Category: Personal Finance

SBI vs HDFC vs ICICI vs BOI vs IDFC First Bank: Revised ROI On FD Compared

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SBI FD Rates (below Rs 2 Cr) For Regular Public

The tenure of an SBI FD will range from 7 days to 10 years, depending on the need for investment and whether it is short-term or long-term. For general customers, these FD interest rates range from 2.9 percent to 5.4 percent. These rates are in effect from January 2021.

Tenure ROI in %
7 days to 45 days 2.90%
46 days to 179 days 3.90%
180 days to 210 days 4.40%
211 days to less than 1 year 4.40%
1 year to less than 2 years 5.00%
2 years to less than 3 years 5.10%
3 years to less than 5 years 5.30%
5 years and up to 10 years 5.40%

SBI FD Rates For Senior Citizens

SBI FD Rates For Senior Citizens

India’s largest lender, State Bank of India (SBI), recently extended its SBI WeCare FD for senior citizens for the third time, until June 30. The interest rate on SBI’s special FD scheme for senior citizens will be 80 basis points (bps) higher than the general public rate. SBI presently proposes a 5.4 percent interest rate on five-year fixed deposits to the general public. The interest rate on a fixed deposit made by a senior citizen for a tenure of 5 Years and above only under the special FD scheme i.e. SBI Wecare Special FD, will be 6.20 percent. Below are the SBI FD rates for senior citizens for a deposit amount of less than Rs 2 Cr.

Tenure ROI in %
7 days to 45 days 3.40%
46 days to 179 days 4.40%
180 days to 210 days 4.90%
211 days to less than 1 year 4.90%
1 year to less than 2 years 5.50%
2 years to less than 3 years 5.60%
3 years to less than 5 years 5.80%
5 years and up to 10 years 6.20%

HDFC Bank FD Rates For Regular Public

HDFC Bank FD Rates For Regular Public

HDFC Bank provides 2.50 percent interest on deposits with a maturity period of 7 to 29 days, and 3 percent on deposits with a maturity period of 30 to 90 days. On deposits for 91 days to 6 months, the interest rate is 3.5 percent, and on deposits for 6 months to less than one year, the interest rate is 4.4 percent. On one-year FDs, the bank offers 4.9 percent interest. Term deposits maturing in one year and two years yield 4.9 percent interest. FDs with a maturity period of two to three years will generate 5.15 percent. For 3 to 5 years, you’ll get a 5.30 percent interest rate. Deposits with a maturity period of 5 to 10 years will provide 5.50 percent interest rate respectively.

Tenure ROI in %
7 – 14 days 2.50%
15 – 29 days 2.50%
30 – 45 days 3.00%
46 – 60 days 3.00%
61 – 90 days 3.00%
91 days – 6 months 3.50%
6 months 1 days – 9 months 4.40%
9 months 1 day < 1 Year 4.40%
1 Year 4.90%
1 year 1 day – 2 years 4.90%
2 years 1 day – 3 years 5.15%
3 year 1 day- 5 years 5.30%
5 years 1 day – 10 years 5.50%

HDFC Bank FD Rates For Senior Citizens

HDFC Bank FD Rates For Senior Citizens

The HDFC Bank also extended its special fixed deposit scheme for senior citizens until June 30, the third time the bank has done so. On these deposits, HDFC Bank offers 75 basis points (bps) higher interest rates. If a senior citizen places a fixed deposit with HDFC Bank Senior Citizen Care FD, the interest rate will be 6.25 percent. These rates are in effect from November 2020. Senior Citizens who plan to lock a fixed deposit less than Rs 5 crore for a period of 5 years one day to 10 years during the special deposit period from 18th May’20 to 30th June’21 will get an additional premium of 0.25 percent over and above the current premium of 0.50 percent. For a deposit amount of less than Rs 2 Cr, HDFC FD Rates for senior citizens are listed below.

Tenure ROI in %
7 – 14 days 3.00%
15 – 29 days 3.00%
30 – 45 days 3.50%
46 – 60 days 3.50%
61 – 90 days 3.50%
91 days – 6 months 4.00%
6 months 1 days – 9 months 4.90%
9 months 1 day < 1 Year 4.90%
1 Year 5.40%
1 year 1 day – 2 years 5.40%
2 years 1 day – 3 years 5.65%
3 year 1 day- 5 years 5.80%
5 years 1 day – 10 years 6.25%

ICICI Bank FD Rates

ICICI Bank FD Rates

ICICI Bank is offering 2.5 percent for 7-29-day FDs, 3 percent for 30-90-day FDs, and 91-184-day FDs. 3.5 percent, between 185 and 289 days 4.4 percent, and 4.4 percent for 290 days to less than a year. ICICI Bank is offering 4.9 percent interest on FDs maturing in one year to less than 18 months, and 5.15 percent interest on deposits maturing in 18 months to less than three years. ICICI Bank is giving a 5.35 percent interest rate on FDs maturing between three and five years, and a 5.50 percent rate on FDs maturing between five and ten years. Senior citizens will get interest rates ranging from 3% to 6.30 percent from ICICI Bank. These rates are in effect from October 21, 2020.

