Month: May 2021

These Investments Can Soon Double Your Income

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1. Debt medium to long term mutual funds:

These funds that typically lend funds to for a period of 4-7 years and hence a full economic life cycle is observed. The fund offers a return of up to 8.85 percent per annuum, so this mutual fund category can double an investors’ money in 7 years and 6 months. Notably this mutual fund is fraught with risk.

2. Short term debt funds:

2. Short term debt funds:

These funds typically can offer a return of up to 9 percent, so the time taken for money to double in this scheme shall be 8 years. Short debt funds park money in corporate for a shorter period of 1-3 years.

3. NPS:

3. NPS:

National pension scheme i.e. aimed at providing you social security benefits during your sunset years has as on May 14, 2021 offered 1-year return of 50-60 percent in case of Scheme E-Tier I account. If the returns remain consistent than the investor shall be able to double his corpus in just 1.44 years.

In scheme C, the maximum of return obtained in the NPS scheme is 9.5 percent on an average, so the time taken to double investors money in the Scheme C shall be 7.5 years.

4. NSC or National Savings Certificate:

4. NSC or National Savings Certificate:

NSC offers tax deduction as part of Section 80C and currently is offering an interest rate of 6.8 percent so the maximum time taken to double your money shall be =72/6.8, 10.5 years. NSC is among the post office savings scheme that is highly safe.

5. Monthly Income Scheme

5. Monthly Income Scheme

Here with an interest rate pegged at 6.6 percent, the investment shall take a total of 10.91 years.

Similarly for other post office savings schemes it shall take between 9- 13 years as per the current interest rate offering to double your money.

Conclusion

Conclusion

NPS scheme with exposure to equity which on equity boom over the past year yielded returns of over 50 percent in the last one year, so it in a case if the returns sustain the scheme shall be able to double your money at the fastest rate. Similarly, MFs both short term and medium to long term will double your returns in 7 years and 6 months to 8 years.

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Banks must swear by RBI’s norms on governance

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The Reserve Bank of India (RBI) issued operative guidelines with regard to the appointments of MD and CEO, Whole Time Director, Chairperson, Non-Executive Directors and composition of important committees last month, as part of its measures to strengthen corporate governance standards in commercial banks.

Further, the regulator plans to bring out a ‘Master Direction on Governance’ in commercial banks, based on the ‘Discussion Paper on Governance in Commercial Banks in India’.

The discussion paper, as well as the recent instructions on appointments of directors and constitution of important committees, gives much importance to the roles of independent and NEDs in developing an efficient and effective ‘corporate governance model’ in banks.

While the theory aspect looks sound for documentation purposes, the spirit lies in how the written rules are practised in reality.

The Kumar Mangalam Birla Committee, which submitted its report on corporate governance in listed entities in 1999 (which paved the way for SEBI’s section 49 of the listing agreement), remarked thus: “The imperative for corporate governance lies not merely in drafting a code of corporate governance but in practising it, and the best results would be achieved when the code is treated not as a mere structure, but a way of life.”

How can banks achieve this? Probably the regulator and banks may have to bring qualitative changes in the way corporate governance recommendations are practised in the banks. Let us examine them.

Board Agenda

The role of Chairman and Managing Director has been separated in many banks, including public sector banks (PSBs), following the recommendations of PJ Nayak Committee (2014). The main aim of this move was two-fold. First, to ensure that the meetings are conducted to take up items, which are board-driven and not senior management-prepared. Second, to devote the precious time of the board on quality issues and not on rudimentary issues.

The Nayak committee emphasised that the board should only concentrate on business strategy, financial report and their integrity and risk. If the annual reports published by PSBs are anything to go by, one feels that the agenda items are even now management-directed. Time taken for completion of calendar of reviews is one example. Another example is the income earned on non-core banking activities such as sale of third-party products (insurance, mutual funds), which form a miniscule of the total income in many banks, especially PSBs. To achieve this, significant level of staff strength is used. This business strategy of the senior management is approved year after year by the board of many banks, apparently without any major discussion.

Role of Directors

Attending a board meeting in a bank is totally different from attending similar meetings in manufacturing and service-oriented companies. Independent and NEDs joining a bank’s board are from different walks of life. They can only be the members of the Audit Committee of Board (ACB) that discusses the financial and internal/ external audit report before it is sent to the board for approval.

