Tag: Money

UPI sets new record in July

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Unified Payments Interface continued to gain in popularity in July and crossed the 300 crore mark in terms of volume and Rs 6 lakh crore in transaction value.

Data released by the National Payments Corporation of India revealed that UPI processed 324 crore transactions worth Rs 6.06 lakh crore in July. This reflected the opening up of the economy and was a sharp jump since June when it had processed 280 crore transactions worth Rs 5.47 lakh crore.

On a daily basis, UPI has been processing 9 to 10 crore transactions recently. As per NPCI’s transaction count for July 29, UPI processed 10.44 crore transactions worth Rs 19,154 crore.

Launched in 2016, UPI processed 100 crore transactions for the first time in October 2019. While the lockdowns due to the Covid-19 pandemic had impacted digital payments and transactions but UPI has been gaining popularity due to its wide acceptance, ease of use as well as norms of social distancing.

NPCI data revealed that other modes of digital payments also continued to gain traction.

Immediate Payments Service (IMPS) clocked 34.97 crore transactions amounting to Rs 3.09 lakh crore in July. This was the first time that IMPS has also breached the Rs 3 lakh crore mark. It had processed 30.37 crore transactions worth Rs 2.84 lakh crore in June.

Aadhar Enabled Payment System (AePS) transactions also rose to 8.88 crore in volume terms and Rs 23,447.11 crore in value in July. It had processed 8.75 crore transactions amounting to Rs 24,667.08 crore in June.

As many as 19.23 crore transactions worth Rs 2,976.39 crore were processed on NETC FASTag in July as compared to 15.78 crore transactions totaling Rs 2,576.28 crore in June.

Reflecting the rapid adoption and deepening of digital payments across the country in recent years, the Reserve Bank of India- Digital Payments Index for March 2021 rose to 270.59 as against 207.84 for March 2020.

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We are looking at a revival through retail focus, says Shivan JK, MD, Dhanlaxmi Bank

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Thrissur-based Dhanlaxmi Bank has chalked out strategies for growth by expanding its retail book. Shivan JK, Managing Director and CEO, is optimistic of achieving a good growth rate in the current fiscal. He says that the bank would continue to focus on CASA and retail advances including gold loans. The business volumes grew 6.39 per cent to ₹18,834 crore for the last fiscal. Edited excerpts:

What are your growth plans in the current financial year?

We will continue our focus on expanding our retail book through gold loan and other retail products. We have launched limited period MSME campaign. Our gold loan book is showing steady growth and with the launch of special 1/3-month product this book is gaining traction.

Also read: Dhanlaxmi Bank posts ₹5.28 crore net profit in Q4

We are looking at an overall 12-15 percent growth with thrust on retail/ agri including microfinance and select MSME and corporate growth. Our liability franchise is robust, and we estimate steady growth in CASA and retail term deposits.

What is the position of NPAs of the bank? How has it progressed last year?

The GNPA position as on March 31, 2021, was 9.23 per cent. We are maintaining a provision coverage of 74.20 per cent.

The position has deteriorated from the previous year due to a low advance base and recognition of NPAs, which were under moratorium following the Supreme Court order on March 23. If we include the ‘proforma’ NPAs, we were at 10.82 per cent as at the end of Q3.

Most of these are small ticket NPAs with good security coverage. Due to lockdown, our recovery efforts are constrained. We are hopeful of bringing this level below 9 per cent by end of this quarter. And there are no major fresh slippages expected.

What is the impact of Covid on the bank’s business? What plans are in place?

The growth has been muted whereas asset deterioration has steadily increased. The moratorium and its sudden lifting added to the woes.

We have instructed our operating offices to maintain all Covid protocols and safety precautions. We are tying up with two private hospitals to ensure that all staff take at least the first dose of vaccine.

When do you see the economy recovering? Also do you see interest rates going up soon?

Our hope is that things return to almost normal from the second quarter of this fnancial year and then the economy will bounce back with a growth in GDP of 8-9 per cent for the FY as per revised predictions. As for your question regarding the interest rates going up, we have reached the bottom. But with the liquidity overhang and the time lag in corporate demand picking up, the rates would be stable in the short term but will firm up by Q3.

