is within permissible limits and the bank can justify it, it can deduct this from their customers’ account,” adds Roongta.

To keep abreast of the paid services and differential pricing, all you need to do is to visit your bank’s website. Moreover, the details of services and respective fees will be posted on the notice board in every bank branch.

Indirect savings
Net banking also helps save money in other ways. For instance, if you have opted for the facility to pay bills online, you can skip the late payment fee.
In addition, there are service providers like credit card issuers, who charge a fee for branch payments. Some banks also offer bonus points for online services, which can then be redeemed for online shopping through the bank’s partner. Consider the ICICI Bank’s Payback facility and State Bank of India’s Loyalty Rewards programme.

Safety vs savings
The benefits of net banking notwithstanding, a lot of people balk at availing of this option because of the concerns about the security of online transactions, especially in an age where phishing and online fraud is on the rise.

Raj, however, counters this, saying that Internet banking is probably safer than physical transactions. “Banks have introduced a double authentication system, which makes Net banking much safer,” he says. According to him, each customer is given a unique password to log into his account.
To complete any transaction, he needs to key in an ID sent via SMS to his registered mobile number. “So it is not possible to go wrong. It’s highly unlikely that any other person, even a fraudster, could have both the unique log in/password and the registered mobile number,” he adds. Incidentally, you don’t get any security assurances while transacting physically at the bank.

Banking licences: Is the RBI being too conservative
Economic Times

Is the Reserve Bank of India (RBI) seeing all the leaves, branches, fallen twigs, root system, annual rings, Cambrian structure, etc, of the trees, while missing the wood altogether, in the matter of issuing new banking licences? The latest clarifications from the central bank on its guidelines issued earlier this year would suggest it is. This is unfortunate. India is a sadly underbanked country, whose citizens are, for the most part, left to the tender mercies of shadow-banking operators, thanks to the formal banking sector’s failure to give them access. India needs more banks, new kinds of banking, particularly mobile banking — which is ideally placed to take advantage of the electronic infrastructure being put in place by the Unique Identity project — and better regulation. To achieve this, we need new organisational forms: for example, a joint venture between a well-functioning state-owned bank and a telecom operator. The new guidelines are blind to such things.
The RBI is entirely right to not compromise on integrity requirements. A promoter group will be assessed for the entirety of its operations, not just of a particular company through which a banking licence is being sought. However, what sense does it make to not phase in the requirements on mandatorily holding government bonds (SLR) and parking cash with the RBI? The new licensees would suck up from the market liquidity meant for productive investment, to splurge on government bonds. As new banks race to meet their SLR target, they would bid up the price of government bonds, creating an artificial pressure on interest rates and an equally artificial boost to the value of bank books and the marked-to-market value of gilts held on them. To what end, RBI?
The non-operative financial holding company route to bank ownership is fine. But its prescribed ownership structure rules out joint ventures and conflicts with an insurance company seeking a licence. We need prudence. But that cannot be allowed to become an excuse for inertia. Indians deserve good banking, all of them.

Mercedes-Benz A-Class launched at a starting price of Rs 21.93 lakh

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Contactless Tech:
Soon, just wave your card and pay
Business Line

A wave and your payment is done. Besides ensuring faster payment, this facility will also reduce the risks of
skimming or counterfeiting of the cards.

No more having to swipe your credit or debit card or inserting them in a point-of-sale device. This is thanks to the wireless antenna embedded in your card. This contactless payment technology feature — VISA payWave — is now being considered by banks for the Indian market, Uttam Nayak, Group Country Manager India & South Asia, Visa, told Business Line here.

Besides ensuring faster payment, this will also reduce the risk of skimming of, or counterfeiting, the cards. “We are ready with the tap-and-go feature (payWave). We are in the process of testing and certifying certain banks. After that they will have to scale up.”

In Australia: Nayak said that VISA payWave is already available in Australia and most South Asian countries except India. In Australia, more than 60 million transactions happen through VISA payWave every month, Nayak said. Organised retail and fast food chains there have just lapped up this contactless payment facility. “They (organised retail in Australia) saw benefits as they are able to control cashier cost by introducing payWave. The stores now prefer to go contactless for speedier payments.”