Tenure ROI in % for general public ROI in % for senior citizens
7 days to 14 days 2.50% 3.00%
15 days to 29 days 2.50% 3.00%
30 days to 45 days 3.00% 3.50%
46 days to 60 days 3.00% 3.50%
61 days to 90 days 3.00% 3.50%
91 days to 120 days 3.50% 4.00%
121 days to 184 days 3.50% 4.00%
185 days to 210 days 4.40% 4.90%
211 days to 270 days 4.40% 4.90%
271 days to 289 days 4.40% 4.90%
290 days to less than 1 year 4.40% 4.90%
1 year to 389 days 4.90% 5.40%
390 days to < 18 months 4.90% 5.40%
18 months days to 2 years 5.00% 5.50%
2 years 1 day to 3 years 5.15% 5.65%
3 years 1 day to 5 years 5.35% 5.85%
5 years 1 day to 10 years 5.50% 6.30%
5 Years (80C FD) 5.35% 5.85%

Bank of India FD Rates

Bank of India FD Rates

Term deposits from Bank of India range from seven days to ten years. On these FDs, the bank proposes interest rates ranging from 3.25 percent to 5.30 per cent. These FD rates are in effect from October 1, 2020.

Tenure ROI in % for general public ROI in % for senior citizens
7 days to 14 days 3.25 3.75
15 days to 30 days 3.25 3.75
31 days to 45 days 3.25 3.75
46 days to 90 days 4.25 4.75
91 days to 179 days 4.25 4.75
180 days to 269 days 4.75 5.25
270 days to less than 1 year 4.75 5.25
1 Year & above but less than 2 Yrs 5.25 5.75
2 years & above to less than 3 years 5.3 5.8
3 years & above to less than 5 years 5.3 5.8
5 years & above to less than 8 years 5.3 5.8
8 years & above to 10 years 5.3 5.8

IDFC First Bank FD Rates

IDFC First Bank FD Rates

IDFC First Bank offers 2.75 percent interest on FDs maturing in seven to fourteen days. The bank offers a 3% and 3.5 percent interest rate for 15-29 days and 30-45 days, respectively. 4.00 percent for term deposits maturing in 46-90 days, and 4.50 percent for term deposits maturing in 91-180 days. IDFC First Bank offers 5.25 percent on FDs maturing in 181 days to less than a year, and 5.75 percent on deposits maturing in 1 year to 499 days. The highest FD rates are offered by IDFC First Bank for deposits with a 500-day term, with a rate of interest of 6% p.a. IDFC First Bank offers 5.75 percent interest on long-term deposits for a term of 501 days to ten years. These rates are in effect from September 15, 2020.

Tenure ROI in % for general public ROI in % for senior citizens
7 – 14 days 2.75 3.25
15 – 29 days 3 3.5
30 – 45 days 3.5 4
46 – 90 days 4 4.5
91 – 180 days 4.5 5
181 days – less than 1 year 5.25 5.75
1 year – 499 days 5.75 6.25
500 days 6 6.5
501 days – 2 years 5.75 6.25
2 years 1 day – 5 years 5.75 6.25
5 years 1 day – 10 years 5.75 6.25



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Gold Price Outlook For Next Week; Gold Down Nearly $200 in Q1

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Gold in India

In India, when the markets closed on Thursday, gold futures were 469 rupees higher, while silver futures were 1226 rupees higher. Jewellery, investment, central bank reserves, and technology are the four main drivers of global gold demand. MCX June Gold Futures ended at Rs 44,935 per 10 gm, going up by Rs 469 or over 1%.

Gold’s current short-term momentum, according to analysts, is positive. The ratio of bullish to bearish/neutral forecasts is 3:4. Seasonality, such as marriage and harvesting, has an impact on gold demand in India. Gold is traded in US dollars on international markets. When you import USD, it is converted to INR. As a result, fluctuations in the USD or INR can affect the price of gold imports and, as a result, the selling price.

Gold prices in India are still down 11,000 from August 2020 highs of 56,200.

International Gold

International Gold

Since the beginning of the year, 10-year yields have risen more than 80 basis points in the first quarter. Gold has also disappointed, having lost nearly &dollar;200 since the beginning of the year, the worst start to any year in nearly 40 years.