Also read:Banks decide to extend unsecured personal loans for Covid treatment

How about NRI investments in your business? And are there any plans for merger with bigger banks?

We are not a big player in the NRI segment compared to other peer banks. In this current financial year, it will be one of our focus areas. And, no, we don’t have any plans for merger with other bigger banks.

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‘Managing wealth is managing yourself’, says Ashish Shanker of MOPWM

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A veteran in financial services industry, Ashish Shanker as managing director and chief executive of Motilal Oswal Private Wealth Management (MOPWM) leads a team that advises top corporates/institutions and over 3,000 HNI families. He has played a key role in building the investment, research and advisory platform and creating the proprietary ‘4C fund manager’ framework at the firm. As a captain of ship that advises client assets worth ₹25,000 crore, here is a sneak-peek of how the much sought-after wealth manager tends to his own personal finances.

What does money mean to you?

Money is a means to fulfill needs and desires for self, family and parents. It is a means to an end. You should have enough of it but then the greed for it also can end up destroying us.

What are your top financial goals as an individual?

For any parent, the kid comes first. Providing for my kid is at the top of my mind, so that he has a decent education and he has a decent lifestyle. Then, of course, providing for a high-quality retirement where I don’t have to compromise on lifestyle once I retire. I’m a little bit of a gourmet connoisseur, I like to have my malt as well. There are intermittent goals, such as travel and, at some point, may be housing. I do own a house, but it’s in my hometown (Pune). At some point, if price and wallet permit, buying a house in a Mumbai suburb of my choice is also a goal.

What does your portfolio look like?

Close to 85-90% of my money is invested in equities. All my incremental money also goes in equities. I do not count my PF (provident fund) in this.

My first job was as an equity analyst with a local brokerage firm. Even before that, I fell in love with equities in probably 12th standard. I used to interact with people in my family who were related to stock markets. I’ve been in private wealth firms now for 16 years. Hence, from day one, it’s been equities. Equity investments for me are a combination of stocks and mutual funds. I also hold a lot of my portfolio in ESOPs.

What was your most successful investment? What are the mistakes you’ve made?

All the investments that I made in the late 90s, and mind you I have not sold a single share, have been the most successful in terms of IRR (internal rate of return ). I bought Nestle, ITC etc., but on a very small capital.

I also do remember that I bought a lot of the dot-com stocks which went to zero. My experience has shown that if you buy 20-30 stocks and hold them, the better quality companies more than make up for the duds. So, the lesson I’ve learned is that in equities, patience and longevity beats everything else. It is 90 per cent temperament and 10 per cent skill.

How much emergency funds do you have and where do you keep it?

I’ve always had this principle that you should have at least six months of your expenses as emergency funds. You may call it very inefficient to keep that amount of money idle, but I always have that amount lying in my savings account. Now, there are even savings banks accounts, which give you 6-7 per cent. I tell people that maybe you should have one year’s worth money but six months is good enough for me.

What kind of amount would you require for your retirement?

Ten years back, if you’d asked me, I could have put a number of ₹5 crore. But today, that number doesn’t excite me because my lifestyle has gone up. I have figured it’s a moving target. Today, the target I am looking at is 200-250 times my monthly expenses.

As a private wealth veteran, what is the most important message to people on managing wealth?

As philosophical as it may sound, managing wealth, I believe, is predominantly about managing yourself. If you know your own temperament, you will be a better investor. Also, keeping it simple, and thinking long term is the crux of what I’ve learned in 24 odd years of my career. Ultimately, you are your biggest cash-generating machine. So, invest in yourself as in your career or your training, picking up skills.

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Demand for cash surged in 2020-21 due to Covid-19 pandemic: RBI Annual Report

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The precautionary demand for cash surged in the economy in 2020-21 due to the Covid-19 pandemic, the Reserve Bank of India said in its Annual Report 2020-21.

“The year witnessed a higher than average increase in banknotes in circulation primarily due to precautionary holding of cash by the public induced by the Covid-19 pandemic, and its prolonged continuance,” said the report, which was released on Thursday.

