Month: September 2021

Credit card issuances, spends see sharp uptick as festive season nears, BFSI News, ET BFSI

Banking & Finance

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Credit card firms are witnessing a sharp rebound in new card issuances and spends as lockdowns and restrictions ease across geographies.

On a year to date basis, the credit card industry witnessed a sharp improvement in spends, albeit on a marginally lower base in July. New card sourcing picked up momentum, supporting Cards-in-Force (CIF) growth of 10% YoY. In July 2021, the business volumes grew by 38% year on year, which was aided by the increasing shift towards online spending. Spends grew a robust 78% YoY. The new customer additions have shown an improvement in MoM and are expected to improve further thus aiding CIF growth.

ICICI Bank

Amongst the private banks, ICICI Bank continued to remain a clear outperformer registering a growth of 23%/145% YoY in CIF/Spends on a YTD basis. This resulted in the market share improvement of 190/503bps YoY in CIF/Spends to 17.7%/18.4% respectively. New card additions were the highest for ICICI at 655,000 during this fiscal

SBI Cards

SBI Cards picked up momentum with new card additions of 198,000 being the highest in the past 16 months, resulting in a CIF growth of 14% YoY. During YTDFY22, spends grew by 68% YoY, supported by a lower base a year ago. July 21 business volumes are encouraging and with the COVID 2.0 impact waning, the growth momentum is likely to sustain. Business volumes remained strong growing at 40% YoY in July 2021 and 46% on a YTD basis.

HDFC Bank

While HDFC Bank remains the market leader with a 20%+ market share in CIF/spends each, it continued to underperform as the credit card vertical was impacted due to the RBI’s restrictions on new card sourcing. However, with the RBI permitting the issuance of new cards, the company is expected to improve its performance. On a YTD basis, the performance remained muted with CIF remaining flat YoY and spends registering a growth of 60%, favoured by a lower base. The bank’s customer base came down by 222,000 customers in YTDFY22.

AU Small Finance Bank

AU Small Finance Bank, a new entrant in the credit card space since November 2020 has witnessed a strong pick-up (albeit the low base) since the commencement of the business. While the bank holds a negligible market share in terms of CIF/Spends which currently stand at 0.04/0.02% respectively on a YTDFY22 basis, increasing traction in the credit cards vertical would aid revenue streams for the bank.

The outlook

“The relaxations in the Covid related lockdowns and a gradual pick-up in the economic activities have aided a strong revival in spends, new sourcing, and business volumes in July 21. The forthcoming festive season will lend further support to the picked-up momentum in the spends and new customers sourcing. However, a possible Covid 3.0 remains a key risk. We continue to believe that Citi Bank’s exit from the credit cards business along with the domestic corporate loan recovery cycle yet to pick up, provides good growth opportunities for the credit cards business, supported by improving macro-conditions,’ Axis Securities said in a note.



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Reserve Bank of India – Press Releases