Holding above its declining resistance line, which is now support is clearly bullish for gold, offering an open window to bulls and bears. However, the expansion of the yellow metal has not yet been confirmed and the breakout does not invalidate the medium time bearish implications.

In the short run, the international gold markets formed a little “double ground,” but at this point experts believe the market needs to break down above &dollar;1750 to continue rising. Gold prices are supported by a weaker dollar and lower bond yields. Yellow metals will also benefit from inflationary pressure.

Wells Fargo expects gold to stage its “strongest rally” this year, with a target price of &dollar;2,200. “Gold supplies have shifted from plentiful to scarce. In the past, such events have sparked some of gold’s most powerful price rallies.

Conclusion

Conclusion

Unlike other asset classes, gold prices have historically had a relationship with volatility. While other asset classes, such as bonds and stocks, dislike increased volatility because it indicates greater uncertainty about cash flows, dividends, and coupon payments, gold tends to benefit during times of increased volatility.

Gold Last week

25th Mar 2021 1st April 2021 Weekly Change
Gold Price COMEX $ 1725.1

$ 1730.3

+0.30%
Gold Price MCX Rs 45,112 Rs 45,404 +0.65%
Gold Price in Mumbai (Retail)

 Rs 46,430 Rs 46,605

+0.38%

TableSource: crowdwisdom360



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Know All About New TDS Rules That Will In Effect From July 1, 2021

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To whom the new rules will apply

The new provision was enacted to allow individuals whose income is subject to TDS to file their income tax returns. It will allow more individuals to file ITRs and improve government accountability. The following individuals will be affected by the current provision:

  • Non-filers who have paid TDS or TCS of Rs 50,000 or more in the last two years but have not filed an income tax return will be subject to the new provision (ITR).
  • According to the Finance Act, if the provisions of Section 206AA apply to a single individual, the tax shall be deducted at the higher of the two rates provided in this section and in Section 206AA, in addition to the provisions of this section.
  • A non-resident who does not have a permanent establishment in India is exempted from the new rule.

Nature of payments for which the new provision will apply

Nature of payments for which the new provision will apply

The new rule applies to a variety of payments, including interest, contracts, professional services, rent, and so on. This rule, however, will not apply to transactions in which the maximum amount of tax is required to be deducted. As a result, the following transactions are not included:

  • Salary payments
  • Premature withdrawal of EPF
  • Winnings from any lottery or crossword puzzles or card games
  • Winnings from any horse races
  • Investment income from a securitisation trust
  • TDS is levied on cash withdrawals exceeding Rs. 1 crore.

In case PAN is not furnished

In case PAN is not furnished

If the specified individual fails to provide PAN to the payer, in addition to not filing income tax returns by the due dates, the TDS rate will be higher than the above rates or 20%. While deducting TDS on payments to specified individuals, the current regulation allows payers to check the following three points every time:

  • If the payee’s tax deduction in the previous two years was more than Rs. 50,000
  • If the individual who is liable for TDS has filed his tax return for the previous two years.
  • The deadline for filing the original return has expired for both previous years.

There is no need to deduct tax at higher rates on a payment if the due date to file ITR for any of the year has not expired. As a result, when the payer identifies these findings in the third year, the tax should be withheld at source at the higher rates stated earlier. As a result, the TDS rate should be 5% which is higher than 2% twice of 1%. In addition, if the individual fails to provide his or her PAN to the payer, TDS will be deducted at a rate of 20%, which is higher than the standard rates of 5% or 2%.

Reason to introduce the new section

Reason to introduce the new section

Section 206AA of the Act allows for a higher rate of TDS for non-furnishing of PAN, according to Budget Memorandum 2021, which explains the reason for the new section. Comparably, non-furnishing of PAN is subject to a higher TCS rate under section 206CC of the Act. Although these provisions have fulfilled their purpose in ensuring that different people obtain and furnish PAN, the Budget plan noted that similar provisions are required to guarantee that those who have accrued a reasonable amount of TDS/TCS file a report of income. As a result, it is planned to introduce a new section 206AB to the Act as a special clause that allows for a higher TDS rate for non-filers of income-tax returns. According to the Budget Memorandum, it is also proposed to add section 206CCA to the Act as a special clause to allow for a higher rate of TCS for non-filers of income-tax returns. The new section will extend to any amount, income, or the amount paid, payable, or credited to a specified person by a person (herein referred to as deductee). It also claimed that this provision will not extend where tax is required to be deducted under sections 192, 192A, 194B, 194BB, 194LBC, or 194N of the Act.

What is Section 206AA and Section 194N?

What is Section 206AA and Section 194N?