The value and volume of banknotes in circulation increased by 16.8 per cent and 7.2 per cent, respectively, during 2020-21 as against an increase of 14.7 per cent and 6.6 per cent, respectively, witnessed during 2019-20.

“Concerted efforts were made to ensure that Currency Chests remain adequately stocked with all denominations of banknotes in order to maintain timely supply of fresh banknotes across the country,” it further said.

Currency in circulation has been increasing along with the rise in digital payments. The volume of banknotes in circulation has been rising and stood at 12,436.7 crore pieces as on March 31, 2021 versus 11,597.7 crore pieces in 2019-20.

Significantly, the volume and value of ₹2,000 notes in the currency in circulation declined while that of ₹500 notes increased.

In 2020-21, the share of ₹2,000 currency notes of the overall currency in circulation in terms of volume fell to 2 per cent from 2.4 per cent in 2019-20 and 3 per cent in 2018-19. In value terms, it fell to 17.3 per cent in 2020-21 from 22.6 per cent in 2019-20.

In contrast, the share of ₹500 currency notes in terms of volume in the overall currency in circulation rose to 31.1 per cent in 2020-21 from 25.4 per cent in 2019-20. In value terms it increased to 68.4 per cent in 2020-21 from 60.8 per cent in 2019-20.

“In value terms, the share of ₹500 and ₹2,000 banknotes together accounted for 85.7 per cent of the total value of banknotes in circulation as on March 31, 2021, as against 83.4 per cent as on March 31, 2020,” the report said.

In volume terms, ₹500 denomination constituted the highest share at 31.1 per cent followed by ₹10 denomination banknotes, which constituted 23.6 per cent of the total banknotes in circulation as on March 31, 2021, it further said.

The report said the RBI is in the process of introducing varnished banknotes in ₹100 denomination on a field trial basis with a view to elongate the life of the banknote.

Outlining its agenda for 2021-22, the report said it will focus on procurement of new shredding and briquetting systems, augmentation of disposal of soiled notes; and establishment of a state-of-the-art facility for conducting cutting edge research to test robustness of security features of currency notes and introduction of new security features.

“Going ahead, the Reserve Bank’s endeavour would be to enhance the lifespan of banknotes, automate the handling and processing of notes, and rationalise the available infrastructure for maximum utilisation,” it said.

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Shriram Life Insurance FY21 net profit at ₹106 crore

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Private insurer Shriram Life Insurance reported a three fold increase in its net profit to ₹106 crore in 2020-21.

Gross premium increased by 23 per cent to ₹2,019 crore last fiscal while the number of policies increased by eight per cent to 2,95,838.

“This growth was supported by a 25 per cent growth on total new business premium and 24 per cent growth on retail renewals,” it said in a statement on Friday, adding that approximately 47 per cent of its new business came from the rural segment.

As much as 54 per cent of the insurer’s claims came in from the rural segment. Income from investments more than doubled to ₹541 crore in 2020-21.

Casparus Kromhout, MD and CEO, Shriram Life Insurance said, “Shriram Life has been focused on serving the protection needs of the rural segment and lower income segments. These segments are most affected by the crisis due to the dual impact of the health emergency and loss of income. We remain committed in reaching our customer segment during this difficult time to ensure that financial protection is extended to more customers and that life cover continues for existing customers.”

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Depositors’ body wants banks to take a cue from Govt and not cut deposit rates

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The All India Bank Depositors’ Association (AIBDA) has requested the Reserve Bank of India (RBI) to advise banks to reduce their operating cost and prune the net interest margin, so that the entire burden of cut in interest costs does not fall on depositors.

The Association, in its pre-monetary policy memorandum to RBI, underscored that the depositors in the small income earner and senior citizen categories are suffering the most due to the current negative real interest rate (adjusted for inflation).

“While a pause in repo rate is desirable to support growth at this point in time, too much liquidity in the market works adversely against the depositors without a significant increase in bank credit. As depositors are major stakeholders and risk bearers in the financial system, their interests should not be ignored,” said DG Kale, President and Amitha Sehgal, Honorary Secretary, AIBDA.