Press Releases

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(Amount in ₹ crore, Rate in Per cent)
  Volume
(One Leg)		 Weighted
Average Rate 		Range
A. Overnight Segment (I+II+III+IV) 8,620.90 3.33 2.70-3.50
     I. Call Money 460.70 2.81 2.70-3.25
     II. Triparty Repo 8,160.20 3.35 3.15-3.50
     III. Market Repo 0.00   –
     IV. Repo in Corporate Bond 0.00   –
B. Term Segment      
     I. Notice Money** 2.25 2.75 2.75-2.75
     II. Term Money@@ 0.00 – –
     III. Triparty Repo 0.00 – –
     IV. Market Repo 0.00 – –
     V. Repo in Corporate Bond 0.00 – –
  Auction Date Tenor (Days) Maturity Date Amount Current Rate /
Cut off Rate
C. Liquidity Adjustment Facility (LAF) & Marginal Standing Facility (MSF)
I. Today’s Operations
1. Fixed Rate          
     (i) Repo          
    (ii) Reverse Repo Sat, 18/09/2021 2 Mon, 20/09/2021 45,044.00 3.35
    (iii) Special Reverse Repo~          
    (iv) Special Reverse Repoψ          
2. Variable Rate&          
  (I) Main Operation          
     (a) Reverse Repo          
  (II) Fine Tuning Operations          
     (a) Repo          
     (b) Reverse Repo          
3. MSF Sat, 18/09/2021 2 Mon, 20/09/2021 1,755.00 4.25
4. Special Long-Term Repo Operations (SLTRO) for Small Finance Banks (SFBs)£          
5. Net liquidity injected from today’s operations
[injection (+)/absorption (-)]*		       -43,289.00  
II. Outstanding Operations
1. Fixed Rate          
    (i) Repo          
    (ii) Reverse Repo Fri, 17/09/2021 3 Mon, 20/09/2021 3,19,912.00 3.35
    (iii) Special Reverse Repo~ Thu, 09/09/2021 15 Fri, 24/09/2021 6,937.00 3.75
    (iv) Special Reverse Repoψ Thu, 09/09/2021 15 Fri, 24/09/2021 2,513.00 3.75
2. Variable Rate&          
  (I) Main Operation          
     (a) Reverse Repo Thu, 09/09/2021 15 Fri, 24/09/2021 3,50,015.00 3.41
  (II) Fine Tuning Operations          
     (a) Repo          
     (b) Reverse Repo Tue, 14/09/2021 7 Tue, 21/09/2021 1,00,019.00 3.38
3. MSF Fri, 17/09/2021 3 Mon, 20/09/2021 168.00 4.25
4. Long-Term Repo Operations# Mon, 17/02/2020 1095 Thu, 16/02/2023 499.00 5.15
  Mon, 02/03/2020 1094 Wed, 01/03/2023 253.00 5.15
  Mon, 09/03/2020 1093 Tue, 07/03/2023 484.00 5.15
  Wed, 18/03/2020 1094 Fri, 17/03/2023 294.00 5.15
5. Targeted Long Term Repo Operations^ Fri, 27/03/2020 1092 Fri, 24/03/2023 12,236.00 4.40
  Fri, 03/04/2020 1095 Mon, 03/04/2023 16,925.00 4.40
  Thu, 09/04/2020 1093 Fri, 07/04/2023 18,042.00 4.40
  Fri, 17/04/2020 1091 Thu, 13/04/2023 20,399.00 4.40
6. Targeted Long Term Repo Operations 2.0^ Thu, 23/04/2020 1093 Fri, 21/04/2023 7,950.00 4.40
7. On Tap Targeted Long Term Repo Operations€ Mon, 22/03/2021 1095 Thu, 21/03/2024 5,000.00 4.00
  Mon, 14/06/2021 1096 Fri, 14/06/2024 320.00 4.00
  Mon, 30/08/2021 1095 Thu, 29/08/2024 50.00 4.00
  Mon, 13/09/2021 1095 Thu, 12/09/2024 200.00 4.00
8. Special Long-Term Repo Operations (SLTRO) for Small Finance Banks (SFBs)£ Mon, 17/05/2021 1095 Thu, 16/05/2024 400.00 4.00
Tue, 15/06/2021 1095 Fri, 14/06/2024 490.00 4.00
Thu, 15/07/2021 1093 Fri, 12/07/2024 750.00 4.00
Tue, 17/08/2021 1095 Fri, 16/08/2024 250.00 4.00
Wed, 15/09/2021 1094 Fri, 13/09/2024 150.00 4.00
D. Standing Liquidity Facility (SLF) Availed from RBI$       26,695.80  
E. Net liquidity injected from outstanding operations [injection (+)/absorption (-)]*     -6,67,840.20  
F. Net liquidity injected (outstanding including today’s operations) [injection (+)/absorption (-)]*     -7,11,129.20  
G. Cash Reserves Position of Scheduled Commercial Banks
     (i) Cash balances with RBI as on 18/09/2021 6,26,769.63  
     (ii) Average daily cash reserve requirement for the fortnight ending 24/09/2021 6,25,660.00  
H. Government of India Surplus Cash Balance Reckoned for Auction as on¥ 17/09/2021 0.00  
I. Net durable liquidity [surplus (+)/deficit (-)] as on 27/08/2021 11,40,445.00  
@ Based on Reserve Bank of India (RBI) / Clearing Corporation of India Limited (CCIL).
– Not Applicable / No Transaction.
** Relates to uncollateralized transactions of 2 to 14 days tenor.
@@ Relates to uncollateralized transactions of 15 days to one year tenor.
$ Includes refinance facilities extended by RBI.
& As per the Press Release No. 2019-2020/1900 dated February 06, 2020.
* Net liquidity is calculated as Repo+MSF+SLF-Reverse Repo.
# As per the Press Release No. 2020-2021/287 dated September 04, 2020.
^ As per the Press Release No. 2020-2021/605 dated November 06, 2020.
€ As per the Press Release No. 2020-2021/520 dated October 21, 2020, Press Release No. 2020-2021/763 dated December 11, 2020, Press Release No. 2020-2021/1057 dated February 05, 2021 and Press Release No. 2021-2022/695 dated August 13, 2021.
¥ As per the Press Release No. 2014-2015/1971 dated March 19, 2015.
£ As per the Press Release No. 2021-2022/181 dated May 07, 2021.
~ As per the Press Release No. 2021-2022/177 dated May 07, 2021.
ψ As per the Press Release No. 2021-2022/323 dated June 04, 2021.
Ajit Prasad
Director   
Press Release: 2021-2022/885