They form the majority in RMCB (Risk Management Committee of the board), which takes up the capital adequacy, liquidity needs, apart from the policies to be drafted on the various risks in the banks (operational, credit and market risks). Hence, ‘orientation training’ prior to joining the board and periodical ‘continuous education’ are absolute essentials.

Apart from supporting the MD and CEO in the business strategies brought to the table, one expects NEDs (some of whom are former central bankers or retired chiefs of PSBs) to play a proactive role in evaluating the risk policies practised, effectiveness of internal control mechanisms, and discussions with external/ internal auditors, once a year at least, on the concerns noticed.

However, the happenings in a private sector bank, which was rescued with investments from a group of public and private sector banks last year and the conflict of interest/ undue benefit allegations cast on the chief of a large private bank two years back, does not inspire confidence among stakeholders that the reputed persons occupying the board in these banks played their role effectively.

Conflict of interest

The guideline says that whenever there is a conflict of interest, the board member concerned shall refrain himself from voting. This should be changed, and the board member should absent himself from the board proceedings when the conflict of interest issue is taken up by the board. Only in the absence of that member will the other board members feel encouraged to share their opinion in a more forthright manner.

Audit committee of the board

ACB’s role flows directly from the board’s oversight function. It acts as a catalyst for effective financial reporting. Banks’ financial results have become more complex now. One can cite many instances of ACB meetings held by PSBs without a qualified member in such boards.

This defeats the purpose of ACB as even the well-informed members, who have only an understanding of financial matters, might prove to be just novices before a well-prepared CFO.

Quality of internal audit and all forms of external audit reviews and remedial measures thereof is another important function played by ACB. Asset Quality Review by the RBI, which resulted in recognition of ₹5-lakh crore fresh NPAs in 2015-16 by the banking system, did leave a feeling that the ACB in those banks could have played this role much better.

In addition to the general corporate governance practices governing commercial banks, radical reforms are needed from the government to make a material improvement in the governance of PSBs.

The government should cede its regulatory role in favour of RBI and keep an arm’s length in managing PSBs so that corporate governance practices in the latter improve substantially.

(The writer is a former Chief General Manager with a PSB)

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Why PMJDY must be scaled up to next level

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The Pradhan Mantri Jan Dhan Yojana (PMJDY) should be scaled up to the next level to provide access to formal credit and push digital transactions further, according to experts.

Launched under the National Mission for Financial Inclusion in August 2014, the Jan Dhan scheme has now been labelled as the largest financial inclusion scheme in the world, with over 42.3 crore no-frills accounts (beneficiaries) and a total balance of ₹1,44,169 crore as on May 12.

Of the total beneficiaries, about 28 crore are from rural- and semi-urban areas and over 50 per cent are women.

The flagship scheme of the Centre has resulted in almost every household having access to formal banking services, along with a platform for availing low-value credit, insurance and pension schemes, and a delivery channel in emergency situations such as the Covid-19 pandemic.

Notwithstanding these gains, it is the need of the hour to scale up the scheme to the next level to reap complete benefits of financial inclusion and digital advantages achieved so far.

Digital push

“With Aadhaar and minimal documents, the digital identity is established for the creation of Jan Dhan accounts,” D Janakiram, Director, Institute for Development and Research in Banking Technology (IDRBT), an arm of the RBI, told BusinessLine. Once the bank account is linked to the UPI (unified payment interface), this enables mobile payments with a number of third-party apps, including Google Pay.

“The sheer convenience of cashless payments using mobile phones has enabled a large number of people to adopt digital payments during the pandemic. UPI has witnessed manyfold increase in terms of the number of transactions in recent times, touching a few billion transactions per month,” said Janakiram.

First objective

According to Janakiram, the Jan Dhan scheme has achieved the first objective of creating digital identity, but there is a need to scale up the digital infrastructure to reduce costs per transaction. At the moment, the number of ATM withdrawals for these accounts is kept at four in a month, which leads to heavy cash withdrawals and cash transactions. “If there is no limit for ATM withdrawals in a month (which can happen only when costs per transaction reduce drastically, which will need technology adoption, including cloud adoption), speculative cash withdrawals will reduce,” he observed.