They cautioned that a negative real interest rate may increase the wedge between savings and investment in the economy going forward and hamper growth in the long run.

The Association observed that since February 7, 2019, the repo rate (interest at which RBI provides liquidity to banks to overcome short-term mismatches) has been reduced by 250 basis points and has remained unchanged at 4 per cent since May 5, 2020.

Moreover, the RBI has made a liquidity provision of over ₹13-lakh crore in 2020-21.

Flush with liquidity amidst sluggish demand for credit, commercial banks reduced term deposit rates nearly by 200 basis points, it added.

Take a cue from government

The AIBDA office bearers opined that banks could take a cue from government’s decision not to cut the interest rates on Small Savings Schemes.

“In a deregulated environment, it may not be possible for the RBI to re-regulate deposit rates. But the entire burden of cutting interest costs should not fall on depositors. We would like to reiterate that the one-year real deposit rate should be at least 2 per cent for saving-investment equilibrium to be maintained at a reasonably high level,” Kale and Sehgal said.

ATM/POS charges

The Association said no charge should be imposed by the card-issuing bank in case of a failure of transaction at ATM/POS.

Referring to banks imposing a fee every time there is a transaction decline at an ATM or point of sale (POS) due to insufficient balance in the account, the AIBDA reasoned that such transactions are nowhere at par with cheque/ECS returns. These charges are currently of the order of ₹25 + GST.

“It (declined POS/ATM transactions due to insufficient balances) does not involve any intent of systemic inconvenience or distrust to a third party. We would like to mention that NPCI does not consider it as a transaction and there is no cost imposed by NPCI/ acquirer bank onto the card-issuing bank,” said Kale and Sehgal.

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Income Taxes: ICAI issues exposure draft of revised Accounting Standard

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The CA Institute has come up with an exposure draft for a revised accounting standard on income taxes, to be applicable on entities that are not required to adopt the Indian Accounting Standards (Ind AS) notified by the Corporate Affairs Ministry.

Currently, all listed companies and unlisted companies – with a networth of ₹250 crore and above – are required to adopt the Ind AS. For other corporate and non-company entities, the accounting standards specified by the CA Institute are applicable.

The latest move follows the decision of the various standard setting forums – the Accounting Standards Board (ASB) of ICAI, the NFRA and the Ministry of Corporate Affairs (MCA) – to revise accounting standards.

‘Underlying principles’

“Accordingly, the ASB of ICAI has embarked on the process of upgradation of these standards which will be applicable to the entities to whom the Ind AS are not applicable,” sources said. The objective behind the revision is to ensure that underlying principles are not too different between the Ind AS entities and the other entities.

The exposure draft on Accounting Standard for Income Taxes (AS 12) is the latest among the several standards that are proposed to be revised. The entire set of revised standards are expected to be implemented at one go in a future date and the timeline for this is not yet decided. June 10 is the last date to send comments on the exposure draft. The CA Institute has specified June 10 as the last date by when comments can be sent on the exposure draft.

“For the accounting standard on income taxes, there will not be much change. Whatever standard one is following, almost the same position will continue for entities that are not adopting Ind AS,” sources said.

The proposed revision, which will impinge on public sector banks, certain insurance companies and entities that function as partnerships, will not fully align itself to the Ind AS 12 as the guidance given to ASB by the Central council is not to change the position of existing accounting standard on income taxes (AS 22) to that of Ind AS 12.

One of the main change in the revised accounting standard on income taxes, as against the existing AS 22, will be on the aspect of recognition of deferred taxes. Earlier, when there was unabsorbed depreciation or carry forward losses, there was a question whether deferred taxes should be recognised and will there be future profit to realise the deferred taxes.

“Now although the outcome would be the same, the language has been aligned to Ind AS 12 wherein one has to see the probability of getting profits in the future, reasonable certainty and there is also guidance to determine whether the entity would have profits to realise the deferred tax assets,” sources added.

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How to retire early without spoiling family’s dreams

Personal Finance

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Raghavan, aged 49, and Saraswathi, aged 42, wanted to draft their retirement readiness plan. Raghavan, after a busy corporate life, felt it was time to quit and spend time with family. His daughter Anu (18) had just joined college and son Venkat (16) was in ninth standard.