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Reserve Bank of India – Tenders

Tenders

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The Captioned meeting was held at 3.00 p.m. on September 15, 2021 through WebEx in the Board Room on the third floor of the Bank’s Main Office Building at Bakery Junction, Thiruvananthapuram. List of participants are indicated below:

(a) List of Bank’s Officials who attended the meeting

1 Shri. Manoj P General Manager (through WebEx)
2 Shri. Ramesha S T General Manager, Project Management Cell-SZ RBI, Chennai (through WebEx)
3 Shri. V Jayaraj Assistant General Manager
4 Shri. Suresh Kumar R Nair Assistant Manager (Tech-Electrical)
5 Smt.Mahalakshmi R Assistant Manager(Tech-Civil) (through WebEx)
6 Shri. Shiva Priyanth K.V. P Assistant Manager
7 Smt. Anu Treesa Jose Senior Assistant

(b) Architect appointed by Bank

1 Smt. Devi Anilkumar Architect (through WebEx)

(c) List of Contractors’ representatives who attended the meeting

Sl no Name of the Representative Name of the Contractor
1 Shri Abhay Santhosh M/s Manikath Constructions
2 Shri Ananthakrishnan C S M/s Instyle Decorators

2. Shri V Jayaraj, Assistant General Manager welcomed the participants to the meeting and invited queries, if any, from the prospective bidders regarding the captioned tender. The details of queries raised by the Contractors and clarifications / comments of the Bank are tabulated below:

