Reserve Bank of India – Press Releases
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A. OMO PURCHASE ISSUE
B. OMO SALE ISSUE
Detailed results will be issued shortly. Ajit Prasad Press Release: 2020-2021/1149 |
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Month: February 2021
RBI chief calls for reduction in indirect taxes on petrol and diesel
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There is a need for a coordinated and calibrated reduction in indirect taxes on petrol and diesel by the Centre and States, according to Shaktikanta Das, Governor, Reserve Bank of India.
To a specific question on the impact of high price of petrol and diesel on inflation, Das said: “Diesel and petrol prices do have an impact on the cost side. They act as cost push factors across a range of activities.
“…High petrol and diesel prices do have an impact on cost of manufacturing and cost of transportation and other aspects.”
So, there is need for a coordinated action between the Centre and States because there are indirect taxes levied both by the Centre and States, the Governor said in his reply at the 185th Foundation Day of the Bombay Chamber of Commerce and Industry.
Revenue requirements
Das observed: “There is a need for coordinated and calibrated reduction in taxes. At the same time, we do realise that governments – both Central and State – have their revenue pressures, and they are required to spend higher sums of money to enable the country and the people to come out of the Covid stress.”
So, the revenue requirement and the compulsions of the government are fully understood, the Governor said.
“But having said that, the impact of inflation is also something that comes in from the fact that petrol and diesel prices do have an impact on the cost of manufacturing and on the cost of production.
“So, I am sure, going forward, both the Central and State governments will take positive decisions in a coordinated manner,” noted Das.
In his comments in the latest monetary policy committee meeting, the Governor underscored that CPI (retail) inflation, excluding food and fuel, remained elevated at 5.5 per cent in December due to the inflationary impact of rising crude oil prices and high indirect tax rates on petrol and diesel, and pick-up in inflation of key goods and services, particularly in transport and health categories.
Proactive supply-side measures, particularly in enabling a calibrated unwinding of high indirect taxes on petrol and diesel – in a co-ordinated manner by Centre and States – are critical to contain further build-up of cost-pressures in the economy, he added.
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How to improve your credit score post-pandemic
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When any adversity hits, we as human beings put our rational thought process on the back-burner and err. If these decisions are linked to financial matters, then the cost multiplies, snowballing beyond one’s control.
When the pandemic struck, the behaviour was no different. Loss of job or paycuts, bulky medical expenses – borrowers were forced to cut corners. Loan and card bills suffered, impacting the credit score.
As green shoots emerge, it is an opportune time to reflect on the financial faults and correct the past mistakes such that your credit score gets a fillip.
The Reserve Bank of India’s moratorium gave respite to borrowers for the period between March 1, 2020 to August 31, 2020, while ensuring that the moratorium seekers’ credit report is not affected.
However, there could be other aspects such as credit utilisation and monthly repayment obligations which need your attention now.
A good credit score not just brightens the prospects of getting a loan, but also determines the rate at which the loan is given. If another catastrophe strikes, a high credit score acts like a shield to guard you from a credit crunch.
Start with the basic step of sourcing a copy of your credit report from either of the credit bureaus. Note that every credit bureau offers the borrower a free credit report once a year.
Pay up costly loans
To make ends meet during the pandemic if you went all out seeking loans, especially withdrawing cash using credit cards, then that should be your first rectification step. Cash on credit card is the costliest loan and any surplus that you have, should be used to pay that at the first instance.
Next on your radar should be to shorten the list of loans, trimming them based on the interest rate you pay – the highest rate loan paid out first. Fewer loans mean better focus at handling debt, which augments your credit score.
Continue older loan/ credit card
To shorten the list of loans, do not consider closing the older loans or credit cards first. With the older loans and credit cards there is credit history, and this can positively impact your credit score.
Restructure loans
If you are struggling with your loan repayment as the pandemic left you without a job even six months later, then sit across the table with your bank and renegotiate the payment terms, interest rate or EMI amount, such that it is easier for you to pay. Such restructuring of loan enables you to make timely repayment on your terms, ensuring your credit score is not affected due to loan defaults.
Minimise credit utilisation
Using up 100 per cent of your credit card or overdraft limit indicates your inability at handling money. Bankers fix their gaze on what is referred to as ‘credit utilisation’ or the amount of free credit limit available on your cards. Instead of using up 90 per cent of your credit limit on one credit card, it makes immense sense to have three cards with 30 per cent credit limit consumed. This simple but critical step aids to your credit score as only a small portion of the available credit limit has been used.