“The economy also needs to move from financial inclusion to financial empowerment, which means we need to transform Jan Dhan accounts into Jan Dhan Vriddhi accounts with access to credit and digital infrastructure to monitor and model risk,” Janakiram added.

Credit access

A research study undertaken by Prasanna Tantri, Executive Director, Centre for Analytical Finance, Indian School of Business, also underscores the need to take the scheme to the next level.

“My research has shown that the programme has made a significant positive difference to the economic lives of the poor. The movement of account balances during the pandemic shows that poor households have used these balances during difficult times. In the next stage, the government should focus on improving access to formal credit to the poor,” said Tantri.

As per the structure of the scheme, PMJDY beneficiaries in the age group of 18-65 are eligible for an OverDraft (OD) of ₹10,000.

However, no information is available about the status of overdrafts. The government also announced a group loan scheme for PMJDY beneficiaries a couple of years ago.

“I am not sure about the status of those loans. Instead of focussing on newer plans to push credit, the government will do well to make sure that the information about PMJDY accounts is made available to credit bureaus and, more importantly, to the emerging fintechs,” said Tantri.

There is rich information in the transaction pattern, the nature of the transactions, the quantum of balance, the sources of funding, and the timing of transactions, which will enable the development of a credit score for PMJDY account holders.

The government may take the initiative in this regard by asking credit bureaus to work on it. Once a score is developed, formal private credit is likely to follow, said Tantri, adding that the 44 crore PMJDY beneficiaries could serve as an attractive market for fintechs.

Financial education

The government can also think of a financial education programme for PMJDY beneficiaries. It appears there is a permanent component of savings in savings accounts. The savers can earn more by converting some of the balances into fixed deposits.

According to RBI Governor Shaktikantha Das, financial inclusion in the country is poised to grow exponentially, with digital-savvy millennials joining the workforce, social media blurring the urban-rural divide, and technology shaping the policy interventions. Going forward, there needs to be greater focus on penetration of sustainable credit, investment, insurance and pension products by addressing demand-side constraints with enhanced customer protection, said Das in a speech in December 2020.

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Covid-19: SBI temporarily raises ceiling for cash withdrawal by customers at ‘non-home’ branches

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State Bank of India (SBI) has temporarily upped the ceiling for non-home cash withdrawal for self and also enabled non-home cash withdrawal by third-parties at its branches so that customers don’t have to travel far to meet their urgent cash requirements amid the raging Covid-19 pandemic.

India’s largest bank has doubled cash withdrawal for self (using cheque) to Rs 1 lakh per day.

Cash withdrawal for self (using withdrawal form) accompanied by Savings Bank Passbook has been upped five times to Rs 25,000 per day.

Cash withdrawal by a third party, which was not allowed earlier, has been pegged at Rs 50,000 per day (using cheque only).

Home branch is a branch where the customer’s account is maintained. Branches other than their home branch are called non-home branches.

The above mentioned revision in ceilings for non-home transactions for ‘Personal’ segment customers is available up to September-end 2021. The move could prompt other banks to follow suit, to help customers transact at the nearest branch in case of an emergency.

SBI has disallowed cash payment to third parties via withdrawal forms. Branches would verify Know-Your-Customer (KYC) document(s) of the third party and preserve them along with the instruments.

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Bank of Baroda’s New Cheque Payment Rule From June: Check Details

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Planning

oi-Sneha Kulkarni

|

To prevent fraud during cheque payments, Bank of Baroda will make “Positive pay confirmation” mandatory for its customers starting June 1, 2021. Customers will only need to reconfirm their check information if the amount to be processed exceeds Rs 2 lakh, according to the bank.

BOB customers are requested to provide us with advance notice of cheques issued to beneficiaries so that the Bank can move the High-Value cheques without requiring a re-confirmation phone call from your base branch at the time of presentation for payment in CTS clearing, stated Bank of Baroda on its website.

Bank of Baroda's New Cheque Payment Rule From June: Check Details

What is Positive Pay?

Positive Pay is a term that entails reconfirming key information on large-value checks. The issuer of the cheque submits certain minimum details of the cheque (like date, name of the beneficiary/payee, number, etc.) to the drawee bank through electronic channels such as SMS, mobile app, internet banking, ATM, and so on, which are then cross-checked with the presented cheque by CTS. Any difference is reported by CTS to the drawee and presenting banks, which take corrective action.

