IFSCCodeof.in

According to Mundra, it is very important for banks to have a ‘very hard look’ at the traditional models which banks have been pursuing.

While the process of re-imagination of business models for banks has already started, the banks should not ‘try to imitate’ fintech companies in totality as it is not the right approach, former RBI deputy governor S S Mundra said on Tuesday.

Growingly, it is looking like banks are evolving as the fintech companies, which also do the business of accepting deposits and do lending, Mundra said while speaking at the 14th edition of the Banking Colloquium, organised by CII.

“Banks have to be conscious that fintech companies are compact entities, they are nimble. So, banks trying to imitate a fintech company in its totality, to my mind is not a right approach and it is not a right business model,” he pointed out.

According to him, it would be beneficial for both the banks and the fintech companies to have a meaningful cooperation, and in this way, both can leverage their respective strengths. “So it is that situation where there is a competition, but there is a cooperation.”

Mundra said fintech companies have the strength of being nimble and innovative, while banks have the advantage of having good resource bases, reach and trust of the customers. “So, these things can be complementary and to the advantage of both,” he emphasized.

The former RBI deputy governor said both banks and fintech companies ‘should avoid the temptation’ of introducing too many products and too many processes, whether it is by way of collaboration or in-house, in short intervals.
“My personal observation and experiences are it leaves both their important constituencies confused. And, the important constituencies are their own staffs and their own customers,” he said.

According to Mundra, it is very important for banks to have a ‘very hard look’ at the traditional models which banks have been pursuing.

“I am not suggesting that branches should go away but there is a need to reimagine the business model. One has to see which are the branches that are loss making and which are the branches that are contributing positively, which are the branches which can be downsized and which branches can be completely done away with and where you can rely completely on technology and where you can rely on agency arrangement,” he said, adding for every bank it was important to do a complete holistic assessment of their branch networks and how to derive maximum value from this.

On corporate lending, he said banks should not sell only products to a corporate as most corporates are now expecting ‘solutions’ from the banking system. “So if you only focus on products you will only end up making some topline, but it will not add to your bottomline. So you need to adopt a solution-based approach if you want to do corporate banking,” he added.

ELSS Funds

You can’t sell, redeem, or switch these plans during the three-year lock-in term. When compared to the Public Provident Fund (PPF), which has a 15-year lock-in time, and the National Savings Certificate (NSC), which has a 5-year lock-in period, the ELSS has a relatively short lock-in duration.

In comparison to other traditional tax-saving paths, LSS has the shortest lock-in time of three years and the potential to create greater profits. The stock market accounts for at least 65 percent of the ELSS fund’s assets. Unlike other fund options such as sector funds, financial services, and infrastructure, investments in equity-linked savings schemes are diversified and invested across sectors and industries.

Expense Ratio of the ELSS Fund

The expense ratio refers to the fees that mutual funds charge for managing their investors money.

Investors should evaluate the expense ratio of tax-saving funds while making investments. The fund’s high expense ratio indicates that the fund incurs a lot of costs.

In this area, the expense ratio ranges from 1.46 to 2.99 percent. A fund with a low or moderate expense ratio and a greater rate of return should be chosen by the investor.

Risk and Diversification

In terms of stock exposure and diversification, different ELSS funds use different strategies to maintain a balanced portfolio. Some funds spend a bigger percentage of their whole portfolio in fewer stocks, while others stick to a diversified strategy. Investment risk and return are inextricably connected. High-return mutual funds carry larger risks, while low-return mutual funds carry smaller risks.

To determine the best Tax Saving Fund, you must first determine your risk profile, or how much risk you are willing to face when investing in mutual funds.

Fund Manager and Fund House

If a fund has a good and consistent fund manager who has produced positive results in the past, it may be fairly believed that the fund will continue to produce positive results in the future. Always look into the fund manager’s background and track record, not just for this fund but for any other funds he or she runs. When a fund house is created, it has the necessary experience to handle huge sums of money.

Because decision-making processes are pre-determined, a change in the fund management has no impact on the fund’s performance.

Return consistency

After reviewing the consistency of their performance in different periods of market cycles and evaluating calendar year returns, carefully select funds. A fund should be able to outperform its benchmark in rising markets while falling less in falling markets. Seek funds that have consistently performed in the highest quartile among funds with similar portfolios and have a consistent portfolio management strategy.

Market cap composition

SEBI has granted fund managers complete discretion in determining the percent allocation in stocks The manager decides on the allocation based on market conditions, the fund’s aim, and his own risk-taking capability to attain that goal. Examine the fund’s past market cap allocation trends as well as the consistency of its investment patterns. It is preferable to choose funds with a consistent investment pattern rather than funds with a regularly changing investment pattern because the latter carries a larger risk.