Fast food restaurants (in Australia) have seen their sales go up because of this tap-and-go payment feature, without any need for signature. “They are able to give a proposition of quick food. People who come to fast foods are generally in a hurry.”

Another area where this tap-and-go feature has been a big success is with the New York City’s taxi drivers, who insist on contactless payments. This is because these taxi drivers often get robbed at night. “People just pay with their card or with their phone itself (SIM has contactless) to the taxi drivers. You just have to tap your card or with your phone.” Nayak also said that skimming frauds in cards can be avoided to a great extent if the Reserve Bank of India were to mandate EMV chips on all cards used in India.

More secure: EMV chip-based cards are more secure and already mandated for those who use their cards for overseas transactions. More than 350 million cards have been issued in India, with the majority of them being debit cards.

A mouse click is no match to express-speed Railway clerks
Why early birds get the best pickings at the Railways ticket queue

Ever wondered why tickets on popular trains appear to be sold out within minutes of booking opening on IRCTC, the Railway’s online booking platform, or even at the reservation counters?
Millions of frustrated travellers have always suspected graft, and an unholy nexus of touts, agents, booking clerks and even mysterious systems operators in IRCTC.
The real reason is more surprising. The Railways’ army of booking clerks, who operate its over 10,000 counters, actually beat the computer hands down when it comes to the speed with which they can complete a booking.
And while corruption is certainly an issue, most of the agents who ‘guarantee’ a confirmed booking actually manage to pull off the ‘miracle’ by paying someone to queue up at the booking windows, ahead of the rest.

Bookings per minute
The IRCTC system, and the Centre for Rail Information System (CRIS)-designed system which lies at the back of it, may have the capacity to handle over 1 lakh users simultaneously — but can actually complete only 2,000 bookings a minute.
In contrast, an experienced booking clerk can complete a booking — from entering the passenger details to blocking the seats and issuing the tickets — in an astonishing 35 seconds flat. Multiply that by 10,000 and that is almost 20,000 bookings a minute, 10 times the online capacity.
That is why tickets in 300-and-odd popular trains get completely booked within the first five-ten minutes of counters (as well as online booking) opening.
Some of these tickets get sold out by the time the first e-ticket is booked successfully, said a source on condition of anonymity. This is true for both reservation booking, which opens 60 days in advance, and Tatkal booking, which opens at 10 a.m. one day in advance.
For any user trying to log into the system for online ticket booking at say, 8 or 10 a.m., it takes a minimum of three minutes to log in, select the train, check the status, fill in the passenger name and complete a bank transaction to book a ticket.
It is only after the money is credited to CRIS that a seat is reserved.
In contrast, the booking clerk at the counter has direct access to the CRIS server and takes a fraction of the time. Of course, this is subject to the operator’s efficiency.
“For us, it’s almost like playing fastest fingers first in Kaun Banega Crorepati,” remarked a clerk at one of the booking counters.
However, this has not deterred a growing number of people from avoiding physical queues and booking tickets online.
In 2012-13, about 45 per cent of the total reserved train tickets and 62 per cent of Tatkal tickets were booked online. But the tickets show data for all the trains and also include waitlisted tickets booked during the day.

Excess demand
At 10 a.m. , when Tatkal bookings open, IRCTC’s e-ticketing Web site gets hit by 10 lakh Internet connections, which is 10 times the Web site’s capacity to handle about 1.2 lakh parallel connections on Web servers.
Moreover, the ticket booking capacity is further lower at 2,000 a minute.
The Railway Minister has announced that this capacity will be enhanced by about three-and-a-half times.
This will improve the experience, hopefully, but customers are still unlikely to get a reservation on sought-after trains — unless they queue up!

RBI now against 0% EMIs for consumer goods, banks
withdraw finance schemes; festive sales likely to be hit

Planning to buy a phone or a television during the upcoming festive season? Don’t bet on paying off the bill in interest-free instalments. These schemes are being withdrawn as the Reserve Bank has frowned on the practice of banks tempting consumers to make big-ticket purchases by offering to break up credit card payments into EMIs.
RBI feels consumers have been fooled by zero per cent or discounted interest rate schemes into believing that bank funding comes for free, and wants them stopped. Consumer durable manufacturers offer the zero per cent facility mostly on high-value products such as smartphones, LED TVs and premium home appliances.
“Such schemes only serve the purpose of (luring) and exploiting vulnerable customers,” the central bank said in a confidential note to banks on September 17. “These were found to be impinging on customer protection, accounting integrity and thereby the fair market practices which banks should epitomise.”
ET has a copy of the note. There was no response from the central bank to queries regarding the note.

