MME-Cover-15 aug.eps by zhangyun

VIEWS: 147 PAGES: 37

									EP 3-35-alok-akm.qxd         7/25/2010           5:18 PM         Page 3

                                                                                                                               EDITOR’S NOTE

                                                                    5 crore+ people waiting to
                                                                     join New Pension Sytem
                                                                              This time, I wish to talk
                                                                          something absurd. If you
                                                                          are willing to check your
                                                                          tolerance level, go ahead.
              Year : 01              Issue : 19
                                                                          Why can’t we give a dustbin
                                                                          treatment to filtration theory
           JYOTI NARAIN
                                                                          of development which pro-
                                                                          fesses that richness trickles
           EDITOR                                                         from affluent to poor and
                                                                          therefore the states’ efforts
                                                                          should be intended towards
           EDITORIAL TEAM                                                 elevating the affluent.
           Kanchan Dass, Senior Sub editor
           Shilpy Arora, Senior Sub editor cum correspondent
                                                                          Pyramid theory supports it.
           Alok Dwivedi, Sub Editor cum correspondent                     Why can’t we talk of invert-
           Harish Kumar, Sub Editor cum correspondent                     ed pyramid structure?
           Renu Baliyan, Sub Editor cum correspondent
                                                                          Developmental through MNREGA is a testimony to its success
                                                                          where rural people sitting at the bottom of the pyramid are tast-
           GRAPHIC DESIGNER                                               ing prosperity while contributing to infrastructural development.
           Harikrishan Pal
           Arun Sharma                                                    Why can’t we include the beneficiaries of MNREGA under
                                                                          NPS-lite scheme? As per a statement given in the Lok Sabha,
           Ravi Girota
                                                                          2.10 crore households were provided employment under
                                                                          MNREGA during 2006-07, 3.39 crore in 2007-08, 4.51 crore
           CIRCULATION                                                    during 2008-09 and 5.06 crore during 2009-10. Under MNRE-
           Sudhir Kumar Rai
                                                                          GA, one person from a household gets guaranteed employment
                                                                          for 100 days in a year and Rs. 100 is paid for each working day.
           ADVERTISEMENT                                                  If the government increases the number of working days to 110
           Kamal Sharma
           Subhash Chaudhary
                                                                          and the wage of 10 days is credited into their pension account, it
                                                                          will do wonders. (Since NPS lite requires a minimum of Rs 1000
           HEAD OFFICE                                                    per annum into pension account.) Alternatively, PFRDA may
           C- 125, Sector- 19
                                                                          lower the amount of NPS- lite for MNREGA workers. Then, the
           Uttar Pradesh                                                  people working under MNREGA will be the first to be covered
           Email:                            under the social security network. If the political regime feels
           Phone: 0120- 4710700
           Fax: 0120-4710728                                              that MNREGA rewarded it with second tenure (UPA-II), adding
           www.                                         social security umbrella to MNREGA may make its vote bank
                                                                          all the more stable. It will be another example of inverted pyra-
                                                                          mid success, wherein social security system will start from the
                                                                          bottom of the pyramid and extend to the top of it. If all the 5.6
                                                                          crore workers (FY 2009-10) under MNREGA are given this
                                                                          cover, PFRDA will get Rs. 5600 crore in one go. Fund managers
           Published by Jyoti Narain for
           Pearls News Network Pvt. Ltd.from C-125,
                                                                          will get more to manage and stocks, corporate bonds and gov-
           Sector- 19, Noida,                                             ernment securities market will get a major boost. And the gov-
           Uttar Pradesh and Printed at MP Printers,                      ernment is already providing a contribution of Rs. 1000 to every
           B- 220, Phase- II, Noida- 201305                               PFRDA account opened in FY10-11 under Swavlamban
           Disclaimer: Money Mantra is a personal finance                 Scheme. A win-win situation for all the parties. This issue is ded-
           magazine and the financial solutions provided by
           different experts in this magazine are only sug-               icated to the emerging social security
           gestive in nature. Readers should take advice                  system New Pension Scheme (NPS). Was
           from their financial advisors before taking a final
           call. In no case, Money Mantra team or manage-
                                                                          I really talking absurd?
           ment can be held responsible for financial loss                    With best wishes,
           caused to readers.
    EP 3-35-alok-akm.qxd   7/25/2010   5:18 PM   Page 4

                  CONTENTS                                                   News Track
                  August15, 2010                                             08 Kins to get more in motor acci-
                                                                                dent deaths: SC
                   Volume 19                                                 08 Bank account at just Re.1                Stock & Commodity Banking
                                                                             09 Place orders in pre-open                 20 Upside limited for yel-                 46 Falling prey to innova-
                      ON THE COVER                                           09 Exit load to be uniform
                                                                                                                         low metal is short term                    tive fraudsters
                                                                                                                                                                    If the transaction is made before the
                                                                                                                         An improved appetite for higher risk
                                                                                                                         assets has taken some of the glitter out   card is blocked, the amount has to be

                      PENSION FOR ALL                                                                                    of the gold in recent weeks.

                                                                                                                         24 Bullish trends likely to
                                                                                                                                                                    borne by the card holder.

                                                                                                                                                                    48 Banking the VK way
                                                                                                                                                                    Investors must be aware of the fact that
                                                                                                                                                                    the RBI has not authorised banks to
                      New Pension Scheme (NPS) has been receiving                                                        For the past several months, domestic
                                                                                                                                                                    buy back gold from the customers.
                     rave reviews from its critics due to its risk-return                                                retail money has been lying on the
                     profile, robust regulatory framework and the social                                                 sidelines.
                                                                                                                                                                    Mutual fund                                  BIG TALK
                     security sytem it professes. Now, it has a low cost                                                                                                                                         17 Mr. Veerappa Moily, Union Law
                     variant NPS lite which has made it affordable even                                                                                             50 Take informed decision                    Minister is engrossed in restructuring
                     for a daily wager. To the dismay of regulators,                                                                                                There are reports that a lot of              and revamping the Indian judicial sys-
                     the product has not been reaching to those who     36   10 Call 15525 to resolve insur-
                                                                                                                                                                    investors are closing their MF folios,
                                                                                                                                                                    means they are evaluating various
                                                                                                                                                                                                                 tem. Be it setting up commercial courts
                                                                                                                                                                                                                 or making the courts IT enabled, expe-
                     need it badly. The story unravels excellence of                                                                                                other options for themselves.                diting judicial process or releasing the
                                                                                ance related problems
                     the product NPS and analyses the marketing hur-                                                                                                                                             under-trials, he has been setting mile-
                     dles blocking it from reaching the masses.
                                                                             10 L&T General gets IRDA’s nod
                                                                             11 ULIP exit charges capped
                                                                                                                                                                    Insurance                                    stones. Moily unfolds his vision to MM.

                                                                                at Rs.6000                                                                          52 Made to look good
                                                                             11 IRDA plans tough norms for                                                          Policy holders must know that policy
                                                                                ULPs                                                                                illustration is a cost illustration, not a
                                                                                                                                                                    return illustration.
                                                                                                                                                                                                                 Special Stories
                                                                             12 Rupee gets a new symbol
                                                                             12 SEBI asks for no frills                  Scrips on Radar                            54 Less is beautiful                         14 Cashless confusion
                                                                                                                                                                                                                 While making PPN for cashless facility,
                                                                                Demat accounts                           26 Sintex Industries                       One can avoid taking a health policy at
                                                                                                                                                                                                                 PSU insurers have left out a number of
                                                                             13 Hold MF units in Demat form              The leadership position, strong bal-       a time of any temporary illness as
                                                                                                                                                                                                                 top notch hospitals in four metro cities.
                                                                                                                                                                    insurer may ask for above normal pre-
                                                                             13 ICICI Bank to finance Harley             ance sheet and momentum growth
                                                                                Davidson                                 from its subsidiaries make the compa-      mium.
                                                                                                                         ny a good bet for investment.              56 Bury home loan worry                      Consumer Law
                                                                             Financial Planning                          28 Axis Bank                               It is very important to take appropriate
                                                                                                                                                                    insurance for any loan a person takes as
                                                                                                                         The bank deserves premium valua-                                                        60 Recovering the loss
                                                                                                                         tions on the back of its various           it ensures that the burden of loan is not    One should take care while parking
                                                                                                                         sources of sustainable fee income and      put on the family members in case of         vehicles in parking lots as theft could
                                                                                                                         strong growth outlook.                     any unforeseen event.                        happen anywhere.

                                                                                                                         29 Amtek Auto
                                                                                                                         The company has diversified into pre-
                                                                                                                         mium margin market through acquisi-        Regulator Speak
                                                                                                                         tions in Europe and US.
                                                                                                                                                                    42 Mr. Yogest Agarwal, the new
                                                                                                                         30 Den Networks                            chairman of PFRDA, is all set to
                                                                                                                                                                    overhaul the Indian pension system.
                                                                                                                         Den could turn aggressive on acquisi-      Within a month of ascending to this
                                                                                                                         tion of smaller LCOs/independent           post, he has come up with a novel
                                                                                                                         cable operators as also on large           pension product NPS lite which will
                                                                                                                         national/regional operators.               pension affordable even for chai
                                                                             66 Dr. Menon’s Clinic                                                                  walla and rikshaw wallah. He is
                                                                                                                         31 Bharti Airtel                           determined to include at least 10
                                                                             Vandana, a working woman, lives in a
                                                                             joint family. She saves a sizeable amount   With the acquisition of Zain, Airtel       lakh more people in the social secu-
                                                                             from her income. She visits Dr. Menon       has become the first Indian brand to       rity system called NPS. He spoke
                                                                             seeking financial plan for her future       go truly global with a footprint that      his mind to MM.
                                                                             goals.                                      covers over 1.8 billion people.
EP 3-35-alok-akm.qxd     7/25/2010      5:19 PM       Page 6

                                                                                                                                                                                                                                                                COFFEE HOUSE
              READER                  Mail

                                                                            “          Base rate system is a revolution in
                                                                                       Indian banking. If implemented suc-
                                                                              cessfully, it will make bankers more account-
                                                                              able towards cost of funds, discrimination
                                                                              among common and affluent customers will
                                                                              narrow down, change in interest rate sce-
                                                                              nario will be quickly visible on retail loans
                                                                              and growth will get a fillip. I applaud you for
                                                                              such a precise, in depth and timely analysis
                                                                                                                                                           What should the government
                                                                              of base rate regime. Mr Dhingra has aptly put
                                                                              the base rate system in historical perspec-
                                                                                                                                                             do to contain inflation?

                                                                                                                                                    “                                                             “
                                                                              tive of PLR and BPLR. I agree with his obser-
                                                                              vation that base rate will infuse transparen-
                                                                              cy into interest rate system and retail loan
                                                                              will get a boost.
                                                                                                                                               “            The government need not do anything to control
                                                                                                                                                       inflation. It should sit idle and watch inflation grow-
                                                                                                                                                       ing. It has done the same thing in the last 12 months.
                                                                                                                                                       Inflation inched up from sub zero level to double dig-
                                                                                                                                                                                                                       Inflation has several facets. It’s making the com-
                                                                                                                                                                                                                  mon man’s life miserable, giving regulators a tough
                                                                                                                                                                                                                  time, earning the government wrath of opposition
                                                                                                                                                                                                                  parties. The fact that double digit inflation is posing
                                                                                                                                                       its, food inflation moved up to the level of 20%, what     a risk to the growth of economy has made RBI cau-
                                                                                                                    - Ahimsa, Jodhpur                  could the government do?                                                               tious on monetary front. In
                                                                                                                                                       Government hiked petrol and                                                             order to rein in inflation,
                                                                                                                                                       diesel prices, it deregulated the                                                       it has raised interest rate.
                     The Big Fat                                                                       it. Awesome job!                                prices subsequently, it loosened                                                        But much remains to be
                                                                                                                          Vikram Bakshi                its strings and let the inflation go                                                    done. Indian inflation is
                     Weddings                                                                                                                          out of proportion. In fact, it                                                          getting catalysed by food
                          Refer to "Wedding Planning -                                                 There's More To                                 helped inflation grow. Right                                                            crisis. Government has to
                     For Honey, Don't Waste Money!"                                                    Networking Sites                                from finance minister to the min-                                                       do a lot on this front.
                     (MM July 31, 2010). For filthy                                                                                                    ister for agriculture and the                                                           Distribution of subsidised
                     rich people, the best use of black                                                    Refer to "Post Tweets, Tap                  deputy chairman of planning                                                             foodgrains, taking action
                     money is in weddings. Wedding                                                     Business" (MM July 31, 2010).                   commission have been making                                                             against hoarders and
                     in farm houses, five star hotels and                                              Good to read that tweets can pro-               statements that inflation will be                                                       importing grain in scarce
                     such places is a status symbol.                                                   mote business too. As otherwise                 reined in a ‘month’ or so. But the                                                      are some of the measures
                     Now dress designers are hired who                                                 social networking sites such as                 ‘month’ has been evading the                                                            which may help. Besides
                     flaunt their designs in the big fat                                               Twitter have become very power-                 common man for the last one                                                             this, the government
                     weddings. In fact, children's wed-                                                ful media to express one's person-              year. All the strong and mighty                                                         should make a plea to the
                     ding is the one of the biggest            style, especially middle class?         al whims and fancies, likes and dis-            quote weatherman to support                                                             state governments to
                     dreams that parents nurture. For                     M Kumar, New Delhi           likes. Although these are meeting               their claim vis a vis inflation.                                                        lower taxes on commodi-
                     the Indian middle class parent, it                                                points of the virtual kind, when                They emphasise that none other than Indra, the rain        ties in scarce and reduce tax burden on petrol and
                     is still a major responsibility to
                                                               All About Fashion                       celebrities and politicians air their           God, holds the key to inflation. If rain is normal, har-   diesel to make it cheaper for public transport system.
                     marry off their wards. Middle class           I found Money Mantra's link.        personal opinions, they become                  vest will be rich and flowing godowns will bring infla-    It will make transportation cheaper and in turn check
                     even borrow money for wedding             Just read it. Wow! It's detailed and    real-life overtones with people                 tion down. RBI is so shy in controlling liquidity that     price rise. Central government should maintain sta-
                     events in their family since mar-         well organised, must have taken         reacting strongly, giving rise to a             its monetary measures are cheered by the market to         tus quo on stimulus front in order to assist industries
                     riage in India, unlike the West, is       quite a bit of research and all to      political controversy. Therefore,               the pleasure of inflation. The Prime Minister has          in checking cost of production and rein in price. It
                     still considered sacred. We must try      put together...good for you!            celebrities and politicians should              marked inflation as grave threat to economy, but his       should desist from taking fiscal prudence measures
                     and preserve the sanctity of this                       Jayeeta Purkayastha       be careful when they tweet or write             stalwarts have not been able to control the same so far.   till inflation is in control and stabilised. No doubt,
                     ideal. The best is to have simple                        Dasgupta, by e-mail      on their blogs.The purpose of these             In fact, India has surpassed its neighbouring countries    freeing the price of petro goods is a welcome meas-
                     marriage with family and very                 Wonderful article and great         social networking sites was not to              in terms of inflation. To our surprise, global food        ure as far as fiscal prudence is concerned, but its tim-
                     close relatives and friends and           information. Very well researched       use it as a public media but to                 scarcity is affecting only India and other countries are   ing is inappropriate when we see the level of infla-
                     countable numbers of guests only!         article. It has some very interesting   express inner or true feelings with-            immune to it. Let the government sit idle and see          tion. RBI should not hesitate in taking tough mone-
                     Is it possible in our present set up      and valuable information and the        out any serious motives, perhaps!               whether its inaction helps in bringing down inflation      tary measure to check inflation, otherwise the situa-
                     of society's thinking and living          numbers add so much credibility to           Mahesh Kumar, New Delhi                    or not.                                                    tion may worsen.
                                                                                                                                                                                    - P N Upadhyay, Lucknow                                      - Kanta Sushil, Cochin
                                                              SEND YOUR LETTERS & EMAIL:
                                                 Address: Editror, Money Mantra C- 125, Sector- 19 Noida                                                Topic for next issue: Is insurance companies’ stand on cashless issue justified? Please send your entries in 175
                                                          Email:                                                      words at or The Editor, Money Mantra, C-125, Sector-19, Noida-201301 by 07/08/2010

                 6     MONEY MANTRA     August 15, 2010                                                                                                                                                                                       August 15, 2010    MONEY MANTRA   7
EP 3-35-alok-akm.qxd     7/25/2010     5:19 PM       Page 8

                 News Track
                 Kins to get more in motor                                                                                                                 Place orders in
                                                                                                                                                           pre-open session
                                                                                                                                                                                                                   A LAPTOP FOR EVERYONE

                 accident deaths: SC                                                                                                                       SEBI has decided to introduce call auction mecha-
                                                                                                                                                           nism in pre-open session. To begin with, it shall be
                                                                                                                                                           introduced on a pilot basis by BSE and NSE for the
                         ow next of the kins of the motor       police sub-inspector from Rs.14.6 lakh         various deductions from a gross salary      scrips of Sensex and Nifty. The pre-open session

                 N       accident victims can expect rel-
                         atively higher compensation
                 from the insurance companies, follow-
                                                                to Rs.19.7 lakh. The sub-inspector was
                                                                killed in a motor accident 20 years ago
                                                                in 1990. Earlier, the Motor Accident
                                                                                                               of Rs.13794, calculated his income as
                                                                                                               Rs.9489. Hence applying the relevant
                                                                                                               multiplier, the MACT had awarded a
                                                                                                                                                           shall be for a duration of 15 minutes from 9 AM to
                                                                                                                                                           9:15 AM, out of which 8 minutes shall be allowed
                                                                                                                                                           for order entry, order modification and order can-
                 ing the recent ruling by the Supreme           Claims Tribunal had, after applying            compensation of Rs.14.44 lakh.              cellation, 4 minutes for order matching and trade
                 Court. While delivering a judgment in                                                                                                     confirmation and the remaining 3 minutes shall be
                 a compensation dispute, the apex court         PEGGING GDP AT 8.5%                                                                        the buffer period to facilitate the transition from
                 has said that for the purpose of calcu-                                                                                                   pre-open session to the normal market. The session
                 lating the claim, only the income tax                                                                                                     shall close randomly during last one minute of order
                 component can be deducted from the                                                                                                        entry i.e. anytime between 7th and 8th minute of
                 victim's salary to arrive at his net                                                                                                      the order entry. Such random closure shall be system
                 income amount.                                                                                                                            driven. Limit orders and market orders shall be
                     Delivering the judgment, a bench of                                                                                                   entered during the pre-open session.
                 the Supreme Court said that while
                 ascertaining the income of the
                 deceased, any deductions shown in the
                 salary certificate as deductions towards                                                                                                  Exit load to be uniform                                  The Union Minister for Human Resource Development, Shri Kapil Sibal unveil-
                                                                                                                                                                                                                    ing a low cost computing-cum-access device, in New Delhi on July 22, 2010.
                 GPF, life insurance premium, repay-
                 ment of loans etc, should not be exclud-                                                                                                  Securities and Exchange Board of India (SEBI)
                 ed from the income. It is important to
                 note that this was followed till now
                                                                                                                                                           has asked Asset Management Companies (AMCs)
                                                                                                                                                           to have a uniform exit load for investments
                                                                                                                                                                                                                    No cell in dealing rooms
                 while calculating the monthly income                                                                                                      through lump sum route as well as systematic             SEBI has barred the use of mobile phones in the dealing rooms
                 of victim. This method of calculation                                                                                                     investment plans (SIPs). If a few officials of           of mutual funds. The step is taken to prevent front-running and
                 resulted into reduction of the victim's                                                                                                   different fund houses are to believed, the capital       has also asked the AMCs to record telephone calls from or into
                 income and hence the compensation                                                                                                         market regulator has said this to them without           dealing rooms. It has said that the recorded calls by dealers
                 was reduced by insurance companies                                                                                                        providing any reason. Usually, AMCs waive off            should be regularly monitored by its compliance department. In a
                 automatically as the compensation was                                                                                                     the exit load for large investors depending on           mutual fund, front-running harms unit holders as it reduces the
                 based on the same.                                                                                                                        demand of the situation. Most AMCs do not                realisations from share sale or increases the cost of share
                     Applying this principle, the                                                                                                          charge exit loads for investments over Rs 3-5            purchases. As per the SEBI order on June 17, three investors,
                 Supreme Court ordered an increase in                                                                                                      crore. In the case of SIP, Mutual Fund companies         who placed orders in the same set of stocks just before those
                 the compensation to the widow, three                                                                                                      charge an exit load as per the period mentioned in       were traded by dealer Nilesh Kapadia on HDFC AMC's behalf,
                                                                 The Chairman, Economic Advisory Council to PM, Dr. C. Rangarajan releasing the document
                 children and parents of a 36-year-old           'Economic Outlook 2010-11’, in New Delhi on July 23, 2010.                                the prospectus.                                          made combined profits of about Rs.2 crore in four months.

                 NEWS BRIEF
                 Bank account @ just Re.1                     Download ASBA forms from BSE-NSE sites                         UTI revises schemes           ICICI Pru modifies exit load                IRDA to control misselling                      Insurers seek more time
                 To reach out to the relatively weaker        With a view to helping the investors, stock exchanges          UTI MF has announced to       ICICI Prudential MF has revised exit load   In an effort to control misselling of           Citing lack of time, life insurers have
                 sections, State Bank of India has            have started a facility whereby they can download and          start Dividend Transfer       for its a few schemes from July 16. It      policies, insurance regulator IRDA has          sought more time to implement the
                 come up with an initiative in Andhra         print ASBA application form from the BSE or NSE                Plan (DTP) in its various     would charge an exit load of one per cent   proposed that licence of an agent be            new guidelines on ULIPs. Earlier
                 Pradesh. Now weaker sections of              website. Even after many months of introduction of             schemes on a prospective      if the units are redeemed before one        cancelled if 50 per cent of the policies        IRDA had asked the life insurers to
                 the society and small businessmen            Application Supported by Blocked Amount (ASBA),                basis from July 26, 2010.     year from the date of allotment. The        sold by him/her are not renewed                 follow the new guidelines from
                 in urban areas will get the facility to      investors were not being able to use the facility              Unit holder(s)' enrolment     schemes are- ICICI Prudential               annually. It does not want spouses and          September 1. The executive
                 open bank accounts for just Re.1.            effectively. Non-availability or limited availability of       under the DTP facility will   Infrastructure, Dynamic Plan, Focused       close relatives of employees of insurers        committee of Life Insurance Council
                 People can get access to all the             ASBA forms with Self Certified Syndicate Banks                 automatically override any    Bluechip Equity, Discovery, Power, Equity   as agents. It has said that these               has sought at least three months
                 major banking facilities like                (SCSBs) is considered a primary reason behind it. Now,         previous instructions for     Opportunities, Emerging S.T.A.R, Indo-      proposals would help in protecting the          extension for implementing the
                 depositing and withdrawing small             each downloaded ASBA form would have a unique                  'Dividend Payout' or          Asia Equity, Service Industries, Banking    interests of policyholders. The regulator       proposal. In addition, the council has
                 sums of money, earning interest              application number. Hence, the application made using          'Dividend Reinvestment'       and Financial Services, Technology,         has said that the minimum first-year            requested the regulator to allow
                 etc. To aid this facility, the bank has      photocopy of the downloaded form will not be                   facility in the source        FMCG, Equity and Derivative -Wealth         premium income to be procured by an             them to offer pension plans without
                 used biometric smartcards.                   accepted.                                                      scheme.                       Optimiser and Balanced Fund.                agent will be Rs.1.50 lakh per year.            guaranteed returns.
                 8     MONEY MANTRA    August 15, 2010                                                                                                                                                                                                      August 15, 2010   MONEY MANTRA    9
EP 3-35-alok-akm.qxd        7/25/2010      5:19 PM       Page 10

                 News Track
                                                                                                                                                                 ULIP exit charge:                                  IRDA plans tough
                       India this fortnight
                      GDP Growth
                                                              Call 15525 to                                                                                      max at Rs. 6,000
                                                                                                                                                                 IRDA has said that the charges for
                                                                                                                                                                                                                    norms for ULPs
                                                                                                                                                                                                                    Following the suit of its capital market
                      (Last Qtr of FY10)

                   IIP Growth
                   (May 2010)
                                               11.5%          resolve problems                                                                                   discontinuation of ULIPs will range
                                                                                                                                                                 from Rs.1000 to Rs.6000 depending on
                                                                                                                                                                 the premium paid by the policyholder,
                                                                                                                                                                 when the policy is discontinued during
                                                                                                                                                                                                                    counterpart SEBI, Insurance Regulator
                                                                                                                                                                                                                    IRDA as well is on a regulation spree.
                                                                                                                                                                                                                    After tightening the norms for ULIPs,
                                                                                                                                                                                                                    IRDA is shifting its focus to Universal
                      Export Growth
                                                 30%              nsurance       Regulatory         and         and speedy redressal to consumers'               first to fourth policy years. Maximum              Life Policies (ULPs) and a new set of
                      (June 2010)

                      Import Growth
                   (June 2010)                    23%         I   Development Authority (IRDA)
                                                                  has launched a call centre to provide
                                                              grievance redressal services to insur-
                                                                                                                complaints. Over the past few years, a
                                                                                                                sharp rise has been recorded in the
                                                                                                                complaints of claim refusals and
                                                                                                                                                                 discontinuance charge, if the policy is
                                                                                                                                                                 discontinued during the first policy
                                                                                                                                                                 year, would be maximum up to
                                                                                                                                                                                                                    regulations will be announced in the
                                                                                                                                                                                                                    next couple of months for these
                                                                                                                                                                                                                    policies. ULPs are quite similar to
                      Inflation Rate                          ance customers. The insurance regu-               delayed settlements. According to a              Rs.3000 for the policies having                    ULIPs as these combine insurance and
                      (June 2010)              10.6%          lator has selected Sparsh BPO, which              report, IRDA receives as much as 400-            annualised premium up to Rs.25000                  investment. Like ULIPs, one part of
                                                              will provide manual and IVR tele-func-            500 complaints every month.                      and maximum upto Rs.6000 for the                   the premium for ULPs goes into                                      Earlier
                                                              tionalities and offer an alternative for               The call centre service will be avail-      policies having annualised premium                 buying life cover and rest part is                   people thought that
                                                              the consumers to launch complaints                able in nine languages including                 above Rs.25000.                                    invested into bonds or equities.
                                                              against any insurance company.                    English, Hindi, Telugu, Tamil,                                                                                                                            with the imposition
                                                                   "If you have a complaint against             Malayalam,         Marathi,      Bengali,                                                                                                                    of VAT the states
                                                              any insurer or you are not satisfied with         Kannada and Gujarati. IRDA and                   LUXURY REDEFINED
                                                              services of your insurance provider                 Sparsh are working to introduce the                                                                                                                      will lose their rev-
                           The present                        company, call a toll free num-                          service in more languages in com-                                                                                                                       enue. But it has
                                                              ber- 155255. Customer exec-                              ing future.
                           high rate of                       utive may ask you to give a                                  The call centre offers its serv-                                                                                                                  been proved mis-
                      inflation is mainly                     few details such as policy                               ice only for 12 hours from                                                                                                                            placed. Similarly
                      due to food price                       number, register number,                                Monday to Saturday. But due to
                      inflation. With a                       etc. The call centre will                            some technical snag, only BSNL                                                                                                                           the apprehension
                                                              get in touch with the                             subscribers have access to this num-                                                                                                                      that the states will
                      normal monsoon,                         company con-                                      ber. This technical snag is, however,
                      which is the expec-                                                    cerned and         temporary.                                                                                                                                               lose revenue in GST
                      tation at present,                                              try to resolve                 Later, a web-based integrated
                                                                                                                                                                                                                                                                          regime will also be
                      the rate of inflation                                         the issue at the            grievance management system will be
                      will abate in the                                             earliest," says an          introduced by IRDA. The management                                                                                                                                 misplaced.
                                                                                     official of IRDA.          system would help track complaints via
                      second half of the                                                      IRDA              a real-time connectivity at anytime with
                      year.                                                               has      long         the portals of 43 insurers. The system                                                                                                                     PRANAB MUKHERJEE
                                                                                          been look-            is an improvement over the prevailing                                                                                                                    Finance Minister, said at a dis-
                      DR. MANMOHAN SINGH                                                   ing for a            grievance system as it enables policy                                                                                                                     cussion organised by FICCI on
                      said while addressing the 55th                                       way to pro-          holders to launch a complaint and view                                                                                                                                          July 22.
                      National Development Conference                                                                                                            Hyderabad: Models stand beside a new Rolls Royce car as visitors admires it during inauguration of
                      (NDC) on July 24.                                                    vide simple          its status.                                      the International Auto Show 2010 at HICC in Hyderabad on Thursday.