TDS is imposed on payments made to non-residents and residents who do not have a PAN under Section 206AA. It was implemented in the fiscal year 2010-11, and it allows any taxpayer who earns taxable income to provide their PAN to the income payer. TDS is imposed under Section 194N on cash withdrawals above Rs 20 lakh by a taxpayer who has not submitted a return for three years. On withdrawals exceeding Rs 20 lakh, a 2% TDS is deducted, according to this clause.



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Should You Invest In Small Savings Scheme?

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Personal Finance

oi-Roshni Agarwal

|

An abrupt sharp interest rate cut announced for the new quarter beginning April on post office small savings scheme and then an overnight withdrawal has left many to wonder as to how long the rates that are currently on the higher side given the low interest rate regime may prevail. And now in context of it we tell you should you lock in the current high rates being offered on the various the small savings scheme.

Should You Invest In Small Savings Scheme?

Should You Invest In Small Savings Scheme?

Rate cut on small savings scheme may be reconsidered in the next quarter or may be sometime later

There have been news reports suggesting that the recent reversal in rate cut is more of a political issue and some 1/4th of the deposits are garnered from states currently going through election. Regardless of this, personal finance experts also opine that there exists a mechanism to align small savings scheme interest rate with the market rate. And primarily interest rate on small savings scheme is decided based on the yield on government securities (G-securities) of the same maturity over the previous year plus a 25 basis point spread is provided over and above it. 1 basis point is one-hundredth of a percentage point.

And as the overall interest rate in the economy is on the lower side, the government shall be forced to bring down the rate on small savings scheme too sooner or later.

Should you invest in small savings scheme considering possible future rate cut?

Any investments that you wish to make now into small savings scheme shall be based on broader aspects being

1. Long term financial goals

2. Your overall asset allocation in debt and equity so as to have a balanced portfolio that is not too risky and at the same time enables you to make up for the inflation demon. Other debt instruments may also be considered for any gap such as EPF etc.

3. Taxation aspect

4. Liquidity

5. Eligibility criteria such as Sukanya Samriddhi or Senior Citizens Savings Scheme for that matter

6. Maximum annual investment limit in an instrument

Now here we discuss about the individual schemes:

1. Senior Citizens Savings Scheme (SCSS):

Specifically designed for senior citizens, currently the scheme offers an attractive return of 7.4 percent which can be locked for 5 years. Also, for the investment or contribution made towards the scheme, senior citizens get 80C rebate. Besides the interest is payable quarterly so it is a good investment avenue for those seeking regular income source. Investment wise the maximum cap is Rs. 15 lakh and a couple can put in a maximum Rs. 30 lakh. Note the interest income is taxable.

2.

This instrument that is primarily to cater to the financial needs of a girl child at the time of education or for marriage earns 7.6 percent which is tax free. Here too there is an investment cap similar to PPF of Rs. 1.5 lakh per year and it is allowed for a maximum of 2 girls of a couple.

Here this instrument is also for a long term with restrictions on withdrawal such as first withdrawal is allowed only when the child has done her tenth grade or turned 18 years of age. And the final redemption can be made upon completion of 21 years from the account opening date. Nonentheless, the leeway is granted in case of marriage i.e. if being married at an earlier date, the amount from the instrument can be withdrawn pre-maturely.

Likewise PPF now gains all the more attractiveness amid new rules being floated for EPF. Nonetheless even in a case if the rates on PPF are revised lower, it remains a good investment owing to its EEE taxation benefit.

So, considering your overall allocation into debt and if it still needs to be filled you can lock in at the current higher rates and invest in small savings scheme. But be mindful of the fact, that you definitely need to have a higher equity portfolio in the long run to beat inflation.

GoodReturns.in



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Your PPF Account May Become Irregular: Here’s Why

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Investment

oi-Vipul Das

|

Because of its sovereign guarantee and tax advantages, the Public Provident Fund (PPF) is a prominent debt investment option. The guidelines covering PPF accounts, on the other hand, are rigid, and one must be conscious of them to reap the full benefits of PPF. If these regulations are not followed, the government may mark the account as irregular. The account may be closed, the contributions may be halted or returned, and interest payouts may be halted if a PPF account becomes irregular. After that, it will take a long time to get your PPF account in force. A PPF account can become abnormal in several ways which are as follows.

Your PPF Account May Become Irregular: Here’s Why

PPF account opening rule

Only one PPF account can be opened under a single name, according to the regulations. People who have a PPF account in a bank are not allowed to open another account in a post office and vice versa. If anyone opens two accounts by default, the second account will be regarded as an irregular account that will not receive interest until the two accounts are merged. Either the father or the mother can open a PPF account on behalf of a minor. Both parents cannot open a separate account for the same minor in order to prevent having multiple accounts. As a result, an individual can open one PPF account for each minor for whom he or she is the guardian.