Sl no Query Bank’s Clarification
1 Item No 9(a) and 9(b) in Schedule of Quantities: Procedure or sequence of Waterproofing inside and outside lift pit may be explained. In respect of Item No. 9(a) and 9(b) sequence of work has already been mentioned in schedule Further, it is clarified that:
Ground water table is 0.3m (approx.) from ground level. Therefore, lift pit is to be water- proofed both from inside and outside. After PCC layer (over the cement plus M-sand filling) has set, waterproofing using HDPE membrane is to be done over the PCC layer as per specifications in 9 (b) under Schedule of Quantities and manufacturer’s specifications then RCC wall and the raft of the lift pit are concreted (Item no. 7 & 8 in the Schedule of Quantities). Once these RCC works have set, then with necessary earthwork water-proofing with HDPE sheet on the external sides of the lift-pit walls, after necessary careful earth-work-excavation, is to be carried out as per specifications in item-9(b) under Schedule of Quantities and manufacturer’s specifications. Then, internal sides of the lift-pit (walls and raft) are to be water-proofed as per the specifications detailed under item no 9 (a). Further, it is clarified that for item no. 9 (b) pertaining to water-proofing with HDPE membrane of approved make to be used (e.g. Masterseal 730 UVS waterproofing membrane manufactured by M/s. BASF or any other approved equivalent)
2 Procedure of doing item no:16 in Schedule of Quantities (RCC slabs over decking sheet) It was clarified that this item referred to the RCC-work over decking sheet of connecting passages at different floors. Also, approved make decking sheet as indicated in Tender has to be used for the work with the prior approval from Bank. It was further explained that these the decking sheet are to be installed as per the connections detailed in the relevant drawings between the appropriate horizontal section (SHS 150x150x6) of the Structural frame-work fabricated for the lift-shaft and the existing building at each level, above RCC work of 125 mm thickness is to be carried out as detailed in the relevant specifications and structural-drawings (ref: Dwg. No. Lift/ STR/ 03 for details of this item). Necessary gentle outward slope from lift-shaft as decided by Bank’s Architect onsite has to be maintained at all levels in this item of work so as to avoid any water in the lobby or lift-well roof from entering the shaft.
3 Approved makes It is reiterated, that the materials are to be procured with the Bank’s prior approval. Especially for structural steel work (item no. 19 under Schedule of Quantities) Bank’s approved makes to be used.
4 Time line and safety norms Time lines and safety aspects specified in tender are to be strictly followed during the execution of work, as the works are to be executed during working hours of the office.
5 Special conditions of contract: lift plumb line, etc. Under special conditions of contract, it further clarified that successful bidder must carry out the work of the lift with 100% precision in maintaining plumb line and level of the MS lift shaft so that the verticality is accurately maintained throughout the height of the shaft for installation of the lift-car later.
6 Information on Ground – water table Contractors to note that the existing Ground – water table is at 0.3 m (approx.) from Ground Level hence, dewatering charges (item no. 10 in the Schedule of Quantities) is to be calculated for all necessary de-watering works as per the specifications in this item and the item rate quoted shall cover for all applicable underground Civil works.

Bidders shall note that all the above clarifications provided by the Bank during the pre-bid meeting along with details indicated in the Tender document shall form part of the contract.

3. Shri V Jayaraj, Assistant General Manager thanked the participants for attending the meeting. The meeting concluded at 3:50 pm.

Regional Director
(Kerala and Lakshadweep)

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How Senior Citizens Over The Age of 65 Years Can Open NPS Account?

Personal Finance

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Choice of Pension Fund (PF) and Asset Allocation

When a subscriber joins NPS beyond the age of 65, he or she has the option of choosing between pension fund (PF) and Asset Allocation, with a maximum equity allocation of 15% and 50% under Auto and Active Choice, respectively. The pension fund can be modified only once a year, while the asset allocation can be adjusted two times a year. Below are the two investment options under NPS for subscribers over 65 years of age.

Auto Choice:

The maximum allocation to the equity asset class in (%) under this investment option is as follows:

Asset Class in per cent Asset Class in per cent Asset Class in per cent
Sl. No. Auto Choice Equity (E) Corporate Bonds (C) Government Securities (G)
1 Aggressive Life Cycle Fund (LC 75) 15 10 75
2 Moderate Life Cycle Fund (LC 50) 10 10 80
3 Conservative Life Cycle Fund (LC 25) 5 5 90
Source: http://www.npstrust.org.in/

Active Choice:

The limit on equity allocation is 50%, while the remainder of the asset classes is as follows:

Cap on Asset Class Cap on Asset Class Cap on Asset Class Cap on Asset Class
Active Choice Equity (E) Corporate Bonds (C) Government Securities (G) Alternate Investment (A)
Percentage of Allocation 50% 100% 100% 5%
(Alternate Investment as asset class not provided under Tier II), Source: http://www.npstrust.org.in/

Exit and withdrawal rules

Exit and withdrawal rules

Subscribers who join NPS after the age of 65 will be subject to the following exit rules:

Normal Exit shall be after 3 years: The subscriber must use at least 40% of the corpus to buy an annuity, with the remainder available for withdrawal as a lump sum settlement or withdrawal. If the corpus is equal to or less than Rs 5.00 lakh, the subscriber can then choose to withdraw the whole accrued pension fund in a lump sum.