                 NEWS BRIEF
                 JP Morgan revises load: JP                        ended scheme, into an open ended one             L&T General gets IRDA's nod:                 Nil load for SBI blue chip: SBI                  credit are not available. Both are                  Launch of new schemes:
                 Morgan Mutual Fund has modified exit              from July 9. Now the fund will charge an         L&T General Insurance has received           Mutual Fund has abolished the exit               working towards putting in place a                  Benchmark Mutual Fund has filed an offer
                 load under its schemes- JP Morgan                 exit load of one per cent, if units are          license from IRDA for commencing oper-       load for SBI Blue Chip Fund and now              partially structured buyer's credit, where          document with the SEBI to launch six
                 India Equity Fund, Smaller Companies              redeemed within a year.                          ations. With this registration, the total    exit load charge for the scheme is nil.          exporters will bear the subsidy. ECGC               open-ended listed index schemes- IT
                 Fund, Alpha Fund and JF Greater China                                                              number of general insurers registered in     Earlier, an exit load charge of 1 per            will grant the political risk. The product          BeES, FMCG BeES, Services BeES, Energy
                 Off-shore Fund from July 13. All four             Taurus revises exit load: Taurus                 the country has reached 24.                  cent was levied in case of exit within           is expected in six to eight weeks.                  BeES, Pharma BeES and Realty BeES.
                 schemes will charge an exit load of one           MF has revised exit load for Taurus Nifty                                                     one year from the date of allotment.
                 per cent, if investments are redeemed             Index Fund from July 15. Now, all units          IRDA clears IPO norms: IRDA has                                                               Plan to raise PMS cut off:                          AIG MF schemes online: AIG
                 before 12 months.                                 redeemed within 15 days from allotment           finalised the IPO guidelines for insurers    New product from Exim: Exim                      SEBI is pondering over a proposal to                MF has started the purchase and
                                                                   will attract an exit load of one per cent. The   and has referred the same to the capital     Bank is planning to join hands with              increase the minimum threshold limit                redemption of units of its few schemes
                 SBI infra fund converted: SBI                     exit load would be same for SIP of this          markets regulator SEBI for final approval.   Export Credit Guarantee Corporation for          for portfolio management service (PMS)              through an alternate transaction
                 Mutual Fund has converted SBI                     fund and it would be applicable to each          The insurance regulator has said that        structuring new credit tools where               to Rs. 25 lakh. Currently, the minimum              platform of NSE- Mutual Fund Service
                 infrastructure Fund -Series 1, a close            installment.                                     approval for the same is expected soon.      government or multilateral lines of              threshold limit for PMS is Rs.5 lakh.               System (MFSS) from July 22, 2010.

                 10      MONEY MANTRA      August 15, 2010                                                                                                                                                                                                                   August 15, 2010   MONEY MANTRA   11
EP 3-35-alok-akm.qxd    7/25/2010     5:19 PM       Page 12

                 Farm Fresh
                 The New Symbol of Rupee                                                                                                                                          MARKET PERFORMANCE
                           ith the introduction of new        that the government wanted a rupee             listed by a five-member jury bench.                                   Best Performers in group ‘A’ vs Nifty
                 W         rupee      symbol,    India
                           becomes world's fifth coun-
                 try to have a currency symbol. Since
                                                              symbol to reflect the values and cul-
                                                              ture of India. In addition, the symbol
                                                              will help distinguish the Indian rupee
                                                                                                             All the five designs had a common
                                                                                                             element but government selected a
                                                                                                             symbol designed by Bombay IIT
                                                                                                                                                                                                   (from 09-07-2010 to 23-07-2010)
                                                                                                                                                                                                                        Nifty                    Sintex Industries
                 many developed nations have a sym-           from the rupee or rupiah of many               post-graduate D. Udaya Kumar on                                                                            Educomp Solutions        Uco Bank
                 bol representing their currency, the         neighboring countries such as Nepal,           July 15. Reason being his design is                                                                        Unitech                  Crompton Greaves
                 Government of India intended to              Pakistan, Sri Lanka and Indonesia.             simple, and easy to write and under-
                 introduce a rupee symbol last year.              After a year long competition              stand.
                 In his budget presentation, Finance          regarding the symbol for Indian cur-                Elucidating the distinctiveness of
                 Minister Pranab Mukherjee had said           rency, finally, five designs were short        symbol, Kumar said his design rep-
                                                                                                             resents the Indian flag. Two lines at the                                                                                                                                                 In some
                                                                                                             top and white space in between sig-                                                                                                                                         ways, the weaken-
                                        Typing                       Other currencies
                                                                                                             nify tricolor with Ashok Chakra. The                                                                                                                                                    ing of the
                                                                                                             two lines also give impression of
                                       Step 1: Download                                                      equality and stable economy. Also, the                                                                                                                                         economies in the
                                     fonts - Rupee.ttf or                                                    symbol appeals both Indian and                                                                                                                                                 West means that
                                 Rupee_Foradian.ttf.                                                         international citizens as it mingles let-
                                The fonts are available                                                                                                                                                                                                                                   capital is trying to
                                                                                                             ter 'R' of Devanagari (ra) and Roman
                           free of cost on the                 Symbol                     Command
                                                                                                             (R).                                                                                                                                                                            find appropriate
                             Internet at/blog.foradi-          Dollar ($)                    Shift +4             Although the symbol can be typed                                                                                                                                         destination. India
                      rupee-font-ver-         Pound (£)                  Alt + 0163         using regular keyboard, authorities                                                                                                                                         is one of the coun-
                                  sion-20.                     Cent (¢)
                                                               Euro (€)
                                                                                           Alt +0128
                                                                                                             plan to feature the symbol on new key-
                                                                                                             boards to encourage its usage.
                                                                                                                                                                              Hold MF units in Demat form                                                                                   tries where there
                                  Step 2: Copy down-           Japanese Yen (¥)                                   New symbol of rupee will not only                               Now mutual fund investors can have their units in dematerialised form as NSDL                               should be some
                  loaded font in the 'Font' folder of           Chinese Yuan (¥)          Alt+0165           help in internationalisation of Indian                           has enabled holding of the same for its demat account holders. It means this will
                                                               Korean Won (W)            Type 'W' >
                                                                                                                                                                                                                                                                                                capital inflows
                  your Control Panel.                                                                        currency but also help revive the issue                          enable the investors to centralise all their MF holdings. Investors can use their
                                                                                    Select it> Right         of full convertibility of rupee into                             existing demat accounts for converting their MF units in dematerialised form. For                               into the country
                                                                                 click >Click font>          other currencies. All major currencies                           their existing mutual fund units, one has to get a Conversion Request Form (CRF)                               that is of higher
                 Step 3: Open a word document.                                         Tick "Double          of the world are convertible i.e. they                           from his Depository Participant. This CRF is to be submitted to the DP along                                    order than even
                 Select the "Rupee" font in                              Strikethrough"> Click Ok            can be converted without the permis-                             with the statement of account. After due verification of the request, the CRF would
                 menu bar.                                     Nigerian Naira (N)         Type 'N'>          sion of their central bank or                                    be sent to Asset Management Company (AMC)/Registrar and Transfer Agent (RTA),                                the previous year.
                                                                            Select it> Right click>          government. But Indian rupee is only                             which would, after verifying, credit the mutual fund units into the demat account
                                                                         Click font> Tick "Double            partially convertible as RBI controls                            of investor. Demat account for MFs would work like Demat for shares. For this,                                    DR. C. RANGARAJAN
                  Step 4: Press the key given above                                  Strikethrough"          the foreign investments flowing in and                           the investor can subscribe to mutual fund units through his/her stock broker using                                    Chairman, PMEAC
                  the tab key. Rupee symbol (`)                        Thai Baht (?) Type '0E3F' >           out of India. The new symbol of                                  the stock exchange platform. Upon subscription, the AMC/RTAwill credit the mutu-                           said at a press conference in
                  appears.                                                  Select it> Press- Alt+x          rupee is expected to raise this                                  al fund units to his/her demat account.                                                                            New Delhi on July 23.
                                                                                                             issue again.

                 NEWS BRIEF
                 UTI Lifestyle Fund revised:                  amount for Monthly and Quarterly               Online remittance facility:                                      ICICI to finance superbikes:                  SC/ST candidates is Rs.7.50 lakhs for                   Chola’s click easy: Chola-
                 UTI Mutual Fund has converted its            option is Rs.1000.                             Standard Chartered Bank has launched                             Harley Davidson has joined hands with         students availing it within India and                   mandalam MS General Insurance has
                 close-ended scheme UTI India Lifestyle                                                      online remittance service named                                  ICICI Bank for providing finance to the       Rs.15 lakh for those availing it for                    launched click easy travel insurance at
                 Fund to an open-ended one with effect        SEBI for no frills demat:                      Transfer2Home to facilitate customers                            customers buying its bikes. The top           studies abroad. These loans can be                      its website
                 from July 16. It will charge an exit load    Concerned over slow growth in the num-         t o r e m it m o n e y t o I n d ia f r o m S in g a p o r e ,   bike brand has started outlets in             applied at                  The online purchase facility is designed
                 of one per cent, if units are redeemed       ber of retail investors, SEBI has asked        US, UK, UAE, Hong Kong and Bahrain.                              Hyderabad and Chandigarh and has                                                                      to make travel insurance buying easy,
                 within a year.                               depositories NSDL and CDSL to offer 'no                                                                         planned to start three more outlets in        BoM to compensate customer :                            transparent and paperless.
                                                              frills' demat accounts. At present, DPs col-   Collateral free loans:              Andhra                       India this year.                              Bank of Maharashtra has received orders
                 SWP facility in schemes: Axis                lect Rs.300-500 for each account as            Pradesh will offer crop loans to farmers at                                                                    from District Consumer Forum to com -                   HDFC launches two plans:
                 Mutual Fund has introduced the SWP           annual maintenance charge. Besides,            7 per cent interest along with crop insur-                       Education loan for SCs: West                  p e n sate a cu sto m e r. I t h ad re tu rn e d h is   HDFC MF has unveiled two new fixed term
                 facility under Axis Equity Fund, Axis        there are other charges for transactions.      ance benefit. It seeks guidance of the                           Bengal has become the first state in the      cheque saying the balance in his account                plans named- HDFC FMP 100D July 2010
                 Income Saver and Axis Triple Advantage       Current charges are considered high by         Centre, RBI and cooperation of all banks                         country to introduce education loan for       was insufficient, when his account was                  (1) and HDFC FMP 370D July 2010 (1)
                 Fund from July 21, 2010. The minimum         the market regulator.                          on this issue.                                                   the scheduled castes. The loan limit for      having sufficient balance.                              with two options- growth and dividend.

                 12    MONEY MANTRA   August 15, 2010                                                                                                                                                                                                                                      August 15, 2010   MONEY MANTRA   13
EP 3-35-alok-akm.qxd     7/25/2010      5:19 PM           Page 14

                  Special Report
                                                                                                                                                                 delivery (normal and caesarean), open-      hospitals were included in PPN in               1500-1600 crore loss per annum in the

                 Cashless Confusion                                                                                                                              heart surgery etc. This is being done in
                                                                                                                                                                 line with Central Government Health
                                                                                                                                                                 Scheme (CGHS) customers. With this
                                                                                                                                                                 rate card, these four companies have
                                                                                                                                                                 started a Preferred Provider Network
                                                                                                                                                                                                             Delhi-NCR. Though the number of hos-
                                                                                                                                                                                                             pitals agreeing to the terms and condi-
                                                                                                                                                                                                             tions of the PSU insurers is increasing,
                                                                                                                                                                                                             bigwigs like Escorts and Apollo are not
                                                                                                                                                                                                             ready to buckle under pressure.
                                                                                                                                                                                                                                                             health insurance segment. Anupam
                                                                                                                                                                                                                                                             Gupta, COO of Pune-based TPA MD
                                                                                                                                                                                                                                                             India, asks, "Is it fair if policy holders
                                                                                                                                                                                                                                                             have to reduce or finish his sum insured
                                                                                                                                                                                                                                                             due to over-billing?"
                    Alok Dwivedi/Kailashpati                        remain uninsured during the rest of the       to all that hospitals cheat our policy         (PPN) from July 1 in Delhi-NCR,                  Private insurance companies are                Insurance companies allege that
                 Mishra/Pooja Mehrotra                              year. TPAs play a vital role in health        holders. This practice is against the          Mumbai, Chennai and Bangalore Since         maintaining a distance from the whole           top-notch hospitals perform undue tests
                                                                    insurance. They are intermediaries            interest of patients, as they are left unin-   most of the top notch hospitals did not     issue. Iffco Tokio and ICICI Lombard            to make huge bills. They say that
                     t all started on July 1, 2010. A Max           between insurers and policyholders.           sured for the remaining part of the pol-       agree with these rates, they have been      preferred not to comment. Apollo                wrongdoings of hospitals start from the

                 I   Hospital branch in Mumbai got can-
                     cellation of a cancer patient from
                 its Third Party Administrator (TPA).
                                                                    These are not only responsible for
                                                                    empanelling hospitals, but negotiating
                                                                    the rates for treatment on behalf of insur-
                                                                                                                  icy year." On the other hand, insurance
                                                                                                                  companies are forced to pay huge sums.
                                                                                                                  Rawat says, "For a premium of Rs.100,
                                                                                                                                                                 de-listed from the PPN of PSU insurers.
                                                                                                                                                                 Insurers have made it clear that policy
                                                                                                                                                                 holders, willing to get cashless facili-
                                                                                                                                                                                                             Munich Health Insurance has said that
                                                                                                                                                                                                             it continues to offer cashless facilities at
                                                                                                                                                                                                             its 4000-strong network of healthcare
                                                                                                                                                                                                                                                             day of patient's admission itself to the
                                                                                                                                                                                                                                                             hospital. Other parties, which are not
                                                                                                                                                                                                                                                             even part of this matter, offer testimo-
                 After that the cancellations started               ance companies as well. These organi-         insurance companies on an average              ty, should get themselves treated from      providers. Mr Antony Jacob, CEO,                ny to this. Pushpa Girimaji, a well
                 increasing and it didn't remain a story            sations are engaged in processing insur-      incur an expenditure of Rs.120. To curb        the current list of their PPN.              Apollo Munich Health Insurance, says,           renowned consumer activist, says,
                 of any particular hospital or any par-             ance claims as well. At present, there are    such malpractice, we have decided to           Reimbursement facility would not be         "Changes to the provider network are            "When a customer goes to hospital, first
                 ticular city. In fact, all the public sec-         27 TPAs operating in the country.             start the PPN system."                         given if a person takes treatment in hos-   an ongoing exercise with insurance              question he/she is asked whether he/she
                 tor insurers had decided to de-list a                                                                With over-billing of their health          pitals which are out of the PPN ambit.      companies. While making changes, we             is insured or not. Treatment goes
                 number of super speciality hospitals               The genesis of                                insurance customers by hospitals, insur-            For now, the four PSUs have a tie-     believe that customer interest should           according to the reply of this question."
                 from their list in four metropolitan               cashless trouble                              ance companies were reporting a loss of        up with only 103 hospitals in Delhi and     not be compromised with and clear and           An official with Star Health says,
                 cities. Now, the question is - Is it fair that         The move of PSU insurers                  around Rs 1500-1600 crore per annum.           around 350 in the country. The new          advance communication should be                 "Hospitals perform undue tests for mak-
                 policy holders are bearing the brunt of            (National Insurance Corporation, New          For resolving this problem, insurers had       formed PPN has 74 hospitals in              given to customers."                            ing huge bills. Not only this, patients are
                 the dispute between insurers and hos-              India Assurance Company, Oriental             two options - either to increase the pre-      Mumbai, 65 in Chennai and 58 in                  Insurance regulator IRDAhas made           made to stay in hospitals for more than
                 pitals?                                            Insurance Company and United                  mium of policy holders who are will-           Bangalore. Most of the top-notch hos-       it very clear that it won't interfere in this   the days required." Even TPAs recog-
                      Usually, the health insurance                 Insurance Company) is aimed at bring-         ing to get treatment in those hospitals or     pitals in the country such as Apollo,       matter as it is not a regulatory issue.         nise this fact. Gupta says, "Even if a per-
                 schemes are given for one year and pol-            ing down the claim ratio in the health        to de-list these hospitals from their          Hindujas, Lilavati, Breach Candy,           On the other hand, the Competition              son is admitted with a normal problem,
                 icy holders have to renew it after every           insurance segment. These insurance            panel. In this scenario, to control the        Fortis, Escorts and Max are not in the      Commission of India (CCI) has said that         hospitals perform unnecessary tests. In
                 one year. Policy holders have to choose            companies noticed that the patients with      undue expenses, all the public sector          network of these insurers.                  it won't act on the issue suo motu. P S         addition, a panel of doctors visits unnec-
                 a sum insured for the policy and pre-              insurance covers were being charged           general insurance companies, have pre-              But the most pathetic part of the      Parashar, member, CCI, says, "We can't          essarily and it is important to note that
                 mium is fixed according to that. If the            higher than other patients. Man Singh         scribed rates for 42 types of treatments.      story is that hospitals were not informed   do anything regarding the matter until          this visit is a charged service. Normally,
                 sum insured of a person lapses in ini-             Rawat, RM, United India Insurance,            These are planned surgeries such as            well in time that they were out of cash-    the matter is brought to us."                   a patient is charged Rs 15-20 thousand
                 tial months itself, then he will have to           says, "It is not a hidden fact. It is known   cataract treatment, gall bladder surgery,      less facility panel. Later, PSU insurers                                                    for cataract operation, but he is charged
                                                                                                                                                                 expressed their view on the issue           Over billing syndrome                           Rs 25-30 thousand in case he is
                                                                                                                                                                 through news paper advertisement on             Insurers are facing this over-billing       insured." The charges are different in
                                                                                                       Medical Insurance                                         July 15. In this advertisement, these       problem for many years. This matter             case the policy holder is having a CGHS
                                                      Customer: Every person                                                                                     insurers said that policy holders would     was raised by TPAs of insurers in year          card and if another person is having a
                                                      who is buying health
                                                      insurance policy is cus-
                                                                                                                        1 Comprehensive health
                                                                                                                          coverage: It is complete               be informed by TPAs about the revised       2005 as well but the issue remained             cashless facility. "CGHS card holder
                                                                                                                       coverage for hospital and                 list of network hospitals. Later            unresolved at that time. As discussed           is charged Rs 1.5 lakhs for bypass sur-
                                                      tomer. In case of Group                                          physician charges subject to              Moolchand, Sir Ganga Ram and Metro          earlier, insurers were reporting Rs             gery, but an insured patient is charged
                                                      health insurance, all the                                        deductibles. This coverage
                                                      persons of group are con-                                        combines basic Hospitalisation
                                                      sidered as customers.                                            coverage policy and Critical ill-
                                                                                                                       ness coverage.                                Over-charging syndrome                                          Charges and counter charges
                                                                                                                                                                 Overcharging: When hospitals charge more than
                                         How                                                                                                                     the rate prescribed by Central Government Health
                                      the health                                           2 coverage:
                                                                                                                                                                 Services (CGHS), it is alleged 'overcharging'.
                                                                                                  a) Reimbursement hos-                                          Ways of overcharging
                 Premium: Fee
                                      insurance                                            pitalisation: Reimbursement
                                                                  Network                  of the expenses (incurred by                                            Patients are kept admitted by hospitals for more
                 taken by insur-        system                                                                                                                     than necessary days.
                 er to offer health                               Hospital: With           the policy holder during the
                 insurance is           works?                    the help of TPAs,        treatment) is done by insur-                                            Hospitals perform unnecessary tests with even a
                 called premium.                                  insurers make a          ers after approval by TPA.                                              normal problem.
                                                                  network of hospi-        b) Cashless hospitalization:                                            Panel of doctors pay visits unnecessarily to the
                                                                  tals in which poli-      Mediclaim policy holders are                                            patients                                                   Insurers: Due to over          Customer
                                                                  cy holders are           entitled of cashless facilities                                                                                                    billing insurers are mak-      Reducing the             Five Star Hospitals-
                                                                  offered treatment.       in the network hospitals after                                          Referring to un-necessary departments                                                                              Small and medium
                                                                                                                                                                                                                              ing an estimated loss of       number of net-
                                                                                           approval by TPAs.                                                                                                                  Rs.1500 crore annually.        work hospitals           hospitals have limited
                                                                                                                                                                                                                              Hospitals are de-listed        of cashless              facilities. Our charges
                                                                                                                                                                                                                                                                                      are more as we offer
                                                                                                                    3 Criticalillness insurance is a
                                                                                                                                illness coverage:

                                                                                                                      form of health insurance that
                                                                                                                                                                                                                              as they aren't agreeing
                                                                                                                                                                                                                              to new rates.
                                                                                                                                                                                                                                                             facility is not
                                                                                                                                                                                                                                                             less than                excellent facilities.
                         TPAs: Third Party Administrators                                                                                                                                                                     TPAs- Hospitals                breaching the            Hospitals are de-list-
                         (TPAs), facilitators between insurers                                                     provides cover in the event of a per-                                                                                                                              ed arbitral basis.
                                                                                                                   son suffers from critical diseases.                                                                        increase the charged by        contract.
                         and customers, are responsible for                                                                                                                                                                   50 per cent in case of
                         processing insurance claims, empan-                                                       Typical illnesses and diseases cov-
                                                                                                                   ered by critical illness may differ                                                                        patients who have
                         elling hospitals and negotiating rates
                                                                                                                   from company to company.                                                                                   insurance.
                         for treatment on behalf of insurers.

                14     MONEY MANTRA     August 15, 2010                                                                                                                                                                                                             August 15, 2010     MONEY MANTRA   15
EP 3-35-alok-akm.qxd     7/25/2010      5:19 PM        Page 16

                   Special Report                                                                                                                                        BIG TALK
                                                                                                                                                                         r. Veerappa Moily is not only
                  Rs.3.5 lakhs for the same."
                       Hospitals counter the charges of
                  overbilling. Dr Anil Bansal, Secretary,
                  Indian Medical Association says,
                                                                 can't be treated properly in PPN, he can
                                                                 permit cashless treatment in a hospital
                                                                 other than the network hospitals. K K
                                                                 Agarwal, cardiologist in Moolchand
                                                                                                               the world. Things will not change until
                                                                                                               we bring in laws that will punish every
                                                                                                               stakeholder if any fraud is detected."
                                                                                                               A few hospitals have agreed to the rates
                                                                                                                                                              M          a cabinet minister but a pro-
                                                                                                                                                                         lific writer, voracious reader,
                                                                                                                                                              and a contemporary thinker. He
                  "Doctors don't want to take a chance           Hospital, says, "Policy holders are now       of PSU insurance companies after the           believes in epics but gives it a differ-
                  if there is any doubt during the treat-        being treated on case to case basis."         CII meeting in Mumbai.                         ent treatment to guide young genera-
                  ment. Generally, doctors do it if the per-                                                                                                  tion. As law minister of the country Mr.
                  son is not paying from his pocket. Can         Struggling for a solution                     Confusion in the air                           Moily has been a pioneer of judicial
                  it be called over-billing?" K K Agarwal        Insurers are mulling over several                   PSU insurers have made PPN to            reforms process. He is having a blue
                  asks, "If the first doctor's fee is Rs 1000,   options to end this impasse. Here are a       curb their expenses and even insurance         print of vision document and engrossed
                  and that of the second and the third one       few:                                          regulator is not ready to mediate to sort      to implement it in the country. He spoke
                  is Rs 500 and Rs.150, which doctor in               Pay more premiun to get treated          the issue. In the meanwhile, patients          to Awanish Kumar Mishra, Editor,
                  view of the insurance company would            at five star hospitals:All the four state-    have been left wondering as why they           Money Mantra on issues ranging from
                  be accused of over-charging?"                  owned non-life insurance companies            are not allowed to use cashless facili-        judicial reforms to ULIP ordinance and
                  Spokesperson of Fortis says, "The alle-        are looking at segmenting the health          ty despite having paid premiums on             his recent epic Shree Ramayana
                  gation about over-charging has no              insurance market to ensure that cashless      time.                                          Mahanveshanam. Here are the
                  ground because TPAs control the                facility is available at top hospitals for         The confusion of effective date?:         excerpts.
                  approval process and prices are pro-           those willing to pay for it. Officials of     Rawat says, "The new PPN is appli-
                  vided to all TPAs and insurance com-           PSU insurers are mulling introducing          cable to the customers who buy or              You've been a pioneer of judicial
                  panies in advance prior to medical treat-      a product where the buyer would pay           renew the policy after July 1, 2010."          reforms process. Can you tell us a
                  ment." Dr Sanjeev Bagai, CEO, Batra            more premium if they want to get treat-       But his claim is repudiated by his own         few reforms undertaken by you?
                  Hospital, says, "If a patient requires         ed in best hospitals.                         TPA in Mumbai-MD India, as its offi-               We have been working on a lot of
                  examination by a team of doctors, we                Option of smart cards:Afew com-          cial says, "No policy holder is given          issues. First is the disposal of cases.
                  can't deny him the care simply because         panies have left out TPAs and offering        cashless facility in the hospitals which       We had a two-day national consultation
                  the policy doesn't allow it."                  solutions on their own. Star Health,          are not the part of PPN. We are send-          session on October 24 last year on judi-
                                                                 which was working with the help of            ing all the policy holders to network          cial reforms with particular focus on
                  Fate of policy holders                         TPAs, is not dependent on them. Max           hospitals of PPN only."                        speedy disposal of cases. We have also
                       The sudden exclusion of top-notch         Bupa, a new entrant in the segment, is             Is it legal to withdraw cashless          worked out many programmes to
                  hospitals from cashless treatment list         working on the No TPA model. They             facility?: Girimaji says, "Over charg-         implement the vision document that I
                  defeats the main purpose of buying             are offering smart cards to their cus-        ing is not new by these hospitals.             presented. The heart of the vision doc-
                  health insurance policy for policy hold-       tomers instead. Apollo Munich is plan-        Charges are quite different in other hos-      ument is the national litigation policy.
                  ers. Going by the current list of PPN,         ning to offer smart cards to its cus-         pitals in comparison with theses hos-          It will make government efficient and
                  treatment of policy holders would incur        tomers. Jacob says, "Technology and           pitals for the same treatment. As far as       responsible. It has been seen that the
                  less expense which would save the sum          innovation is a key to success and we are     interests of consumers are concerned,          state and the central governments are
                  insured. It means they would be able to        constantly looking at new ways to offer       change in the policy terms in between          major litigants. If we reduce govern-
                  carry a bit more sum for other treatments      innovative products and services to our       the policy is breach of contract." But         ment litigations, courts would have
                  during the next treatment. But, as top         customers. Our IT team is reviewing the       Rahul Aggarwal, CEO, Optima                    more time for people's litigations.
                  notch hospitals have been excluded from        smart card options."                          Insurance Brokers, expresses different         Secondly, we have approached 13th
                  the list, policy holders would not be able          Penalty for fraudulent practice:         opinion altogether. He says, "Policy           Finance Commission that provided Rs
                  to get cashless treatment in these.            Dr Naresh Trehan, Chairman of a               holders should note that cashless facil-       5000 crore for next five years, from cur-
                       A few breathers: It is important to       Confederation of Indian Industry (CII)        ity is not a part of their policy. Policy      rent financial year, to implement early
                  note here that Insurance companies may         committee on health and senior cardio-        holders are entitled for proper and time-      disposal of cases. It will ensure that no
                  provide cashless facility in emergency         thoracic surgeon, says, "Insurers and         ly reimbursement for sure, but insur-          case remains pending for more than
                  cases and under group insurance cover.         healthcare providers have always been         ance companies are not bound to give           three years and the case will be disposed
                  If insurance company feels that a patient      playing this cat and mouse game all over      cashless facility."                            within fourth year.
                                                                                                                                                              Q. Are these measures sufficient

                               Hospitals of
                                                                should do lobby-
                                                               ing on government
                                                             for an institution which
                                                                                                              The way out
                                                                                                                                                              enough to deal with ever increasing
                                                                                                                                                              number of pending cases?
                                                                                                                                                                  We have worked out a programme
                                                                                                                                                              for that. We have introduced a number
                                                                                                                                                                                                           ‘A commercial court
                             network should
                              be chosen on
                              the quality of
                                                               would look after the
                                                              regulation of charges
                                                                 of health service
                                                                                            If one
                                                                                                                                       Policy holders
                                                                                                                                     should have the list
                                                                                                                                                              of programmes like morning and
                                                                                                                                                              evening courts and lok adalat in a mas-
                                                                                                                                                              sive way. Moreover, many people will
                                                                                                                                                                                                           in each high court’
                                                                     providers.                                                       of hospitals in
                                                                                                                                                                                                           court managers and how they are             also been introduced. Currently, judges
                                                                                        taken policy,                                                         be trained to mediate. This can be done
                                                                                                                                        his/her area                                                       going to help the judicial system?          seem to be occupied with court man-
                                                                                        it is better to                                                       by building state judicial academies to
                                                                                        go for the                                            which are                                                        We are working to set up e-courts       agement and classification of the cases.
                                                                                                                                                              train government advocates both at the
               General                                                                  companies                                                offering     state and central level. We have been
                                                                                                                                                                                                           that will work on IT enabled system.        With the introduction of court man-
               insurers                                                                 which have                                              cashless                                                   These courts will function in both high     agers, we can lessen the burden on
           should bargain                                                                                                                       facility.
                                                                                                                                                              working on building state judicial acad-
                                                          Option                        smart card                                                                                                         courts and subordinate courts so that the   judges. This can save at least two-three
            with hospitals                               of smart                                                                                             emies. Also, there's a need to train
                                                                                        facility.                            If a policy holder has                                                        process of resolving cases can be expe-     hours of judges that can be utilized in
                on new                                 card can be                                                                                            judges.
                 rates.                                                                                                 planned his/her treatment in any                                                   dited.                                      litigation of cases. Case management
                                                        instead of                              specific hospital, he/she should check with the TPA           What is the concept of e-courts and              The concept of court managers has       has become extremely important these
                                                           TPAs.                                whether that hospital is offering cashless facility or not.
                 16    MONEY MANTRA      August 15, 2010                                                                                                                                                                                                       June 30, 2010   MONEY MANTRA   17
EP 3-35-alok-akm.qxd     7/25/2010    5:19 PM          Page 18

                     BIG TALK
                 days.                                                                                         nance wouldn't have been introduced.