Contribution limit rule

If an account holder contributes more than Rs 1.5 lakh in a year, the deposits will be considered irregular and will not earn interest or be liable for a tax gain under Section 80C of the Income Tax Act. As a result, without any interest, the concerned post office will reimburse the excess amount to the account holder.

Joint account rule

A joint PPF account is not allowed to open. It is only possible to specify the details of a nominee while opening an account. As a result, only one account can be opened and not a joint account in any Post Office or Bank in the country.

Account extension rule

After the 15-year term has expired, the PPF account may be extended indefinitely. However, if one continues to contribute during the extension period without consulting the post office, it can become irregular. If you wish to hold your account open and make fresh deposits, you must notify the post office in writing one year before it expires by filling out Form H. If one continues to deposit after filling the Form, all new contributions will be considered irregular and no interest will be provided. Section 80C benefits will not be applicable on contributions made in a PPF account after the 15-year period has expired without using the benefit to continue the account.

Premature closure rule

Premature closure of PPF accounts is allowed after five years of account opening, under exceptional situations such as the account holder’s, spouse’s, or dependent children’s or parents’ treatment for serious disease, or for the children’s higher education. If an account is prematurely closed, 1 per cent interest is deducted from the date of account opening/extension, if necessary. The account will be closed if the account holder expires, and the nominee or legitimate heir(s) will not be able to continue making deposits in the account. PPF interest will be paid at the end of the preceding month in which the account is closed if it is closed due to death.

What happens when a PPF account is marked as irregular?

Your PPF account would have been inactive if you didn’t contribute for a year. As a consequence, the account will become dormant, and a penalty will be levied. As a PPF subscriber, you can even miss access to certain perks. You must contribute at least Rs 500 per year to keep your account active. Although disabling your account will not result in the loss of your savings, you will no longer be able to contribute to it. You will not be eligible to take advantage of the benefits and services available to members with active accounts. For example, from the third to the sixth financial year after opening the account, a subscriber with an active PPF account is entitled to take a loan of 25% of the balance amount available. This option will be inaccessible if your account is deactivated. Those with a dormant or deactivated account are also ineligible for the partial withdrawal option, which enables customers to access a portion of their PPF contributions after the seventh financial year since account opening. Accounts that have been deactivated are also not allowed for premature closure of the account. You will only be allowed to withdraw the entire amount at maturity, which is 15 years since the account was opened, once it has been discontinued. Though you won’t be able to contribute to the account once it’s closed, the capital you’ve already deposited will continue to gain interest until it matures. You must pay the penalty for the duration of deactivation in order to withdraw the accrued capital. One benefit that you would miss if you did not contribute to PPF is the tax benefit. PPF comes under EEE or ‘exempt, exempt, exempt,’ which ensures that subscribers can claim a tax benefit up to Rs 1.5 lakh from their deposits under Section 80C and receive tax-free interest and returns.

How to activate an irregular or dormant PPF account?

To reactivate an inactive PPF account, you must submit a written request to the bank branch or post office where your account is maintained. A penalty of Rs 50 is imposed for each financial year that your account has been inactive, which must be paid to start the reactivation procedure. You must also pay the Rs 500 minimum deposit for each year your account has been dormant. Your PPF account will be reactivated once the approval process is completed by your concerned post office or bank.

Note

Nirmala Sitharaman, the Union Finance Minister, recently announced that the rate of interest on small saving schemes will remain the same as it was in the last quarter of 2020-2021. This means that for the quarter ending 30 June 2021, your PPF will continue to earn a 7.1 per cent interest rate.



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Franklin Templeton’s Sanjay Sapre, BFSI News, ET BFSI

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Franklin Templeton Mutual Fund on Friday said its commitment to India remains ‘steadfast’ and the fund house has no plans to exit its operations in the country.

This comes following media reports suggesting intervention by the fund house’s US-headquartered parent seeking the diplomatic route for a “just and fair” hearing by market regulator Sebi in the investigation pertaining to six wound-up debt schemes.

According to the reports, Franklin Templeton had threatened to exit India if it was not given a fair hearing.

In a letter to investors Franklin Templeton Asset Management (India) Pvt Ltd President Sanjay Sapre said, “we have no plans to exit our India business. Any speculation suggesting otherwise, or any rumours around sale of business in India are incorrect and simply that-rumours”.

He reiterated that Franklin Templeton’s commitment to India remains steadfast.

Sapre said that Franklin Templeton was an early entrant in the Indian mutual fund industry and remained a part of the industry even while many other global asset managers decided to leave.

He, however, did not deny reports of engaging with government authorities.

