Plan Your Investment
Plan Your Investment

Introduction

When you are going for shopping, it is obvious that you would be interested to check if there is any discount available before buying that product. If there is any discount, the probability of buying that product is more because you have the feeling that you are saving the money. Another view point is that it is a pure marketing trick for the companies to sell the product. What ever it is, we have to find our ways to save the money where ever it is possible. In the same way, you can save the lot of money in the internet purchase if you are using the coupon code, or gift coupon provided by the company.

What is Coupon Code?

Online coupons work by the same principal as traditional coupons which you would redeem at a retail store. The only difference is that “online” coupons are only redeemable online and are not for in-store purchases. Since most internet users are transitioning to more online shopping due to the convenience and competitive pricing, online coupons have become the way of the future.

What is Cash Back Shopping?

The company which offers the coupons gets paid a commission every time one of its members makes a purchase at one of its merchants’ websites. We they give a percentage of that commission, in the form of cash back, to the member who made the purchase. The more purchases you make the more cash back accumulates in your  account. It is one of the way online users can save their money.

For example, some of the insurance agents reduce the first year premium from the customers, because they will pay it from their commission. It is one of the technique to get more customers. In the same way, cash back works in the online.

Summary

This is a short article explaining the coupons and how internet users can utilize it to save the money. There are lot of companies offering the coupons for the users. You have to search for the some company and get the coupons and buy it online.

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In my previous articles I have explained about the phishing scams and how to protect from that. These kind of scams are raising steadily and more number of the bank customers fall into this trap. You have to be very careful on doing the bank transactions and giving out any sensitive information to the internet. There may be some one watching you without your knowledge, if your PC is not secured enough to protect from the malwares. I have received news letter  from HDFC bank explaining how to protect from the phishing attacks.  The following are few points worth consider:

• In case of doubt, do not click on any link provided in the e-mail
• Do not give any confidential information such as password, customer id, Credit/Debit Card number or PIN,CVV,DOB to any e-mail request, even if the request is from government authorities like Income Tax department or any Card Association company like VISA or Master Card
• Do not open unexpected e-mail attachments or instant message download links
• Always check the web address carefully before sharing any sensitive information
• For logging in, always type the website address  on your web browser
• The Padlock icon at the upper or bottom right corner of the webpage must be always ‘On’ during secure transactions
• Ensure that you have installed the latest anti-virus/ anti-spyware/ personal firewall/ security patches on your computer or high end mobile phones
• Use non-admin user ID for daily work on your computer
• Do not access NetBanking or make payments using your Credit/ Debit Card from shared or unprotected computers in public places
• Do not call and leave any personal or account details on any telephone system, voice message, e-mail or an SMS
• Do not transfer funds to or share your account details with, unknown/ non-validated source, luring you with commission, attractive offers

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Introduction

If you are happened to read the recent newspapers, it is most likely to read a news talking about the base rate system for the banks. Every banks announcing the base rates for lending loans. What is that?. I have written earlier in March 2010, about the implementation of the base rate system from 1st July, 2010. In this article, I will explain the use of base rates and how it will impact the banks and borrowers. It is one of the reforms on banking system by RBI to reduce the lending risk for banks. In the next sections, we will see that in detail. If you like the article, Please subscribe to our future articles here.

Say Bye to Prime Lending Rate (PLR)

Before setting the base rate system, banks used another rate system called Prime Lending Rate (PLR) to set their lending rates. The problem with this system is, banks manipulated this PLR to lower level to offer discounted lending rates for the borrowers. It may cause the loss for the banks if they offer loan with much cheaper price. The real intention of the RBI is to make the banking system much stronger after the global financial crisis.

The banks meet huge loss because of the default loans. The main reason is, when banks offer loans with cheaper price to lure the customers, most of the customers without adequate financial support too get the loans. It will end in default (can not repay the loans). Base rate system provides more transparency on setting the rates. Each bank use some criteria to set their base rates.

What is Base Rate System?