Positive pay confirmation is proposed to be made mandatory for High Value cheques of Rs.02.00 Lacs and above, starting on June 1, 2021.

Bank of Baroda’s latest cheque payment rule from June:

1) There is no choice for changing or deleting a recorded confirmation in any mode because changes or deletions are not possible once the data is sent to the National Payment Corporation of India’s server. Customers may, however, halt the payment of issued cheques at any time prior to their presentation/payment in CTS clearing or at the counter.

2) If the given key details match the actual cheque presented in the CTS clearing and all else is in order, such as appropriate funds, signature match, and so on, the cheque will be transferred.

3) Confirmations submitted/verified via any channel/mode up to 06.00 PM (daily) will only be processed for the next clearing session. Following that, all confirmations will be processed in preparation for the next clearing session. Confirmation through Branches is available during the respective Branch’s daily business hours. All other modes/channels will be available 24 hours a day, 7 days a week to have Positive Pay confirmations.

4) For each successful submission of Positive Pay confirmation, a reference (registration number) will be sent via SMS to the registered mobile number. Just one mode must be used to provide confirmations.

5) Customers must ensure that they have sufficient funds to present/pay the given cheque/s, whether verified or not.

6) Cheques that are more than three months old from the date of confirmation will not be approved.
The cheque can be dated at some time in the future.
7) In Mobile Banking/Net Banking, customers must enter their login credentials (MPIN, Password, etc.).

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5 Best Mutual Fund SIP Plans To Invest In 2021 For Beginners, First Time Investor For High Returns

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What is Mutual Fund SIP?

SIP stands for Systematic Investment Plan and is a form of investing in mutual funds. A lump sum or one-time payment is another choice for investing.

SIP allows you to invest as little as Rs 500 in a mutual fund, which is not possible for most other investment options. There are a variety of mutual funds to choose from, and you can invest in ones that have investment goals and risk levels that match your risk profile. A Systematic Investment Plan does not require a large sum of money to start, as the minimum investment is as low as Rs 500, and some funds also provide SIPs for as little as Rs 100 per month. As a result, one of the most important strategies for prudent investing is systematic investment plans.

Why SIPs are best for beginners?

Why SIPs are best for beginners?

There is no need to time the market when you use a SIP for your investing needs. There’s also a methodical approach to investing. Furthermore, you will benefit from two effective investment strategies: compounding and rupee cost averaging.Your mutual fund investments are managed by a competent fund manager with the assistance of a research team. The asset allocation investment plan is developed by the fund manager. Investing in fixed deposits can only give you extra income. If you want to build wealth, however, SIP mutual funds are a good option. And at the interval you want to spend, this balance is automatically deducted from your bank account. Individuals can diversify their portfolios by investing in a variety of stocks as well as other assets such as debt, gold, and other precious metals.

Tax Benefits on Mutual Funds

Tax Benefits on Mutual Funds

Tax deductions are available for various financial instruments under Section 80C of the Income Tax Act, up to a limit of Rs 1.5 lakh per financial year, and tax-saving mutual funds are one of them. Due to its higher returns and the shortest lock-in period of three years among all Section 80C options, the Equity Linked Savings Scheme (ELSS) has become a common tax-saving choice for Indians in recent years.

5 Best SIP plans to invest in 2021 for Beginners

5 Best SIP plans to invest in 2021 for Beginners

5 Best SIP plans to invest in 2021

Fund Name NAV Minimum SIP 1 Year Return 3 Year Returns Expense ratio
Quant Active Fund Rs 361.36 Rs 1000 118.7% 26.94% 0.57%
Mirae Asset Tax Saver Fund Rs 29 Rs 500 88.32% 20.69% 0.30%
PGIM India Midcap Opp RS 37.29 Rs 1000 116.93% 22.75% 0.45%
Mirae Asset Emerging Bluechip Fund Rs 90 Rs 1000 86.54% 21.14% 0.73%
Parag Parikh Flexi Cap Fund Rs 43.13 Rs 1000 70.41% 21.54% 0.91%

Quant Active Fund

Quant Active Fund

The 1-year returns on Quant Active Fund Direct-Growth are 118.17 percent. It has produced an average annual return of 20.87 percent since its inception. The healthcare, financial, metals, chemicals, and technology sectors account for the majority of the fund’s holdings. In comparison to other funds in the group, it has less exposure to the healthcare and financial sectors. If an individual invest Rs 10,000 monthly SIP for 3 years, his annulaized return would be 45.62%. This is ELSS fund.