The accompanying table (Assets) shows his net worth.

His investment assets are ₹5.53 crore. Also, he holds 75 sovereigns of physical gold. Raghavan has been a balanced risk taker over the years. He understands the volatility of equity investments and stayed put over the years to generate reasonable returns from his investment portfolio. He has now exited all his direct equity investments and stuck to mutual funds over the years. He has a sound investment portfolio built over the years, with regular investing.

Family history suggested that the life expectancy number for him and his wife would be 100 years. His family has maintained a modest lifestyle with monthly expense of ₹45,000 per month excluding children’s education expenses.

Goals

Firstly, he needs to maintain one-year expenses as emergency fund in fixed deposits.

Secondly, Anu needs ₹6 lakh towards her college education for the next two years, which is to be maintained as fixed deposits/liquid funds. Also, Anu’s PG needs funding.

Anu’s marriage expenses are estimated to be ₹35 lakh. Anu’s gold gift needs will be met from Raghvan’s current holding of physical gold.

Similar planning for Venkat is also required.

The family needs ₹2.7 crore to manage expenses of ₹50,000 per month for a period of 58 years, till Saraswathi attains 100 years of age.Expected return assumed to be at 8 per cent CAGR.

We suggested they add ₹5,000 per month towards any medical need as additional retirement fund. This may be needed to support any prescription costs, medical helper costs over the years.

It was also suggested that Raghavan keep some corpus towards his property maintenance. His independent house may need reconstruction/renovation as the years pass by.

All his goals are seen in the accompanying table.

Final thoughts

Raghavan is very well positioned to opt for immediate retirement with his modest lifestyle. With the current allocation of 49:51 in equity:debt, he can fund most of his goals without any compromise.

We arrived at a total cost of all his goals to be Rs 6.52 crore. His financial assets are worth Rs 5.53 crore. With long-term equity exposure to goals such as retirement health fund, post retirement vacation fund and property maintenance fund, this corpus is sufficient for him to retire immediately.

Mathematically, for a financial planner, saying ‘yes’ to retirement-ready status to a client is easier.

But there are other behavioural aspects to a peaceful and comfortable retirement. Having worked for more than 25 years with dedication, he was prudent and disciplined while saving for retirement. But he never really bothered to spend time with family or enjoy vacations which have become more important for him now.

This is likely to increase spending in the initial years of his retired life. So, it was advised to look out for regular earning opportunity.

This is basically to protect oneself against unexpected change in financial assumptions such as interest rate, inflation and other surprises such as health needs and lifestyle expenses.

When it comes to retirement readiness, it is always better to exceed the planned corpus by substituting with regular income or allocating additional corpus called ‘retirement fall back fund’.

Hence it was advised that Raghvan take logically sound decisions on spending in the first five years post retirement.

The writer, Co-founder of Chamomile Investment Consultants in Chennai, is an investment advisor registered with SEBI

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Ageas Federal Life Insurance net profit down 20%

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Ageas Federal Life Insurance reported a 20 per cent drop in its net profit to ₹119 crore in 2020-21 from ₹148 crore 2019-20. Total premium grew by 6 per cent on a year on year basis to ₹1,959 crore in 2020-21 while renewal premium increased by 4 per cent to ₹1,327 crore last fiscal.

“This is the ninth consecutive year of profit for the life insurer since it first declared profit in 2012-13. The growth in total premium was driven by a 24 per cent rise in individual new business premium to ₹504 crore,” it said in a statement.

New business premium

The company also benefited from a 40 per cent growth in individual new business premium from Federal Bank, it said. The private sector insurer’s 13th month persistency was at 86 per cent as of March 31, 2021 as against 83 per cent, a year ago.

“We will continue to ramp up our proprietary distribution channels, while looking to further leverage the relationship with our bancassurance partners,” said Vighnesh Shahane, MD and CEO, Ageas Federal Life Insurance. The board has recommended a final dividend of ₹104 crore, at a rate of dividend of 13 per cent, subject to approval at the Annual General Meeting.

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