                                                                 We will ensure that no                        Today, it is only the government that
                 Q. And what about the woes of

                                                                                                               is trying to bridge the problem. You
                 numerous under trials languishing               case remains pending for                      have seen the market getting destabi-
                 in jails?
                                                                                                               lized due to SEBI-IRDA spat over
                     Currently, there are more than three        more than three years and                     ULIP. Government interfered, the mar-
                 lakh under trail contestants in jail as
                                                                 the case will be disposed                     ket stabilized. There're concerns. Idea

                 there's no capacity to hear cases. And
                                                                                                               is not to bring any changes in the reg-
                 people who are in jail are those who            within fourth year.                           ulator. They can function on their own.
                 can't provide for bail and hire any advo-
                                                                                                               ULIP ordinance will not affect their
                 cates. Keeping this in mind, we                 sultations. Last month, we had consul-        functioning or autonomy. It is only to
                 launched a programme from January 26            tations in Guwahati for eastern zone,         support and facilitate them.
                 to July 31, 2010 to release at least two        for states like West Bengal, Jharkhand,
                 lakh under trails. Today, about 1, 75,000       Bihar and Orissa. We also held con-           Sir, your recently released book,
                 prisoners have been liberated. And we                                                         Shree Ramayana Mahanveshanam

                                                                 sultations in Chennai for Southern
                 expect to release over two lakh people          states. The fourth consultation was held      has been widely accorded by critics.
                 by July 31. So, if we assume that a fam-        in Delhi for central zone. The fifth con-     How have you been able to find out
                 ily has five members, we have actual-                                                         time out of your busy schedule and
                 ly relieved six lakh people in any coun-
                 try. Several other things are on cards
                 like introduction of commercial courts
                 as per the bill introduced by Lok Sabha.
                 The bill is, however, before a com-
                                                                 sultation will be held in Goa for west-
                                                                 ern region. All these five regions will
                                                                 help us understand the growth reality
                                                                 and issues taking place in a particular
                                                                 region. We will get to know how best we
                                                                 can dispose of the cases, how we can
                                                                                                               write such a great work?
                                                                                                                    I've been into writing, especially
                                                                                                               in the Kannada language, right from my
                                                                                                               10th standard days. I've been writing
                                                                                                               short stories, poems. Then I wrote nov-
                 mittee and Rajya Sabha and is likely            quicken the process and so on. This is        els. Before I write any novel, I do
                 to be passed in the next session.               going to create a revolution in imple-        research on the topic for 2-3 years. Then
                                                                 menting the reforms effectively and           only I start working on them. I thought
                 Could you elaborate the concept of
                                                                 with co-operation between the judiciary       writing          Shree        Ramayana
                 commercial courts? What role can
                                                                 and central government.                       Mahanveshanam fourteen years back.
                 commercial courts play in a boom-
                                                                                                               Although it is within the parameters of
                 ing economy?
                                                                      The way your office dealt with the       Valmiki Ramayan, there are a lot of
                      There will be at least one com-
                                                                 controversy of Lokayukta has been             innovative ideas in it. I've rewritten it
                 mercial court in each high court. We
                                                                 appreciated by everyone How will              in poetry form.
                 have invested about five crore rupees
                                                                 you make it more powerful?                         It was in five volumes in Kannada.
                 on setting up commercial courts. The
                                                                      Lokayukta is an important institu-       Now, the same thing is being translat-
                 idea is to dispose off the cases within
                                                                 tion recommended by the first admin-          ed in English. It can be sung in
                 a year. The concept of commercial
                                                                 istrative reforms commission. The main        Hindustani music. I gave it a different
                 courts is common in the UK. In fact, the
                                                                 idea is to look into corruption and level     treatment. According to me, every epic
                 UK established commercial courts
                                                                 of bureaucracy at political level.            is a guide for young people; so that they
                 almost 100 years back. Disposal of
                                                                 However, only some states have given          can think about these characters. So,
                 cases in these courts takes a minimum
                                                                 power to it. This is the reason we're         I've given different treatments to Sri
                 of three months and six months at the
                                                                 thinking to amend the constitution to         Rama, Laxman, Sita, Ravana,
                 most. It will create conducive invest-
                                                                 give Lokayukta a constitutional status.       Mandodari, Bali, Sugriva and other
                 ment environment for both foreign and
                                                                 With this, they can function with more        characters.
                 domestic players since legal barriers
                 are preventing investment to a                  independence and capability to deal           …and you have given a new expla-
                 great extent.                                   with political and bureaucratic               nation to the concept of Rama rajya
                      Besides, we have proposed amend-           corruption.                                       Yeah. You're right. People think
                 ment to Arbitration and Mediation Act.          Recently, government issued the               Rama rajya is the governance intro-
                 With this, we're going to make India the        ULIP ordinance. Some regulators               duced by Sri Rama. But it is not true.
                 most preferred destination for interna-         like RBI and SEBI feel that it can            Rama rajya was created by the people
                 tional arbitration. Currently, the impor-       diminish their and autonomy. They             of Ayodhya. Ayodhya was not owned by
                 tant mediation and arbitration centers          have requested the government to              anyone, neither Rama nor Bharat.
                 in the world are Singapore, Hong Kong           let the ordinance expire. What is             People of Ayodhya made it what is
                 and Paris. We look forward to attract           your take on this?                            known as Ram rajya.
                 that kind of business. Even we will                  The ordinance has been issued            What's next on the table?
                 make domestic arbitration attractive.           because of certain conflicts among the            It's Draupadi. Because of Draupadi,
                 We are coming out with a well-craft-            regulators. There are so many finan-          Kurukshetra took place. That is the
                 ed bill in next session most probably.          cial regulators like RBI and SEBI,            most powerful character in India and
                 But what is the way to implement                insurance regulator IRDA and others.          world over. She was the force of unity,
                 these reforms in high court and sub-            There's whole lot of misunderstanding         which bound all the five Pandavas at
                 ordinate courts?                                because of their overlapping activity.        one place. While writing Draupadi, I
                     I have listed a 10-12 agenda items.         If they have been in a position to work       read autobiographies of most power-
                 I have been conducting regional con-            in their own sphere of activity, this ordi-   ful women of the country.

                18   MONEY MANTRA    August 15, 2010
EP 3-35-alok-akm.qxd     7/25/2010    5:19 PM       Page 20

                      C JUNCTION
                                                                                                                                                            of financial uncertainty, risk aversion                                 Silver MCX continuous
                 Upside Limited For Yellow                                                                                                                  means investors take refuge in hard
                                                                                                                                                            assets such as gold. But receding risk
                                                                                                                                                            aversion has seen spot gold correct from

                 Metal In Short Term                                                                                                                        a record of $1,265 an ounce hit on
                                                                                                                                                            June 21.
                                                                                                                                                                Firm dollar and volatile stock mar-
                       Anjani Sinha                           A bounce in global equities                      in recent days has slipped against the       kets prompt investors to sell bullion to

                                                                                                               euro. Traders expect dollar weakness         cover losses. Gold’s failure to revisit a
                                                              and an up tick in U.S. bond                      to help support gold prices, but reced-      recent record could also spur some sell-
                          GOLD & SILVER
                                                              yields all acted to drag                         ing risk aversion related to euro zone       ing. Gold decline is also supported by
                              Market Review                                                                    sovereign debt will check price gains.       the news after China said bullion would
                      (06th July to 20th July 2010)           gold and the other                               Outlook: Gold is on course for a 10th        not become a major investment home
                      With the start of the fortnight, the    precious metals.                                 straight annual advance, the longest         for its foreign exchange reserves, in
                 precious shiny yellow is trading lower                                                        winning streak since 1920. In the short      spite of it the lukewarm attitude to gold
                 as it failed to sustain at higher level                                                       term, gold may have limits to its            reiterated       by    China's      State
                 due to the power of the US dollar which      foreign currency. Investors viewed the           upside potential, but the longer term        Administration of Foreign Exchange
                 is recuperating from the extensive           news as bearish as the amount of gold            trend remains intact. An improved            is unlikely to have long-term repercus-
                 decline. At COMEX, Gold August con-          will eventually return to the market             appetite for higher risk assets like equi-   sions in bullion markets.
                 tract lost by $17.00/Toz, while COMEX        so gold swap operations conducted                ties and industrial commodities has
                 Silver September contract lost by 13.00      by the Bank of International                     taken some of the wind out of gold's               REFINED SOY OIL                                                   Refined Soy oil MCX
                 cents/Toz. In the same period, MCX           Settlements (BIS) in recent months               sails in recent weeks. The euro's recov-                 Market Review
                 Gold August lost Rs.170/10 gram and          stirred fears of gold dumping.                   ery in recent weeks has prompted                    (6th July to 20th July 2010)
                 Silver September contract lost by                Precious metals markets also                 investors to unwind those short euro-            Soyabean oil prices continued to
                 Rs.81/Kg. At NSEL, Ahmadabad spot            watched holdings of gold ETFs to                 long gold trades.                            flare up on domestic demand and glob-
                 Gold lost Rs.212/10 gram and Silver          gauge the level of risk aversion. In                  Sentiment towards gold is weak on       al markets firm sentiment. Demands
                 gained by Rs.20/Kg. NSEL Demat E-            the fortnight decline in the ETF                 speculation that investment demand is        from local stockiest continues to
                 Gold lost by Rs.14.20/gm, while NSEL         holdings put pressure on gold. Gold              slowing after the metal failed to extend     increase to cover the upcoming festive
                 Demat          E-Silver       lost     by    prices got support from dollar, which            its rally to a record level. During times    season needs. MCX near month con-
                 Rs.1.80/ 100 gm.                                                                                                                           tract rose by Rs.28.25 to close at
                      Sell off in gold was witnessed                                           Gold MCX continuous                                          464.90/10 kg.
                 throughout the fortnight. As the pre-                                                                                                          Soyabean and Soya oil gained on
                 cious metal is considered the perfect                                                                                                      the Chicago Board of Trade following
                 hedge against inflation, but with no                                                                                                       reports that the yield in US soyabean
                 inflation threats currently surfacing,                                                                                                     could be affected by heavy rains in the
                 investors turned bearish on gold and                                                                                                       growing areas. Other factors that have
                 focused on low yielding assets as a safe                                                                                                   helped soya oil firm during the fortnight
                 investment. A bounce in global equi-                                                                                                       were reports of China planning to
                 ties and an up tick in U.S. bond yields                                                                                                    import more soyabean, a rebound in the
                 all acted to drag gold and the other pre-                                                                                                  European economy and gains in crude         Market   Contract     Open      High      Low      close          Prev.    Net
                 cious metals. Gold dragged down due                                                                                                        oil prices. The other factor is the US                                                                        close    change
                 to lackluster investment and jewelry                                                                                                       Department of Agriculture pegging           MCX      Aug' 10      441       468.50    441      464.90         436.05   +28.25
                 demand over the seasonally soft sum-                                                                                                       soyabean stocks at 571 million bushels,
                 mer months, with a further outflow                                                                                                         lower than trade estimates of 594 mil-      with importers and processors.           ing farmers to hold back beans as they
                 from the world's largest gold ETF                                                                                                          lion bushels. This indicates near-term      According to data released by Solvent    expect prices to rise. The month of
                 undermining sentiment.                                                                                                                     tightness in the US markets.                Extractors Association (SEA), imports    August is believed to be very crucial for
                      Appetite for gold was also ham-                                                                                                           Soya oil is rising due to uncertain-    went down by 6% to 7.32 lakh tonne       crop growth and any adverse situation
                 mered as the State Administration of                                                                                                       ty over weather for growing U.S. crops,     against 7.8 lakh tonne reported during   in weather may impact yield adverse-
                 Foreign Exchange (SAFE) in China                                                                                                           solid export demand and outlooks for        the same month of last year. The cumu-   ly. Thus market is adding some risk pre-
                 reiterated gold will not become the main                                 SPOT MARKET PRICES                                                a tighter old-crop balance sheet.           lative import of vegetable oils from     mium to the market.
                 investment channel of its foreign            Commodity Market                  Price           Open      Close       Prev. Net             Supplies from last year's harvest are       November 2009- June 2010 (vegetable           Outlook: Industry analyst believes,
                 exchange reserves. SAFE said U.S.                                              Quote                                 Close Change          tight and there are growing worries that    oil year runs from November to           lack of a supporting policy is leading
                 Treasury securities would remain an          Gold           NSEL Amd           Rs. /10 gm. 18509         18324       18536 -212            the crops currently growing could fall      October) was 5.5 million tonne, com-     to lower oilseed cultivation in the coun-
                 important market for the managers of         Silver         NSEL Amd           Rs./kg.     28711         28793       28773 +20             short of yield expectations based on        pared to 5.8 million in the correspon-   try this kharif season. Zero import duty
                 China's official currency reserves, but                                                                                                    slumping crop ratings. The market           ding period of the previous oil year.    for edible oil and delayed rains may
                 gold would not become a major com-                                     FUTURES MARKET PRICES                                               received a fresh dose of fundamental            Inadequate monsoon rainfall in the   result in a 5-7% fall in the sowing of
                                                              Market   Commodity-       Unit         Open      High      Low       Close   Prev.   Chg
                 ponent of the central bank's portfolio.                                                                                                    and outside support, with a drop in soy-    main soybean-growing regions in India,   major kharif oilseeds such as soybean,
                                                                       Contract                                                            Close
                      The Bank of International                                                                                                             bean crop ratings serving as a catalyst     Asia's biggest supplier of the animal    groundnut and sunflower. Domestic
                 Settlements (BIS) entered into swaps in      MCX      Gold-Aug-10      Rs/10 gm.    18491     18538     18191     18339 18509 -170         to attract value hunting buying.            feed ingredient, has delayed planting,   oilseed farmers as well as crushers have
                                                              COMEX    Gold-Aug-10      $ / Troz     1207.80   1218.70   1175.20   1190.9 1207.90 -17
                 the financial year to March 31 with                                                                                                            India's vegetable oil imports           prompting farmers to hoard beans in      not been getting remunerative prices for
                 counterparty that the BIS will take a        MCX      Silver-Sep-10    Rs/kg.       28680     29340     28461     28630 28711 -81          dropped by 6% in June, its sixth straight   anticipation of higher prices. Sowing    their produce since October 2009, thus
                 total of 346 tons of gold in exchange for    COMEX    Silver- Sep-10   Cents/Troz   1782.30   1853.30   1745.00   1770.00 1783.00 -13      monthly fall due to significant stocks      has been delayed and that's encourag-    causing a drop in the cultivation of

                 20    MONEY MANTRA   August 15, 2010                                                                                                                                                                                                   August 15, 2010     MONEY MANTRA    21
EP 3-35-alok-akm.qxd     7/25/2010     5:19 PM       Page 22

                 oilseeds so India will see a significant      playing on the minds of the market.          the crops currently growing could fall
                 fall in kharif oilseed sowing if the gov-         In the short term, refined soy oil       short of yield expectations based on
                 ernment does not stop cheap oil               futures are expected to trade higher on      slumping crop ratings. Monsoon being
                 imports. Higher supply of soyabean oil        account of firm overseas market              irregular and farmers holding up their
                 from South American nations such as           Supplies from last year's harvest are        stocks, soybean prices are likely to
                 Brazil, Argentina and Paraguay is also        tight and there are growing worries that     increase in the coming days.

                               COTTON                                                      Cotton futures (ICE)
                              Market Review
                        (6th July to 20th July 2010)
                     The international cotton prices
                 slipped during the fortnight as traders
                 eyed uncertain demand and strong
                 incoming supplies. Favorable weather
                 conditions heightened expectations for
                 a bountiful U.S. fall harvest. The ICE
                 future cotton prices October delivery
                 settled down 4.15 cents, or by 5.06%,
                 at 77.86 cents a pound.
                     The cotton prices have fallen 4.5%
                 since the start of July as traders factored
                 in expectations for a bumper crop in the
                 U.S., up 50% from last year at 18.30
                 million 480-pound bales, according to
                 data from the USDA. Near-ideal con-
                                                                Market         Contract     Open     High      Low     close   Prev.      Net
                 ditions for cotton development are fos-                                                                       close      change
                 tering growth. The U.S. cotton crop was
                                                                ICE (Cents/lb) Oct 10       78.17    79.29     77.86   77.86   82.01      -4.15
                 rated 68% in good-to-excellent condi-
                 tion in the week ended July 18, up from                                                  the highest ever. The average produc-
                 66% the previous week, USDA data                                                         tion is around 30 million bales, having

                 show. The U.S. dollar gained as traders       The cotton prices have                     touched 32 million two years ago.
                 avoided the euro ahead of the release         fallen 4.5% since the start                Cotton acreage this year increased 10%
                 of results from stress tests on European                                                 in Gujarat & Maharashtra, and 7%, in
                 banks. Bearish U.S. housing data also         of July as traders factored                Andhra Pradesh states etc. Afew trades-
                 added strength to the dollar as signs of      in expectations for a                      men believe the increase could even
                 stalling U.S. economic recovery damp                                                     be 9%. Last year, cotton was sown in
                 risk appetite. Investors bought the safe-     bumper crop in the U.S.,                   10.2 million hectare and this year it is
                 haven dollar, which made cotton more          up 50% from last year at                   likely to touch 11 million hectare. The
                 expensive in other currencies.                                                           seed market undertone is also steady.
                     The worlds 2010-11 crop projec-           18.30 million 480-pound                         Outlook: Sentiments of traders are
                 tions show higher production which            bales.                                     turning bearish on cotton price as indi-
                 mostly offsets by lower beginning                                                        cation for new crop is suggesting
                 stocks. Beginning stocks are reduced                                                     bumper crop. Traders in US are uncer-
                 mainly in Pakistan, due to adjustments                                                   tain about the demand that will meet the
                 in production beginning in 2007-08                                                       glut of cotton coming to the market. A
                 reflecting reduced estimates of average                                                  bumper crop is expected from India as
                 bale weights. Production for 2010-11 is                                                  well. The quantum of raw cotton
                 raised in the United States, Brazil, and                                                 arrivals in various upcountry markets
                 Uzbekistan, but lowered in Pakistan.                                                     has reduced ranging around 8,000 bales
                 World consumption is raised slightly                                                     per day. With wide spread monsoon
                 based on increases for Turkey and the                                                    rains across most of the cotton belt and
                 United States. World trade is support-                                                   the reports of expected good cotton crop
                 ed by projected higher import demand                                                     in the ensuing cotton season 2010-11
                 by Pakistan, Turkey, and China. World                                                    have changed the sentiments of the
                 stocks are marginally above the June                                                     domestic mills, who were buying cot-
                 projection and the world stocks-to-use                                                   ton for their lean season requirement.
                 ratio is the smallest since 1994-95.          quoted at Rs.29,100-29,300 per candy.      It is felt that the domestic cotton prices
                     In India, cotton prices continued to      The steady monsoon so far this season      in the coming weeks may rule steady.
                 rule steady with moderate transaction.        is expected to raise the cotton produc-                  (Author is MD, National Spot
                 The Shankar-6 prices in Gujarat were          tion in the country to 35 million bales,                      Exchange of India Ltd.)

                 22    MONEY MANTRA    August 15, 2010
EP 3-35-alok-akm.qxd     7/25/2010    5:19 PM       Page 24

                D STREET

                 Bullish Trend Likely To                                                                                                                                PUT CALL CONCENTRATION (July)                                                OPTION STRATEGIES
                                                                                                                                                                                                                                                  Sell 1 lot 5200 put @ Rs 40 and
                                                                                                                                                                                                                                                 sell 1 lot 5700 Call @ Rs 23 of

                 Continue                                                                                                                                                                                                                        August expiry
                                                                                                                                                                                                                                                     For traders who believe the
                                                                                                                                                                                                                                                 likely range to be 5200 to 5700 in
                      Ashish Kapur                                                                      during the previous month and Nifty
                                                              Domestic retail money has                                                                                                                                                          August month may sell call of

                                                                                                        futures which were earlier trading at a
                 Our Markets are showing an amazing           been lying on the sidelines               discount have started trading at a pre-                                                                                                  5700 and put of 5200 of August
                 amount of resilience and strength. Even                                                mium.                                                                                                                                    series. This strategy will give an
                 on days when global markets are weak         for the past several                          Analyzing the charts Nifty has bro-                                                                                                  inflow of Rs 63 and a fixed return
                 due to a gloomy economic outlook in the      months. We sense a feeling                ken out of a range which should take                                                                                                     of 11% between 5200 and 5700.
                 developed world our markets have                                                       us to 5500-5550 levels where some sup-                                                                                                   Below 5137 and above 5763 the
                 refused to give way to any significant       of 'being left out' creeping              ply should come in. A flag formation                                                                                                     strategy will incur losses.
                 selling pressure. In fact buying emerg-      into the retail mindset in                (Mentioned in the previous edition) was
                                                                                                                                                                                                                                                 Buy 1 Lot 5600 Call @ Rs 50,
                 ing on every decline has been the hall-                                                witnessed on daily charts which has also
                 mark of trading over the past fortnight.     the not too distant future.               helped Nifty to move out of the range.                                                                                                   Sell 1 lot 5700 Call @ Rs 23, Sell
                 Good progress of monsoon, corporate          All this will help sustain the            A long term channel pattern on the daily                                                                                                 1 lot 5800 Call @ Rs 9, Sell 5 lots
                 results on expected lines so far and suf-                                              charts may be tested at the upper end                                                                                                    5000 Put @ Rs 20 and Buy 1 lot
                 ficient liquidity pouring in to our mar-     momentum and create                       which exists at 5550 levels. Same pat-                                                                                                   5200 puts @ Rs 40
                 kets from abroad have helped maintain        euphoria before we see any                tern can also be seen on the monthly                                                                                                         Traders who think that mar-
                 the bullish trend in our markets.                                                      charts and we expect Nifty to touch 5550                                                                                                 kets are likely to witness sharp
                      Going ahead we expect this trend        significant correction.                   levels in the next few trading
                 to continue though valuations at least                                                 sessions.                                                                                                                                movement on either side in
                 in the large cap space are not cheap any-                                                  RSI is in a no trade zone but is near                                                                                                August month can trade this strat-
                 more. Reason for our bullishness is the      in Nifty which has pushed it to hit a     the over bought levels and OBV (On                                                                                                       egy. This strategy will provide
                 sheer momentum building up in the mar-       high of 5453.45. Markets are trading in   Balance Volumes) is looking strong.                                                                                                      loss below 4950 levels and above
                 ket on the back of continuous inflow of      a strong territory and we expect Nifty    Leading indicators on volumes are pos-                                                                                                   5950 levels. Minimum profit in
                 funds from overseas. Also domestic           to move higher. We saw volatility mov-    itive and we also expect volatility to cool                                                                                              the given range is 2.1% between
                 funds and institutions have been large-      ing on the higher side and volumes were   off and meaningful moves to                                                                                                              5200 and 5600 and the maximum
                 ly staying away and using every rise to      also increasing. FII & DII activity has   come in during the next few trading
                 sell and create more liquidity in their      improved and we saw buying interest       sessions.                                                                                                                                gain is 12% at 5000 levels. The
                 portfolios. With markets likely to sus-      coming in from the institutional              Nifty is already moving higher and                                                                                                   strategy also provides decent
                 tain at these levels or move higher on the   participants.                             the first resistance is expected to come                                                                                                 returns of 7.2% at 5100, 5700 and
                 back of the positive sentiments and              We saw good amount of rollovers       in at 5500 - 5550 levels, after which we                                                                                                 5800 levels.
                 encouraging corporate numbers in the
                 first quarter of FY 2011, we can expect                                      NIFTY INDEX                                                                                                                                       est amount of open interest with over
                 this liquidity to also start coming back.                                                                                                                                                                                      114 lakh shares, followed by 5400, 5600
                      To add to this is the domestic retail                                                                                                                                                                                     and 5300 call options with 87 lakh, 83
                 money which has been lying on the side-                                                                                                                                                                                        lakh and 44 lakh shares outstanding
                 lines for the past several months. We                                                                                                                                                                                          respectively in the July series.
                 sense a feeling of 'being left out' creep-                                                                                                                                                                                         On the puts front we can see that
                 ing into the retail mindset in the not too                                                                                                                                                                                     5300 and 5200 put options are the most
                 distant future. All this will help sustain                                                                                                                                                                                     active and have the highest amount of
                 the momentum and create euphoria                                                                                                     expect Nifty to cover couple of hun-         Nifty has broken out the                     open interest with over 100 lakh & 87

                 before we see any significant correction.                                                                                            dred points in a hurry.                                                                   lakh shares outstanding in July series.
                 Encouraging economic and corporate                                                                                                        On the downside we expect Nifty         range which should take us                       Looking at the above concentration
                 data, good progress of monsoon and the                                                                                               to take support at 5225 levels after which                                                the likely range for the next few
                 feel good factor likely to set in before                                                                                             another strong support comes in at 5100.
                                                                                                                                                                                                   to 5500-5550 levels where                    trading sessions is expected to be 5200
                 the Common Wealth Games in Delhi are                                                                                                      One should remain long in the mar-      some supply should come in.                  to 5600.
                 all going to help sustain this bullish                                                                                               kets and portfolios should be limited to                                                      5500 strike calls has the highest
                 phase in our markets.                                                                                                                only 5-6 specific stocks. A stop loss at                                                  interest signifying selling and on the
                      Valuations though are on the high-                                                                                              5100 should be kept for all long posi-       Stocks are also trading with a bit of pre-   down side 5300 strike puts are active
                 er side but keeping in mind the corpo-                                                                                               tions and one should keep a target of        mium. Put Call ratio has remained in         which may be because of good amount
                 rate growth numbers and the relative sta-                                                                                            5550 and 5700 levels.                        range of 0.94 to 1.06 signaling range-       of hedge created in the markets.
                 bility of our economy, the premium is                                                                                                                                             bound market. We expect these move-              On the whole it is better to sell deep
                 justified and sustainable. Also beyond                                                                                               Derivative Analysis                          ments to continue for some days and          out of money calls and puts as markets
                 the index there are a number of mid and                                                                                                  Nifty has been confined in a range       then we may find a breakout in               though bullish are not likely to break
                 small cap ideas which are still looking                                                                                              and volatility is on a roll. July Nifty      the markets.                                 past and move significantly higher
                 promising.                                                                                                                           future is still trading with a premium           Analyzing the put call concentration     very soon.
                      We have witnessed a range breakout                                                                                              of 5-6 points signaling long buildup.        we can see that 5500 call has the high-          (Author is CEO, Investshoppe India Ltd.)