As I have mentioned in the previous section, Base Rate System is for the banks to set a level of minimum interest rates charged while giving out the loans. This Base Rate System has many advantages over the older method of Prime Lending Rate (PLR).  One advantage is, in the Prime Lending Rate (PLR), one could sanction the loan for lower price for the preferred customer or the corporate bodies and retail customers may have to pay more for the same type of loans. In the base rate system, there will not be much variance on the loans.

However, the base rate system will not be applicable for the following type of loans:

• Agricultural Loans
• Loans given to own employees
• Loans against deposit
• Export Credit

Base rate system is arrived at taking into the account, the cost of deposits and cost of keeping aside cash to meet CLR and SLR. It is convenient for the banks to adjust the lending rates after the changes on policy rates by the RBI.

Transparency on Base Rate System

Another advantage of  base rate system is transparency on calculation method to arrive the base rates. Every bank has to declare to the public how they have calculated the base rates. Fro example, SBI has calculated the base rate by taking into account of past six month deposits.

Excerpt from RBI’s Circular on Base Rate System:

Base Rate shall include all those elements of the lending rates that are common across all categories of borrowers. While each bank may decide its own Base Rate, some of the criteria that could go into the determination of the Base Rate are: (i) cost of deposits; (ii) adjustment for the negative carry in respect of CRR and SLR; (iii) unallocatable overhead cost for banks such as aggregate employee compensation relating to administrative functions in corporate office, directors’ and auditors’ fees, legal and premises expenses, depreciation, cost of printing and stationery, expenses incurred on communication and advertising, IT spending, and cost incurred towards deposit insurance;and (iv) profit  margin.

Base Rates for Banks

The following table presents the base rates announced for some of the leading banks.

Summary

I hope this article would be useful to know the purpose of bringing the new rate system into the banks. It is end of PLR and beginning of new rate system. We have to wait and watch, how the banks set their rates when there is any change in the policy rates. Keep update on the banking news by subscribing to our free newsletter.

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Last Date

July 31,2010 is the last date for filing your IT returns for the assessment year 2009-10.

Online Tax Filing in India

In India, filing tax returns through online is the growing every year. It become very easy for the tax payer to file the returns without directly going to the income tax office. There are many number of websites offering these services. We are partnered with one of the leading online tax filing site www.paisaa.in. The great advantage of using this site is, it provides the service for very low price and has the many other features like Tax Calculator which other sites don’t have. Use the code ‘TPI’ to get 20% discount.

File Your IT Returns Now

Introduction

Why ULIP’s are not good choice?. This is the article written by me couple of months back. At the time of writing the article, ULIP is one of the most controversy product in the financial world. It is because of its high management charges and commission to the agents. The situation has changed after the chain of events like controversy on agents commission and SEBI’s ban on ULIP policies. The cap for charges on ULIP policies have been reduced by IRDA. It becomes the more competitive to mutual funds. This article explains the reforms on ULIP policies. It compares the present charges on ULIP policy with the older policies. If you have any doubts, please post it in the comments section. If you like the article, subscribe to our future articles here.

Articles Related to ULIPs

• What is ULIP?
• IRDA wins over SEBI on ULIP policy verdict
• Difference between insurance and investment
• SEBI Bans 14 Insurance Companies to sell ULIPs
• Why ULIP’s are not good choice?

What was the charges on ULIP policy?

ULIP policies got the very bad name among the investors  because of its high charges levied for the first three years. This section explores the different expenses charged on the ULIP policies.

Most of the ULIP policies charges more fees for the first three years. Basically insurance companies would charges the following fees on the ULIP:

• Initial administration charge
  • Most of this charges are goes to the agents who is selling the policy to you. Agents are getting up to 40% commission from the ULIP policies. Worst fact is that this commission is paid from your premium amount. As we know that ULIP premiums are invested in the market, the final amount invested is reduced because of the charges.
• Regular administration charge
  • This is as like the Initial administration charge, goes to paying the agents commission.
• Policy administration fee
  • This fees levied for sending you the periodic updated on the policy status. It occurs every month.
• Investment management charge
  • This fees levies for managing your fund. Normally this type of charges are levied some percentage on the total fund value.