Premature exit: Premature exit is defined as existing before the conclusion of three years. The subscriber is obligated to use at least 80% of the corpus for annuity purchase and the remainder can be withdrawn in a lump sum according to the premature rules under NPS. If the corpus is equal to or less than Rs 2.5 lakh, the subscriber can then choose to withdraw the whole accrued pension fund in one single amount or lump sum.

In case of death: In the event of the subscriber’s unfortunate death, the whole corpus will be reimbursed in one single payment or lump sum to the enrolled nominee.

Type of Exit Lump sum withdrawal (Maximum) Annuity (Minimum)
Normal Exit (if Corpus > Rs 5 Lakh) 60% 40%
Pre-Mature Exit (if Corpus > Rs 2.5 Lakh) 20% 80%
Unfortunate Death of the Subscriber Entire corpus payable to the nominee as lump sum
Source: http://www.npstrust.org.in/

Tax benefits under NPS

Tax benefits under NPS

Under NPS a subscriber can receive a tax advantage under Section 80 CCD (1) up to a maximum of Rs. 1.5 lac under Section 80 CCE. NPS subscribers are eligible for an additional deduction of up to Rs. 50,000 for contributions in NPS (Tier I account) under section 80CCD (1B). This would be an additional tax benefit to the Rs. 1.5 lakh deduction provided under Section 80C of the Income Tax Act of 1961.

Except for the tax breaks provided under Section 80CCD, subscribers can withdraw funds from their NPS tier I account in part before reaching the age of 60 for specific cases where the amount is withdrawn up to 25% of the subscriber’s contribution is tax-free. The amount contributed for the purchase of an annuity, on the other hand, is completely tax-free.

The annuity benefit you get in subsequent years will be taxable. Only after the subscriber reaches the age of 60, up to 40% of the overall corpus withdrawn in lump-sum is tax-free under NPS Tier I account. Contributing in a Tier II NPS Account, however, does not offer any tax deduction.

How to open an NPS account?

How to open an NPS account?

By following the ways and steps mentioned below one can open an NPS account effectively.

By visiting POP-SP

Any Indian citizen between the ages of 18 and 70 can open an NPS account at any POP-SP. An individual can get a PRAN application form from any of the Point of Presence – Service Providers (POP-SP) filing which he or she can submit the form for account opening. He or she then must make sure that the form is duly filed without any error including passport size photograph, signature, PAN number, and other details such as KYC documentation such as proof of identity and proof of address.

To submit the duly filed PRAN application along with the KYC documents the individual needs to visit his or her local or nearest POP-SP. The CRA will deliver your PRAN card to your correspondence address. POP-SP will issue you a receipt number after you submit your PRAN application. The individual can verify the status of his or her PRAN application by visiting https://cra-nsdl.com/CRA/pranCardStatusInput.do. While submitting the request for registration with any POP-SP, the individual must make the initial contribution of Rs 500.

Through eNPS

Individuals can use PAN & Bank credentials to open an NPS account online by visiting eNPS. Bank/Demat/Folio Account details for KYC validation for subscriber registration by ENPS with the approved bank or non-bank. Based on your selection made throughout the registration procedure, the KYC of the individual will be verified by the Bank/Non-Bank POP. For more information, subscribers can click here.



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HDFC Bank, Paytm set to launch co-branded credit cards

Banking & Finance

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HDFC Bank and Paytm on Monday announced plans for launching a comprehensive range of credit cards powered by Visa.

“The partnership aims to provide one of the widest range of offerings across customer segments, with a special focus on millennials, business owners and merchants,” said a statement.

Customised cards

The credit cards will be customised to meet distinct needs of retail customers, from new-to-credit users to affluent users, and will offer one of the best-in-class rewards and cashback for users, it further said, adding that the new cards offering will also facilitate small business owners.

Also see: Banks geared for card tokenisation

The launch is planned in October 2021 to coincide with the festive season to tap into potentially higher consumer demand for credit card offers, EMIs and Buy Now Pay Later options, with the full suite of products to be on offer by the end of December 2021.