Example: For an investment of Rs 3.6 Lakhs, his returns will be Rs 6.76 Lakh, that is profit of Rs 3.16 lakh(45.62% returns)

Mirae Asset Tax Saver Fund

Mirae Asset Tax Saver Fund

The 1-year returns on Mirae Asset Tax Saver Fund Direct-Growth are 88.32 percent. It has returned an average of 21.79 percent every year since its inception. Every two years, the fund has doubled the capital invested in it. The Value Research Online has rated 5 Star for the fund. It is a equity linked scheme and minimum lock in period is 3 years. The NAV of the fund is Rs 29 and size of the fund is RS 7251 crore. The expense ratio on the fund is 0.30% The minimum amount of SIP is Rs 500. The one year and 3 years return on the fund is higher than the category average returns. The fund’s top 5 holdings are in HDFC Bank Ltd., ICICI Bank Ltd., Infosys Ltd., Axis Bank Ltd., Tata Consultancy Services Ltd.

PGIM India Midcap Opp

PGIM India Midcap Opp

The 1-year direct growth returns of the PGIM India Midcap Opportunities Fund are 116.93 percent. It has produced an average annual return of 19.26% since its inception. The fund’s top 5 holdings are in ICICI Bank Ltd., Aarti Industries Ltd., MindTree Ltd., Federal Bank Ltd., Voltas Ltd.. For May 21, 2021, the NAV of PGIM India Midcap Opportunities Fund is 37.29. The EtMoney Rank of PGIM India Midcap Opportunities Fund is #1 out of 19 funds, with a consistency rating of 5.

As a result, the PGIM India Midcap Opportunities Fund could be a good fit for your portfolio. The Value Research Online has given 5 star rating for fund. This suggests that the fund has not only generated strong returns in the past, but has also done so consistently.

Mirae Asset Emerging Bluechip Fund

Mirae Asset Emerging Bluechip Fund

Mirae Asset Emerging Bluechip Fund

Emerging Asset Mirae Asset Mirae Asset Mirae Asset Mirae Asset had assets under management (AUM) of 69772 Crores, making it a medium-sized fund in its group. The fund has a 0.64 percent cost ratio, which is lower than most other Large & MidCap funds. The 1-year returns on Mirae Asset Emerging Bluechip Fund Direct-Growth are 86.54 percent. It has returned an average of 24.74 percent per year since its inception. Every two years, the fund has doubled the capital invested in it. The fund has the majority of its money invested in Financial, Healthcare, Technology, Automobile, Energy sectors.

Parag Parikh Flexi Cap Fund

Parag Parikh Flexi Cap Fund

It has returned an average of 20.08 percent every year since its inception. Every two years, the fund has doubled the capital invested in it. The returns on the Parag Parikh Flexi Cap Fund Direct-Growth Fund over the last year have been 70.41 percent.The NAV of Parag Parikh Flexi Cap Fund for May 21, 2021 is 43.13. The fund’s top 5 holdings are in Alphabet Inc Class C, ITC Ltd., Microsoft Corportion (US), Bajaj Holdings & Investment Ltd., Facebook Co.

Conclusion

Conclusion

“Mutual Fund investments are subject to market risks,” we have all read and heard. The schemes must be selected based on your desired risk percentage. If you don’t want to take any risks, you can invest in debt or equity savings funds, all of which have no equity exposure and low risk. You can invest in neutral or balanced advantage funds if you believe you have moderate risk tolerance. You could invest in pure equity funds if you are a high-risk taker with a capacity to invest for at least five years.

Diversification is, in fact, one of the most significant advantages of investing in a mutual fund. It ensures that a drop in the price of one or even a few securities does not have a significant impact on portfolio efficiency.

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RapiPay Fintech records nearly 50 per cent rise in cash withdrawals

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New Delhi-based RapiPay Fintech Pvt Ltd has been recording a nearly 50 per cent rise in cash withdrawals on its network for the past two months, with many parts of rural India still seeking cash for emergency and essential services.