“Our engagement with government authorities, in India and globally, is also something we, and many companies do, as a matter of course. We have endeavored to keep all stakeholders, including the relevant government and diplomatic authorities, appropriately informed of developments, and will continue to do so,” Sapre said.

According to him, the intention in reaching out remains bringing the current matters to an appropriate and satisfactory conclusion.

The fund house said it has full confidence in Securities and Exchange Board of India (Sebi) and all regulatory and statutory authorities.

Franklin Templeton MF said the fund house has been fully transparent with the regulator and extended fullest cooperation to them, to help them examine the circumstances surrounding the winding up of the six schemes by Franklin Templeton last year.

The fund house had closed six of its debt funds in April 2020, citing redemption pressures and lack of liquidity in the bond markets.

These schemes, together having an estimated amount of over Rs 25,000 crore assets under management, were Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund and Franklin India Income Opportunities Fund.

Sapre said the fund house’s primary focus over the last several months has been, and remains, on returning money to unit holders as quickly as possible.

In this regard, the fund house said it has directed its efforts to support SBI Funds Management, the liquidator appointed by the Supreme court, in monetizing the portfolios of these schemes and returning monies to investors at the earliest.



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Ether rises to record as crypto rally broadens beyond Bitcoin, BFSI News, ET BFSI

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By Olivia Raimonde

Ether, the world’s second-largest cryptocurrency rose to $2,000 for the first time, as the rally in digital assets continues to broaden beyond Bitcoin.

The digital token for the Ethereum network gained as much as 2.3% to $2,014 on Friday. It has surged about 170% this year. The Bloomberg Galaxy Crypto Index gained gained about 3%, while Bitcoin was little changed after more than doubling this year.

“We’re now really breaking higher and that will very likely attract buying activity,” said Julius de Kempenaer, senior analyst at StockCharts.com. “Ether is gaining in relative strength versus Bitcoin.”

The token has mirrored the gains in Bitcoin over the past year amid a flood of stimulus aimed at boosting the global economy during the Covid-19 pandemic. Critics warn that crypto is a speculative bubble that will likely burst.

Ether has a market value of about $230 billion, compared with about $1.1 trillion for Bitcoin, according to data from CoinMarketCap.com.



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Hope to grow our loan book by 35-40% over next 3-4 years: Rajeev Yadav, MD & CEO, Fintech Small Finance Bank

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Rajeev Yadav, MD & CEO, Fincare Small Finance Bank

With a business model centred on certain geographies, Fintech Small Finance Bank has been largely unaffected by the pandemic. In an interview with Mithun Dasgupta, MD & CEO Rajeev Yadav says the bank looks to grow its loan book by an average 35-40% over the next three-four years. Excerpts:

Do you feel the need to tweak your business model in any way or is the model robust?
I would say that, fundamentally, our model is centred around underbanked and unbanked customers, the rural geographies as we call it, and semi-urban markets. So, the geographies that we operate in are all-important. And environmental changes don’t really impact our core functioning. The kind of portfolio that we offer as a bank has over time evolved to cover more products — be it in lending, saving or protection. But, that is an aggregate of our efforts as an organisation. We will keep learning as we go forward, but the fundamental framework of how we operate has not changed because of the pandemic.

What percentage of your branches are in unbanked regions?
While banking regulations require us to have 25% of our branches in unbanked rural centres, we have 30% of the branches there. We provide doorstep services; customers don’t have to come to our branches. In our microfinance business, 95% of the customers are from rural areas. In the other secured businesses, we could have a reasonable ratio of 60:40 (semi-urban: rural). So, we have a very rural focus in a couple of segments.

Digitalisation is catching on. Since you operate in a specific geography, are you able to offer the digital option in borrowing or lending?
Actually, we are a very, very digital bank and are leveraging digital thoroughly. But, there is a difference in how we operate. Digital technology can be leveraged in two ways —either customers use smartphones and employ the digital route or there is an employee-led model. In the latter case, an employee sits with a rural customer and does the transactions digitally, without any paperwork. Our employees are helping customers with the company-provided tablet app. Thus, we have opened nearly 100% of our savings accounts and disbursed 100% of loans through the digital route.

Your loans are primarily unsecured. Is that a worry?
Since the bank started out as a microfinance business, 80% of its portfolio continues to be unsecured, in a microfinance format. It has been a gradual transformation to secured lending.

By when do you expect a fair balance between secured and unsecured loans?
We are trying to increase the share of secured lending by 6-7% every year. Our unsecured portfolio too enjoys a good growth rate. Unsecured lending happens to be our core segment, through which we further financial inclusion. We therefore need to grow faster to build up our secured portfolio.