• The charges are different from each insurance company. Few companies charge the whole amount in the first three years, but some of the companies to charge little on entire tenure of the policy.
• Agents mis-sell ULIPs by saying that you have to pay only for the first three years, after that you need not pay anything. It is because they get the high commission on first three years.

ULIP Reforms

In this section I will write about the reforms introduced for the ULIP policies. There are number of changes done on nature of the ULIP since October 2009. It makes ULIP more attractive to the investors compare to the previous one with high cost deductions.

• ULIP with less than 10 Years
  • There is 3% cap on charges levied by the insurance companies on ULIP. It means, the total fees collected on ULIP premiums can not exceed 3%. It is defined as difference between net yield and gross yield should not exceed 3%.
  • In the above 3%, the management fee can not be more than 1.5%.
  • Gross yield is the yield generated by the ULIP before all charges are deducted.
  • Net yield is the yield generated by the ULIP after all charges are deducted
• ULIP with greater than 10 years
  • Over all fees can not be more than 2.25%.
  • Management fees can not be more than 1.25%.

• Remember that charges here would include allocation charge, administration charge, mortality charge and all such charges by any other name. The total fees would reduce when you opt for the long term investment.
• Unit-linked insurance products (ULIPs) filed after September 30, 2009 will have a lock-in of five years.
• According to the IRDA, there will be new norms on tightening the commission and fees on ULIP products. It is trying hard to make the investment more attractive for the investors.
• The new norms will have the high life cover, in the existing policies have the high focus on the investment rather than the protection on life. IRDA want to bring more clarity on the life cover and investment portion on the same product. This make investors to clearly understand how much is invested and how much is insured.
• In order to put more money in the hands of investors, IRDA recently said that insurers cannot charge a fee for surrendering a unit-linked insurance policy after five years.
• At present, insures charge more fees on surrendering the policy even after the completion of the lock-in period.

What you should look at ULIP?

When you are planning to buy the ULIP policy, it is necessary to look into the following facts to make the right decision. The problem in choosing the right policy among hundreds of existing policies is taunting task for the investors. The following are the few factors you have to look at while selecting the ULIP:

• You must know what is the purpose of buying the ULIP policy. If your goal is to buy a life insurance, then ULIP is not the right choice. This is the place where many investors mis-understand the difference between insurance and investment. ULIP is combination of life cover with investment product.
• If you are looking for the investment with low risk, then ULIP will not be suitable for you. As I have explained earlier, your premiums are directly invested in the market. The returns are based on market conditions.
• Don’t go the way of agents guidance. You will regret for that in future. You must be careful on protecting your own money. Don’t blame others for your mistake. Do the proper analysis on available ULIP policies and make the right decision.
• ULIP is not for the short term investment. If you are looking for the investment product for less than five years, mutual funds can be good choice. If you are looking for the investment of minimum 10 years, ULIP will be better option.
• One of the important factor, know the charges deducted on your premiums. Ask your agents clearly that how much will be invested after deducting all the charges. Also ask him the commission earned on selling the policy to you. He must disclose the commission details to you.
• Ask too many questions to agent for better understanding of the policy.

Say Thanks to SEBI!!!

I would see these reforms and changes on the ULIP policies because of the increasing competition from the SEBI over IRDA. ULIP investors must say thanks to SEBI for putting pressure on IRDA to introduce new norms on ULIP policies. However IRDA wins over SEBI in the battle. I feel customer finally won the battle. The reason why IRDA has reduced the fees on ULIP, because SEBI has removed the 1% entry fees on mutual funds.

ULIP Vs Mutual Funds

After these reforms, one has to think hardly to decide which one is the best investment options. Still there are many factors differentiating these two products, it clearly depends on the needs of customer. I would write down few points comparing these two products.