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Non-industrial sectors dominate non-food credit growth since 2014

Banking & Finance

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The overall non-food credit growth during the period 2014-15 to 2020-21 was almost entirely driven by expansion of credit to non-industrial sectors, particularly lending to the retail segment in the form of personal loans, per an article in the Reserve Bank of India’s latest monthly bulletin.

Active participation of both the dominant-group (including six leading banks on the basis of their share in total non-food credit) and the other-group of banks (which includes the remaining 27 banks) is driving credit growth to the non-industrial sectors, according to an analysis of 33 select banks by RBI officials Pawan Kumar, Manjusha Senapati and Anand Prakash.

Impact of Covid

The authors observed that credit extended by the other-group to the industrial sector was affected significantly due to Covid-19 but the performance of this group is better than the dominant-group as far as credit to agriculture and services sectors is concerned.

They said that, “The sharp slowdown in industrial credit, especially by other-group of banks, warrants attention and steps to step up credit offtake commensurate with appropriate risk-taking, a number of which have already been taken by the Government and the Reserve Bank, could defreeze the credit market for the industrial sector and help in reviving the growth momentum derailed by the Covid-19 pandemic.”

After witnessing a significant slowdown in credit offtake during 2019-20 and 2020-21, there has been some uptick in credit growth in the recent months notwithstanding the second Covid wave, which augurs well for the economy, the authors said.

Credit boom period

According to the article, bank credit growth has witnessed significant fluctuations in the past one and half decades.

“The period between 2007-08 to 2013-14 could be characterised as bank credit boom period in the Indian economy, as non-food credit registered double digit growth, primarily driven by robust credit growth to the industrial sector,” the authors said.

Both dominant-group and other-group of banks lent aggressively to the industrial as well as other sectors.

Also see: E-mandate processing: Banks, payment aggregators rush to meet deadline for recurring online transactions

Within industries, infrastructure, and basic metal & metal product industries accounted for a major portion of credit offtake from both the bank groups during the credit boom period.

Credit cycle reversal

Thereafter, however, the credit cycle reversed along with a shift in the sectoral deployment of bank credit.

“During 2014-15 to 2020-21, overall credit growth decelerated, primarily driven down by reversal in credit growth to the industrial sector because of deleveraging by non-financial firms, increasing dependence on non-bank sources for financial resources, and some risk aversion on the part of banks, especially by the other-group of banks to lend to industries, which got further compounded after the outbreak of Covid-19 pandemic,” the authors said.

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Buy This Liquor Stock With A 32% Upside, Says ICICI Direct

Personal Finance

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Globus Spirits: Key triggers for future price performance

  • GSL’s capacity is scheduled to more than double in the next two years, from 16 crore litres in FY21 to 33 crore litres. Once commercialised, the management’s objective of establishing capacity in ENA deficient areas (West Bengal, Bihar, Jharkhand, etc.) would allow for faster utilization at the greater realization.
  • Following the commercialization of capabilities, management plans to expand its consumer business in the states (which accounts for 50% of FY21 revenues) by supplying items at various price points and enhancing its range of offerings to appeal to a variety of tastes.
  • Consumerization of its ENA capacity enhances asset turnover as well as per-unit volume realization, offering a strong boost to return ratios.
  • The government accelerated the 20 percent blending objective to 2025, resulting in increased ENA diversion to ethanol and creating structural support for ENA prices by drying up surplus capabilities.
  • GSL has seen high FCF inflow as a result of changing dynamics in the liquor business.

Target Price & Valuation

Target Price & Valuation

“Globus Spirits has benefited from changing dynamics in the liquor industry (inflation in ENA prices and growth in the IMIL area due to greater quality, higher strength, and attractive product positioning). The management has been on the cutting edge of seizing chances.

We remain bullish on the stock and continue to suggest BUY.

Target Price & Valuation: On FY23E EPS, we value the stock at Around 1750, or 17x P/E,” the brokerage has said.

According to ICICI Direct, the IMIL segment accounted for 42 percent of consolidated revenues, with bulk alcohol (45 percent) and others accounting for the rest. Rajasthan accounts for 80% of all IMIL sale.