If we grow secured lending by 6-7% every year for another three-four years, we could strike the right balance between secured and unsecured loans.

Do you co-lend with fintech companies? Or is your book totally proprietary?
Yes, our book is proprietary. Small finance banks cannot do co-lending. Being a ground-level company, we specialise in small-ticket loans in villages. So, we don’t need a third party for last-mile purposes.

Which products are you focused on in the secured loan segment?
There are three products we are focussing on right now — gold loan, micro loan against property (LAP) and affordable housing loan. Both micro LAP SME loans and affordable housing loans are very large markets. What’s more, there are not enough players in these markets.

Since the bank has a largely unsecured portfolio, how do you assign risk weight to assess capital adequacy ? How much do you provide against loans?
The regulator has various rules for different products. Right now, our capital adequacy is of the order of 27-28% (of which nearly 95% is tier-I), although the minimum requirement is only 15%. Capital adequacy is therefore not a problem. From a provisioning perspective, we do a higher level of provisioning for unsecured loans. As a bank, we provide accelerated provisioning. So I would say risk weight is not a vital variable for us. It is the provisioning policy and the commensurate capital available with the bank that are the important metrics.

Given the capital you have, at what pace do you expect the loan book to grow in the next three-four years?
Various scenarios are possible. We can theoretically run the bank for one or two years and bring capital adequacy down to a level close to the regulatory requirement. But given that we have to meet regulatory conditions on the listing, which is scheduled for September — and provides us an opportunity to raise capital — we plan to raise capital in this fiscal, which will suffice for the next two-three years. Loan growth has slowed this year because of the pandemic. Assuming some ups and downs in business, we can hope to grow our loan book by an average 35-40% over the next three-four years.

Do you see any risks to business in the post-Covid era?
Covid-19 has obviously led to a certain degree of risk in the consumer portfolio of all banks. With consumers of all kinds getting impacted, continuance of cash flows is less certain than before. But we anticipated that. And given the bank’s good performance in the past, we made additional provisions. In any case, we have sufficient profitability to manage the incremental credit issues arising out of Covid-19. As the business is back to near-normal levels, both in terms of disbursement and collection efficiency, there is no incremental risk, unless the situation changes materially on the Covid-19 front.

What is your collection efficiency in the microfinance segment? Is there any risk in geographical terms?
If we look at the overall collection efficiency, including the pre-Covid portfolio, it is just under 95%. We are among the leading banks on that metric. The figure for non-delinquent zero bucket collection efficiency is 99.5%. That’s a key benchmark for normalcy. We don’t have exposure to the North-East, particularly Assam. So, there is no such geographical risk.

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March IPO: How Did 9 IPOs Perform In Their Debut?

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Planning

oi-Sneha Kulkarni

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In March, Dalal Street was overflowing in IPOs (initial public offerings). The bourses – NSE and BSE – have a total of nine companies listed. These nine companies raised a total of Rs 6,255 crore. An initial public offering (IPO), also known as a stock market launch, is a public offering in which a company’s shares are sold to institutional and, in most cases, retail investors. One or more investment banks underwrite an IPO and arrange for the shares to be listed on one or more stock exchanges. When a company lists its securities on a public exchange, the money paid by investors for the newly issued shares goes directly to the company, as well as any early private investors who choose to sell all or part of their holdings as part of the larger IPO.

March IPO: How Did 9 IPOs Perform In Their Debut?

Kalyan Jewellers

On March 26, Kalyan Jewellers was listed at Rs 73.9, a 15.06% discount to the issue price. Kalyan Jewellers’ shares fell as much as 13.44% on Friday, closing at Rs 75.30 apiece on the BSE. Kalyan Jewellers raised Rs 1,175 crore in its initial public offering, which included a fresh issue of Rs 800 crore in shares. On April 1, the stock closed at Rs 71.45, up 4.92%.

Anupam Rasayan India

Anupam Rasayan India was listed on March 24 at Rs 534.7, a 3.66% discount over the issue price. The Rs 760 crore IPO received 44.06 times bids, with the HNI quota (NII) receiving 97.42 times, the QIB quota 65.74 times, and the retail quota 10.77 times. On a restated EPS of Rs 5.80, the scrip had a PE of 95.2 times trailing 12-month at the issue price. This is more than double the peer average of 33 times. On April 1, the stock closed at Rs 517.10 up 5.43% on BSE.

Suryoday Small Finance Bank

It was listed on March 26 at Rs 293, a 3.93% discount over the issue price. According to NSE data, the Rs 582-crore issue received bids for 3,20,66,482 shares against 1,35,15,150 shares on offer. On April 1, the stock closed at Rs 273, down 0.13% on NSE.