Reference

• What is this Sebi-Irda-Ulip issue really all about?
• Cap on Ulip fees may hurt agent commissions
• Sebi nod not needed for Ulip sales: Govt

Summary

I hope this article would be more useful to the small investors who are confusing over these two investment options. It is purely depends on you investment goal. Another point which I want to mention is, don’t blindly invest on others advice. You should have studied the policy terms and accept it. These are invested in the market, any mistake on the decision may cost you more. Be wise while investing on the ULIPs or mutual funds. If you have any doubts, please post it in the comments section. We have many readers who have experience on these products, they would help you in choosing the better products.

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It is almost one year back, I have written about the interest free education loans announced by the Indian govt. for Indian students who are pursuing the studies in India. It is one of the great reforms in the education sector to help the poor students. The qualification to avail this scheme is, if your family income is below Rs.4.5 lakhs p.a.

There is tremendous response on the post, it shows the expectation from the public to know more about the scheme. But, sadly there is very much delay on implementing the scheme (known for Indian politics). At last, last week it is been officially sent the notification to all the Banks in India.

I am writing this post to let our readers know about the updated news on the scheme which announced last year. The good news is that, the scheme is effective from the year 2009-10. If you have paid the interest on the period, it will be returned to your bank account.

Full interest subsidy will be provided during the period of moratorium on loans for students. Here the moratorium means the time till the students completing the course and 6 months after completing the course. The proof of income is to be certified by authorities to be designated by the State governments.

Eligible students can approach the respective bank branch from where they are availing the loan and complete the formalities so that the individual accounts could be credited with the interest due on the loan from the academic year 2009-10 onwards.

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Savings Bank Account Deregulation

All the banks in India has to offers 3.5% interest rates for all the savings bank account holders.  It is the regulation enforced by Reserve Bank of India (RBI). This regulation has been amended recently to give the exact interest rates for all the days in a month. Previously banks provided only for the last 20 days of minimum balance which will be very less for the account holders. From 1st April,2010, savings bank account holders would receive the more interest income because of these changes.

Last week RBI has announced that it would like to deregulate the interest rates for the savings bank accounts. Here deregulation means, it will not be under the control of RBI anymore. The interest rates will differ for each bank. The banks will decide the interest rates based on their financial condition and other factors. The deregulation puts more competition among the banks to attract more savings bank account holders.

Some of the facts about Savings Bank account

• Savings bank account interest rates are 3.5% across all the banks.
• Prior to April 2010, savings bank interest rates are calculated for the last 20 days of the month and taking into the consideration of minimum balance.
• Deregulation would put more pressure on the banks to increase the interest rates.
• It is expected that after deregulation, the interest rates may go up to 4.5%.
• Deregulation is on proposal stage, after the review by industry experts, RBI will formally announce the deregulation

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Couple of weeks back I have written about the power struggle between the insurance regulator IRDA and stock market regulator SEBI. Firstly, SEBI has banned 14 insurance companies to stop selling the ULIP polices and it requests them to register with SEBI to issue the fresh ULIP policies. It made fierce battle between IRDA and SEBI to control the ULIP policies. This issue is moved to the court finally to decide the fate of these two regulators.

Articles Related to Ulip

• What is ULIP?
• Difference between insurance and investment
• SEBI Bans 14 Insurance Companies to sell ULIPs
• Why ULIP’s are not good choice?

Last week finance ministry has announce that, IRDA has the full control on ULIP policies. SEBI has no rights to ask them to stop issuing the fresh policies. It came as the big blow to SEBI. Everyone expected that the verdict will come in favor of SEBI because the 80% of the money in ULIP policies are invested in the stock market.

What is your opinion about this result? Do you think IRDA is the right person to regulate the ULIP policies, or there is lot of amendments needed in the policy structure? Please post your thoughts on the comments section

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Introduction

Why is this title named as “Euro to Zero“?. It is not just fancy statement to lure the readers to look what I am writing about. The reality show happening in the entire euro zone is teaching us the big lesson. Every country must learn from Greece, about the seriousness of government fiscal deficit and how it will become disastrous if they are not controlling the budget deficit. This article explains the details inside euro zone and how it will impact the value of euro currency. Also I will talk about the future of Euro currency. I hope you will enjoy this article. If you like the article, please subscribe to our future articles here.