The contribution of cash withdrawals to overall business increased to 47 per cent so far in May this year (till date) from 31 per cent in March. The average ticket size of Aadhaar Enabled Payment System (AePS) transactions rose to ₹2,905 in May from ₹2,500 in March, according to RapiPay Fintech’s internal data.

The average ticket size of Micro ATMs (M-ATMs) withdrawals also rose to ₹3,970 for the reporting month from the earlier ₹3,636 in March.

“Even though people have started using digital payment modes, the second wave of the pandemic has caused some uncertainties, with people preferring to hold on to cash in case of a crisis. People are withdrawing more cash from their neighbouring stores or banking correspondents to pay for emergency and essential services,” RapiPay Fintech Managing Director and Chief Executive Officer Yogendra Kashyap said.

“Because of the lockdown, people are unable to travel to ATM machines or banks in rural areas, and withdrawals are mainly to meet immediate cash requirements for medicines and doctors’ consultation fees among. Also, citizens are withdrawing payments received under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) and Pradhan Mantri Kisan Samman Nidhi (PM-KISAN), which is also adding to the withdrawals,” he added.

About 40 million people had applied for jobs under MGNREGS in April up from 36 million in March, while about ₹20,000 crore has been credited to nearly 9.5 crore farmers under the PM-KISAN scheme.

For May, Meghalaya topped the charts in AEPS with an average ticket-size of ₹7,810 versus ₹6,313 in March followed by Nagaland ₹5,174 (₹3,790 in March), Goa ₹5,290 (₹1,433), Assam ₹3,950 (₹3,600) and Kerala ₹3,706 (₹3,200). On the M-ATMs front, Jammu & Kashmir topped the list with an average withdrawals of ₹7,235 (₹3,291 in March), followed by Manipur ₹5,019 (₹5,000), Nagaland ₹4,950 (₹4,600), Kerala ₹5,190 (₹4,169) and Arunachal Pradesh ₹4,602 (₹4,600).

Across India, the transaction value of AePS rose 166 per cent in the last six months.

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SIPs In These CRISIL Rated Small Cap Funds Can Yield Good Returns If You Have A Longer Term

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Top Best Small Cap Mutual Funds And Their Past Returns In Charts:

Note we have taken SIP investment into perspective and returns mentioned are annualized returns:

Small cap fund AUM NAV as on May 21, 2021 1-year 3-year 5-year gains in %
Union Small Cap Fund-Regular Plan-G 445 cr 23.19 91% 34% 20%
Aditya Birla Sun Life Small Cap fund D-Growth 2589 cr 50.66 103% 28% 15%
Axis Small Cap Fund Direct Plan-G
4854 cr 53.52 88% 36% 25%
Kotak Small Cap Fund- G 3712 cr 144 120% 42% 25%
Nippon India Small Cap Fund-Growth 13085 cr 65.99 110% 36% 23%

1. Union Small Cap Fund-Regular Plan-G:

1. Union Small Cap Fund-Regular Plan-G:

It is a CRISIL4-star rated fund . Expense ratio is of 2.57 percent and some of the fund’s top holdings are in stocks Happiest Minds, Navin Fluroine, CSB Bank, Rossai Biotech, Greaves Cotton etc. Lump sum investment has to be for Rs. 5000 while the SIP in the fund can be started for as less as Rs. 2000.

2. Aditya Birla Sun Life Small Cap fund Direct –Growth:

2. Aditya Birla Sun Life Small Cap fund Direct –Growth:

It is a 2 star CRISIL rated fund. Expense ratio of the fund is 1.11% and the scheme in a 1-year period has underperformed its index with gains of 121% considering one time investment. Top holdings of the fund include Deepak Nitrite, Cyient, JK Cement, Just Dial, Radico Khaitan etc. Minimum one time investment as well as SIP investment in the fund is fixed at Rs. 1000.

3. Axis Small Cap Fund:

3. Axis Small Cap Fund:

It is a CRISIL 4 star rated fund indicating good performance over peers. Expense ratio is at 0.41%. Minimum SIP investment can be made at Rs. 500 while for lump sum the investment has to be of Rs. 5000. Top holdings of the fund Galaxy Surfactants, Tata Elxsi, Fine Organic, Brigade Enterprises, JK Lakshmi Cement etc.