                 24    MONEY MANTRA   August 15, 2010                                                                                                                                                                                                  August 15, 2010   MONEY MANTRA   25
EP 3-35-alok-akm.qxd     7/25/2010    5:19 PM        Page 26

                 BROKER’S PICKS                                                                                                                                                                                                               BROKER’S PICKS
                 Sintex Industries                                       BUY CMP: Rs.350 TARGET: Rs.421                                              FAG Bearings                              BUY    CMP: Rs. 759 TARGET: Rs. 800

                 Strong balance sheet to                                                                                                             Available at cheaper valuations
                                                                                                                                                        Harshal Patil                                        FAG Bearings : 3 months performance
                 fuel growth                                                                                                                         FAG Bearings India Limited (FBIL) is
                                                                                                                                                     one of leading bearing manufacturers in
                      Ashish Kapur                                                                                                                   India. The company is a part of the
                                                                            Sintex Industries: 3 months performance                                  FAG group, Germany, which is a
                 Incorporated in 1931, Sintex Industries                                                                                             world leader in bearings. FBIL has its
                 is a major player in the processed plas-                                                                                            state of the art plant located at
                 tics and textile segment. It started out                                                                                            Vadodara in Gujarat state. Its product
                 with textile manufacturing but giving                                                                                               portfolio encompasses various types
                 into the popularity of overhead water                                                                                               of bearings like deep grove bearings;
                 tanks, it shifted its focus to plastics.                                                                                            four point ball bearing, self-aligning
                 Today, this Gujarat based Indian Plastic                                                                                            bearings, cylindrical roller bearings,
                 Company has become the biggest                                                                                                      spherical roller bearings and tapered
                 exporter of plastic products in India.                                                                                              roller bearings. In addition to manu-
                 The products ranging from Pallets,                                                                                                  facturing of bearings, the company is
                 Tanks, Doors, Insulated Boxes, SMC                                                                                                  also involved in the trading of bear-
                 Meter      Boxes,      Prefabs,     FRP                                                                                             ings. FBIL has an installed capacity
                 Underground Petroleum Storage,                                                                                                      of 50.03 mn bearings per annum
                 Tanks etc.                                                                                                                          (across all product categories) and
                                                                                                                                                     operates at utilisation levels                                          Annual Financials
                 Plastic Industry overview                                                                                                           of ~ 95%.                                  P/L (Rs MN)                   CY07         CY08           CY09          CY10E
                 We expect the plastic consumption to                                                                                                    The sale of manufactured bear-         Net Sales                   6,413.0      7,444.1        7,976.9         9,331.0
                 grow significantly over the coming                                                                                                  ings accounts for 62.9% (CY09) of          Total Sales                 6,516.2      7,660.5        8,264.2         9,534.0
                 years:-                                                                   Per Capita Plastic Consumption                            revenues while the trading activi-         Operating Expense           5,103.7      5,932.5        6,945.4         7,877.0
                      Increasing number of construction                                                                                              ties account for 34.6% (CY09) of           EBITDA (EX Ol)              1,309.3      1,511.6        1,031.5         1,454.0
                                                                   Japan         Europe          USA        China         World         India
                 projects pan India is driving the demand                                                                                            revenues. FBIL is a market leader          EBITDA (Inc Ol)             1,412.5      1,728.0        1,318.8         1,657.0
                 for temporary structures for site office,         90kg          90kg            80kg       27kg          20kg          6kg          in the spherical bearings space with       Depreciation                  193.6        205.9          200.8           231.0
                 bunk houses and other residential units.                    Key Data                     190 basis points to 15.1% though its net   ~60% market share. During CY09             Interest                      (22.7)         4.8            7.0             6.4
                      The automobile majors are replac-         (In Rs Crores)   FY10 FY11e FY12e         profit margin weakened by 50 basis         the company has introduced 18 dif-         PBT                         1,244.8      1,473.5          995.8         1,419.7
                 ing conventional material with light                                                     points to 8.7%. The subsidiaries too       ferent types of spherical ball bear-       Tax                           449.5        516.3          340.4           479.0
                                                               Revenue           3407     4,088 4,906
                 custom molded plastic components,                                                        showed a decent business growth. The       ings.                                      PAT                           795.3        957.2          655.4           940.7
                 thereby increasing fuel efficiency and        Net Profit        329      417   515       net profit of the subsidiaries jumped          FBIL is promoted by FAG                EPS                             47.9        57.6           39.4            56.6
                 also ensuring a smooth drive.                 Margin %          9.7%     10.2% 10.5%     67.7% to Rs 20.7 crore while the prof-     Kugelfischer George Schaefer AG,           Source : Company reports,   HDFC Sec.
                      India's per capita consumption, 6kg,     No of o/s shares 13.65 13.65 13.65         it of the parent company was up only by    Germany, which is a global leader
                 is set to double over the next three years    (in crores)                                20.5%. The textile business that had       in the bearings space. Being a world                  Share Holding (%)             cial muscle of the company. Therefore
                 and India is all set to become the third      EPS (in Rs)      24.1 30.6 37.7            been performing below par in the past      leader in the bearings space, FAG           Description as on              Jun-10   with the overall economy improving,
                 largest consumer of polymers global-                                                     came up strongly to post a 68% jump        Kugelfischer is a preferred supplier        Foreign (Promoter & Group)       51.3   FBILs performance is also expected to
                                                               P/E (x)           14.1     11.1   9.0
                 ly. Adding to this, $80 billion worth of                                                 in returns.                                to the automobile majors like GM,           Indian (Promoter & Group)         0.0   improve and attain the higher level
                 new investments are expected to take          already improved company's margins.                                                   Ford, Volkswagen, Volvo and Diamler         Non Promoter (Institution)       26.7   seen in the past.
                 place in India's plastic industry over        In future too, we foresee improvements     Outlook and Valuation                      Chrysler. Most of these players are         Non Promoter (Non-Institution)   22.0
                 the next three to four years.                 on account of acquisitions and                 The outlook for the industry as well   looking at either entering the Indian       Grand Total                     100.0   Outlook and Valuation
                                                               integration.The company has been car-      as company is likely to remain san-        auto market or expanding their exist-      ratios could rise further in case FBIL       The stock quotes at a cheaper val-
                 Investment Rationale                          rying over Rs 1,000-crore cash on its      guine. The leadership position, strong     ing capacities in India. This is likely    distributes higher dividends or starts   uation compared to the two other large
                      Dominant player in domestic plas-        books, hence possibility of an acquisi-    balance sheet and momentum growth          to benefit FBIL in the form of             spending large sums on capex. Also       players i.e. SKF and NRB. While
                 tics market: The company has con-             tion can not be ruled out. Further it is   from its subsidiaries make it a good       increased demand from these play-          the operating margins for the com-       absence of large capex plans to raise
                 tributed 70% to overall revenue in FY10.      carrying an order book worth Rs 2,300      bet for investment. At current market      ers, as they would prefer FBIL to          pany have been consistently close        capacities and a larger portion of trad-
                 It is 10 times the size of its competitor     crore in the monolithic business to be     price of Rs 350, the stock is trading at   any other player due to their relations    to 20% in the past (except in CY09).     ing activity could be a reason for the
                 in single storey pre-fabs, 6 times in cus-    executed over the next 22 months.          attractive valuation of 9x of its FY12e    with FAG Germany (Parent compa-                Further more the company has a       differential in P/E, we feel that the
                 tom moldings and is the sole monolith-        These factors are strong enough to         EPS. We derived at a target price of Rs    ny).                                       zero debt position perennially and       difference could narrow going for-
                 ic construction company in the coun-          accelerate the company's growth in the     421 based on 11x FY12e EPS. This is            FBIL has a strong financial posi-      also has minor capex amounting to        ward. We think that FBIL can be
                 try. Around 60% of its revenue comes          coming quarters despite inflationary       in accordance with the expected rev-       tion, which is reflected by its zero       Rs 550 mn lined up for CY10. The         bought at the CMP and added in the
                 from Govt. contracts. Going forward,          pressures.                                 enue generation from current order         debt position and strong return ratios     same would be funded through inter-      Rs.759 for sequential targets of Rs.800
                 high revenues are expected keeping in             The company showed a 37.5%             book. Further the cash per share on bal-   (ROCE and RONW) except for                 nal accruals. This could enable the      and Rs.820 in 1-2 quarters.
                 mind Govt.'s strong infrastructure plans.     increase in net sales in the Q1FY11. The   ance sheet of Rs.73 provides cushion       CY09 (due to the effects of the glob-      company to tide over any stressful                              (Writer is associated
                      The overseas subsidiaries have           operating profit margin increased by       to the valuations.                         al slowdown in HiCY09). The return         situation and also suggests the finan-                        with HDFC Securities)

                 26    MONEY MANTRA    August 15, 2010                                                                                                                                                                                          August 15, 2010   MONEY MANTRA    27
EP 3-35-alok-akm.qxd     7/25/2010    5:19 PM        Page 28

                  BROKER’S PICKS                                                                                                                                                                                                                     BROKER’S PICKS
                 Axis Bank   ACCUMULATE CMP: Rs. 1342 TARGET: Rs.1477
                                                                                                                                                           Amtek Auto                 BUY CMP: Rs. 178 TARGET: Rs. 212 (6-9 months)

                 Bet on advances and deposits                                                                                                              Diversified profile to show the way
                       Vaibhav Agrawal                                                                                                                        Kalpit Oza                                                Amtek: 3 months performance
                                                                                 Axis Bank: 3 months performance
                 Axis Bank is India's third largest private                                                                                                Indian auto component industry is
                 sector bank and it is providing bank-                                                                                                     witnessing resurgent times following
                 ing convenience to its customers                                                                                                          a strong domestic auto industry
                 through its largest ATM network in the                                                                                                    growth. Amtek Auto is one large com-
                 country with 2595 ATMs and network                                                                                                        pany in this space. Amtek Auto has a
                 of 608 branches. Advances for the bank                                                                                                    diversified business profile, catering
                 increased by a robust 39.1% yoy and                                                                                                       to a vast customer base (top five cus-
                 4.1% sequentially to Rs1,08,609cr,                                                                                                        tomers contributing less than 15% of
                 while     deposits      increased       to                                                                                                revenues). Consolidated revenues
                 Rs1,47,479cr, a growth of 33.8% yoy                                                                                                       have witnessed a CAGR of 34% over
                 and 4.4% sequentially. The advances                                                                                                       the last five years and we expect it to
                 growth was driven by the large and mid-                                                                                                   grow by 11% and 10% in F6/11 and
                 corporate segment (mainly telecom),                                                                                                       F6/12 respectively (PAT CAGR of
                 which increased by 54.7% yoy.                                                                                                             45.6% over F6/09 to F6/12).
                 Consequently, the NII of the bank                                                                                                             Around 70% of Amtek Auto's total
                 recorded a growth of 44.8% yoy and                                                                                                        revenue is derived from 4-Ws seg-
                 3.7% sequentially.                                                                                                                        ment; with CV's and 2/3-Ws con-
                     The deposit growth was driven by                                                                                                      tributing the balance 11% and 9%
                 17.2% qoq growth in Term deposits.                                                                                                        respectively. Amtek Auto reported a                          Valution Summary (Consolidated)
                 The CASA ratio of the bank declined            and agri lending businesses declined by     in the large and mid corporate credit,         substantial decline in its exports from   Y/E 31 March (Rs m)           FY09        FY10E            FY11E           FY12E
                 to 40.2% (which is a seasonal phe-             6%.                                         and 20% in the SME segment, while the          F6/08 to F6/09 (to US$50mn as             Revenues                    34,386        36,636           40,483          44,531
                 nomenon in the first quarter of the                 The bank generated Rs196cr             balance was restructured in agriculture        against ~US$250mn) on the back of         yoy growth (%)               (26.2)           6.5            10.5            10.0
                 financial year) from 46.7% in                  (Rs326cr) of trading profits during         and capital markets. A sector-wise             poor demand scenario prevailing in        Operating profit             7,004         8,976           10,526          11,266
                 4QFY2010, though it was stable on yoy          Q1FY2011, a decline of 40% yoy.             analysis by the bank indicates that            the Western markets. But now with         OPM (%)                        20.4         24.5             26.0            25.3
                 basis. Reported NIM at 3.71%, regis-           About 60% of the total trading profit       restructuring of textiles was the high-        signs of recovery we expect the           Reported PAT                 1,728         3,043            4,782           5,396
                 tered a decline of 38bp sequentially           was related to trading of corporate         est at 22%, followed by shipping 22%,          exports to grow at a steady rate.         yoy growth (%)               (59.6)         76.1             57.1            12.8
                 largely on account of the payment of           bonds.                                      sugar, petroleum and real estate at 8%             Amtek Auto has been catering to a     EPS (Rs)                       12.3         15.1             20.4            23.0
                 interest on savings deposits on daily               The gross slippage during the quar-    each.                                          vast customer base, with top 5 cus-       P/E (×)                        14.6         11.8               8.8             7.8
                 balance from 1QFY2011 onwards.                 ter stood at Rs421cr, indicating an annu-       Asset quality pressures have shown         tomers contributing less than 20% of      Price/Book (×)                  0.8           0.8              0.8             0.8
                     Fee income registered 19% yoy              alised slippage ratio of 1.6% lower than    signs of easing, with an improving eco-        the total revenues. This, in turn has     EV/EBITDA ( ×)                  8.0           6.3              5.2             4.2
                 growth, rising to Rs743cr (Rs627cr)            FY2010, which was at 2.2%. Gross            nomic outlook and reducing corporate           enabled the company to avoid client       Debt/Equity (×)                 1.2           0.7              0.5             0.4
                 during Q1FY2011, with strong contri-           NPAs increased by 1.7% sequentially         leverage owing to which the NPA pro-           concentration and thereby reduce risk.    ROE (%)                         5.6           8.0            10.2            10.2
                 bution from the corporate segment. Fee         to Rs1,341cr, while net NPAs stood at       visions are expected to decline, going         The wide customer base could largely      ROCE (%)                        6.3           8.2            10.0            10.7
                 income from large and mid-corporate            Rs413cr (Rs419cr). Gross and net NPA        forward. Accordingly, we estimate a            be attributed to diversified product      Source : Company, India Infoline Research
                 credit (including infrastructure) grew         ratios of the bank were stable at 1.1%      decline in NPA provisions by 21.1%             profile in offerings. With over 200       grow at 11% and 10% in F6/11 and           portfolio with large client base.
                 42% yoy, followed by that from treas-          and 0.4%, respectively.                     in FY2011E (implies NPA provision at           products, the company has a niche         F6/12 respectively. This growth will       Further, the company has diversified
                 ury and debt and capital markets (22%               The cumulative restructured assets     0.5% of assets in FY2011E v/s an aver-         presence across segments of forging,      be driven by strong demand in the          into premium margin market through
                 yoy), capital markets (10% yoy), retail        till 1QFY2011, however declined to          age of 0.3% over FY2005-09).                   aluminum castings (nascent stage),        automotive segment in India. Further,      acquisitions in Europe and US. Its
                 business (8% yoy), business banking            Rs 2,151cr (1.81% of gross customer                                                        machining/ assemblies and ring gears      recovery in revenues from the JVs and      leadership position across large port-
                 (6% yoy) and fee income from the SME           assets). The bank restructured ~69%         Outlook and Valuation                          business. Consolidated revenues for       subsidiaries will fuel the growth. The     folio of products is expected to be the
                                                                                                                At the CMP, the stock is trading at        the company have witnessed a CAGR         company has planned major expan-           key revenue driver.
                                                         Key Financials                                     relatively attractive valuations of 2.5x       of 34% over the past 5 years. We          sions at non-automotive space, which           We expect the company to witness
                  Y/E March (Rs cr)         FY09           FY10E         FY11E                FY12E         FY2012E ABV, a 24% discount to                 expect revenues for the company to        in our view will translate into strong     a CAGR of 9% over F6/09-F6/12 in
                  Nil                       3,686           5,004         6,314                7,950        HDFC Bank. We remain positive on the            Share holding Pattern                    growth from non-auto sector.               revenues. OPM, too are expected to
                  % chg                      42.6            35.8          26.2                 25.9        bank and believe that it deserves pre-          March’10                        (%)          Raw material costs, which              improve to 25.1% in F6/11 and F6/12
                  Net Profit                1,815           2,515         3,042                4,078        mium valuations on account of its               Promoters                        29      accounts for 55-60% of sales consist       each on back of enhanced margins at
                  % chg                        9.5             8.5         21.0                 34.1        attractive       CASA         franchise,        Institutions                     49      mainly of steel. It follows a flexible     the overseas front coupled with the
                  NIM (%)                      3.0             3.1           3.2                  3.2       multiple sources of sustainable fee             Non promoter corp hold          6.5      policy of passing on any increase or       advantage of operating leverage. This
                  EPS (Rs)                   50.6            62.1          75.1                100.7        income, strong growth outlook and A-            Public & others                15.5      benefit in raw material cost to its cus-   will translate into an EPS of Rs19.3
                  P/E (×)                    26.6            21.7          17.9                 13.4        list management. We have an                                                              tomers. This acts as a natural hedge       for F6/11. At our target price, the
                                                                                                                                                           Performance rel. to sensex
                  P/ABV (×)                    4.8             3.4           3.0                  2.5       Accumulate rating on the stock, with           (%)           1m        3m        1yr
                                                                                                                                                                                                     against the volatility in steel prices.    stock would trade at 11x F6/11E EPS
                  RoA (%)                      1.4             1.5           1.5                  1.6       a Target Price of Rs1,477, implying an         Amtek Auto    6.0     (6.4)      15.1                                                of Rs19.3.
                  RoE (%)                    19.1            19.2          17.7                 20.5        upside of 10%.                                                                           Outlook and Valuation                                   (Writer is associated with
                                                                                                                                                           Bosch         4.3      11.0      48.0
                  Source : Company, Angel Research, Price as on July, 13,2010                                   (Writer is associated with AngelBroking)   Bharat Forge 5.0      15.5       71.4        Amtek Auto has a wide product                                    India Infoline)

                 28    MONEY MANTRA    August 15, 2010                                                                                                                                                                                                 August 15, 2010    MONEY MANTRA    29
EP 3-35-alok-akm.qxd     7/25/2010    5:19 PM       Page 30

                 Den Networks OUTPERFORMER CMP: Rs. 206 TARGET: Rs.292 (18 months)                                                                       Bharti Airtel                          BUY CMP: Rs. 302                 TARGET: Rs. 330-340

                 A leading consolidator in market                                                                                                        Going for a global brand
                      Nikhil Vora
                                                                               Den Networks: 3 months performance                                               Rajesh Jain                                           Bharti Airtel: 3 months performance
                 DEN Networks (DEN) has, within
                 two years of operations, emerged as                                                                                                         The trend of Indian stock market
                 India's second largest MSO with an                                                                                                      is clearly up though the performance
                 estimated reach of 10m and 1.1m pay-                                                                                                    of US and European markets are down.
                 ing subscribers. With aggressive sec-                                                                                                   European markets are a sign of con-
                 ondary point acquisitions (67 till                                                                                                      cern to the market but since we are trad-
                 date), DEN is well-entrenched in 77                                                                                                     ing in Indian markets, one has to go with
                 cities across nine states. While DEN                                                                                                    our market trends. It is precisely this
                 will continue to pursue inorganic                                                                                                       reason that we mention a clear stoploss
                 growth, it plans to plough Rs1.6bn in                                                                                                   in our trading view. We bring two stocks
                 digitization over the next three years.                                                                                                 out of which one had been beaten down
                 A funded balance sheet (Rs3.6bn of                                                                                                      badly and the other is a stock which was
                 IPO proceeds) and the need to 'secure'                                                                                                  sideways for nearly a year.
                 the existing base would enable DEN                                                                                                          Bharti Airtel is structured into four
                 to add 3.1m digital homes and                                                                                                           strategic business units - Mobile,
                 increase its paying base to 3.8m by                                                                                                     Telemedia, Enterprise and Digital TV.
                 FY13E. Improved declaration levels                                                                                                      The Digital TV business provides
                                                                                                                                                         Direct-to-Home TV services across
                                                Income Statement                                                We see 29% revenue CAGR for              India. The Enterprise business provides      acquisition, Airtel has become the first      stock had been underperforming and
                  Years of Mar 31 (Rs m)                FY09      FY10     FY11E      FY12E     FY13E       DEN over FY10-13 with 60% CAGR               end-to-end telecom solutions to cor-         Indian brand to go truly global with a        falling. The stock has a very good sup-
                  Net Sales                             7,122     9,191    11,288     14,316    19,651      in subscriber revenues, 5% CAGR in           porate customers and national and inter-     footprint that covers over 1.8 billion        port between 280- 285 levels where one
                  % growth                                763         29       23         27        37      carriage revenues and 12% CAGR in            national long distance services to telcos.   people.                                       can accumulate the stock keeping a stop
                  Operating expenses                    7,085     8,293     9,736     11,541    14,467      Star-DEN JV. As MSOs retain most of          Recently has completed the acquisi-              The stock of Bharti Airtel has taken      loss of 260 for the targets of 330 -340.
                  EBITDA                                   37       898     1,552      2,774     5,184      the gains from the initial round of          tion of Zain Groups mobile operations        a very good rally in the first ten days       The stock made 52 weeks high of 485
                  % change                              (116)     2,355        73         79        87      monetization, we expect DEN's oper-          in 15 countries across Africa. With this     of July 2010. For the last one year, the      on 24.09.09 and low of 252 on 21.05.10.
                  Other income                             72         65       96        101       115      ating profit to grow 6.5x with PAT of
                                                                                                            Rs2.1bn in FY13. The management's                                                                                                         chemicals in India, it offers a wide
                  Net interest
                  pre-tax- profit
                                                                                                            aggressive approach to growth offers
                                                                                                            added comfort on execution.
                                                                                                                                                         United Phosphorus                                                                            range of products that includes insec-
                                                                                                                                                                                                                                                      ticides, Fungicides, Herbicides,
                  Current tax                              20         74      200        461       974                                                       BUY CMP: Rs. 184 TARGET: Rs. 210+                                                        Fumigants, PGR and Rodenticides.
                                                                                                            Outlook and Valuation                                                                                                                     The company has operation in every
                  Profit after tax                      (172)       366       600      1,272     2,834
                  Minorities                               21       (63)    (139)      (365)     (757)          We see DEN not only as a survivor            United Phosphorus Limited is a lead-      company has its presence across value          continent and has customer base in 86
                  Net profit after                                                                          in the cable space, but also as a lead-      ing global producer of crop protection        added Agri inputs ranging from seeds to        countries, making it global player of
                  non-recurring items                    (151)      303       461       908       2,077     ing consolidator in the market. To           products, intermediates, specialty chem-      crop protection and post harvest activity.     crop protection products in the world.
                  % change                              (36.9)   (300.1)      52.3      96.9      128.9     grow rapidly, DEN could turn aggres-         icals and other industrial chemicals. The     Being the largest manufacturer of agro-        The company ranks amongst the top
                                                                                                            sive on acquisition of smaller LCOs/                                                                                                      5 post- patent agrochemical manu-
                 and a stronger revenue model are                entered into the syndication business      independent cable operators as also                     United Phosphorous: 3 months performance                                          facturers in the world. It is one of the
                 expected to drive 43% CAGR in                   through a 50:50 JV with Star Network.      large national/regional operators. We                                                                                                     world's few companies to manufac-
                 DEN's cable revenues to Rs13.2bn                The JV is an aggregator and distribu-      have valued the cable business on EV/                                                                                                     ture complex organo-phosphorus
                 over FY10-13. Syndication business              tor of 25 channels across India, Nepal     subscriber basis, which has been                                                                                                          compounds starting from the basic
                 under Star-DEN (Rs6bn in FY13E for              and Bhutan on analogue cable, digital      arrived at on the basis of months of                                                                                                      raw material, rock phosphate ore.
                 50% share) will also add to the scale.          cable as also the DTH platform. With       ARPU. As per this method, primary                                                                                                             The stock consolidated from the
                 DEN's proven execution capabilities             revenues of Rs9.3bn, Star-DEN is the       point subscriber for DEN is valued at                                                                                                     month of May 09 to May 10 in a side-
                 provide comfort on its ability to               largest syndication bouquet (Zee at        US$210 as against Comcast's valua-                                                                                                        ways zone from where it took a break
                 emerge as a formidable consolidator             Rs7bn and Sony Rs6.8bn). Star-DEN          tion of $3,500 per subscriber as the                                                                                                      on a higher side and now in a con-
                 in the cable industry.                          JV is better placed to ensure higher       latter has ARPU 12x that of DEN.                                                                                                          solidation zone. One can look to
                     DEN's focus has shifted to STB              collections from the cable industry.       Deploying this valuation methodology                                                                                                      accumulate the stock between the
                 seeding for securing the subscriber             For DEN, the deal also offers stability    on DEN's 2.7m secondary points,                                                                                                           range of 165-175 keeping a stop loss
                 base as also improving declaration              and higher returns at low capital          1.05m primary points and 0.7m broad-                                                                                                      of 155 for the higher targets of 210+
                 levels. With Rs1.6bn of funds ear-              involvement. The low debt component        band customers in FY13E, we have                                                                                                          in coming weeks. The stock made 52
                 marked for digitization and increased           further gears up the healthy balance       arrived at an EV of Rs49.7bn and                                                                                                          weeks high of 199.45 on 29.06.10
                 acceptance from LCOs, we see DEN                sheet of DEN, which has demonstrat-        equity value of Rs52.7bn for DEN.                                                                                                         and low of 133 on 20.11.09.
                 adding 3.1m STBs to its existing reach          ed best value creation till date as com-                   (Writer is associated with                                                                                                        (Writer is Vice President & Head-
                 of 0.4m. In January 2008, DEN                   pared to peers.                                                          IDFC-SSKI)                                                                                                                Research with SMC Global)

                 30    MONEY MANTRA   August 15, 2010                                                                                                                                                                                                      August 15, 2010   MONEY MANTRA   31
EP 3-35-alok-akm.qxd    7/25/2010     5:19 PM      Page 32

                                                                                                                                                                           Technical Report
                 Reverse Cash and carry arbitrage                                                                                                                                     PIVOT
                                                                                                                                                      Stocks       Close        S2         S1    Pivot                 R1              R2
                      Anjani Sinha                                                                       between spot and futures prices means
                                                                                                         lending funds realized from selling the      SENSEX       18113      17792      17953   18040             18201             18288
                 Fundamental analysis in the trade
                                                                Example: Reverse cash                    physical commodity and simultane-            NIFTY         5442       5345       5394    5420              5469              5495
                 results into better understanding of the         and carry arbitrage                    ously buying the futures contract in the     ABB            848        841        844     849               852               856
                 price of underlying. It also provides a           An arbitrager in the commodi-         first transaction and closing out the        ACC            816        796        806     819               829               842
                 tool to lock opportunity by way of cal-       ty market enters in commodity             futures contract by taking delivery of       AMBUJACEM      115        112        113     115               116               118
                 culated buy and sell decision.                futures transaction when he sees any      the physical commodity on maturity in        AXISBANK      1357       1320       1339    1353              1371              1386
                 Arbitrage is a tool which is often            risk less profit opportunity in the       the second transaction.
                                                                                                                                                      BHARTIARTL     302        288        295     299               306               310
                 employed in trade for an underlying           market. In July 2010, he implements           It is a combination of a short posi-
                                                                                                                                                      BHEL          2417       2374       2396    2411              2433              2448
                 which is traded either with different         reverse cash and carry arbitrage          tion in an asset such as a stock or com-
                 time horizons or in different markets.        transaction in silver in the following    modity, and a long position in the           BPCL           641        629        635     644               650               659
                 It is a method to lock in a profit by         manner:                                   futures for that asset. Reverse cash-and-    CAIRN          323        306        315     321               329               336
                 simultaneously entering into transac-                                                   carry arbitrage seeks to exploit pricing     CIPLA          328        324        326     328               331               333
                 tions in two or more markets. If the          i) In July 2010, he sells 30 Kg of sil-   inefficiencies for the same asset in the     DLF            327        314        320     325               332               337
                 relationship between spot prices and             ver in the spot market at Rs.          cash (or spot) and futures markets in        GAIL           474        448        461     469               483               491
                 futures prices in terms of basis or              29300/- per kg and simultane-          order to make risk less profits. The arbi-   HCL TECH       371        367        369     371               373               376
                 between prices of two futures con-               ously buys September Silver            trageur or trader accepts delivery of the    HDFC          3018       2930       2974    2999              3043              3069
                 tracts in terms of spread changes, it            futures contract of 30 Kg at Rs.       asset against the futures contract, which    HDFC BANK     2057       2010       2034    2048              2072              2086
                 gives rise to arbitrage opportunities.           28700 per Kg.                          is used to cover the short position. This
                                                                                                                                                      HEROHONDA     1948       1908       1928    1940              1960              1973
                 Difference in the equilibrium prices                                                    strategy is only viable if the futures
                                                                                                                                                      HINDALCO       158        154        156     157               159               160
                 determined by the demand and supply           ii) Invests the sale proceeds of Rs.      price is cheap in relation to the spot
                                                                   8, 79,000 @ 10% p.a for two           price of the asset. That is, the proceeds    HINDUNILVR     262        258        260     262               264               266
                                                                   months (simple interest).             from the short sale should exceed the        ICICI BANK     909        878        893     902               917               925
                                                                                                         price of the futures contract and the        IDEA            66         62         64      65                66                67
                                                               iii) Closes out the futures position      costs associated with carrying the short     IDFC           193        187        190     192               194               196
                                                                    on the contract expiration day       position in the asset.                       INFOSYSTCH    2755       2711       2733    2749              2770              2786
                                                                    when the spot and futures prices         Arbitragers are interested in mak-       ITC            298        255        277     288               309               320
                                                                    converge by taking delivery of       ing purchases and sales in different         JINDALSTEL     647        615        631     640               656               665
                                                                    silver.                              markets at the same time to profit from      JPASSCIAT      131        126        128     130               132               134
                                                                                                         price discrepancy between the two            KOTAK BANK     770        747        758     774               785               801
                                                               iv) He earns an interest of Rs.           markets. So arbitragers are interested
                                                                                                                                                      LT            1927       1882       1905    1918              1941              1955
                                                                   14153.00 on an investment of          in locking in a minimum profit by
                                                                                                                                                      M&M            633        603        618     626               641               649
                                                                   Rs. 8,79,000.                         simultaneously entering into transac-
                                                                                                         tions in either between two markets          MARUTI        1354       1325       1340    1360              1374              1395
                                                               v) Arbitragers earn an arbitrage          or between two instruments. An arbi-         NTPC           204        200        202     204               206               208
                                                                  profit of Rs. 3847.00 by replac-       trager knows the minimum profit              ONGC          1278       1249       1263    1272              1287              1296
                                                                  ing physical silver at the rate of     potential at the time of entering into       PNB           1059       1024       1041    1059              1076              1094
                                                                  Rs 28700/- per Kg.                     transactions. They lock in profits when      POWERGRID      101         99        100     101               103               104
                                                                                                         they spot cash and carry arbitrage           RANBAXY        457        445        451     455               460               464
                                                                                                         opportunity or reverse cash and carry        RCOM           190        184        187     189               192               194
                                                                      at two different markets also      arbitrage opportunity. Traders who           RELCAPITAL     815        784        805     814               824               833
                                                                      gives opportunities to arbi-       continually watch the markets can see
                                                                                                                                                      RELIANCE      1059       1043       1051    1056              1064              1069
                                                                       trage. Arbitrage provides         inconsistencies in pricing and can
                                                                                                                                                      RELINFRA      1131       1120       1126    1133              1139              1146
                                                                      market efficiency in commod-       make relatively low-risk profits by
                                                                 ity futures and hence prices are        arbitraging those inconsistencies. In        RPOWER         173        170        172     172               174               174
                                                             quoted at their fair value most of the      today's financial markets, most arbi-        SAIL           207        201        204     206               209               211
                                                             times. Cash and carry arbitrage is          trage opportunities occur either             SBIN          2476       2391       2434    2460              2503              2530
                                                             common. Another form of this arbi-          between regions, delivery periods,           SIEMENS        722        705        713     722               730               738
                                                             trage is reverse cash and carry. In this    types of instruments (such as options        STER           176        169        173     175               178               180
                                                             issue we will describe reverse cash         to futures) or across a combination of       SUNPHARMA     1748       1694       1721    1737              1763              1779
                                                             and carry arbitrage.                        these conditions. In addition to pro-        SUZLON          60         58         59      60                61                61
                                                                 Reverse cash and carry arbitrage        viding a low-risk benefit to trading         TATAMOTORS     837        806        821     831               846               856
                                                             opportunity arises when the futures         companies, arbitrage helps the market        TATAPOWER     1330       1313       1322    1331              1339              1348
                                                             price of the asset is less than the spot    in two ways: It provides pressure on
                                                                                                                                                      TATASTEEL      541        515        528     535               548               555
                                                             price of the asset plus cost of carrying    prices to move to rational or normal lev-
                                                                                                                                                      TCS            844        827        835     841               849               854
                                                             the asset to the futures expiry date.       els and maintains liquidity in
                                                             Reverse cash and carry arbitrage            the markets.                                 UNITECH         86         82         84      85                87                88
                                                                                                                                                      WIPRO          415        407        411     415               420               424
                 32       MONEY MANTRA    August 15, 2010                                                                                                                                                August 15, 2010    MONEY MANTRA   33
EP 3-35-alok-akm.qxd     7/25/2010     5:19 PM         Page 34