Lastly, treat these credit sanitisation practices like hygiene. Difficult to establish, but once inculcated, they feel like second nature.
(The writer is, MD and CEO, CRIF High Mark)
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Reserve Bank of India – Press Releases
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Government of India has announced the sale (re-issue) of Government Stock detailed below through auctions to be held on February 26, 2021. As per the extant scheme of underwriting notified on November 14, 2007, the amounts of Minimum Underwriting Commitment (MUC) and the minimum bidding commitment under Additional Competitive Underwriting (ACU) for the underwriting auction, applicable to each Primary Dealer (PD), are as under:
The underwriting auction will be conducted through multiple price-based method on February 26, 2021 (Friday). PDs may submit their bids for ACU auction electronically through Core Banking Solution (E- Kuber) System between 9.00 A.M. and 9.30 A.M. on the date of underwriting auction. The underwriting commission will be credited to the current account of the respective PDs with RBI on the date of issue of securities. Ajit Prasad Press Release: 2020-2021/1148 |
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Social Alpha, SIDBI join hands to launch a fund for startups in assistive technology space
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Social Alpha and Small Industries Development Bank of India (SIDBI) have partnered up to set up the Swavalamban Divyangjan Assistive Tech Market Access (ATMA) fund, an inclusion fund offering financial grants to Social Alpha-incubated startups working in the Assistive Technology sector.
Each startup working in this space will have access to implementation support of up to ₹20 lakh. The fund will finance up to 50 per cent of the product price for the initial users, as per an official release.
“Creating new markets in Assistive Technologies has been a big challenge and requires significant investment in ecosystem development. ATMA fund heralds a new era for the Assistive Technology sector by enabling early adoption of innovative solutions,” Manoj Kumar, CEO and co-founder, Social Alpha, said.
“We believe that the reduction in out-of-pocket expenditure will catalyse demand, which is essential for the long-term sustainability and growth of entrepreneurial risk-taking in this sector. We are happy to partner with SIDBI as its support can help scaling this fund to include pan-India incubators while offering a much-needed boost to this sector’s research and development efforts,” added Kumar.
Shri. V Satya Venkata Rao, Deputy Managing Director, SIDBI said, “MSMEs and the development sector are the worst impacted by the Covid-19 pandemic. Taking cognisance, Government, through Atma Nirbhar Bharat Abhiyan, has taken measures to boost the MSME sector to be instrumental in the economic revival of the country. With SIDBI’s vast experience in catering to MSMEs and operating various funds, developing a Social Impact fund i.e., Swavalamban Divyangjan ATMA Fund comes as an opportunity to be part of this mission.”
The startups will be able to apply for Social Alpha incubation throughout the year. Applicants will have to go through a rigorous selection process to qualify.
“Social Alpha will identify the assistive technologies that need support and evaluate the business plan. The incubatees will also be eligible for Social Alpha follow-on investment, subject to further due diligence,” it said.
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Customers stand to gain as private banks can now take up govt business
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The lifting of the embargo on granting government business to private banks will not only enable them get a greater share of government business, but will also benefit their customers, say experts.
“Customers of new private sector banks will be very happy, there will be a marginal change for old private banks and public sector banks may lose some ground,” said a former banker.
At present, apart from public sector banks, only a few large private sector banks are allowed to do government business.
Now, all private banks will be able to take up activities such as small savings schemes such as public provident fund and Sukanya Samriddhi accounts, and tax payments and pension payments, among other initiatives.
Customers with existing accounts in a private bank will not have to approach a public sector bank for these activities.
“It will be a gain to the customer as well as to the bank. Apart from the three large private sector banks, other private banks can also now serve customers for services such as tax payments, pensions and small saving scheme,” said Prashant Kumar, Managing Director and CEO, YES Bank, adding that private banks can also offer solutions to the government for payment of subsidies and direct benefit transfers through their strong focus on technology.
Tech advantage
Most private bankers believe that in terms of technology, they are much better positioned to serve customers.
Uday Kotak, Managing Director and CEO, Kotak Mahindra Bank, in a tweet said: “It will enable the banking sector to serve customers better. Private and public sector must both work towards sustainable development of India.”
Private banks are also hopeful of higher fee income and float from doing government business.
“Fee income will be a direct advantage to private banks as they will get commission for doing government business. Public sector banks will lose ground on this,” noted a former banker.
Meanwhile, float or the amount parked with banks by customers, is being seen as another big positive by private banks. Government business brings in float money to public sector banks, some of which will now be routed to private banks.