Craftsman Automation

Craftsman Automation was listed on March 25 at Rs 1350, a 9.40% discount over the issue price. Craftsman Automation shares were listed on the BSE at Rs 1,350 per share, a 9.4% discount to the issue price of Rs 1,490. On the National Stock Exchange, the stock was listed at Rs 1,359, a discount of 8.79%. On April 1, the stock closed at Rs 1,447, up 1.98% on NSE.

Laxmi Organic

Laxmi Organic’s Rs 600 crore initial public offering drew a massive response (IPO) Laxmi Organic Industries’ stock opened at Rs 156.20 on stock exchanges, a 20% premium to its issue price of Rs 130 per share on the BSE.

Heranba Industries

The company’s shares began trading at Rs 900 per share, up 43.54% from the IPO price of Rs 627 per share. Heranba Industries had a market capitalisation of Rs 3,600 crore when it went public. The company listed at Rs 900, which is over 40% premium to the issue price. On April 1, the stock closed at Rs 631, up 0.04% on NSE.

Easy Trip Planners Limited

Easy Trip Planners was listed on March 19 at Rs 206, a 10.16% premium over the issue price. The listing was subdued in comparison to the IPO’s oversubscription. The Rs 510-crore issue of the online travel company was subscribed to 159 times. On April 1, the stock closed at Rs 213, up 2.05% on BSE.

Nazara Technologies Limited

Nazara Technologies was listed on March 30 at Rs 1971, a 79.02% premium over the issue price. The stock of Nazara Technologies started trading at Rs 1,971 per share, up Rs 870 or 79.02% from the IPO price of Rs 1,101 per share. On the day of the listing, the debutant stock had a market capitalization of Rs 6,002.25 crore. On April 1, the stock closed at Rs 1,670, up 13.94% on NSE.

MTAR Technologies Limited

MTAR Technologies was listed on March 15 at Rs 1063.9, an 85.03 percent premium over the issue price. MTAR Technologies made a strong market debut, trading at Rs 1,063.90 on the Bombay Stock Exchange (BSE), a premium of 85.03 percent over its issue price of Rs 575. On April 1, the stock closed at Rs 1,045, up 2.06% on BSE.



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How Gold May Perform In FY 2021-22?

Personal Finance

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oi-Roshni Agarwal

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Now is the time again when you might plan your finances and investments basis your likely income flow and future financial goals and given the low interest rate regime for long term investments you definitely have to have a larger portion into equity and neither can ignore the yellow metal that is thought of as both as a safe-haven and inflationary hedge. And after a roller-coaster, you may as well be willing to know how gold may perform in the new fiscal year after climbing to record highs in the interim of FY21.

How Gold May Perform In FY 2021-22?

How Gold May Perform In FY 2021-22?

Now the factors currently weighing on gold price are:

Rising US 10-year treasury yield as well:

10-year US treasury yield has gone down below 1.7 percent. As can be explained here treasuries as well as gold both are considered to be safe-haven and so there exist positive correlation between bond prices and gold and negative correlation between bond yield and gold. This is because there is an opportunity cost of holding gold which does not bears any interest income so funds move from gold to bonds, weighing negatively for gold prices.

Also, at the same time the rise in bond yield have raised expectations of a hike in interest rate. Though, countries including the US, Bank of Japan have committed to maintain low interest rates for long.

Gains in the dollar:

Dollar has retreated lower in today’s trade but most of the economic indicators for the US economy in recent time have been optimistic including the GDP outcome, robust manufacturing data and a fall in number of US citizens claiming unemployment benefit and this has lent support to the dollar which is now gaining ground. This has also weighed on gold prices.

Threat of governments and central bank rolling back stimulus measures:

As and when there is seen normalization of economic activity, government’s as well as central banks may roll back the various stimulus measures provided to trigger economic revival. This approach has been already taken on to by some of the nations such as Brazil to tackle inflation.

Investment demand for gold has seen a hit even though gold price has corrected sharply

Owing to volatility in the yellow metal, investors have offloaded their position in gold and as per SPDR ETF data, while gold holdings in September 2020 were reported at 1278 tonnes, these have substantially come down to 1040 tonnes as per last reports.

So, while any sharp run in gold similar to that witnessed in 2020 will not be possible without drastic dollar losses, there is still steam left for the gold to run up owing to coronavirus which continues unabated and also because of several other geo-political risk facing the world. Besides, global central banks liquidity tap which may continue to run until there is strong economic rebound will also support gold prices.

For investors it may again be a volatile year for gold with prices swinging between Rs. 42000 to Rs. 60000 per 10 gm. Buying on dips for gold is suggested to maintain 10-15% allocation in gold.

GoodReturns.in



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