                                                             Market in the grip of
                                           Kundli 2Aug 2010, Time: 9:00 am, Place: Mumbai
                                              Mars, Venus,                    Sun
                                                                                4      3
                                                      6       Mercury

                                                 7                                     Ketu


                                            Rahu                    11                 Moon
                                                                                Jupiter                                              Pt. Jai Govind Shashtri
                                                                                                                                 e mail :

                                                                                                                        Be cau-
                                      Trade                                     Better                                  tious.                     All the
                                      cau-                                      day for                                 Banking,                   sectors
                                      tiously.                                  com-                                    Insurance,                 expected
                                      Good           High                       modity                                  Education    FII           to per-
                                      for            volatility.                sector.                                 and IT       would         form
                                                     Good                       Market                                                             better.    A day of
                                      intra-                                                                            scrips       invest,
                                                     day for       Normal       would          Trade                                               Metals     rumours
                                      day                                                                               may per-     Indians
                                                     commod-       till noon.   close in      cautious-                                            may        and con-
                                      opera-                                                                            form bet-    would
                                                     ity sec-      Profit       green.        ly.                                                  overper-   fusion.
                                      tors.                                                                             ter.         prefer to
                                                     tor.          booking                    Market                                               form.      Profit
                                                     Heavy         expected                   may wit-      Market                                            booking
                                                     indus-        in after                   ness          to remain                                         expected
                                                     tries,        noon.                      profit        dull.                                             in after
                                                     Fertiliser                               booking.      Profit                                            noon. Be
                                                     s,                                       Real          booking                                           cautious.
                                                                                                                                     scrips to
                                                     Aviation                                 estate,       expected.                do better.
                                                     and                                      engineer-
                                                     FMCG                                     ing sec-
                                                     scrips to                                tor scrips
                                                     perform                                  may
                                                     better.                                  show

                                      2 August 3 August 4 August                5 August 6 August 9 August              10August     11 August    12 August 13 August

                 34    MONEY MANTRA    August 15, 2010
EP-36-45-akm.qxd                               7/25/2010      5:27 PM     Page 38

                                                   COVER STORY
                                                                                                                                                                                                                                                        his is nothing short of social revolution. Now even a farmer, a rickshaw

                                                                                                                                                                                                                                                 T      puller and an anganwaadi woker can withdraw pension when he/she attains
                                                                                                                                                                                                                                                        the age of 60. Pension Fund Regulatory Development Authority (PFRDA)

           Pension For All
                                                                                                                                                                                                                                                 has come up with a novel scheme New Pension Scheme-Lite (NPS lite), where-
                                                                                                                                                                                                                                                 in a person who could save just Rs 1000 a year can get pension from the same
                                                                                                                                                                                                                                                 regulator who regulates pension of IAS, IPS officers and other government
                                                                                                                                                                                                                                                 employees. In the current financial year, government is providing a subsidy of
                                                                                                                                                                                                                                                 Rs 1000 to all those who open a pension account with PFRDA (subject to an
                                                                                                                                                                                                                                                 annual investment limit of Rs 12000).
                                                                                                                                                                                                                                                      The thought of retirement has been so depressing primarily due to the eco-
                                                                                                                                                                                                                                                 nomic uncertainty. Governments the world over have been attempting to cre-
                                                                                                                                                                                                                                                 ate a viable social security system for the retired people. This has resulted into
                                                                                                                                                                                                                                                 social security umbrella in the form of pension system. Indian government

                                                                                                                                                                                                                      PFRDA BUILDING NEW DELHI
                                                                                                                                                                                                                                                 took an initiative to provide pension to one and all by setting up Pension Fund
                                                                                                                                                                                                                                                 Regulatory Development Authority (PFRDA). With the number of persons aged
                                                                                                                                                                                                                                                 60 and above expected to grow from 100 million in 2010 to 330 million by
                                                                                                                                                                                                                                                 2050, pension reforms need to be taken up on a priority basis.
                                                                                                                                                                                                                                                      The PFRDA was established amid much fanfare by the government in
                                                                                                                                                                                                                                                 2003. The PFRDABill, 2005, which was to be an enabling legislation that defined
                                                                                                                                                                                                                                                 its powers and duties, has failed to receive the approval of Parliament till date.
                                                                                                                                                                                                                                                 Through an executive order, the government mandated PFRDAto act as an inter-
                                                                                                                                                                                                                                                 im regulator for the pension sector. With the end of the 14th Lok Sabha on
                                                                                                                                                                                                                                                 February 26, 2009, the Bill lapsed. The Bill was reintroduced in 2009, but has
                                                                                                                                                                                                                                                 been attracting cobwebs as it has been blocked by political hurdles. But these
                                                                                                                                                                                                                                                 hurdles are very common while setting up such a regulator. The capital mar-
                                                                                                                                                                                                                                                 kets regulator, Securities and Exchange Board of India (SEBI), faced a similar
                                                                                                                                                                                                                                                 dilemma when it first became operational. SEBI was formed by the govern-
                                                                                                                                                                                                                                                 ment in 1988, but received legal mandate only four years later, with the pass-
                                                                                                                                                                                                                                                 ing of the SEBI Act, 1992.
                                                                                                                                                                                                                                                 What is so special about it?
                                                                                                                                                                                                                                                     You must be wondering what is so special about the new pension scheme.
                                                                                                                                                                                                                                                 There have been plenty of pension schemes and retirement solutions available
                                                                                                                                                                                                                                                 in the market; then what was the need to launch one more? If the government
                                                                                                                                                                                                                                                 so desired to have a pension scheme for one and all, it could have opened EPF
                                                                                                                                                                                                                                                 and EPS for the common people. The fact is that EPF and EPS give a return of

                                                                                                                                                f late, modern India is discovering its social security sys-                                     around 8%. This return is abysmal in comparison to the growing expenses of
                                                                                                                                                tem into new pension scheme (NPS). From cabinet secre-                                           retirement days. It required a professional fund management system to gener-
                                                                                                                                                                                                                                                 ate better return. Therefore, PFRDA came into picture. All the government
                                                                                                                                                tary to chhotelal halwaai, police officer to petty thieves,                                      employees, who joined their services on or after Jan 1, 2004 are covered under
                                                                                                                                        kotwaal to kisaan all willbe covered by a single security umbrella.                                      the new pension scheme only. State governments have also joined the new
                                                                                                                                                                                                                                                 pension system. "Almost half the state governments have either joined new
                                                                                                                                        NPS has given a good yield, has been widely acclaimed by fianan-                                         pension scheme or have agreed to join," says Yogesh Agarwal, Chairman,
                                                                                                                                        cial analysts for its risk return profile and robust regulatory                                          PFRDA. (see the adjoining table)
                                                                                                                                        supervision, still it has not taken off the way it would have.                                           Less expensive
                                                                                                                                        Awanish K Mishra analyses the product and looks into the lacunas                                             Apart from market-related return, new pension scheme offers fund man-
                                                                                                                                                                                                                                                 agement by widely acclaimed pension fund managers (PFMs) at negligible
                                                                                                                                        which has been pulling its marketing plug.                                                               expenses. Could you believe that the fund managers are charging just Rs.
                                                                                                                                                                                                                                                 90,000 for managing Rs. 1000 crores. This is 0.0009% of the amount man-
                                                                                                                                                                                                                                                 aged. Compare this with the expenses of mutual fund schemes which are
                                              954947         :Total number of subscribers
                                                                                                                                                                          Rs 5175 crore                                                          pegged at 2.5%. Critics may say that NPS is not as cheap as it is portrayed to
                                                                                                    The SIX pension fundmanagers (PFMs)                                                                                                          be. If a person deposits Rs. 500 in his pension account every month, his charges
                                              639902         : Central government employees                                                                                      PENSION FUND CORPUS
                                                                                                                                                                                  (as on 17th July, 2010)
                                                                                                                                                                                                                                                 are Rs 40 (account opening charge)+ Rs. 240 (Rs.20*12 transactions)+ Rs.350
                                                                                                         ICICI Prudential Pension               Reliance Capital                                                                                 (depository charges). This means Rs 630 has to be paid on an investment of
              ( Figures as on July 2, 2010)

                                              9277           : Central Govt autonomous bodies   1        Funds Management Co.       4           Pension Fund                                     Unorganised sector                              Rs 6000. It is almost 10% of the amount invested. To counter such charges,
                                                                                                                                                                           State Govt.
                                              296095         : State Government employees                                                                                                                                                        PFRDAhas launched a low-cost scheme NPS lite which will attract only Rs 105
                                                                                                         IDFC Pension Fund                       SBI Pension                                        Central Govt.                                for investment up to Rs 12000 in a year. From the second year, the charge will
                                              8325           : Unorganised sector               2        Management Company         5            Funds Private                                                                                   be reduced to Rs 70 only. Imagine, you are depositing an amount of Rs 1lakh
                                                                                                                                                                                                                                                 in NPS. It will charge you Rs. 630 whereas mutual fund may charge you to
                                              1348           : Corporate sector                                                                                                                                                                  the tune of Rs 2500 and ULIP may take away almost 40 thousand. Which one
                                                                                                         Kotak Mahindra                         UTI Retirement
                                                                                                                                                                                                                                                 is better in terms of expenses?
                                              1298           : Tier two accounts                3        Pension Fund           6               Solutions

                                              36   MONEY MANTRA   August 15, 2010                                                                                                                                                                                                                 August 15, 2010   MONEY MANTRA   37
EP-36-45-akm.qxd   7/25/2010         5:27 PM        Page 40

                        COVER STORY

                                                                                                                                                       How to join: Visit the branch of any public                                      Investment options                           Expected return
                                                                                                                 his is retirement solution from the
                   Attractive return                                                                             government of India. Anybody          sector bank or post office or designated dis-                                    You can choose the way you                   The pension fund managers have been able
                                                                                                                 can get pension after the age of      tributor of the scheme and open a pension                                        wish to get your money invest-               to generate return of 12%+. You will be given
                    NAV of Pension fund (Tier-I account)                                                                                                                                                                                ed. Three options are available:
                    Name of Pension fund            NAV                                                   60, if he/she joins the scheme.              account. Account opening charge is Rs. 40.                                                                                    a log in and password to view as to how much
                                                                                                                                                                                                                                        Asset Class E: High risk                     money ha been credited to your account, how
                    ICICI Prudential Pension Fund 12.65                                                                                                                                                                                 option. 50% of the investment                many units have been allotted to you for your
                    Scheme E Tier-I                                                                         Types of Account                                                                                                            corpus will be invested into                 money and how much it has grown into. NAV
                    IDFC Pension Fund Scheme E 12.59                                                         NPS permits two types of account. One is basic pension account                                                             equities.                                    of new pension scheme is available at
                    Tier-I                                                                                    (tier one) which is mandatory. Second is a saving account (tier                                                           Asset Class C: Medium-risk                   PFRDA website. Some analysts have
                    Kotak Mahindra Pension Fund    11.74                                                       two) which is fully optional and voluntary.                                                                              option. Amount will be inevst-               estimated that a contribution of Rs. 1 lakh per
                    Scheme E Tier-I                                                                                 Non-withdraw able account: The Tier-1 account is the                                                                     ed into corporate bond.                 annum into NPS for 20 years will grow into
                    Reliance Capital Pension Fund 12.39
                    Scheme E Tier-I
                    SBI Pension Funds Private
                    Scheme E Tier-I
                                                                                                                basic NPS account which is non-withdraw able till retirement.
                                                                                                                Money can be withdrawn earlier in case the holder of the
                                                                                                                account dies.
                                                                                                                 Withdrawable account: A Tier-2 account is available to
                                                                                                                   only those who are subscribers of the Tier-1 account. The
                                                                                                                                                                                         New                                                    Asset Class G: Low-
                                                                                                                                                                                                                                                  risk option. Amount
                                                                                                                                                                                                                                                    will be invested into
                                                                                                                                                                                                                                                      Government secu-
                                                                                                                                                                                                                                                                                     Rs. 1.8 crore if compounded annual growth
                                                                                                                                                                                                                                                                                     rate is assumed at 10%. It's better than any
                                                                                                                                                                                                                                                                                     available product in the market. (See the
                    UTI Retirement Solutions
                    Pension Fund Scheme E Tier-I
                    (As on 21st July 2010, Source: PFRDA)

                        Now, come to the return part. NPS
                   doesn't guarantee any return. "As a reg-
                                                              12.72                                                 unique selling point of the Tier-2 account is that money
                                                                                                                      contributed into this can be freely withdrawn as and
                                                                                                                       when the subscriber wishes.

                                                                                                                              Minimum Amount required
                                                                                                                                                                                       Pension                                                      The low-cost advantage
                                                                                                                                                                                                                                                                                                                 INSURANCE                  Mutual
                   ulator, we can't guarantee any return.
                   But our fund managers would be com-
                   ing up with charts to show indicative
                   return," notes Mr. Agarwal. But it gives
                                                                                                                              You can open ordinary pension account
                                                                                                                               with just Rs. 500/-. Rs. 6000 per annum
                                                                                                                                i.e. Rs. 500 a month is must to continue
                                                                                                                                  the account. Under NPS lite, a pen-
                                                                                                                                                                                       Scheme                                                      Investment amount per year (Rs)

                                                                                                                                                                                                                                                   Charges per year (initial period)* (Rs)
                                                                                                                                                                                                                                                                                                            NPS Pension Plan


                                                                                                                                                                                                                                                                                                                  (Ulip based)

                                                                                                                                                                                                                                                                                                                                         fund pen-
                                                                                                                                                                                                                                                                                                                                         sion plan


                   you several options to invest. You may                                                                          sion account can be continued with
                   choose investment options like equities,                                                                         the subscription of Rs. 1000 per                                                                               Charges per year (5-10 years)* Rs                         388               6000             1250
                   corporate bonds and government secu-                                                                              annum as well.
                                                                                                                                                                                                                                                   Charges per year (11-15 years)* Rs                        455               3000             1250
                   rities. If you are not able to decide upon
                   the options, you may go for automatic                                                                                                                                                                                           Charges per year (16 years+)* Rs                          455                    0           1250
                   route and let the fund managers cus-                                                                Choice of Fund Management                                                                                                   Fund Management                                     0.0009%                1.25%            1.25%
                   tomise an investment pattern for you                                                                                                                                                                                            Age limit for annuity (years)                              60           Flexible                58
                                                                                                                       NPS is unique in the way that it gives you the freedom to choose fund man-
                   depending upon your risk - return pro-                                                              ager as well as the investment pattern you desire.
                   file. The pension fund managers, who                                                                                                                                                                                            Assume CAGR                                              10%                 10%              10%
                                                                                                                       Active choice: You can choose not only the fund manager but also what
                   have been managing government pen-                                                                  asset allocation to go with. Once subscribed, there is also a switch win-                                                   Maturity proceeds after 30 years (Rs)                   1.8cr               1.3cr          1.39cr
                   sion funds, have given a return of 12%                                                              dow available every year in May.                                                                                            Lump sum (Maximum)                                       60%                 33%          0-100%
                   plus. 'PFMs have given good return,                                                                 Auto choice- Lifecycle fund: Your contributions are pooled into a life-
                   somewhere in the range of 12%," says                                                                cycle fund and then invested as per pre-defined asset allocations that                                                      Pension corpus (Minimum)                                 40%                 67%          0-100%
                   Mr. Agarwal. What about the PFMs                                                                    change over the lifecycle of the subscriber. For example, up to 35 years,                                                   *Premium allocation charge and policy administration charges are calculated at the end of the year.
                                                                                                                                                                                                                                                   Typically, these charges are computed on premium at the beginning of the year/month.
                   managing pension fund of the common                                                                 50% goes into the aggressive class E with 30% and 20% in asset class-
                   man, the employees of unorganised sec-                                                              es C and G, respectively. As retirement nears at age 55, only 10% is invest-
                                                                                                                       ed in class E and C, and 80% is transferred to the less-risky class E.
                   tor? It is well reflected in the NAV pub-
                   lished on daily basis. If we average it
                   out at 10%, a person depositing Rs. 1              direct tax code, new pension scheme          agers who also manage your pension                                       PFRDA showing the number of units             part of NPS marketing team. It is being                 tleneck with new pension scheme.
                   lakh a year into pension fund account              has been classified under EEE                account, but you will be permitted to                                    deposited into your account and its           marketed through designated public                      Investment into pension products of
                   will get approximately Rs 1.8 crore                (Exempt-Exempt-Exempt scheme).               withdraw money from this account as                                      value at that particular date.                sector banks and post offices and a few                 insurance companies were allowed tax
                   after 20 years. This is almost 50 lakh             This means, once your money goes into        and when you desire. Thus the lacuna                                         But who are the people managing           private sector outlets. Till date, 4000                 incentive under section 80C but sav-
                   more than the return of ULIP and mutu-             NPS account it will not be taxed at all.     of liquidity has been resolved. Till date                                the fund? PFRDA has empanelled six            distributors have managed to enroll                     ing under new pension scheme didn't
                   al fund. (see the infographics)                    You may withdraw it and enjoy without        more than one thousand accounts have                                     fund managers -SBI Pension Funds Pvt.         around 9000 people (from unorganised                    qualify for it till Union Budget 2010
                                                                      getting taxed.                               been opened.                                                             Limited, UTI Retirement Solutions             sector) in the scheme, accounting for                   made it eligible for the same.
                   Most of the tax breaks                                                                                                                                                   Limited, IDFC Pension Fund                    just 2.2 persons per distributor per year.                  Disinterested fund managers:
                        If we talk of tax breaks, pension             Rich in liquidity                            How it works?                                                            Management Co. Limited, ICICI                 Mr. Agarwal is well aware of the prob-                  NPS has been suffering from apathy
                   fund is a good investment avenue. In                   Pension account is locked for the            NPS works like a mutual fund                                         Prudential Pension Funds Management           lem and trying to find a remedy for it.                 of fund managers. All the six fund man-
                   fact, why did we choose to give you                period till you attain the age of 60 years   scheme. You deposit your money into                                      Co. Limited, Kotak Mahindra Pension           "We’ll have to revisit the entire model                 agers are an offshoot of gigantic finan-
                   an example of Rs. 1 lakh per annum sav-            and therefore, it lacks liquidity. This      pension fund account and the desig-                                      Fund Limited and Reliance Capital             to marketise the product. Pension fund                  cial companies and command a huge
                   ing into pension scheme? Because this              problem has been sorted out. No. no..        nated pension fund manager will be                                       Pension Fund Limited.                         managers have to own up and sell the                    network of distributors and individual
                   much amount a salaried person can save             pension account has not been equipped        entrusted with the task of managing it.                                                                                product." It's noteworthy that where                    agents. Had they tried to sell the prod-
                   for tax benefits under section 80C. Your           with any exit window, but the investors      You will be allotted units against your                                  Not so popular                                ULIP annuity schemes have been pro-                     uct, they could have done it in no time.
                   investment into pension fund will qual-            opening pension account has been             investment amount and see it growing                                          When it is such a nice scheme, why       viding 35-40% upfront commission to                     But the fund management charges they
                   ify for tax rebate under section 80C of            given an option to open a separate sav-      with the daily declared Net Asset Value                                  is there no mad rush to join it? You're       agents, new pension scheme has been                     get for managing pension fund is neg-
                   the Income Tax Act 1961 within the pre-            ing account called tier two account.         (NAV). You can check your corpus                                         right. No doubt, it is a good product         giving none.                                            ligible (Rs. 90 thousand for managing
                   scribed limit of Rs. 1lakh in a single             Money deposited in tier two accounts         online as to how much it has increased.                                  but it has not been marketised aggres-            Tax incentives were absent: Lack                    Rs. 1000 crore). After taking charge of
                   financial year. In fact, under revised             will be managed by the same fund man-        You will get a physical statement from                                   sively. Individual agents are still not a     of tax incentive has been a major bot-                  PFRDA on June 7, 2010, Mr Agarwal

                   38   MONEY MANTRA        August 15, 2010                                                                                                                                                                                                                                                 August 15, 2010      MONEY MANTRA        39
EP-36-45-akm.qxd   7/25/2010       5:27 PM       Page 42

                   COVER STORY
                                                                                                                                                         post office and ask for a pension

                             NPS-LITE                  T   o extend the coverage of NPS to the weaker and economically disadvantaged
                                                           sections of the society with their limited investment potential, PFRDA has launched
                                                                                                                                                         account. They will give you an account
                                                                                                                                                         opening form. "If you are opening an
                                                                                                                                                         ordinary pension account, you will have
                                                                                                                                                         to pay Rs. 40 towards account open-
                                                                                                                                                         ing charge, Rs. 350 towards record
                                                                                                                                                         keeping charges (for one year) and Rs.          N
                                                                                                                                                                                                                         PFRDA to Educate
                                                                                                                                                                                                                       Investors, Distributors
                                                                                                                                                                                                               ew Pension scheme has been a marketing failure so far. It has been
                                                                                                                                                                                                               able to garner just 9000 subscribers during last one year. Of late,
                                                                                                                                                                                                               PFRDA has accepted its defeat at marketing front and planning to
                                                       NPS- Lite which specifically targets the marginal investors and promotes small sav-               20 for the first transaction. If you open       launch a marketing as well as investor education programme. It has pro-
                                                       ings during their productive life. "NPS-Lite Model" has been designed to ensure                   a NPS lite account, your account will be        posed to set up Subscriber Education and Protection Fund (SEPF).
                                                       ultra-low administrative and transactional costs, so as to make such small investments            opened for Rs. 30 only and record keep-         Purpose: SEPF           Funding: It will be funded by            Administration
                                                       viable. It will operate on "group" model. It will harness the outreach and capacity of            ing charges will be limited to Rs. 70           fund will be utilized   grants and donations given by the        It will be admin-
                                                       the Government operated schemes, NGOs, MFIs, NBFCs etc. in targeting and serv-                    per annum. First 12 transactions are free       for advertisements      Central Government, State                istered and uti-
                                                       icing the old age savings needs of low income workers. Each eligible group or                     under NPS lite scheme," says Rani               to create sub-          Governments, companies or insti-         lized by a
                                                       "Aggregator" in NPS Lite model will be responsible for grass-root level enrolments,               Singh Nair, Executive Director,                 scriber awareness,      tutions; the interest or other           Subscriber
                                                       ongoing collection, re-conciliation and transfer of individual contributions as well              PFRDA. In technical parlance, this              to organise train-      income received out of the invest-       Education and
                                                           as for ongoing services and information delivery.                                             account is called basic pension                 ing camps and           ments made from the SEPF and             Protection Fund
                                                                    'Andhra Pradesh Building and Other Construction Workers Welfare Board                account or tier one account.                    seminars, conduct       the sums realized by way of              Committee
                                                                                                                                                                                                         studies and market      penalties by                             (SEPF
                                                                 has already been appointed as an aggregator under NPS-Lite for making                       Basic pension account is meant for                                   PFRDA.
                                                                                                                                                                                                         research projects                                                Committee).
                                                                 NPS available to its more than a million potential member base' says Rani Sing          pension, therefore withdrawals from             related to NPS etc.
                                                                  Rawat, Executive Director, PFRDA.                                                      this account are not allowed before the
                                                                                                                Who can open: Economically               maturity age of 60. "If we allow with-
                                                                                                                weaker section of society.               drawals from pension account, it will
                                                                                                                                                         become ULIP, it will become mutual
                                                                                                                Min deposit: Rs. 1000 per annum          fund. We encourage regular savings
                                                                                                                                                         for the sunset days. Therefore, with-
                                                                                                                Max deposit: Rs. 12000 per annum         drawal from tier one account is pro-
                                                                                                                                                         hibited," says Mr Agarwal. But there
                                                                                                                Cost of management: Cheaper than         may be several situations like child's
                                                                                                                ordinary pension account                 education and marriage, buying a
                                                                                                                                                         house or vehicle or some emergency
                                                                                                                Swavlamban Scheme: It is
                                                                                                                                                         requirements where withdrawals may
                                                                                                                available for NPS lite as well. For
                                                                                                                                                         become necessary. "To meet such
                                                                                                                each account opened till 31st March
                                                                                                                                                         emergency requirements, we have
                                                                                                                2011, government of India will
                                                                                                                                                         given an option of saving account
                                                                                                                contribute Rs. 1000 into the account.
                                                                                                                                                         called tier two account. It is fully
                                                                                                                Who will collect the fund:               optional and voluntary. The only dif-
                                                           IT'S LIGHTER!                                        Microfinance institutions, self help     ference between tier one and tier two       Not alone in the race                      Reliance and UTI are at second and
                                                   Ordinary NPS                                     NPS lite    groups are being roped in to collect     account is that you can't withdraw              As you know, PFRDA is the regu-        third positions respectively.
                                                                                                                subscription from account holders        money from tier one account before          lator for government pension funds as
                        Account opening charge                 40                                         35                                                                                                                                        Government assures
                                                                                                                and deposit the same into pension        retirement whereas you may with-            well. It's managing more than Rs. 5000
                        Annual charge                         350                                         70                                             draw from tier two account as many          crore of government pension fund cor-          Some critics are sceptical about the
                        No. of free transactions               Nil                                        12                                             times as you wish," he clarifies.           pus. SBI Pension fund is managing          status of pension fund regulator itself.
                                                                                                                                                             What is the minimum amount              almost 40%, LIC nearly29% and UTI          They argue that the PFRDAhas no leagl
                                                        Rs. 20 per       Rs. 5 per transaction (after 12 free
                        Transaction charges                                                                                                              of investment? You may open a pen-          retirement solution scheme is manag-       mandate till date. With the PFRDA bill
                                                       transaction             transactions are exhausted)
                                                                                                                                                         sion account with Rs. 500 only. A           ing 31%. So far, SBI has given the max-    pending in Parliament, how the regu-
                                                                                                                incentivised to push the scheme for-     minimum of Rs. 6000 has to be               imum return. At the moment, New            lator can be trusted? It's functioning
                   called a meeting of pension fund man-             manager. It's noteworthy that the state-   ward." A committee has been consti-      deposited annually. People belong-          Pension Scheme has 9.5 lakh pen-           on the basis of an executive order. Mr.
                   agers. All the fund managers insisted for         owned Life Insurance Corporation           tuted under the leadership of G N        ing to economically weaker section          sion accounts in total. Out of these,      Veerappa Moily, Union Minister for
                   a hike in fund management charges. "It            (LIC) mopped up around Rs 7,500 crore                                               may opt for NPS lite which requires         9600 accounts belong to individuals        Law and Justice, has an answer for it.
                                                                                                                Bajpayee, former chairman of LIC and
                   was expected that low fund manage-                from its single pension product Market                                              an amount of Rs. 1000 a year.               from non-government sector. "Very          "The Cabinet has seized the matter. We
                   ment charges, Rs 9 for Rs 10 lakh each,           Plus, whereas PFRDA has been able to       then SEBI, to look into the ways to          All said and done, how would            soon we'll be achieving 10 lakh            will expedite the process to get it passed
                   would make more money available for               garner around 35 crore only in one year    incentivise pension fund managers and    one get money back after attaining          accounts target. When this is              in Parliament."
                   investments and will be an incentive for          from the public.                           prepare a blueprint to popularise the    the age of 60? You will be given an         achieved, the annual maintenance               But the big question is who will
                   the NPS investors, but it has not pro-            Mr Agarwal is quite receptive about it.    scheme.                                  option to withdraw a part of your cor-      charge for a pension account will go       keep an eye on the activities of PFRDA.
                   duced the desired effects. Rather the 21          "The six pension fund managers per-                                                 pus as lump sum and the remaining           down from Rs. 350 to Rs. 285," says        Comptroller and General (CAG) has
                   life insurers, which have pension prod-
                                                                                                                How to join NPS club?                    amount will be paid to you as monthly       Mrs. Nair. The 9600 pension fund           been pressing upon the government to
                                                                     mitted for the unorganised sector so far
                   ucts on both unit linked and tradition-           did nothing to sell the NPS because they       By now, my arguments must have       or yearly pension. If you don't want to     subscribers from non-government            give it the authority to audit the books
                   al platforms and were expecting com-                                                         aroused your interest in NPS. How to     withdraw a lump sum amount, all the         sector constitute a corpus of Rs. 35       of the PFRDA. Sooner or later, it is
                                                                     had quoted absurdly low fees to bag
                   petition from new pension fund man-                                                          open a pension account? Where to go?     money so deposited will be paid to you      crore. SBI has received maximum            bound to happen.
                   agers, have been able to mobilise sub-            business and have ended up with            Whom to approach? It's so simple. You    as monthly/ yearly pension. In case of      mandate for pension management                 But one should not wait for these
                   stantial amount of premium by selling             prospects of making losses on addition     may visit any of the designated public   untimely death, your nominee will           from individuals. It is managing           leagal formalities. Join early to
                   their products," says a pension fund              of new subscribers. They need to be        sector bank branch or the designated     receive this pension.                       almost three fourth of the corpus.         reap more.

                   40   MONEY MANTRA     August 15, 2010                                                                                                                                                                                                August 15, 2010    MONEY MANTRA   41
EP-36-45-akm.qxd   7/25/2010       5:27 PM     Page 44


                                                                                                                               ‘We expect to open 10 lakh
                                                                                                                               new pension accounts ..’

                                                                                                                                                                                                     We are looking at ways to reduce the
                                                                                                                                                                                                     charges. The point is that if you want to
                                                                                                                                                                                                     run a good pension system, and you
                                                                                                                                                                                                     want to maintain the details of each and
                                                                                                                                                                                                     every account holder, it costs.
                                                                                                                                                                                                     Therefore, while we will be attempting to
                                                                                                                                                                                                     review the charges over a period of time,
                                                                                                                                                                                                     still the charges have to be there.