“The float and fee income that can be garnered on tax collections (₹11 trillion budgeted for 2021-22), duties, GST collections (₹11 trillion), payment facilities, Central/state pension plans (₹2 trilion), small savings schemes (₹13 trillion) can add significant delta to revenues,” said a note by ICICI Securities.
Unions unhappy
However, bank unions point out that public sector banks have been at the forefront of opening Jan Dhan accounts, financial inclusion through branch opening in rural areas, as well as giving out Mudra loans while private banks have lagged behind.
“The government is trying to bring a level-playing filed with a different set of guidelines for private banks. They should create the same rules for them and bring them under the ambit of CVC and other regulatory guidelines,” said Soumya Datta, General Secretary, All India Bank Officers’ Confederation.
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MCA advises investors to verify status of Nidhi companies before investment
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Corporate Affairs Ministry (MCA) has sounded a note of caution to investors looking to invest or investing their hard earned money in Nidhi companies. Investors are advised to verify the antecedents/status of a Nidhi company before becoming a member and investing in such companies, the MCA has said in an official release.
In particular, the investors need to verify the declaration of their status as a Nidhi Company by the Central government, it added.
Under the amended Companies Act 2013 and the Nidhi Rules 2014, companies need to get themselves updated (those companies which were earlier declared as Nidhi company under the Companies Act 1956) or declared as Nidhi company (those companies which were incorporated as Nidhi company after April 1, 2014) by applying to the MCA in form NDH-4.
While examining the applications in form NDH-4, it has been observed by the Central Government that these companies have not been complying with the provisions of the rules in-toto. This has resulted in rejection of applications filed by the companies for declaration since they have not been found fit to be declared as Nidhi Company, the release added.
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Shriram Housing Finance launches video-based credit underwriting
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Shriram Housing Finance Ltd (SHFL) has put in place video-based personal discussion with customers as part of its credit underwriting process.
This is aimed at ensuring that customers as well as employees are out of harm’s way in these pandemic times.
“Earlier we used to meet every customer. Now, we have started doing video personal discussions with the customers (PDC).
“Under PDC, a customer is sent a link. The customer comes online and our underwriter speaks to him/her, spending about 45 minutes to an hour understanding the customer’s business/job profile, cash flows,” said Subramanian Jambunathan, MD and CEO, SHFL.
The entire conversation is recorded and gets tagged to the loan account.
“So, the entire discussion, which we used to have in person, has moved online. This does not happen with every customer.
“But it is happening in about 25-30 per cent of the customers. I expect this to keep increasing by the day,” explained Jambunathan .
Partnering for customer leads
SHFL, which is a subsidiary of Shriram City Union Finance Ltd (SCUF), is partnering with companies, clubs, aggregators, who are digital, to acquire customer leads.
For example, the company has a tie-up with a loyalty programme, where it has given pre-approved loans to a certain set of customers in that programme.
SHFL’s offer loans for purchase of a new / resale house, as well as purchase of plot and construction of houses . It also provides loans for self-construction of a house or extension / renovation of the existing property
“So, once a customer says ‘yes, I want this’, he gets a digital application form. This form is filled by the customer and sent to us with his papers (such as bank account statement).
“The bank account statement is analysed automatically on the system and we get a report. Credit score report from the Credit Bureau gets pulled in automatically. Essentially, the credit underwriter has to see the reports and say okay/ not okay (to the loan proposal),” said Jambunathan.
He underscored that the entire underwriting process, which would take about two to four days, has been compressed to a day.
“There is also full-fledged record of the video discussion, which is tagged to the account. Earlier, when our underwriter would visit the customer…whatever he would put down on paper would be the final word.
“Now, the video PDC is available for auditing purpose. Customers cannot deny what they had spoken because it is pretty much there on record,” the SHFL chief said.
He observed that SHFL has enough data to ensure that its credit underwriters can be trained on how to interact with the customer, the kind of questions to ask, and the signals to look out for.
Business
SHFL, in which SCUF has 77.25 per cent stake and Valiant Mauritius Partners FDI Ltd has 22.75 stake, expects to grow its assets under management to ₹9,000-10,000 crore in the next two-three years from about ₹3,500 crore now.
“Our outer limit to cross the ₹10,000-crore AUM mark is March 2024,” said Jambunathan.
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Life Insurance Premium Can Be Claimed For Tax Benefit Apart From 80C: Here’s How
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Taxes
oi-Roshni Agarwal
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In view of the pandemic, this year besides 80C cover, life insurance premium also enjoys tax benefit as part of the LTC scheme. This is as this year or precisely the year 2020 saw restriction in travel due to the Covid 19 pandemic. Also, this comes as a benefit as 80C section of the Income-tax Act comprises investments such as NSC, Sukanya Samriddhi, PPF, tuition fees etc. and the limit of Rs. 1.5 lakh gets exhausted fast.