What is Euro?

Euro is the currency used by the European Union (EU) countries from 1st January, 1999. This currency is adopted by the 16 countries in the 27 members European Union (EU). The list of  countries using the Euro currency are as follows: Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia  and Spain.
When all the countries are signing up the agreement to adopt the Euro currency, they had the common thumb rule of not having the govt. budget deficit not more than the 3% of the Gross Domestic Product(GDP). How the countries like Greece is join the group is the bad story of How the infamous banks like  Goldman Sacs sink the countries with poor advice. (I personally hate this bank because where ever there is crisis, Goldman Sacs is part of that).

Who are in trouble?

In the previous section I have explained the basic condition to join the Euro currency for EU countries. Few of the countries don’t have the eligibility as indicated, but somehow they want to join the group. Note that UK and few other countries not joined in the group and they are using their own currency. The countries who joined Euro without good GDP growth are failing now. The list of countries are : Greece, Portuguese, Spain, Italy, Hungary. The problem with these countries are spreading to other countries. It looks entire euro zone will be put into the deep trouble. (It seems none of the countries will learn from their mistakes. They have to pay the price for their ignorance.).

What is Fiscal Deficit?

In this section we will look into details of how these countries entered into the financial crisis. In order to maintain a health economy for a country, the fiscal deficit for the country should be in the control. Fiscal Deficit means the country borrowing money from other countries or banks to solve their financial problems . It is good when their GDP growth is good. It will help them to repay the debt easily. But, when there is a situation of only expenses without adequate income for a country, it’s dept will be increased and some point of time it can not be manageable. The Europe countries are in the same situation.

The following are the list of countries with budget deficit as on 2009:

Euro Tragedy

Now we will talk about the problem with the euro currency. The problems on the Europe countries are adversely affecting the euro currency. They value of this currency against all the major currency is galling very fast. The experts opinion is that maintain currency for all the countries won’t be good idea since every country has different financial condition. That is the real problem faced by the countries, they can not alter the value of euro currency without approval from all the countries in EU. For example, when a country is financial crisis, they can reduce their currency value and increase the value of exports. This what China is doing for the long time. That is the another story of tussle between US and China. We are not going to discuss about that here.

Since the countries can not manipulate their currency,they have the very less control on their own currency. It impacts on the exports and GDP growth.

Bailout Plan by EU and IMF

To resolve the problems, European Union(EU) and International Monetary Fund(IMF) come up with the $1 trillion bail out fund to help the affected nations. It is biggest bail out in the history. The money will be used to help all the countries in the Eu, if they fall it debt. The million dollar question is Will this aid will stop the falling nations?. Most of the economists and experts feel the financial aid to falling nations would worsen the situation by encouraging them to do more mistakes instead of giving them opportunity to solve the problem.

Note that, countries has to repay the bail out money given by EU and IMF with in three years.  It clearly shows that the problem is just postponed, not solved.

Future of Euro

There are only three options to left out to save the future of euro:

• Strong economies like Germany, France, etc. should leave the euro currency.
• Troubling economies like Spain, Greece, etc. should move out of the euro currency.
• If the above two are not happening, then euro will be lost its values and one day it will be removed as the currency.

Worth Reading

• Who’s Worse: BP or Goldman Sachs?
• American pressure for China to revalue the yuan is reviving
• IMF says Spain’s economy is in a ‘good situation’
• Greek debt crisis debate
• Greece crisis: how did it happen?

Summary

I hope this article is worth reading to know the facts about the euro currency. If there is any problem in the Europe economy, it will surely affect the entire world. According to the data, PC makers get 38% of the profit from the Europe exports. The future indicates there is another possible mild recession on world economy. I have explained that as Double Dip Recession in my previous article. Pleas post your thoughts about this article in the comments section.

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