                                                                                                                                                                                                     account is not mandatory. It's purely voluntary. If we allow
                                                                                                                                                                                                     you to withdraw money from tier one account (pure pen-
                                                                                                                                                                                                     sion account), it will become ULIP, it will become mutual
                                                                                                                                                                                                     fund. Very few people have opened tier two account. In
                                                                                                                                                                                                     fact, out of 9.5 lakh pension accounts opened so far, only 7
                                                                                                                                                                                                     to 8 thousand have opened tier two account.

                                                                                                                                                                                                     Is there any guaranteed return under NPS?
                                                                                                                                                                                                     We are not guaranteeing any return on the product.
                                                                                                                                                                                                     Guaranteed returns have been attempted in the past, but
                                                                                                                                                                                                     they had to be withdrawn. Nobody could keep the prom-
                                                                                                                                                                                                     ise. Especially in the pension scheme, time span is so large,
                                                                                                                                                                                                     may be thirty years, forty years, that it will be foolhardy to
                                                                                                                                                                                                     assure any return.

                                                                                                                                                                                                     ….but there must be an indicative figure to generate
                    Mr. Yogesh Agarwal has been a visionary                 hat is the USP (unique selling point) of New         corpus for you over a period of time. The method of cor-            interest of investors in the scheme.
                    banker, an acclaimed financial strategist
                    and an apt adiminstrator. Before his cur-
                    rent responsibility of PFRDA Chairman,
                                                                  W         Pension Scheme (NPS)?

                                                                  Pension through regular savings is the USP of NPS. Till
                                                                                                                                 pus building separates NPS from other products.

                                                                                                                                 Why can't you simplify the product? People are confused
                                                                                                                                                                                                     We'll indicate a return. Our pension fund managers will be
                                                                                                                                                                                                     able to indicate how much they can generate. We'll also be
                                                                                                                                                                                                     circulating as to how much one will get depending on the
                                                                  now, pension scheme was available only for the govern-         with tier one account, tier two account...?                         amount and time span of investment. Indicative return YES,
                    he was at the helm of affairs at IDBI Bank,   ment employees. No such option was available for non-          In NPS, you open only a pension account. It is technically          guaranteed return NO.
                    State Bank of Patiala and State Bank of       government workmen. This is for the first time that pen-       known as tier one account. We don't allow withdrawals
                                                                  sion scheme has been drawn up for the benefit of non-gov-      from tier one account before retirement. When demand came           How much return PFMs have generated so far?
                    India. With more than 36 years of rich and    ernment sector employees so that they may enjoy certain        from people that they need money for their child's educa-           Average return per year is in the range of 12-14%. The per-
                    distinguished banking experience, Mr          measures of social security through regular savings.           tion, marriage, building a house etc. before retirement, we         formance of fund managers is being constantly reviewed.
                    Agarwal is set to overhaul Indian Pension                                                                    gave the facility to open a separate saving account for this        We'll be enlarging the scope of fund managers. That is an
                    System. Within a month of taking over the     But , it seems to be quite similar to annuity products of      purpose. This is tier two account. Those who wanted to enjoy        ongoing process and that will continue.
                                                                  ULIP…                                                          the benefits of fund manager's skill and the flexibility of with-
                    reign of PFRDA, he has come up with NPS       NPS is entirely different from ULIP. ULIP is not a pension     drawing money were allowed to open tier two account.                Which PFM is getting maximum mandate from
                    lite, a low cost variant of new pension       fund as such. ULIP may provide annuity based on lump-          Money deposited into the tier two account will be managed           investors? Which investment option under the pension
                    scheme (NPS). He shared his vision with       sum payment. But with the New Pension Scheme, you save         by pension fund managers only. The only difference between          scheme has caught the fancy of investors?
                    Awanish K Mishra, Editor, Money Mantra.       a small amount regularly, may be on monthly or quarterly       tier one and tier two account is that you can't withdraw money      There is no such bias among fund managers. I think all of
                                                                  basis, which you can't withdraw before retirement and you      from tier one account before retirement but you can with-           them are getting equal kind of response. Over a period of
                    Here are the excerpts:                        get regular pension after retirement. NPS builds a pension     draw the money deposited into tier two account. Tier two            time when they are segregated based on their performance,

                   42   MONEY MANTRA   August 15, 2010                                                                                                                                                                            August 15, 2010   MONEY MANTRA   43
EP-36-45-akm.qxd   7/25/2010       5:27 PM       Page 46


                   then you will see some movement of                                                     Scheme -- how to market the scheme?
                   investors from one pension manager to           That (Selling) is in fact one          We are mulling over various options and
                   other pension manager. But as of now,                                                  we'll come up with various schemes to
                   there is nothing like that.Similarly, all the   of the big hurdles of the              market the product. The whole system of
                   options are equally popular.                    New Pension Scheme --                  charges and marketing is under review
                                                                                                          and I'll let you know once these are
                   Is there a move to hike fund manage-            how to market the                      finalised.
                   ment charges?                                   scheme? We are mulling
                   Pension fund managers have asked for                                                   Are you going to involve individual
                   it. We are examining their demand. We           over various options and               agents into marketing agents?
                   may review it.                                  we'll come up with various             We are looking at all the options. We
                                                                                                          are examining it. We are aware of the
                   Who is your target customer, one who            schemes to market the                  problem. At this stage, I can't give you
                   is living in villages or the people in                                                 a readymade solution. If it would have
                                                                   product. The whole system              been so easy, it would have been done
                   All of them. Right from rural areas to          of charges and marketing               earlier.
                   metropolis, everywhere everybody.
                   Marketing is an ongoing process. As the
                                                                   is under review.                      Have you set any target for yourself?
                   suggestions come, we examine them and                                                 As a regulator we don't set target. But we
                   the features will keep on being modified                                              expect to open 10 lakh new pension
                   to make it more popular.                                          accounts in this financial year. Right now PFRDA is man-
                                                                                     aging more than about Rs 5000 crore. More than half the state
                   Who is your favourite customer - economically backward            governments have either said that they are joining or they
                   people or those who are economically sound? Village               have already joined. To be precise, thirteen states have joined
                   or town?                                                          so far.
                        Sabhi ko rakhenge bhai. Poora hindustan hamara karyak-
                   shetra hai. Jyada- kam ki baat nahin hai. (The scheme is          Given the level of awareness about NPS, the target looks
                   for everybody. The whole country is our work field. It is not     unachievable…
                   about more or less.) This is social security system. We'll see    Our product is said to be the best performing pension prod-
                   to it that it reaches every nook and corner of the country.       uct. We claim it and people endorse it. But we have not
                                                                                     been able to market the scheme. So many people don't know
                   Your product is so expensive…how could poor people                what the scheme is as such. Financial analysts say this is
                   buy it?                                                           the best available pension product in the market today.
                   As the corpus grows, cost comes down. There are some              Investor education programme is intended towards various
                   charges on flat basis and some based on the amount invest-        stake holders, including investors, to make them under-
                   ed. We are reviewing all the charges. We are looking at           stand that how does this whole thing work and what are the
                   ways to reduce the charges. The point is that if you want to      benefits attached to it.
                   run a good pension system, and you want to maintain the
                   details of each and every account holder, it costs. Therefore,    You have been a banker throughout. How comfortable
                   while we will be attempting to review the charges over a peri-    you feel with this new assignment?
                   od of time, still the charges have to be there. That's why for    Having been a banker, I know how to manage funds.
                   economically weaker section, we're launching low cost             Managing funds and getting return over it is a banking func-
                   scheme NPS lite. Here, the charges will not be that high.         tion. I hope to use my experience as banker to help investors
                                                                                     get maximum return.
                   Could you elaborate NPS lite?
                   We'll be launching NPS lite, a low cost model of Swablamban       How many staff PFRDA has at the moment?
                   scheme. There are people in the rural sector and urban sec-       Only 12 staff. Kaam badhega to log badhenge. (When work
                   tor that don't require all the features of Swablamban scheme      will grow, then number of people will grow).
                   as such. By reducing features, we may lower the cost of
                   NPS. NPS lite will be mostly managed through aggregator           When do you foresee PFRDA bill getting passed by
                   model. It's sometimes difficult for poor people to deposit sub-   Parliament?
                   scription. Aggregators will collect the subscription from them    Ummeed to hai ki aayega par kab aayega aur kis session men
                   and deposit it in the pension system.                             aayega, yeh to main nahin kah sakta. (Bill is very much on
                                                                                     the cards but when I don't know).
                   Can we expect some hybrid products i.e pension plus
                   products from PFRDA?                                              What is your take on government's move to have
                   We are strictly in the business of pensions. We have no           Financial Stability Development Council (FSDC)?
                   intention to launch hybrid products.                              It's a good development. It's a good mechanism. With the
                                                                                     number of financial regulators in the market going up to four,
                   NPS is termed a marketing failure. It has failed to arouse        there are bound to be hybrid products, there are       bound
                   interest among common people....                                  to be inter-regulatory issues. Somebody has to sort them
                   That is in fact one of the big hurdles of the New Pension         out and I can think of no other better agency than the FSDC.

                   44   MONEY MANTRA     August 15, 2010
EP-46-90-kanchan-akm.qxd    7/25/2010       5:30 PM        Page 46

         FINANCIAL PLANNING                               TAXATION                         STOCK MARKET                                 COMMODITIES     MUTUAL FUND                                INSURANCE                                    BANKING                               INDIA POST
                 EDC Machine Cloning

                 Falling Prey To Innovative Fraudsters
                   Renu Baliyan                                                                                                                           "With technology advancement, it's dif-
                                                                                                                                                          ficult to curb this crime. The system has           Save yourself from credit card fraud:
                         angs have been involved in
                                                                         Credit card fraud                                                                its own loopholes. It needs to be tech-

                 G       credit cards cloning until now.
                         But, recently one of the gangs
                 took the police by surprise when it
                                                                                      Credit card cloning: Credit card cloning or
                                                                                      skimming is a technique whereby someone
                                                                                                                                                          nically sound to check credit card and
                                                                                                                                                          EDC machine cloning," says a senior
                                                                                                                                                          Delhi Police official requesting
                                                                                                                                                                                                                   1      Do
                                                                                                                                                                                                                   not accept a
                                                                                                                                                                                                                credit card if the enve-
                                                                                                                                                                                                              lope containing it is
                                                                                                                                                                                                                                                             2           Being
                                                                                                                                                                                                                                                                 vigilant is very
                                                                                                                                                                                                                                                              important to protect your
                                                                                                                                                                                                                                                            credit card and your identity.
                 cloned six Electronic Data Capture                                                                                                       anonymity. Most of the officials don't             already opened or is tam-                     You need to be alert when your
                                                                                      obtains your credit card details, copies them
                 (EDC) machines. The gang members                                                                                                         have the knowledge of computers and                pered with. The card                              card is being swiped for pay-
                                                                                      onto a bogus card and begins using the cred-                                                                                                                                 ment. Make sure the mer-
                 cloned the EDC machines in con-                                                                                                          the Internet. In such a scenario, they             could already have
                                                                                      it card.                                                                                                                been       cloned                                       chant swipes it on a
                 nivance with the merchants, whose                                                                                                        can't be expected of spotting and inves-
                                                                                                                                                                                                               before      the                                          bank machine, not
                 machines were being cloned. Police                                                                                                       tigating cyber crimes. Recently, there                                                                         something else -
                 recovered 11 credit cards, six EDC              Electronic Data Capture (EDC) cloning: It                                                were amendments with regard to civil                    delivery.
                                                                 is a method in which a fraudster tampers with                                                                                                                                                            - it can be a
                 machines and 54 credit card numbers.                                                                                                     offences in cyber crime. Earlier, only                                                                           skimmer.
                 Such a gang poses a threat to credit or         the EDC machine and applies a chip to copy                                               Additional Commissioner of Police
                 debit card holders since it has the             transactions.                                                                            (ACP) could investigate the matter.
                 involvement of the merchants. The                                                                                                        Now, an inspector rank official, who has
                 gang members used to give 20 to 30                                                                                                       completed 10 years in service in the
                 per cent cut to these merchants.                                         Phishing: Fraudsters do it by sending an e-                     same rank, can also investigate crimes                    3
                     Cloning Electronic Data Capture                                      mail to users falsely claiming to be an estab-                                         related to credit
                                                                                                                                                                                                                          Do                                                   Be
                                                                                          lished legal enterprise. Customers are asked                                                                             not    just
                 (EDC) machine and credit cards:                                                                                                                                       card fraud, he            glance                                                 when disposing
                 Cloning is a process in which a repli-                                   to surrender crucial information that is used                                                   said. The            through the credit                                     of bank statements
                 ca of the original copy is produced. The                                 for theft.                                                                                       fraudster           card statement. Look                                and     credit   card
                 members of the gang cloned six EDC                                                                                                                                        will be              through each transaction                         receipts.     Criminals
                                                                                                                                                                                                                  carefully to spot illegal                       search dustbins for
                 machines and used them for the purpose          How to detect: The best way is to monitor your accounts and                                                            booked
                 of swiping credit cards. Cloning the            bank statements every month, and check the credit report on a                                                         under        all             usage.
                 EDC machine became possible for                 regular basis.                                                                                                         these sec-
                 them only when the merchants of EDC                                                                                                                                   tions of IPC,
                 machine agreed to work with them in             Whom to report: You must inform your bank the moment you                                                             says the offi-      tion 420 and 468 of the IPC, the pun-        impersonation shall be punished for a
                 collusion. One of the gang members,             realise that your card has been cloned. After that you need to                                                           cial. Under     ishment is extended to 7 years. Under        term which may extend to three years,
                 a technical expert, used to tamper with         immediately file a police report.                                                                                              sec-      Section 419 of IPC, whoever cheats by        or with fine, or both.
                 the EDC machine of these merchants.
                 After cloning the EDC machine, the
                 gang member used to install it at the
                 place of their choice to make swipes
                                                                                                                                                                                                                  Law dealing with it
                 from cloned credit card. They cloned          the members involved in cloning. They        etc. It can then claim the amount from                                                                                                  with fine, or both.
                 the EDC machine so that they could            swipe customers' credit cards through        the card-issuer. If the transaction is                                                   Section    420: Whoever cheats
                 not be traced by the police when they         these devices clandestinely. The device      made before the card is blocked, the                                                     and thereby dishonestly induces the per-
                                                                                                                                                                                                     son deceived to deliver any property to
                                                                                                                                                                                                                                                         Section     468:         Whoever
                                                                                                                                                                                                                                                    commits a forgery, intending that the
                 swipe the cloned credit card. Credit card     copies the information held on the mag-      amount has to be borne by the card
                                                                                                                                                                                                     any person, or to make, alter or destroy       document or electronic record forged
                 cloning or skimming is a technique            netic strip. This process takes only a few   holder. In a situation when a card is not                                                the whole or any part of a valuable secu-      shall be used for the purpose of
                 whereby someone steals your credit            seconds, so it can be easily done. The       blocked by the bank despite intimation                                                   rity, or anything which is signed or sealed,   cheating, shall be punished with
                 card information, copies them onto a          customer should keep a hawk eye on the       by the customer, then the bank is                                                        and which is capable of being converted        imprisonment of either description for a
                 bogus card and uses the credit card           person swiping the card.                     responsible towards paying the money.                                                    into a valuable security, shall be punished    term which may extend to seven years,
                 without your knowledge. Gangs used to             Skimming leaves customer and                 Punishment it attracts: A person                                                     with imprisonment of either description for    and shall also be liable to fine.
                 get credit cards through a salesman or        the bank bleeding: Both the card hold-       who has been involved in cloning will                                                      a term which may extend to seven years,           Apart from these sections, the fraud-
                 a courier guy.                                er and the banks are the victims in case     be charged for cheating under Section                                                        and shall also be liable to fine.          ster will be also be charged under the
                                                                                                                                                                                                                                                    Cyber Crime Act or Information
                     Stealing information from credit
                 card: Skimming is a highly specialised
                                                               of skimming. When a fraudster buys
                                                               something with a counterfeit card, the
                                                                                                            420, impersonation under section 419
                                                                                                            of the Indian Penal Code (IPC), for-                                                            Section      419:       Whoever
                                                                                                                                                                                                             cheats by impersonation shall
                                                                                                                                                                                                                                                    Technology Act, 2000.
                 operation where the data on a card's          bill goes to the original card holder.       gery for the purpose of cheating under                                                                                                  Recent Change: Earlier an officer of ACP
                                                                                                                                                                                                              be punished with                      rank was entitled to investigate the mat-
                 magnetic strip is electronically stolen       When a card is swiped on an EDC              section 468 of IPC and under section                                                              imprisonment of either                ter. Even an Inspector having completed
                 and used to clone the card. Apocketsize       machine, the bank concerned pays the         471 of the IPC for using forged docu-                                                             description for a term which          a period of 10 years in his service in the
                 device with a scanning slot is used by        money immediately to the shop/hotel          ment or electronic record as genuine.                                                             may extend to three years, or         same rank can look into such matters.

                  46   MONEY MANTRA     August 15, 2010                                                                                                                                                                                                        August 15, 2010   MONEY MANTRA   47
EP-46-90-kanchan-akm.qxd    7/25/2010      5:30 PM     Page 48

                                                                                                                                                                                                                                                 Home Loan Junction
                                                                                                                                                                                                       Home Loan EMI/Rs 100,000 for a loan amount of Rs 30 Lakh as on July 23, 2010

                                                       Banking the                                                                                                                                     Allahabad Bank
                                                                                                                                                                                                                             FIXED FLOATING FIXED FLOATING FIXED FLOATING
                                                                                                                                                                                                                              1449     1294 1233
                                                                                                                                                                                                                                                10 years

                                                                                                                                                                                                                                                      1059 1119        965
                                                                                                                                                                                                                                                                           15 years                   20 years

                                                                                                                                                                                                       Andhra Bank              DP     1335    DP     1105     DP      998

                                                       VK way
                                                                                                                                                                                                       Axis Bank              1553     1253 1332       999 1244        884
                                                                                                                                                                                                       Bank of Baroda           DP     1253    DP      999     DP      900
                                                                                                                                                                                                       Bank of India            DP     1280    DP     1044     DP      965
                                                                                                                                                                                                       Bank of Maharasthra    1322     1253    DP     1014     DP      900
                                                                                                                                                                                                       Bank of Rajasthan*     1294     1213 1044       956    932      836
                                                                                                                                                                                                       Canara Bank            1392     1280 1168      1044 1066        932
                                                                                                                                                                                                       Central Bank of India    DP     1253    DP     1014     DP      900
                                                        Virendra Kumar Dhingra is a post-graduate in Commerce with                                                                                     Corporation Bank       1378     1294 1137      1044 1032        949
                                                        over forty years of experience in banking. He retired as                                                                                       HDFC                   1568     1227 1349       970 1262        852
                                                        Executive Director, UCO Bank. Currently, he is Director,                                                                                       ICICI Bank             1675     1227 1469       970 1391        852
                                                        Industrial Investment Bank of India Ltd.                                                                                                       IDBI Bank              1378     1253 1137       999 1032        884
                                                                                                                                                                                                       Indian Overseas Bank   1294     1240    DP      999     DP      884
                                                                                                                                                                                                       Indian Bank            1335     1294 1105      1059 1015        965
                                           Q1. Sir, I have been buying gold coins from         the last few months.                                         Further, expenses towards board-           Jammu & Kashmir Bank 1420       1363    DP     1168     DP     1119
                                      Axis Bank and HDFC every year on the eve of                  Q2. Sir, I have scored 97% in GMAT examina-          ing and lodging are also included while
                                                                                                                                                                                                       *Bank of Rajasthan (Fixed) offers 9.5% for the 1st year, 10.5% for the 2nd and 3rd year, thereafter 11.75%.
                                      Diwali. Recently, I needed some money and went           tion and received admission offers from several for-     working out your total education loan          (Floating) offers 8% fixed for the 1st year, 9% fixed for the 2nd and 3rd year, thereafter 9.25% for loans upto Rs
                                      to sell those coins at respective banks. Banks refused   eign universities, including Oxford and Yell, for MBA    requirement but it needs to be sup-            30 Lakh.

                                                                                                                                                                                                        **SBI Easy Home Loan offers 8% fixed for the first year, 9% pa fixed for second and third years, from fourth year
                                      to encash it citing RBI rules. When I went to gold       course. Their course fee is astronomical. Living         ported with documentary evidence.              for fixed interest rates 3.5% above base rate and for floating interest rate 1.75% above base rate, SBI Base Rate
                                      outlets in the city, they agreed to buy gold coin from   expense is also too high. I approached a number of           Q3. Sir, I have been working with a        currently it is 7.5%. Scheme available upto - 30th September 2010. SBI Fixed Interest Rates are subject to reset
             Buy back of gold         me at 5-7% discount. I could not find any outlet,        banks for education loan. They turned down my            private firm for the last four years. My       every five years.

             from customers           where I could sell the coins at face value. Where        request. They are asking for collateral? My father       monthly salary is Rs 35,000 per month. I          Fixed Deposit Interest Rates (upto - Rs. 15 lakhs as on 23rd July 2010)
                                      should I go? What's the RBI rule? If RBI doesn't per-    is a clerk in PWD. He is not in position to provide      want to take loan for my mother's treat-       BANKS                             6mths -        1–       2–     3 – 5 Years
             leads to taking          mit banks to buy back gold coins, why have it            collateral for loan amounting to Rs 20 lakh. What        ment. She is suffering from cancer and                                          < 1 Year < 2 Year < 3 Year < 5 Year & above
                                      allowed banks to sell gold coins?                        to do? Could living expense (boarding and lodg-          treatment requires removal of organ.           Bank of Baroda                     5.50%     6.50%     7.00% 7.00%      7.00%
             position in the                                                  -Ritesh, Delhi   ing) be included in course fee for education loan pur-   Doctors have estimated the expense to be       Bank of India              5.50% - 5.75%     6.50%     6.75% 7.00%      7.00%
             gold which is                 A. Dear Ritesh, buying Gold coins on spe-           poses? Is there any bank providing loan for dis-         around Rs 2.75 lakhs. Which bank should        Bank of Maharashtra                             5.50%             6.50%         6.50%       7.00%         7.00%
                                      cific occasions is nothing but an investment             tance learning programme as well? Please guide me.       I approach and how? Kindly suggest.            Canara Bank                             5.50% - 5.75%             6.75%         7.00%       7.00%         7.25%
             not permitted by         option. You preferred to invest your savings by                               -Jitendra Swaminathan, Cochin                               -Krishna, Ranchi                                                                                                               - 7.50%
             RBI. So, it may          buying gold coins and also trusted the banking               A. Dear Jitendra, my compliments on secur-               A. Dear Krishna, as such there is          Central Bank of India                   5.75% - 6.25%             6.50%         7.00%       7.25%         7.50%
                                      channel since it is more reliable in comparison          ing 97% in GMAT and getting good opportuni-              no special scheme for sanctioning loans
             not be possible          to buying the same through other channels.               ties from world class and reputed management             for treatment of hazardous diseases            Corporation Bank                        5.75% - 6.00%             6.50%         6.75%       7.00%         7.25%
                                                                                                                                                                                                                                                                                     - 7.25%                   - 7.50%
             for customers to         However, you were not aware that RBI has not             institutes. As far as education loan is concerned,       where estimated expenditure is very
                                                                                                                                                                                                       Dena Bank                                          5.50%          6.50%         6.75%       7.25%         7.25%
                                      authorised banks to buy back gold from the cus-          the Government of India over a period of time            high, but there are provisions for sanc-
             sell the coins to        tomers because RBI does not permit the banks to          has devised some schemes wherein deserving               tion of consumer loans or personal             Indian Overseas Bank                    5.50% - 6.00%             6.50%         6.75%       7.00%         7.00%
             their bankers.           trade in bullions. Buy back of gold from cus-            candidates are not deprived of higher educa-             loans to meet your requirements.               Oriental Bank of Commerce 5.50% - 5.75%                           6.75%         6.75%       7.00%         7.00%
                                      tomers will lead to taking position in the gold          tion. Hence, education loan being sanctioned by          Consumer loan can be sanctioned at the                                                                                       - 7.00%
                                      which is not permitted by RBI. So, it may not            the bank has to be without any collateral security       consent of your employer. In case the          State Bank of India                                5.25%          6.00%         6.50%       6.50%         7.25%
                                      be possible for you to sell the coins to your            to a certain extent. Earlier, this limit was 4 lakhs     employer is a government organisa-                                                                                                                     - 7.50%
                                      bankers. Reserve Bank may review this policy             which has since been revised to 7.5 lakhs with           tion, banks prefer to have a tie-up            Syndicate Bank                                     5.50%          6.50%         6.75%       7.00%         7.25%
                                      in future and may permit banks to trade in gold          approval of competent authority. So, if your loan        arrangement with the employer to                                                                                                                       - 7.50%
                                      and bullion but that depends on the global sce-          requirement is up to 7.5 lakhs, you need not offer       grant such loans. But in your case, if the     Union Bank of India                     5.00% - 5.25%             6.50%         7.00%       7.25%         7.50%
                                      nario. Banks can function only under regulato-           any collateral security to the bank. But, if your        bank is comfortable with the guaran-           Vijaya Bank                             6.00% - 6.25%             7.00%         7.25%       7.25%         7.25%
                                      ry guidelines.                                           loan requirement exceeds 7.5 lakhs, you will have        tee and commitment of your employ-             Axis Bank                                          6.00%          6.50%         7.00%       7.00%         7.00%
                                           However, you can sell the gold coins to any         to offer collateral security. Banks, being a com-        er to deduct monthly installments from                                                                         - 6.60%
                                      of the gold merchants and jewellers who are              mercial organisation and having dependence on            your salary and bank is also satisfied         Development Credit Bank                            6.50%          7.00%         7.75%       7.75%         7.50%
                                      licensed to trade in gold. Since your gold coin is       public deposits, can take risk only up to a limit-       with the credibility of your employer,                                                                         - 7.25%
                                      999, there will be no deduction from the pre-            ed extent, and therefore, where exposure is high,        you may get a loan as per your require-        HDFC Bank                               5.50% - 6.00%             6.50%         7.00%       7.50%         7.50%
                                      vailing market price. The gold prices are gen-           they ask for collaterals. In exceptional cases,          ment from the bank.                                                                                            - 6.75%       - 7.25%

                                                                                                                                                                                                                                                                                                                            Source: Apnapaisa Research Bureau
                                      erally fixed on the basis of closing price for gold      terminal benefits of your father can also be                 If that is not possible, you can also      ICICI Bank                                         6.00%          6.25%         7.00%       7.50%         7.75%
                                      in New York for the previous day and also the            attached as security for educational loans of high-      approach banks' branches which are                                                                             - 6.75%       - 7.25%
                                      morning spot price. You will appreciate that             er slabs. Some of the banks are flexible in the          granting personal loans by mortgaging          ING Vysya                               5.25% - 6.25%             6.50%         6.75%       6.75%         6.75%
                                      while selling the gold. Banks will further load          norms for collateral security provided some com-         some property or other collateral secu-                                                                        - 6.75%

                                      their profit margin which you cannot expect to           fort is available to the bank to secure their debts.     rity. Banks, however, should be con-           IDBI Bank                                          6.00%          6.75%         7.25%   7.00%             7.50%
                                      get back while selling the gold coin. I am of the        Alternatively, top officials of the bank can also        vinced of your repaying capacity.                                                                              - 7.00%               - 7.50%           - 7.75%
                                      opinion that you are one of the prudent investors        waive the requirement of collaterals to do the                  (For banking-related queries, mail at   The Federal Bank                                6.25%             7.00%         7.25% 7.25%               8.00%
                                      as gold prices have increased vertically during          same, given they are empowered for doing so.                     Kotak Mahindra Bank                     5.50% - 6.00%             6.50%         7.25% 7.50%               7.50%
                                                                                                                                                                                                                                                                       - 7.25%
                 48   MONEY MANTRA   August 15, 2010                                                                                                                                                                                                                        August 15, 2010       MONEY MANTRA        49
EP-46-90-kanchan-akm.qxd     7/25/2010       5:30 PM      Page 50

         FINANCIAL PLANNING                              TAXATION                          STOCK MARKET                                 COMMODITIES     BANKING                               INSURANCE                                    MUTUAL FUND                                INDIA POST
                 Changing MF Environment                                                                                                                features that are important and mean-                                                         burden and investors should also be
                                                                                                                                                        ingful to them in their decision mak-                 Sticking to MFs                         ready to adopt and use different options.