Key Risk

Key Risk

Below are the two key risks, according to the brokerage;

(i) Hardening of raw material prices,

(ii) Extension of state lockdowns

Despite the record yield, management has reverted to allocating incremental capital to its core strength of building newer ENA capacities and gradually expanding its consumer portfolio, rather than being swayed by ambitions to allocate more capital to the premium portfolio.

Disclaimer

The above stock is picked from the brokerage report of ICICI Direct. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. Please consult a professional advisor.



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5 Best Instruments To Save Tax And Create Wealth Along With It?

Personal Finance

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Employee Provident Fund (EPF)

This monthly deduction from your salary towards EPF can help you build a large corpus for your retirement. Your investment in EPF has the potential to earn better returns when compared with any other debt investment, at the same time it is backed by the Government of India. A reasonable contribution in EPF can be treated as the debt allocation in your portfolio. It also helps you to avail tax benefits u/s 80C. There are options available with many companies where you can voluntarily invest in the provident fund along with the mandatory EPF deduction by the employer. Those who have outstanding liabilities like a home loan or need higher cash flow at the end of every month may opt for a minimum contribution towards EPF, else it is a good investment option from the long term growth and benefits perspective.

Public Provident Fund (PPF)

Public Provident Fund (PPF)

Just like EPF, this investment also falls under the debt asset class and is quite popular among investors. PPF is another long term investment that offers an attractive rate of interest along with the flexibility to invest the amount that you wish to avail tax benefit. The PPF account has lock-in for the first 15 years compared to EPF which can be withdrawn only in case of change of job or at the time of retirement. There are options that permit partial withdrawals from year 7 i.e. on completing 6 years of regular annual investments in PPF if required. This adds some more flexibility in PPF when compared to EPF.

Equity Linked Saving Scheme / Tax Saving Mutual Funds (ELSS)

Equity Linked Saving Scheme / Tax Saving Mutual Funds (ELSS)

ELSS falls under the equities asset class and offers the potential to generate higher returns compared to any other options. ELSS are offered by different mutual fund companies where these funds have a 3 years lock-in and as per the guidelines have to invest a minimum of 80% in the stock market. For investors who want to save tax at the same time invest in equity-oriented funds can certainly consider ELSS as this can work in both ways for them. ELSS also offers good liquidity because the lock-in period is just for 3 years, but it is advisable to hold ELSS investment for a longer period from a wealth-creation perspective. Since the investment is in the stock market, this option has one of the highest growth potential over a period.

Sukanya Samridhi Yojana

Sukanya Samridhi Yojana

Sukanya Samridhi Yojana is a Government of India scheme that help parents of a girl child to save regularly for their daughter. The investment under this scheme at present generate 7.6% return per annum and also give the tax benefit u/s 80C. The investment can be done up to the age of 14 and the maturity will be at 21 years. This scheme can also be looked at as an objective oriented investment where the accumulated funds can be useful for daughter’s higher education or marriage.

National Pension Scheme (NPS)

National Pension Scheme (NPS)

NPS offer tax benefit u/s 80CCD allows you to save tax by making an additional investment of Rs.50,000. This is in addition to the limit of Rs.150,000 u/s 80C. NPS encourages people to invest in a pension account at regular intervals during their employment. Investments under NPS can be invested in equities and debt depending on the risk appetite of the investor. NPS investments you do are locked up to the age of 60 and you can withdraw a maximum of 60% of your corpus at that stage. You have to invest the remaining corpus in annuities which give you a monthly pension post your retirement.

To Conclude

To Conclude

Tax planning is important and there are different ways to save tax. These options have their benefits and you need to select them based on your needs and risk profile. ELSS can be instrumental in generating higher returns at the same time it does carry additional risk. This risk however gets reduced substantially if the investment is held for a longer period. Despite that, if you prefer not to take the risk and you are fine with reasonable growth then you may consider options other than ELSS. Another approach you may take is to create a blend of these options where you can take a limited risk and grow the overall investment at a better rate as well.

About the author:

Harshad Chetanwala, the author of the article is a co-founder of MyWealthGrowth. He is a Certified Financial PlannerCM with more than 19 years of experience in financial services and in the past have worked with companies like Quantum Asset Management Company, HDFC Securities & HDFC Standard Life Insurance.