4. Kotak Small Cap Fund- G:

4. Kotak Small Cap Fund- G:

It is a CRISIL 5-star rated fund with expense ratio of 0.57 percent. The SIP contribution in the fund can be started with Rs. 1000 and for one time Rs. 5000 investment is needed. The fund’s holding include Century Plyboards, Carborundum, Sheela Foam, Supreme Industries, Persistent Systems among other.

5. Nippon India Small Cap Fund-Growth:

5. Nippon India Small Cap Fund-Growth:

This is again a 3-star rated CRISIL fund. SIP in the fund can be started for just Rs. 100 and for one time one needs to invest Rs. 5000. The fund’s allocations are in Deepak Nitrite, Tube Investments, Bajaj Electricals, Navin Fluorine, Balrampur Chini Mills.

Points to note when considering investment in small cap mutual funds:

Points to note when considering investment in small cap mutual funds:

1. Longer tenure of 7-10 years.:

As the small cap mutual fund category exposes one to high volatility and risk, one can delve in the only if they wish to possibly earn a higher return and have a longer tenure of 7-10 years. This is also because if they happen to incur losses they may be in a position to recover losses to some extent if not fully.

2. Include this mutual fund category only to may be supplement your returns:

Here the need be that you take a calculated risk to add up to your investment portfolio by adding small cap mutual funds as these do not earn stable returns.

3. Diligently identify small companies, fund managers:

Select the small companies who have strong fundaments and go with fund manager and AMC that have emerged winners in delivering good return in their space.

4. Do not invest in them only in the lure of small cap funds delivering big:

As in the current scenario, while average return on these schemes is over 100 percent, just don’t get into them as current or past performance should just not be the sole measure for picking a stock or mutual fund for that matter. There is a cycle for every category to outperform and currently it is the small cap that have been rallying.

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Punjab & Sind Bank returns to profit after 8 quarters of losses

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Net NPA almost halved to 4.04% from as much as 8.03% a year earlier. (File image)

After eight quarters of losses, state-run Punjab & Sind Bank turned the corner in the January-March period with a net profit of Rs 161 crore, aided by healthy recovery. The lender had recorded a net loss of Rs 236 crore in the same quarter of FY20.

For the full year (FY21), the bank incurred a net loss of Rs 2,733 cr, compared with that of Rs 991 cr in FY20 (pre-pandemic period). The bank’s gross non-performing assets eased to 13.76% of its advances as of March 31, 2021 from 14.18% a year ago.

Net NPA almost halved to 4.04% from as much as 8.03% a year earlier.

However, sequentially, while GNPAs grew from 13.14% as of December 2020, net NPA, too, jumped from 2.84%. But the rise in gross bad loans was the fallout of the Supreme Court recently vacating an earlier order that had directed lenders not to classify an account (until further order) as NPA if it was not so until August 31, 2020. So, the accumulated NPAs in earlier months had to be declared as part of the March quarter financials.

Having provided for 83% of its bad loans, the bank now expects to post profit in each quarter of this fiscal, managing director and chief executive S Krishnan said, indicating the worst is over for the bank. Its provision coverage ratio (PCR) improved significantly over the past year from just about 67% in March 2020.

Capital-to-Risk (Weighted) Assets ratio, too, jumped to 17.06% in March 2021 from 12.76% a year earlier, thanks to the government’s infusion of as much as Rs 5,500 crore. CASA (current account, savings account) level, which reflects the bank’s ability to garner low-cost funds, jumped almost 19% from a year earlier. However, net interest margin dropped to 1.7% in the March quarter from 1.87% a year before.

Krishnan said the cost of the waiver of compound interest for all borrowers who availed of a loan moratorium in the wake of the pandemic (in sync with a recent Supreme Court directive) could be about Rs 30 crore for his bank. Asked if the lender is urging the government to compensate it for this waiver, he said the Indian Banks’ Association was taking up the matter on behalf of all banks with the Centre.

Refuting speculations, Krishnan said he hasn’t received any communication from the central bank expressing concern about non-interest paying securities (to the tune of Rs 5,500 crore) that the government used late last fiscal to recapitalise Punjab & Sind Bank.

Punjab & Sind Bank, Krishnan said, won’t contribute to the equity of the proposed “bad bank” (National Asset Reconstruction Company), which is expected to be operational in June. However, the bank will consider transferring certain bad loans to it.

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