                 Take Informed Decision                                                                                                                 ing process. There has to be an added
                                                                                                                                                        benefit that is available for the investor
                                                                                                                                                        but they will have to decide on the
                                                                                                                                                                                                      Long term investment will bear fruits
                                                                                                                                                                                                             Differentiation will hold the key
                                                                                                                                                                                                                                                      In this sense this will be a major factor
                                                                                                                                                                                                                                                      that will go into investing in mutual funds
                                                                                                                                                                                                                                                      in the years ahead.
                 Using mutual funds to build a strong long term portfolio that appreciates and                                                          importance of the so-called differenti-         Convenience to investors will be a
                                                                                                                                                        ating factor. Often the mutual funds try                                                      Low expense
                 compounds over a period of time would be a good route to adopt. This will                                                                                                                                      big factor
                                                                                                                                                        and create a differentiation that is not                                                           There was a time when all that the
                 also require that investors change their mental outlook when they actually go                                                          really important for the investor and              Performance will not depend on             investor cared about in their mutual fund
                 to make their investments.                                                                                                             investors would need to avoid such                                   expense ratio            investments was the returns that were
                                                                                                                                                        offerings.                                         Wide coverage of assets will be            generated. However, this is slowly
                     Arnav Pandya                              Differentiation                              offered to them and the manner in which                                                                               offered             changing and the mutual funds are also
                                                                                                            this is different from some other offer-    Overall fund management                                                                       making efforts in this respect. One area
                          ne of the questions that                 There are a lot of similar products      ing. This is likely to be reduced in the        Currently, the investors use mutual                                                       where this is clearly visible is that of the

                 O        investors, mutual funds as well
                          as the regulator are asking in
                 recent months is how will mutual funds
                                                               that are available to investors today.
                                                               Often it becomes difficult even for a
                                                               person who follows the developments
                                                                                                            future as the mutual funds try and
                                                                                                            ensure that they attract the investors
                                                                                                            towards them with easy to understand
                                                                                                                                                        funds for just one specific purpose. This
                                                                                                                                                        could mean considering equity schemes
                                                                                                                                                        in the anticipation of a bull market and
                                                                                                                                                                                                     ing money either for the short term or
                                                                                                                                                                                                     for a longer purpose, like retirement, the
                                                                                                                                                                                                     investor should consider mutual funds
                                                                                                                                                                                                                                                      expense ratio where the figure is heading
                                                                                                                                                                                                                                                      downwards for several funds as they
                                                                                                                                                                                                                                                      make efforts to restrict the amount here.
                 be relevant for investors in the coming       in the mutual fund arena to know the         and simple schemes.                         so on. In the coming period, the investor    as an option among the various choic-            A lower expense ratio means that the
                 time period. There are a lot of chal-         exact feature of a particular scheme or          This will actually give pace to real    has to also look at mutual funds that will   es. Currently, a lot of the options avail-       investor has a lower cost that is being
                 lenges that mutual funds face and there       fund. In this sense there is a lot of con-   differentiation in the Indian market. The   help them succeed in the overall fund        able in the form of mutual funds are             spent in the investment. Due to this rea-
                 is a lot of jostling to get a share of the    fusion in the minds of the investors         changing situation will require that the    management process. So, for example,         not even explored by the investors.              son there has to be a clear manner of look-
                 amount that is flowing towards mutu-          because they are not clear what is being     investors are able to clearly distinguish   when it comes to the question of invest-         The investor has to feel that they are       ing at all funds and not just equity-ori-
                 al funds. There are also reports that a lot                                                                                                                                         actually gaining from the investments            ented schemes to see how they stack up
                 of investors have been closing their                                                                                                                                                that they are making and in many cases           on the expense front.
                 mutual fund folios and this also shows                                                                                                                                              there is very little information that reach-          There is another factor which is also
                 that they are evaluating various options                                                                                                                                            es them so they make investment deci-            emerging slowly which is that of the rela-
                 for themselves. In such a situation here                                                                                                                                            sions depending on whatever informa-             tion of the returns and the cost. For a long
                 are a few factors that will help investors                                                                                                                                          tion they have. This happens because             time period it was assumed that the
                 in their decision making process.                                                                                                                                                   there is also very little interest on the part   schemes with a low expense ratio will
                                                                                                                                                                                                     of the funds to serve the small investors        not be able to generate a high return;
                 Long term investments                                                                                                                                                               because in the search for large assets they      however, this is now changing and hence
                      Various regulatory changes in the                                                                                                                                              target only the big players. Investors will      there is a situation where the investors
                 country are providing a character of being                                                                                                                                          gain from the wide array of operations but       would find that the scheme performance
                 a long term investment for various mutu-                                                                                                                                            they will need to make some efforts in this      is also high whereas the expense is lower.
                 al fund schemes. This is especially true                                                                                                                                            direction to ensure that their total funds
                 with respect to equity-oriented mutual                                                                                                                                              are deployed properly.                           Wide exposure
                 funds. For example, the abolition of the                                                                                                                                                                                                 The challenge for the investors in
                 entry load has meant a significant drop                                                                                                                                             Convenience                                      the coming days will also be to select
                 in initial commission for distributors.                                                                                                                                                 There is a lot of convenience when           the right investments because they will
                 Earlier, it was in the interest of the dis-                                                                                                                                         an individual uses various financial             have a choice that is extremely wide.
                 tributors to ensure that there was a churn                                                                                                                                          products and that should be the situa-           When this happens, then there would
                 in the investors' portfolio because of the                                                                                                                                          tion when it comes to mutual funds also.         have to be an appropriate choice of the
                 high commission that this would gener-                                                                                                                                              There are various investor requirements;         investment selected and the reason why
                 ate.                                                                                                                                                                                so on one side they are looking for              this is actually selected. This will also
                      Now, the situation is different                                                                                                                                                growth in their portfolio while they             require expertise in terms of the knowl-
                 because the distributor earns when the                                                                                                                                              might also be looking to build up a gold         edge of different choices and how they
                 investors remain with the funds for a long                                                                                                                                          exposure. The manner in which they are           will go about structuring the actual port-
                 time period in the form of a trail com-                                                                                                                                             able to fulfil this requirement depends          folio so that it reflects the requirements
                 mission. Similarly, even the new provi-                                                                                                                                             upon their actual use of the funds. In that      that are vital for the investor.
                 sions of the draft Direct Tax Code would                                                                                                                                            sense it is required that the investor looks         Mutual funds will thus come to occu-
                 hurt investors who churn their portfolio                                                                                                                                            at convenience and how best they can             py a place where they will rely on the wide
                 often. Investors should keep these factors                                                                                                                                          gain from the situation.                         coverage of assets to attract investors.
                 in mind while they are framing their                                                                                                                                                    Convenience can be present with              Investors should use this to complete
                 investment plan. Using mutual funds to                                                                                                                                              respect to various issues right from the         activities that they are not able to do on
                 build a strong long term portfolio that                                                                                                                                             manner in which the investment is made           their own. In this respect, there has to be
                 appreciates and compounds over a peri-                                                                                                                                              (with a mere click or in a matter of sec-        a proper manner in which investors make
                 od of time would be a good route to adopt.                                                                                                                                          onds) to the mode in which they will have        their decisions and consequently gain
                 This will also require that investors                                                                                                                                               to deal administratively (fill up details        from the options available.
                 change their mental outlook when they                                                                                                                                               online as compared to filling forms) with              (The writer is Chief Coach at FinCare
                 actually go to make their investments.                                                                                                                                              the instruments. There should not be a                                           Consulting)

                50   MONEY MANTRA      August 15, 2010                                                                                                                                                                                                        August 15, 2010   MONEY MANTRA   51
EP-46-90-kanchan-akm.qxd     7/25/2010      5:30 PM      Page 52

         FINANCIAL PLANNING                             TAXATION                           STOCK MARKET                                    COMMODITIES      MUTUAL FUND                                 BANKING                                  INSURANCE                                INDIA POST

                 Policy Illustration                                                                                                                                                                                                                      1.25% is a 50% increase in costs for
                                                                                                                                                                                                                                                          you? That has a big impact over the
                                                                                                                                                                                                                                                          life of a policy. The compounded effect

                 Made To Look Good
                 Investors need to be cautious while purchasing an insurance policy depending upon
                                                                                                                                                                                                                                                          of this over 25-year tenure of the poli-
                                                                                                                                                                                                                                                          cy can well be imagined!
                                                                                                                                                                                                                                                               There is no policy illustration which
                                                                                                                                                                                                                                                          would have told you the value of your
                 a policy illustration. Liking an illustration should not lead to buying a product.                                                                                                                                                       policy if you had taken it (paying once
                 Decision should be taken after understanding the product thoriughly.                                                                                                                                                                     in a year) in the month of say December
                                                                                                                                                                                                                                                          2007 or January 2008. The fall in the
                                                                                                                                                                                                                                                          sensex and the policy charges would
                      P V Subramanyam                                                                        tion shows how the policy will perform                                                                                                       have ensured that it would take about 7-
                                                                                                             is more misleading than if similar sales                                                                                                     8 years for your policy to reflect the full
                           any readers, friends and clients                                                  materials were allowed to be used in the                                                                                                     amount that you have paid.

                 18 years?"
                           regularly ask for "How much
                           will my investment become in
                                                                                                             sale of mutual funds. This is because the
                                                                                                             life insurance policy is more complicat-
                                                                                                             ed than a mutual fund, and its future rate
                                                                                                                                                                                                                                                          Illustration isn't a
                                                                                                                                                                                                                                                          performance pointer
                     Or the question is "If I have to send                                                   of return is therefore more difficult to                                                                                                          For e.g. in India it may be still pos-
                 my son/daughter abroad 15 years from                                                        predict. While the mutual fund's per-                                                                                                        sible for an agent to say "Equities will
                 now, how much should be my SIP                                                              formance depends only on the gross rate                                                                                                      give a return of say 18% over the long
                 amount? Or how much should be my                                                            of return of the investment and money                                                                                                        term", in the US the S&P has given a
                 ULIP premium?                                                                               management expenses, the life insur-                                                                                                         small negative return over the past
                     Actually, I do not have an answer.                                                      ance policy's return is tied to some more                                                                                                    decade! As the agent does not have an
                 So, this is how I have decided to react.                                                    factors - mortality experience, and lapse                                                                                                    inkling of the assumptions used while
                 Do you want me to create a 15-year                                                          rates of policies (how long the policies                                                                                                     making the illustration, there is little
                 excel sheet? And they routinely say yes.                                                    stay in the books of the life insurance                                                                                                      hope of him being able to explain it to
                                                                                                             company).                                                                                                                                    you. Unlike the investment assumption,
                 The future of money                                                                              Does it make sense that projecting                                                                                                      which can be changed by the agent (in
                      Adding to this confusion of the                                                        the future performance of the relative-                                                                                                      an excel sheet, not normally authorised
                 common man, IRDA has created one                                                            ly uncomplicated product (the mutual                                                                                                         by the company) in different illustra-
                 document called the policy illustra-          Policy illustration is a cost illustra-       fund) is not allowed, while doing the                                                                                                        tions, the mortality and expense
                 tion. A policy illustration is actually       tion, not a returns illustration.             same thing for the more complex prod-                                                                                                        assumptions are embedded in the illus-
                 a cost illustration - it shows what hap-                                                    uct (the endowment policy) is not only           words, the future forecast can be made         life expectancy could go completely          tration and cannot be altered.
                 pens to your money over the next 20           Returns of life insurance are diffi-          legal but COMPULSORY and used as                 to look much brighter than the past.           wrong. In most cases these mortality              The inscrutability of life insurance
                 years based on some assumptions.              cult to predict for it being compli-          the ONLY basis upon which agents sell            Take the returns that an investor would        rates are also only a projection, and not    mortality and expense charges hides the
                 That is to say if you get 10% returns,        cated.                                        and consumers choose among compet-               have got in the S&P index - the aver-          a guaranteed rate! The fund manage-          fact about policy illustrations - the use of
                 how much will your money grow in 20                                                         ing products? It defies all logic. The other     age annual return of the S&P 500 for           ment charges again, are not guaranteed.      low mortality charges in the later years
                 years after paying off all the costs like     Ask for a fresh illustration by your          worry is that the people who are buying          40 years from 1960 through the end of          That the performance of a life insurance     of a policy to make it look much better.
                 administration costs, mortality               life insurance company after poli-            the product are lulled into believing that       1999 was 9%. It was also 9% for the            policy fluctuates with changes in the        This practice allows the insurers to play
                 charges, asset management charges             cy's half life ends.                          the amount mentioned in the illustration         20 years ending the first quarter of 2010,     insurer's investment experience would        the "illustration game," showing either
                 etc. To repeat, it is a cost illustration,                                                  will be waiting for them in an envelope          so you might conclude that predicting          seem obvious. But its dependence on          more death benefit for a given premi-
                 not a returns illustration. However,                                                        when their kid is ready for college!             from long-term history works.                  other factors, especially a company's        um or a lower premium for a given death
                 many people decide on which policy to         An illustration gives an idea of              Obviously not. It is so far from the truth       However, if you look at the returns for        mortality charges, or worse how the          benefit. These illustrations are also used
                 take depending on how much they like          what your amount will become.                 that it defies the very purpose of creat-        the 20 years from 1980 through 1999,           other policy holders behave may not          to show how the premium needs to be
                 the illustration! This is inherently dan-                                                   ing it.                                          you will find an average of 17%. This          be easy to understand. I am yet to come      paid only for 3 years in a 30-year poli-
                 gerous and bordering on fraud! The                                                                                                           is almost twice the return as the 40-year      across a salesperson who can explain         cy. If this is not fraud, tell me what is?
                 illustration prepared by the company         Point of debate                                Investment - more than                           example (source Forbes). So your               the full policy illustration. Or even the         Illustrations are a completely unre-
                 (the agent is just carrying the print out)       Sellers of life insurance policies,        illustration                                     return from investments is a matter of         basic fact that an illustration is just      liable basis for predicting policy per-
                 is not reliable, is not guaranteed, has      especially pension and endowment                   IRDA should do well to take a re-            timing as well and not just a dumb             meant to demonstrate how the expens-         formance and for choosing one insur-
                 too many assumptions, difficult to com-      plans, are forced to do which is illegal for   look at this whole exercise of wasting           'illustration' that makes you feel good,       es (mortality, asset management              ance company over another.
                 prehend, and almost useless to be used       the seller of most of other investments -      paper in creating a document which at            but is not worth the paper on which it         charges etc.) actually bring down the             Once you have signed the policy
                 as a basis for comparison or for decision    to make forward looking statements! For        best is useless and at worst a fraud. How        is printed.                                    yield (return for the policy holder). And    illustration and bought the life insurance
                 making. What this means is that after 20     e.g. the Institute of Chartered                well a policy performs and how close                  In fact, in a policy illustration there   that if you have 2 illustrations in a pol-   policy, it is not worth the paper on which
                 years, the amount you have may bear no       Accountants does not allow its mem-            it comes to meeting or exceeding its             is a good chance that all the assump-          icy with investment value, then the one      it is printed. As long as you know this,
                 semblance to the illustration that you       bers signing a projection forecast - for       illustrated rate of return depends on the        tions on which the illustration is made        that shows higher ending corpus is           sleep peacefully. Your agent may not
                 have today. It may be a worthwhile           say even 6 months! The fund manager            company and policy in all of the areas           could go wrong!                                actually lower because its charges (not      know this.
                 exercise to ask for a fresh illustration     cannot tell you what the NAV (net asset        affecting the rate of return. Also, the                                                         binding, they can change it later on)
                 by your life insurance company on a 20-      value) of the fund will be the following       current results do not always justify            Misleading assumptions of                      are lower.                                         (The writer is a CA, a trainer and the
                 year policy, taken in say 2001, where        day. These are just a couple of exam-          the manner in which these factors are            life expectancy                                    Did you notice that a change in the        author of book ‘Retire Rich Invest Rs 40 a
                 close to 10 years have passed!               ples. To even pretend that the illustra-       shown to play out in the future. In other            The overly optimistic projections of       asset management fees from 0.8% to             Day’. He also runs

                 52   MONEY MANTRA    August 15, 2009                                                                                                                                                                                                            August 15, 2009   MONEY MANTRA   53
EP-46-90-kanchan-akm.qxd     7/25/2010       5:30 PM      Page 54

         FINANCIAL PLANNING                              TAXATION                           STOCK MARKET                                 COMMODITIES     MUTUAL FUND                                  BANKING                                 INSURANCE                              INDIA POST
                 Insurance Premium
                                                                                                                                                                                                          rules also, which are only applicable       used for getting discount on new vehi-
                                                                                                                                                           Reducing home                                  to specific areas of insurance space.       cles also.

                 Less Is Beautiful
                      MM Bureau                                based and one might not be interested         payment time slab. Normally, yearly
                                                                                                                                                           insurance cost                                 Reducing vehicle
                                                                                                                                                                                                          insurance cost
                                                                                                                                                                                                              Santosh Balan, marketing head of
                                                                                                                                                                                                          Bajaj Allianz Insurance, says the cost of
                                                                                                                                                                                                                                                      Keep a clean driving record:
                                                                                                                                                                                                                                                      Insurance companies also take into con-
                                                                                                                                                                                                                                                      sideration that who will drive the vehi-
                                                                                                                                                                                                                                                      cle? Before fixing a premium they may
                                                                                                                                                                                                                                                      ask if the vehicle would be chauffer
                                                               to compromise on that front." There           premium is cheaper than other payment                                                        vehicle insurance premium can depend        driven or owner driven, by male or
                     n the financial world, 'smart' is noth-   are some other simpler ways also to           options.                                                                                     on some of the factors which one might      female, by young or aged by married

                 I   ing but the art of getting maximum
                     by paying the minimum. The theo-
                 ry applies to insurance premium also.
                                                               reduce the premium amount of a
                                                                Avail after sufficient research: A pre-
                                                                                                             Take a single plan: Taking separate
                                                                                                             plans could be costly than taking a sin-
                                                                                                             gle plan. Such a facility is available in
                                                                                                                                                                                                          not think of. It can depend on profes-
                                                                                                                                                                                                          sion; like a teacher will have to pay a
                                                                                                                                                                                                          lesser premium than a truck owner. It
                                                                                                                                                                                                                                                      or unmarried etc. They also try to check
                                                                                                                                                                                                                                                      driving history of the driver. One should
                                                                                                                                                                                                                                                      also know that in vehicle insurance, pre-
                 Asmart cover could be one which gives         mium may vary from company to com-            group insurance and family benefit                                                           may depend on geographical areas; like      mium charges are also calculated keep-
                 maximum benefits by paying lesser pre-        pany even if the policy tenure and the        plans.                                                                                       in north India the claim ratio is high      ing in mind the mileage, i.e. how many
                 mium. Mostly, investors are under the         amount insured are the same. Before           Avail or renew policy online: Some                                                           hence the premium charges are also          kilometers the car/two wheeler/ truck
                 impression that the premium calculated        buying, one should check out various          insurers offer a higher discount when                                                        high etc.                                   etc. travels in a year.
                 is final but that's not true. An investor     policies of similar nature to find the best   a policy is bought or renewed online.                                                         Choose the right vehicle: Choosing
                 can curtail the cost by taking care of a      possible rates.                               This is because when a customer trans-         There are several factors that decide         a vehicle/model which has the history       Reducing coverage for
                 few things.                                    Avail correct riders: Adding riders          acts online with the insurer instead of        the premium cost for home insurance.          of least maintenance cost will call for     older vehicles
                      Before deciding the premium,             to your insurance policy adds to the pre-     going through an intermediary, the             The older your home is, the higher            lower premium. In addition, if you              As a thumb rule, if your indemnity
                 insurance company considers type of           mium. Before taking a rider, one should       insurance company has a considerable           your premium will be. Raj Bora, Vice          install anti-theft devices like keyless     premium is more than 10% of the com-
                 policy, tenure and the sum assured.           see its relevance and avoid duplicity.        saving on processing and distribution          President, Brand Management, IFCO             entry remote controls, car alarms or        pensation you are likely to receive from
                 Avaneesh Nirjar, the co-founder and           Look for best payment option:                 costs which are otherwise passed on to         TOKIO General Insurance says, "We             steering wheel locks, the insurance         the insurer, you should reduce the
                 COO of says,                  Monthly, quarterly, half-yearly and           the customers.                                 insure any house on nine point theo-          company will consider your concern          amount or type of coverage. Nirjar
                                                                                                                                                            ry which includes points like, fire, theft,
                 "Modifications in these considerations        yearly premiums are not the same. A               The rules above could be applied           electrical and mechanical faults etc.
                                                                                                                                                                                                          about the car and may reduce the pre-       explains that if any person has to pay
                 can change the cost of premium. But           customer can cut the premium amount           to any kind of insurance, be it life or        Those who insure their house with             mium charges.                               high premium on an old car say 5 year
                 then these considerations are need            by taking into consideration the right        general. However, there are some other         maximum points (i.e. maximum num-             Get no claim bonus: Every addition-         old, he may take only the third party
                                                                                                                                                            ber of covers) will be eligible for dis-      al no claim bonus year lowers the vehi-     cover. One should keep in mind that if
                                                                                                 Reducing health                                            counts in premium.
                                                                                                                                                                 Discount from renovation: All ren-
                                                                                                                                                                                                          cle insurance cost. Full no claim bonus
                                                                                                                                                                                                          is generally considered by most com-
                                                                                                                                                                                                                                                      a car is more than 15 years old, it is
                                                                                                                                                                                                                                                      considered a vintage car by the insur-
                                                                                                  insurance cost
                                                                                            Premium of health insurance largely depends on the
                                                                                                                                                           1     ovations like plumbing, painting
                                                                                                                                                                 and patch-ups, electrical fittings,
                                                                                                                                                            maintenance of roof etc. will lower pre-
                                                                                                                                                                                                          panies. This can give huge discounts
                                                                                                                                                                                                          in premium, in some cases up to 50%.
                                                                                                                                                                                                          No claim bonus of an older car can be
                                                                                                                                                                                                                                                      ance company keeping in view that
                                                                                                                                                                                                                                                      parts of the car will be rare to find and
                                                                                                                                                                                                                                                      so they charge high premium.
                                                                                            person's age, health and medical conditions. Nirjar             mium charges. One should be in a
                                                                                            says that the health premium is derived from BMI                state to provide documents to show
                                                                                            (body-mass-index) of any person. If the health of               that the work was performed by a
                                                                                                                                                            licensed contractor.
                                                                                            the insurer is not good, it is considered as risk for
                                                                                            insurance company. Health insurance premium can                      Less space, lower the premium:
                                                                                            be reduced by doing the following.                             2     Calculating the inside square
                                                                                                                                                                 footage of your home correctly is
                                                                                                                                                            extremely important. For insurance
                                                                                             Avail in healthy state: Avoid taking a health poli-            purposes, only the square footage of
                                                                                            cy at a time of any temporary illness. Here, the insur-         the 'living area' is included. The base-
                                                                                            er may ask you to pay the mark-up premium which                 ment even if completely finished and
                                                                                            is above the normal premium.                                    attic space is not included for insur-
                                                                                                                                                            ance purposes. If you include the bal-
                                                                                              Espouse a healthy lifestyle: Premiums are directly            cony and other lofty space, your pre-
                                                                                              proportional to policyholder's health and lifestyle.          mium will be based on that number.
                                                                                              Exercise regularly, eat a balanced and healthy diet               Safe home, less premium: The
                                                                                               and avoid smoking and alcohol. Many companies
                                                                                               charge higher rate to smokers than the non-smokers.
                                                                                                                                                           3    premium of house in sensitive
                                                                                                                                                                areas will be higher for the same
                                                                                                                                                            in a VIP area. Also, if the home is
                                                                                                                                                            secured by proper electricity fittings,
                                                                                                 Go for higher deductibles - Any insurance plan
                                                                                                                                                            fire alarm systems etc. one may
                                                                                                that has higher deductibles will have a lower pre-          receive discount. Make sure your
                                                                                                mium. Generally, the deductible is the amounts              insurer is offering you replacement
                                                                                                which are not included in cover and you are sup-            cost coverage for your property, not
                                                                                                posed to pay to hospital, doctor and other medical          depreciation value. For a lower pre-
                                                                                                expenses etc. However, this idea might not be               mium one should bear the cost of
                                                                                                 suitable or applicable to everyone.                        minor problems and your premium
                                                                                                                                                            won't increase.

                 54   MONEY MANTRA     August 15, 2009                                                                                                                                                                                                       August 15, 2009   MONEY MANTRA   55
EP-46-90-kanchan-akm.qxd     7/25/2010      5:30 PM      Page 56

         FINANCIAL PLANNING                             TAXATION                            STOCK MARKET                               COMMODITIES      INSURANCE                                                                   Medical Insurance
                 Expert Advice                                                                                                                                                                                                                       Family age*
                                                                                                                                                                                                                                              30, 36,33,1 41,38,15,1 46, 43, 20,     Pre-Existing
                                                                                                                                                                                                                                           27,4,2     0,8          3         18 Disease coverage

                 Bury Home                                                                                                                                                                              ICICI Lombard -
                                                                                                                                                                                                        Family Floater **
                                                                                                                                                                                                        ICICI Lombard -
                                                                                                                                                                                                        Family Floater #
                                                                                                                                                                                                        Bharati AXA - Smart








                                                                                                                                                                                                                                                                                                    After 4 continu-
                                                                                                                                                                                                                                                                                                   ous policy years.

                                                                                                                                                                                                                                                                                                    After 4 continu-

                 Loan Worry                                                                                                                                                                             Health Plan Premium **
                                                                                                                                                                                                        Bharati AXA - Smart
                                                                                                                                                                                                        Health Plan Premium #
                                                                                                                                                                                                        IFFCO Tokio -
                                                                                                                                                                                                        Individual Medishield **
                                                                                                                                                                                                        IFFCO Tokio -








                                                                                                                                                                                                                                                                                                   ous policy years.

                                                                                                                                                                                                                                                                                                         Not Covered

                                                              to. First is the risk of early death dur-                                                                                                 Swasthya Kavach #
                                                              ing the tenure of the loan in which case                                                                                                  Apollo Munich - Easy               12482        12694           12905           15957       After 3 continu-
                                                              your family will be burdened with the                                                                                                     Health Individual                                                                          ous policy years.
                                                              outstanding loan amount. When you                                                                                                         Standard **
                                                              start paying off your loan, the princi-                                                                                                   Apollo Munich - Easy                 7721        8824             8824          13788
                                                              pal amount comes down. In this insur-                                                                                                     Health Individual
                                                              ance cover is based upon your loan                                                                                                        Standard #
                                                              amount. So as and when the principal                                                                                                      HDFC Ergo - Health                 12632        13375            14118          19593       After 4 continu-
                                                              amount comes down, the sum assured                                                                                                        Suraksha **                                                                                ous policy years.
                                                              also comes down. This is known as a                                                                                                       HDFC Ergo - Health                   8675        9790             9790          15819
                                                              decreasing cover term insurance. For                                                                                                      Suraksha #
                                                              example, for your loan of Rs 45 lakhs       which in theory is supposed to be cheap-       alone policy from general insurance
                                                                                                                                                                                                        Cholamandalam                      16872        17379           17886           21166       After 3 continu-
                                                              for 10 years you would repay about Rs       er than a level term plan (where the           companies. You can buy a critical ill-         General - Individual                                                                       ous policy years.
                                                              3 lakhs in the first year and the sum       amount covered or sum assured remains          ness rider for a maximum of Rs                 Health **
                                                              assured would come down to Rs 42            same - Rs 45 lakhs in your case -              10,00,000 on top of your Rs 45,00,000
                                                                                                                                                                                                        Cholamandalam                        9184       10917           10917           15184
                 Sir, I have purchased a flat in Noida        lakhs in the second year and similarly      through the tenure of the plan). In prac-      policy from Kotak Life Insurance               General - Family
                 under the down payment option. It            to Rs. 39 lakhs in the third year and so    tice, however, the level term plans work       which will cost you an additional pre-         Floater #
                 is under construction and I will get its     on. Only a few life insurance companies     out to be cheaper since only a limited         mium of Rs 15,000 per annum. You
                 possession in the year 2012. I took a        offer this decreasing term cover plan       set of companies are offering the reduc-       can look to buy a critical illness rider for   National Insurance -               14054        15433           15855           18463        After 4 continu-
                                                                                                                                                                                                        Mediclaim Policy **                                                                           ous claim free
                 home loan from HDFC for the same.                                                        ing cover term plan. While this may pro-       the balance amount of Rs 35,00,000                                                                                                             policy years.
                 I am paying an installment of Rs               For your age and a level                  vide you more cover than is strictly nec-      from Bajaj Allianz General Insurance
                                                                                                                                                                                                        National Insurance -                 6268        7018             7018          11790
                 52000 per month. My banker is after            term cover of                             essary, this is still recommended since        company for Rs 46,326 per annum.               Parivar for family #
                 me to buy home loan cover for the                                                        it comes at no cost and the balance                Thus, if you choose both the Kotak
                 loan taken. What is this? How bene-
                 ficial it is? What are its features?           Rs     45,00,000                          amount can be utilised by your family
                                                                                                          for some other financial needs.
                                                                                                                                                         Preferred term (with the critical illness
                                                                                                                                                         rider) as well as the Bajaj Allianz
                                                                                                                                                                                                        Bajaj Allianz - Health
                                                                                                                                                                                                        Guard **
                                                                                                                                                                                                        Bajaj Allianz - Health




                                                                                                                                                                                                                                                                                                    After 4 continu-
                                                                                                                                                                                                                                                                                                   ous policy years.
                 Should I go for the same? Is it essen-                                                        It is not necessary to buy the home       General Insurance critical illness policy,
                                                                for 10 years, the annual pre-                                                                                                           Guard #
                 tial to buy a home loan cover from the                                                   loan from the bank itself. You can buy         then the total cost will be around Rs
                                                                mium will be as follows :
                 same bank which has disbursed loan?                                                      a term insurance form any life insurance       77,000 per annum or about Rs 6,500 per         Star Health - Medi                 14650        14946           15332           18111       After 4 continu-
                 Which insurance company is pro-                                                          company and then assign the policy in          month (a small price to pay for com-           Classic **                                                                                 ous policy years.
                 viding the cheapest and the best home          Kotak Life - Preferred                    favour of the bank.                            plete peace of mind). The costs will be
                                                                Term Plan                                                                                                                               Star Health - Family                 4754        5636             5636            9265
                 loan insurance? Please suggest. My                                                            The other risk you run is that of con-    much higher if you have any existing dis-      Floater Optima #
                 age is 47 years and the loan amount
                                                                               Rs     15,403              tracting a serious illness such as a par-      eases or if you are a tobacco user or not