Festive Sales Likely to be Hit Due to EMI Move
The move by the central bank has panicked companies and retailers ahead of the festive season as nearly 20-30% sales depend on EMI schemes. They’re worried that consumers will refrain from indulging in Diwali shopping sprees, especially after the surprise interest rate increase by RBI on Friday heightened concerns over home and auto loans becoming costlier. Looming over all of this is the growth slump that has got prospective buyers spooked anyway.

“The way forward for the measures suggested by RBI is justified, but the notice given is so short ahead of the festive season and in the middle of a dull economy, that sales are likely to take an instant blow,” said Himanshu Chakrawarti, CEO at The Mobile Store, the country’s largest cellphone retail chain with more than 700 stores.
What may have prompted RBI to examine the finer details of such schemes is the 34% jump in bank loans for buying consumer durables between July 2012 and July 2013 compared with a 12% rise in the year-ago period.

RBI said the interest component in a zero per cent scheme is often camouflaged and passed on to consumers in the form of a processing fee. The concept of zero per cent interest is non-existent and fair practice demands that the processing charges and rate of interest charged should be kept uniform across products and segments, it said.

The central bank has also barred banks from charging discriminatory interest rates on loans for all product categories that don’t attract the zero per cent facility. It wants to stop the current practice where financing takes place on the maximum retail price of the product and not the market price, and wants banks to pass on benefits they get from retailers and brands to consumers.

When it comes to non-zero per cent schemes, retailers said banks charge consumers 4-7% interest, depending on the product value and tenor. That’s much below the base rate, supposedly the minimum lending rate. “This vitiates the transparency in pricing mechanism, which is very important to take (an) informed decision,” RBI said.
Senior officials at two leading retail chains said lenders, including SBI, Axis Bank and Kotak Mahindra Bank, withdrew the zero per cent facility late last week after RBI’s note. Emails sent to ICICI Bank, HDFC Bank, Axis Bank and Kotak Mahindra Bank did not elicit any response.

Data available from retail chains shows State Bank of India charges 4.25% interest per year for a six-month tenor and 6.35% for nine months. HDFC Bank charges around 5.2% interest on six-month EMI schemes and 7.25% for nine months. For ICICI Bank, it is 4% for six months and 6-6.15% for nine months.

A leading Japanese electronics company has decided to put a complete stop to zero per cent EMI schemes, a senior executive said, adding this is likely to hurt sales badly. “There will be a big impact on sales since the contribution of such schemes to our sales had doubled to 20% in the last one year,” he said, requesting anonymity. RBI has directed banks to make pricing transparent and inform consumers about the financial benefits they get from retailers and brands for offering zero per cent interest on credit cards or interest rate discounts.

“It is the responsibility of the banks, who are/ may be using their good offices to get the better bargain, to make the customers fully aware of these benefits and also pass on the benefits to them fully and indiscriminately. More importantly, this has to be done without tampering with the applicable rate of interest of the product,” the note said.

Still, zero per cent schemes could make a comeback, just not in time for Diwali. It will take at least two months for banks to revive the plan since they have to make amendments to such offers in their own system as well as at the brand and retailer end, said the CEO of a leading multi-brand consumer electronics retail chain.

Meanwhile, RBI has also asked banks to terminate their relationships with merchants and retailers who charge an extra fee on debit card payments as this isn’t allowed under bilateral agreements between banks and retail outlets.

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Unfortunate that I am being held responsible for Kingfisher Airlines’ difficulties: Vijay Mallya

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Government looks to build a software ecosystem for Aakash applications

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@B@R_0_0_D wrote:@

Unfortunate that I am being held responsible for Kingfisher Airlines’ difficulties: Vijay Mallya


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the comment should be in a section called “Did they really said that”

Personal loans are easy to get, but come at a high cost

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