LTC Scheme
Now in the LTC scheme, the government has extended salaried class with the advantage that they can claim for expenses made between October 12, 2020 to March 31, 2021 on purchase of good and availing services that attract GST rate of 12 per cent or more instead of travel expenses.
Insurance scheme also included in LTC scheme
Insurance premium payment for life coverage is also included under the LTC but the same premium payment cannot be claimed for tax advantage if the same is claimed as deduction under Section 80C.
When can you claim Life insurance premium under LTC scheme?
Premium payment can be claimed for tax benefit if it is a new policy issuance between October 12, 2020 to March 31, 2021 only and not on renewal premium. And the advantage is available on term plan or a ULIP or an annuity or an endowment plan.
Benefit available in lieu of new life insurance premium under LTC scheme
For a single premium plan i.e. for the policy purchased during the eligibility period, you would get tax benefit on the whole premium amount or maximum LTC benefit amount available to you, whichever is lower. But for regular premium policies issued in that period, you will get benefits on the amount of premium paid till March 31, 2021, provided the aggregate amount is within your LTC limit.
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5 Reasons Why Mutual Fund SIPs Are Good Mode of Investment
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Investment
oi-Olga Robert
By Staff
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If you are new to investment, in a bid to make the right choice, you may have been intimidated by a plethora of options available. Researching stocks, bonds, etc. could be a tedious task, especially for someone not from a finance background.
This is where mutual funds help. They are backed by a team of professionals who make these investment decisions for you by keeping track of the performance of the market.
There are also a variety of options within mutual fund schemes to choose from, based on one’s risk appetite and financial goals.
However, despite the variety of investment options among mutual funds and even sufficient entry assistance, many hesitate to start investing. One of the major reasons being what investors consider as a ‘lack of funds.’
A smart investor knows that even a penny saved now can go a long way in creating wealth for the future, and if you were to invest this penny saved, it would be even better.
This is where SIPs come in, to help small investors.
What are SIPs?
A Systematic Investment Plan (SIP) is an investment option offered by mutual fund houses that lets an investor invest a fixed amount at intervals (pre-decided by the investor) in a particular mutual fund scheme. It is an ideal mode of investment for someone who is starting with planning for a financial goal and does not wish to let debt obligations stop them from saving for the future.
Here are 5 reasons why:
1. Cultivates investment discipline
The periodic and automatic deduction that SIPs allow, encourages you to save as well as invest regularly. Instead of planning to start saving on a future date, you will be making efforts to invest in the scheme on say, a monthly basis, and manage to gather enough funds to get closer to your financial goals, like for your child’s education or retirement.
2. You can invest very little
Most investment funds in India allow you to invest as little as Rs 500 per month. You are also given the option to raise the SIP contribution as you continue with the investment or you could start another SIP in the same scheme or a different scheme of your choice, thereby raising the total investment amount you set aside each month.
3. No emotional investing in markets
Markets have their ups and downs, which may make you regret missing out on an opportunity to purchase at the right time. However, trying to time the market will be stressful, in fact, it is impractical as markets are unpredictable by their very nature.
The volatility may also cause you to make emotional investment decisions that will fail to deliver expected results.
In the case of SIP, you have to keep investing a fixed amount each month, irrespective of the short-term fluctuations in the market and let the mutual fund house make decisions for you.
4. Rupee cost averaging
In continuation of the above point, the NAV (net asset value) of a mutual fund scheme falls when markets are performing bad and rises when markets outperform.
When you keep purchasing varied quantities of mutual fund units at changing costs, your cost of purchasing the fund will average out.
In the case of SIP, you will keep investing a fixed amount irrespective of market conditions, thereby the average cost of purchasing all the units will be on the lower side as compared to making a lump sum investment when the markets are running high.
5. Easy way to start investing
Top asset management companies allow their customers to register for a SIP online and also manage their investment online.
Once the SIP has been created, these fund houses allow customers to track the performance of their investment online, make changes to their plan and even redeem it, all within the comfort of their house.
This is an investor education and awareness initiative by Axis Mutual Fund. Investors have to complete a one-time KYC process. Visit www.axismf.com or contact us on customerservice@axismf.com for more information. Investors should deal only with Registered MFs, details of which are available on www.sebi.gov.in - Intermediaries/Market Infrastructure Institutions section.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully, before investing.
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