In the past 18 years of his career, he has worked in multiple roles focusing on Personal Finance, Asset Allocation, Goal based investing, Mutual Fund, Equities, Debt and Insurance that help families to achieve their financial goals. He specializes in guiding investors on Financial Planning, Investment in Financial Assets & Gold, Mutual Fund Portfolios and Financial Protection.

In his previous stint at Quantum Asset Management Company, he has delivered talks at different platforms to empower the audience with knowledge on personal finance and investing. He strongly believes in creating financial awareness that lets families take control of their personal finances.



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Kotak Mahindra Bank to by 10% stake in KFin Technologies for Rs 310 crore, BFSI News, ET BFSI

Banking & Finance

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NEW DELHI: Kotak Mahindra Bank on Monday said it is buying about 9.9 per cent stake in KFin Technologies, a leading investor and issuer servicing platform. The lender will purchase the stake for Rs 310 crore.

KFin Tech provides a wide array of financial technology solutions across a broad spectrum of asset classes spanning mutual funds, alternatives, insurance, and pension. It has been growing its market share in the mutual fund servicing segment.

“As a platform of choice for asset managers, investors and corporates, we believe KFin is well-positioned to continue growing its market position. At Kotak Mahindra Bank, this investment is in line with our stated strategy of making minority investments in businesses which are professionally managed and have deep client entrenchment,” said Dipak Gupta, Joint Managing Director, Kotak Mahindra Bank.

KFin’s proprietary applications, big data technologies and hybrid cloud environment enable servicing of over 13 crore folios and processing of over 10 lakh transactions on a daily basis.

“KFin Tech is uniquely positioned to leverage its decades of deep capital markets expertise to deliver a differentiated value proposition to the financial markets in India and abroad. Kotak Mahindra Bank’s investment is testimony to the same,” said MV Nair, Chairman, KFin Technologies.

“With Kotak Mahindra Bank’s support, along with the continued support of General Atlantic, an existing shareholder of KFin, we shall be able to achieve greater heights in our technology, business processes, leadership depth and governance.”



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Banks rush to implement ‘standing instructions’ system, but may still miss deadline, BFSI News, ET BFSI

Banking & Finance

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Banks and payment aggregators are rushing to meet the October 1 deadline for implementing a new system for standing instructions for recurring online transactions as the Reserve Bank of India is not likely to extend it. Banks are sending communications to customers saying that they will not process recurring payments, and customers will have to make payments directly to merchants.

“In compliance with the regulatory requirements, we are currently building a solution to seamlessly manage all your domestic standing instructions for recurring payments. This solution will be available soon for you. Starting October 1, any existing standing instruction for domestic and international recurring transactions on your card account will not be processed. We request you to make these payments directly to the service providers to avoid any interruptions,” American Express said in a recent message to customers.

How does the new system work?

Under the proposed system, as a risk mitigating and customer facilitation measure, the card-issuing bank will have to send a pre-transaction notification to the cardholder, at least 24 hours before the actual charge or debit to the card. While registering e-mandate on the card, the cardholder shall be given the facility to choose a mode among available options (SMS, email, etc.) for receiving the pre-transaction notification from the issuer. On receipt of the pre-transaction notification, the cardholder shall have the facility to opt-out of the particular transaction or the e-mandate. For transactions above Rs 5000, banks will also be required to send one time passwords to customers.

What is a standing instruction?

A standing instruction is a service offered to customers of a bank, wherein regular transactions that the customer wants to make are processed as a matter of course instead of initiating specific transactions each time.

This service relates to transactions like renewing subscription to over-the-top (OTT) platforms, newspapers and magazines, and utility bill payments.

The issue

Large lenders and payment entities including State Bank of India, Citi, HDFC, Axis, HSBC, Visa and Mastercard had asked the RBI to postpone the deadline for putting in place a new system to alert customers on ‘standing instruction’ transactions.

The banks were asked to set up the system by March 31, 2021.

The lenders also wanted RBI to exclude transactions against pre-existing standing instructions and those with international merchants from the new conditions for e-mandates on cards for recurring transactions.

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