                                                                                                                                                                                                                                                                                                                        Source: Apnapaisa Research Bureau
                                                                                                                                                                                                        Future Generali -                  14875        15493            16110          18444       After 4 continu-
                 is Rs 45 lakhs for 10 years.                                                             alytic stroke, organ failure or cancer.        physically fit.                                Health Suraksha                                                                            ous policy years.
                                - Mehga, Jamshedpur              (Available only for non-tobacco users)   If you are unfortunate enough to con-              The other risk you run is the risk to      Golden **
                      It is very necessary and important to                                               tract these or similar illnesses, your         your property being damaged due to nat-        Future Generali -                    7864        9100             9100               NA
                 take appropriate insurance for any loan        Aegon Religare I Term                     earning capacity is bound to be affect-        ural disasters such as earthquake, floods      Health Suraksha

                 that anyone takes. This ensures that in                                                  ed and you will have problems paying           etc. Unless you are planning to buy a          Golden #
                 case of any unforeseen event, you or                           Rs 21,740                 for the home loan outstanding at that          standalone bungalow, these risks are best      Reliance General -                 17427        17979           19567           23116       After 4 continu-
                 your family is not burdened by the loan                        (available only online)   time. These kinds of risks are covered         covered by the Coop Housing Society or         Healthwise Standard **                                                                     ous policy years.
                 amount and the insurance company can                                                     by a critical illness policy which pays        residents association and you should           Reliance General -                   8324        9520            11385          17701
                 take care of the outstanding loan              Canara HSBC OBC                           a lump sum after you survive a fixed           prevail on them to take such a cover and       Healthwise Standard #
                 amount.                                        Life - Pure Term Plan                     number of days after diagnosis of such         pay for your share of the premium.
                      Your insurance needs arising out                                                    diseases. Critical illness policy can be           Harsh Roongta is CEO,
                 of a loan are of many kinds and covers                         Rs 24,288                 available as a rider on top of your life             a search comparison engine for loans,
                                                                                                                                                               insurance and investments. He can be
                                                                                                                                                                                                        * Age of husband, wife and 2 children
                                                                                                                                                                                                        ** Policies for Rs. 3 lakhs each for every family member (total fmaily sum assure of Rs. 12 lakhs)
                 several of the risks that you are exposed                                                insurance policy and also as a stand                                                          # Sum assured of Rs. 3 lakhs for entire family
                                                                                                                                                           reached at

                 56   MONEY MANTRA    August 15, 2009                                                                                                                                                                                                                      August 15, 2009        MONEY MANTRA   57
EP-46-90-kanchan-akm.qxd                                            7/25/2010        5:30 PM      Page 58

         FINANCIAL PLANNING                                                                      TAXATION                                                                      STOCK MARKET                                  COMMODITIES      MUTUAL FUND                         FINANCIAL PLANNING                                      BANKING                                 INDIA POST

                 Got salary increment?                                                                                                                                                                                                          options available to the investors- short
                                                                                                                                                                                                                                                term investment and long term invest-
                                                                                                                                                                                                                                                ment. The choice of investment entire-
                                                                                                                                                                                                                                                ly depends on your need. The short term
                                                                                                                                                                                                                                                                                               procedure, talk to some financial advi-
                                                                                                                                                                                                                                                                                               sors and make an appropriate decision.
                                                                                                                                                                                                                                                                                                    For example, investment in real
                                                                                                                                                                                                                                                                                               estate becomes retirement income for
                                                                                                                                                                                                                                                                                                                                                 On the other hand, part-time workers
                                                                                                                                                                                                                                                                                                                                                 should look for options that involve low
                                                                                                                                                                                                                                                                                                                                                 risk. They can invest in different types
                                                                                                                                                                                                                                                                                                                                                 of investment vehicles because they have

                 Invest it wisely
                                                                                                                                                                                                                                                investments are beneficial if any finan-       many people. But you need to look for             enough time to plan.
                                                                                                                                                                                                                                                cial emergency crops up. So, you need          all viable options i.e. whether you want               New investors should always start
                                                                                                                                                                                                                                                not to encash the long term investment         to invest in rented property or owned             with low risk investment options. They
                                                                                                                                                                                                                                                in case of emergency. The long term            property. If possible, meet some                  must focus on one type of investment
                                                                                                                                                                                                                                                investments, on the other hand, are safer      investors who have been investing in the          option. Once they get hold of the intri-
                                                             Shilpy Arora                                                                                Investment Recurring Mutual Funds               Saving         Treasury Bills          and offer a great degree of stability. Let's   real estate sector.                               cacies of investment markets, they can
                                                                                                                                                         instrument Deposits                             Accounts       (TBs)
                                                                                                                                                                                                                                                examine the pros and cons of both:             Step 4: Learn basics                              diversify their portfolio. While regular
                        hree years have gone by since                                                                                                                                                                                                                                               No matter which investment instru-           investors can go for high return avenues,

                 T      Seema dreamed of investing her
                        salary increment. Every time she
                 gets increment, her expenses eat into the
                                                                                                                                                         What is it? Ideal
                                                                                                                                                                     option if
                                                                                                                                                                                   When an Asset
                                                                                                                                                                                   Company invites
                                                                                                                                                                                                         Basic type
                                                                                                                                                                                                         of invest-
                                                                                                                                                                                                         ment. Put
                                                                                                                                                                                                                        TBs are issued by
                                                                                                                                                                                                                        the government to
                                                                                                                                                                                                                        finance its short-      Pros
                                                                                                                                                                                                                                                       Short term investment
                                                                                                                                                                                                                                                                                               ment you choose, you must know the
                                                                                                                                                                                                                                                                                               basics of the investment instrument. One
                                                                                                                                                                                                                                                                                               can find a plethora of tutorials on the
                                                                                                                                                                                                                                                                                                                                                 even if there's high risk. After all, high
                                                                                                                                                                                                                                                                                                                                                 risks bring high returns.

                 amount. There are many people like                                                        Short term investment options (3-15 years)                you want
                                                                                                                                                                     to invest a
                                                                                                                                                                                   funds from public,
                                                                                                                                                                                   the funds are
                                                                                                                                                                                                         your month-
                                                                                                                                                                                                         ly savings
                                                                                                                                                                                                                        term needs. TBs
                                                                                                                                                                                                                        have fixed interest
                                                                                                                                                                                                                                                Offer   emergency Comparatively                Internet. Go through some tutorials and           How to save tax?
                 Seema who have been struggling to                                                                                                                                                                                              withdrawal        riskier                      get familiar with various investment vari-             What if you got to pay tax out of the
                                                                                                                                                                     specific      called mutual         in a saving    rates and maturity
                 invest this extra sum. What prevents                                                                                                                amount        funds. If company     account        period.                 Offer more control Need constant
                                                                                                                                                                                                                                                                                               ables. Say, for example, while investing          increment amount, doesn't the whole
                 them from doing so is- they never plan,                                                                                                             every         earns profit, you     and interest   Minimum amount :        over money         watch
                                                                                                                                                                                                                                                                                               in bonds, an investor must know what              purpose of getting increment is defeat-
                 they never look for appropriate invest-                                                                                                             month.        get dividend. If      will be cal-   Rs. 25,000                                                             does coupon rate mean?, what is matu-             ed. It is, therefore, necessary to adopt
                 ment avenues, they don't know how                                                                                                                   Minimum       company incur         culated on                                                                            rity time?, what is credit rating? and so         tax saving measures. "The best way to
                                                                                                                                                                                                                                                       Long term investment
                 beneficial it could be for future.                                                                                                                  amount :      losses, you get       a fixed or                                                                            on. Moreover, he needs to have knowl-             save tax on your hard earned income
                                                                                                                                                                     Rs. 100       less value for        floating                               Pros                   Cons                    edge about profit and loss account, bal-          is to invest in long term plans like PPF.
                 The best use                                                                                                                                        (but varies   their stock. The      rate.                                                                                 ance sheet and cash flow statement. If            According to the provisions of Sec 80C,
                                                                                                                                                                     from bank     decision of buying    Minimum                                Lower risk             Value of funds
                 Step1: Plan your investment                                                                                                                                                                                                                                                   required, seek expert advice.                     the entire investment in PPF can be tax
                                                                                                                                                                     to bank)      and selling mutual    amount:                                                       increase slowly
                      First, calculate how much incre-                                                                                                                                                                                                                                              Remember, learning is an ongoing             free," says Mr. Ravi Gupta, Investment
                                                                                                                                                                     Interest:     fund will be yours.   Rs. 500
                 ment you have got. After adding a lit-                                                                                                                                                                                         High returns           Require more over-      process. Keep track of latest happening           Consultant,          Safe      Investment
                                                                                                                                                                     7-11%         Minimum               Rate of
                 tle to your monthly expenditure, keep                                                                                                                                                                                                                 head expenses           that could affect your investment instru-         Consultant.
                                                                                                                                                                     (quarterly)   amount : Rs. 500      Interest:
                 aside at least 75% amount for the                                                                                                                                                       3.5%                                                                                  ment.                                                  When asked about safe as well as
                 investment. The best way to do so is                                                                                                                                                                                           Step 3: Research before you invest             Step 5: Make a strategy                           tax free avenues of investment, Mr.
                 to keep your investment: expenditure                                                                                                    Why            Easy         Ideal for new         High liq-      No tax deducted           Comprehensive research is imper-                Investment strategy largely depends          Gupta says, "Government schemes are
                 ratio 3:1.                                                                                                                              invest in      monthly      investors             uidity         at source             ative if you want to get maximum               on time allocation and risk appetite. For         way better than schemes offered by pri-
                      But, if there's any ongoing debt,                                                                                                  it?            install-     Less risk com-        Safe           Low risk              returns. First, study the history of the       instance, if you have a full time job, you        vate companies because they are rela-
                 get out of it first. Never plan investment                                                                                                             ments        pared to stocks       Withdraw       involved              investment instrument and various case         must not have time for making an elab-            tively safe. Say, if you invest in PPF, you
                 if you are already under debt.                                                                                                                         No max-      Professionally        anytime        Easy to under-        studies. Then, do a comparative analy-         orative and diversified investment port-          will get tax benefits on both principal
                                                                                                                                                                        imum         managed                              stand
                 Step 2: Choose a smart option                                                                                                                          limit
                                                                                                                                                                                                                                                sis of methodologies used by smart             folio. However, the level of risk tolerance       and interest amount. Moreover, the rate
                      There are two types of investment                                                                                                                                                                                         investors. Get hold of the investment          could be high as you have fixed income.           of interest is pretty good."

                                                              Investme Public Provident Fund (PPF                                                       Post Office Savings Five-Year Post Office     Post Office Monthly                        Kisan Vikas Patra (KVP)        National Savings          Bonds                      Senior Citizens Savings Stocks
                                                              nt avenue                                                                                 Account Schemes     Recurring Deposit Account Income Account                                                            Certificate (NSCs)                                   Scheme
                 Long term investment options (3-15 years)

                                                              What is       Like a part of your salary goes                                             It is like a saving    LIke bank's RD account, you    You can invest your                It provides interest income    NSCs are issued           Whenever company           People of 60 years of age     Companies issue stocks
                                                              it?           into your company PF account                                                account in a bank.     need to deposit a fixed        monthly income for the             equal to bonds i.e. the        only for a maturity       wants to raise funds, it   or above, or 55 years to      to raise their funds.
                                                                            every month, same way                                                       Minimum amount :       amount every month. This       period of six years. The           amount doubles after 8         period of 6 yrs .avail-   issues bonds, borrows      60 years if retired on        Anyone can buy these
                                                                            there're PPF accounts. The                                                  Rs. 50                 scheme has a fixed term of     amount can be encashed             years and 7 months. The        able in denomina-         money from the             superannuation or under a     stocks and become one
                                                                            account is opened for the peri-                                             Maximum limit:         five years.                    only after one year.               scheme is open to every-       tions of Rs 100, Rs       investors and offers       voluntary retirement          of the owners (share-
                                                                            od of 15 years and extension                                                Rs.1,00,000 for an     Minimum amount : Rs. 10        Minimum amount : Rs.               one, not only farmers.         500, Rs 1,000, Rs         them handsome inter-       scheme can invest in this     holders) of the company.
                                                                            of another 5 yrs is possible.                                               individual account     p.m                            1,000                              KVPs are available in the      5,000 and Rs 10,000.      est rate.                  scheme.                       But high risk is involved
                                                                            Minimum amount : Rs. 500                                                    and Rs. 2,00,000 for   Interest: 7.5% (quarterly      Maximum limit: Rs. 4.5             denominations of Rs 100,       Pre-mature encash-        Interest: Depends on       Maturity period is 5 yrs,     in this type of invest-
                                                                            Maximum limit: Rs. 70,000                                                   joint account          compounded)                    lakhs for individual               Rs 500, Rs 1000, Rs 5000,      ment is not permit-       the company                extendable to 3 yrs.          ment. One can invest in
                                                                            p.a.                                                                        Interest: 3.5%                                        account and Rs. 98 lakhs           Rs. 10,000 and Rs. 50,000.     ted.                                                 Minimum investment : Rs.      stock market via a bro-
                                                                            Interest: 8% p.a.                                                                                                                 for joint account                  Interest: 8.4% compounded      Interest: 8% com-                                    1000                          kerage firm like
                                                                                                                                                                                                              Interest-8% p.a.                   yearly                         pounded half yearly                                  Maximum limit: 15 lakhs       Indiabulls, ICICIDirect,
                                                                                                                                                                                                                                                                                                                                     Interest: 9% p.a.             etc.

                                                              Why           Safe as government-backed                                                   Safe as government- Safe as government-backed         Safe asgovernment-                 Safe as government-backed      Safe as government-       Invested amount is         Safe as government-           Possibility of greater
                                                              invest in      Attractive rate of interest                                                backed              Easy monthly installments         backed                             No maximum limit               backed                    assured back to the        backed                        returns
                                                              it?           Loan facility available from                                                High liquidity      No maximum limit                  5% maturity bonus is               Work as loan security          Attractive rate of        investor (except if        Attractive rate of interest   Greater liquidity
                                                                            third financial year                                                        Withdrawal anytime                                    given                              Reinvestment possible          interest                  company goes bank-         Nomination facility avail-
                                                                                                                                                                                                              Attractive rate of interest                                       No maximum limit          rupt)                      able
                                                                                                                                                                                                              Reinvestment possible                                             Work as loan security     Fixed cash flow

                 58                                          MONEY MANTRA      August 15, 2009                                                                                                                                                                                                                                                           August 15, 2009   MONEY MANTRA     59
EP-46-90-kanchan-akm.qxd     7/25/2010      5:30 PM      Page 60

         FINANCIAL PLANNING                             TAXATION                            STOCK MARKET                                 COMMODITIES     MUTUAL FUND                          CONSUMER LAW                                  BANKING                                  INDIA POST
                 Parking Lots

                  Recovering The Loss
                 Normally, people consider parking lots as a safer zone for stationing vehicles.
                 But sometimes the story can be the other way round. Care should be taken while
                 parking vehicles as theft could happen anywhere.

                      Pushpa Girimaji                          wheeler parked at a parking lot (The          interest at the rate of 12 per cent cal-
                                                               Commissioner, Corporation of Madras           culated from August 5, 1993, till the
                            henever you park your vehi-        vs    S.Alagraj),     the    National         date of payment. (RP No 250 of 1997,

                 W          cle at an authorised parking
                            lot, you are expected to pay
                 a certain fee and the parking lot atten-
                                                               Commission had held that the person
                                                               who collected a nominal fee was only
                                                               providing parking space and was not
                                                                                                             order dated Nov 15,2000).
                                                                                                                  Then subsequently, in the case of
                                                                                                             M/S Hotel Hyatt Regency Vs Mr Atul
                 dant gives you a slip or a receipt on         undertaking to ensure the safety of the       Virmani (FA No 102 of 2004, decided
                 which he notes down your vehicle reg-         vehicle.                                      on August 1, 2008), the National
                 istration number. It is only when you                                                       Commission held a five-star hotel liable
                 produce that slip you are allowed to          Fight it out                                  for the theft of a vehicle entrusted to
                 drive your vehicle out of the parking lot.        Fortunately, in the year 2000, the        its care and parked in the hotel's park-
                 In other words, besides providing park-       apex consumer court re-examined this          ing lot.
                 ing space, the parking attendant prom-
                 ises to safeguard your vehicle while at
                                                               issue afresh and its order in the case of
                                                               Arun Kumar Gumber finally held the
                                                                                                                  This case has its origin in 1996,
                                                                                                             when Mr Virmani visited the hotel's dis-
                                                                                                                                                              Pin the blame
                 the parking lot and for that service, you     parking lot attendants liable for negli-      cotheque and handed over the keys of              Parking lot atten-             Disclaimer notice             Illegal is over-
                 pay him a fee, which varies from place        gent service. The brief facts of the case     his car to the valet for parking and in           dants liable for neg-          not binding on the            charging by con-
                 to place. And obviously, if that vehicle      are as follows: On August 5, 1993 Mr          return got a docket. Later in the night,          ligent service                 consumer                      tractors
                 is damaged or stolen, then he has to take     Gumber had gone to the Indira Gandhi          when he presented the docket and wait-
                 the responsibility for it.                    International Airport in New Delhi to         ed for the hotel attendant to bring his
                      However, for many years, parking         see off his brother. When he returned         car, he was informed that the car was
                 contractors tried to escape this respon-      to the parking lot to collect his car, he     missing.
                 sibility. When the Consumer Protection        found it missing. He lodged a police               In response to his complaint seek-       ing fee, turning a deaf ear to complaints                                               and had imposed a fine of Rs 500 on

                 Act came into being and brought all           complaint, but the car could not be           ing compensation for the loss of the car,     against parking lot contractors, con-                                                   the contractor. Satisfied with this, the
                 paid services under its purview, con-         traced. Since there was no insurance          the hotel argued that the back of the         sumers often find themselves in a sit-       While providing parking                    District Forum held that there was no
                 sumers whose vehicles were damaged            cover for the car, Mr Gumber filed a          docket contained a disclaimer notice          uation where they have no choice but         space, the parking                         deficiency in the service rendered by the
                 or stolen while at the parking lot, began     complaint before the District Forum,          saying that the hotel was not responsi-       to pay whatever is demanded.                                                            railways.
                 to file cases against the parking lot         seeking the cost of the car and com-          ble for the safety of the vehicle parked           But in this particular case, the con-   attendant promises to                           Unwilling to accept such a verdict,
                 attendants, demanding that they make          pensation from the Airports Authority         there. Dismissing this contention, the        sumer stood up and fought against this       safeguard the vehicle at                   Mr Aggarwal filed an appeal before the
                 good the loss.                                of India as well as Mahesh Enterprises,       National Commission held that the dis-        and in the bargain, helped many other                                                   State Commission. His contention was
                                                               which had been allotted the parking           claimer notice, printed in tiny letters       consumers. It all began when Mr              the parking lot and for that               that a belated fine of Rs 500 was too
                 How safe are your vehicles                    contract.                                     on the back of the docket, was not bind-      R.L.Aggarwal parked his scooter at the                                                  small a punishment to a contractor who
                 at parking lots?                                                                                                                                                                       service, you pay him a fee.
                                                                   The District Forum held both of           ing on the consumer. On the other hand,       railway parking lot at Ludhiana. A                                                      overcharged as many as 300 scooter
                      One of the earliest such cases filed     them responsible, but the State               when the hotel took the keys from the         board at the parking area mentioned          And if that vehicle is                     owners daily.
                 before the consumer court was by Mr           Commission after examining the                consumer and handed over a docket, it         the parking fee fixed by the railway         damaged or stolen, then                         After scrutinising the terms of the
                 V Gopalakrishnan against the Rohini           license agreement wherein the licens-         took responsibility for the safety of the     administration as 50 paise, but the atten-                                              agreement under which the parking area
                 Group of Theatres. Here, the com-             ee had assumed responsibility for the         car parked on its premises. The               dant demanded Rs 3. Mr Aggarwal              he has to take the                         was leased by the railways to the con-
                 plainant had left his brand new bicy-         safety of vehicles parked on payment of       Commission, therefore, directed the           protested, but was abused and insult-        responsibility for it.                     tractor, the Punjab State Consumer
                 cle at the theatre's authorised parking lot   prescribed charges, held only Mahesh          hotel to pay Rs 2 lakhs along with inter-     ed. When even the station master to                                                     Commission held the contractor guilty.
                 and gone to see a movie. When he              Enterprises liable. This view was             est calculated at 10 per cent.                whom he complained expressed his                                                        The railways was equally liable as it had
                 returned, he found the cycle missing.         upheld by the National Commission.                                                          helplessness, Mr Aggarwal was forced         sumers were treated at the parking lot,    failed to take action against the con-
                 Here the consumer courts at the dis-          Saying that the State Commission was          Victim of overcharging                        to pay the amount demanded.                  he wanted the excess money collected       tractor for breach of agreement gov-
                 trict and the state level held the theatre    legally right in holding that the facts and                                                      He then complained to the senior        from all vehicle owners to be recov-       erning the contract. It, therefore, direct-
                 liable and directed it to pay for the bicy-   circumstances would constitute 'bail-             Before I conclude, I must mention         officials of the railways and on failing     ered from the contractor or the rail-      ed the railways and the contractor to
                 cle. The highest consumer court, the          ment' and the person responsible for the      another consumer court order vis-à-vis        to get any response, filed a complaint       ways and deposited in the Consumer         jointly and severally pay Mr Aggarwal
                 National Consumer Disputes Redressal          management of the parking area was            parking lots; this order, however, does       before the District Consumer Disputes        Welfare Fund.                              a compensation of Rs 15,000, besides
                 Commission, however, disagreed and            liable to make good the loss suffered         not pertain to theft, but to the problem      Redressal Forum, seeking a refund of               The Railway administration, which    Rs 2000 as costs. This was upheld by
                 set aside the order in May 1996.              by the consumer, the National                 of overcharging. Now overcharging by          the excess amount charged. Holding           till then had not even bothered to reply   the National Commission. (RP No 2231
                       In an earlier case too, where the       Commission          directed       Mahesh     parking lot attendants is commonplace.        both the railway administration and the      to Mr Aggarwal's letters told the court    of 2000)
                 complaint related to the loss of a two        Enterprises to pay Rs 90,000 along with       With local authorities, who fix the park-     contractor responsible for the way con-      that they had investigated his complaint       (The author is a leading consumer activist)

                 60   MONEY MANTRA    August 15, 2009                                                                                                                                                                                                     August 15, 2009    MONEY MANTRA     61
EP-46-90-kanchan-akm.qxd     7/25/2010      5:30 PM         Page 62

                           Change With Changing Times

                    n spite of the fact that year after                                                                             is                                                                                                                                                                                                 usi-

                I   year the government is trying to
                    simplify and rationalise the
                Income-tax Law, there are still innu-
                                                                                                                            ize r, as y
                                                                                                                     r c eve the -
                                                                                                           se How limi ome s.
                                                                                                      for m. the f inc kh
                                                                                                                                 t,                                                                                                                                   A husband cannot give a gift to his
                                                                                                                                                                                                                                                                      wife otherwise the income of the wife
                                                                                                                                                                                                                                                                                                                              ss of b
                                                                                                                                                                                                                                                                                                                       The lo is not
                                                                                                                                                                                                                                                                                                                       ness d as a
                                                                                                                                                                                                                                                                                                                        allow tion to be
                                                                                                                                                                                                                                                                                                                        d e d u c o ff f r o m
                                                                                               im nu ds nt o .5 la ould                                                                                                                                   the         will be clubbed or added with the
                                                                                                                                                                                                                                                     hat re
                merable provisions in the Income-tax                                                                                                                                                                                                                                                                                       e in
                                                                                           n l an ee                                                                                                                                                                                                                     set       incom
                Act which make them appear silly by                                    tio per exc ayme to Rs x sh iding                                                                                                                     u re t ns a er           income of the husband. Is it not unre-
                                                                                                                                                                                                                                                                                                                          salary ase of a
                                                                                    mp                e                         ta        v                                                                                             ens isio mb
                                                                                 xe 00 om ke p up e- pro s.                                                                                                                        To prov reme the ,
                                                                                                                                                                                                                                                                      alistic?The law should be amended
                                                                                                                                                                                                                                                                                                                           the c d employ-
                                                                             e e ,40,0 e inc o ma ome ncom for ayer
                a large number of tax paying public                                                                                                                                                                                                                   now through the DTB to permit some
                of India. In this small article, an                       Th 2 s th d t inc f i ess p                                                                                                                               ta x y t o n o n q u i t y        reasonable amount which can be                        salarie ere is no
                                                                           Rs on a uire on bs o airn r tax                                           -                                                                                e a s e v e s of e d j u s -                                                           ee. T
                                                                                                                                                                                                                                                                                                                                     h          it.
                attempt is made to list down some of                         so e req 10% sla all f othe                                          ist t                                                              in                 a n d ciple t y a n c o m -   given to the spouse without attract-                      gic
                                                                               ar @ , th d       e in ke                                        ex ves s
                                                                                                                                                                                                                   on .
                                                                                                                                                                                                                                                                                                                                      e, the pr ld
                these common tax provisions which
                                                                                   x ce ne m li                                               ns in ion is                                                      pti num er                prin f o r m i i s r e t t h e
                                                                                                                                                                                                                                                                      ing provisions of section 64.
                                                                                                                                                                                                                                                                                                                              Henc s s h o u
                                                                                 ta n lig he                                                io n s                                                            m                             uni , it          tha ing a                                                        vision ended.
                                                                                                                                         vis ca vi re w
                may be amended in the forthcoming
                                                                                   He rea t to t                                                                                                            xe r an 0 p in                   tice nded f hold t to
                Direct Taxes Bill so that a large num-                               e efi                                             ro on pro the e la st, .                                          x e pe ,00 ure on                                                                                                      be am
                                                                                    b n                                            e p rs           , h a t                                            a
                                                                                                                                                                                                    y t 000 30 dit pti d                       me iod o asse -term
                ber of tax paying public of India can                                be                                         th e the EC r t e p en e,                                        njo .15, t Rs pen xem urre on                   p e r i ta l       g
                                                                                                                                                                                                                                                                 lon houl
                                                                                                                              er , a p er 54 de th stm nc
                get some relief. It is expected that the                                                                     p         p n n n                  e                           s e s s ex e                 c ti                      cap ke it ain s for all .                   Standard
                                                                                                                         as aw s io u . I ve H                                            ee o R lea al ax s in uc yee                               ma ital g ays ssets                       deduction
                Finance Minister will surely take care                                                                in ax l . A ect ent khs in lid.                                  loy up t o at edic e-t nse ded plo this -
                                                                                                                l g -t ds n s tm la on va
                                                                                                                                                                                     p                      m         s       ,                        cap 365 d s of a                        as in the
                to address these provisions with an                                                                                                                               em es d t m co xpe thi em ell ed                                      be egorie
                                                                                                            ita ome bon d i es 50 p ot                                         ed pens nce n the e in al e but f the . W on m
                                                                                                                                                                                                                                                                                               past should
                open mind. Here are these tax provi-                                                      p c                  e nv . ca n                                   ri x                                                                          cat
                                                                                                         a             n in                                               la          ha i         th i c d o           m                                                                      be permis-

                                                                                                                                                                                                                   th de ld o th ve tion tio la aw
                                                                                                      e c In ai ta f i R y lly                                         sa al e en ase es, ed roa me nnu sion h.

                                                                                                                                                                                                                      ch uc rm e ex is o fe h
                                                                                                   av the al g con p o is an ga ted.                                                                                                                                                           sible to all

                                                                                                                                                                                                                of e u t co c ui .1 x l
                sions commonly complained about by
                                                                                                                                                                   the edic d be cre esid of m t ab inco er a ces wit

                                                                                                                                                                                                                                             n k
                                                                                                                                                                                                                        ild te it du pe nl e
                                                                                                                                                                                                               n b ho ed t du f t s a
                                                                                                 s                               y           e

                                                                                                                                                                                                             io to s at no e t o f R -t
                the tax payers.                                                                             t
                                                                                            To g in api law r ca ntl as is l ele                                y,           l     n           t     n          p n y                                                                          salaried
                                                                                                                                                             ntl f m ou f i . B ec e ss hs co a

                                                                                                                                                                                                                           re d al ca ns y
                                                                                                                                                                                                           at s M rel s is d ec it o me
                                                                                                                                                           se ct o t sh ew o ears esp eatm gro lak tax e aw                                                                                    employ-

                                                                                                                                                                                                                             n. u/ l le tio -
                                                                                                in c e pe ese r w p e d                                                                                                                                                                                                               Prese

                                                                                                                                                                                                         uc se F tly oe th sp im co
                                                                                                                                                         e                                                                                                                                                                           vidua ntly, to sav

                                                                                                                                                                                                                                  s g n
                                                                                                   in f th up pr ve ca b                               Pr spe limi vi e y in r r tr the s 2 ling don

                                                                                                                                                                                                      ed en The ec It d er, re all l e In

                                                                                                                                                                                                                                   80 it-
                                                                  The F                               o n h ne his uld                                  re is m in hre ted e fo en to R vai be                                                                                                                                      dential tax paye e capital g

                                                                                                                                                                                                   ds xp . dir e. ev in er th

                                                                                                         a hi e g t ho
                                                                 increas M generall                                                                        Th nu st t ran oye wh up or a uld                                                                                                                                        of sec l propertyr can invesain, an ind

                                                                                                                                                                                                                     e d pe e r
                                                                                                                                                                                                 ar e ild e fe w d v f
                                                                                                                                                                                                w e h ar n o te o o
                                                                                                            w er tin p s                                     an e la o g mpl only um e f sho                                                                                                                                       Incom tion 54 by taking t in a res i-

                                                                                                                                                                                              to at e c h tio . H ran he 0C
                                                                limit on es the exempy                         th ut ca
                                                                                                                                                                                                                                                                                                                                   benefi e-tax Actor section advantag i-

                                                                                                                                                                                                im f th hic tui em s g in t n 8
                                                                questio ce in a while tion                         P e                                        th als e e le xim com ad
                                                                                                                                                                 is th ilab ma n in bro                                                                                                                                                                ,
                                                                                                                                                                                                                                                                                                                                  in on t is availab 1961. Ho 54F of th e

                                                                                                                                                                                                  o s w he y th n i ith tio
                                                                         n is why             . The                    th

                                                                                                                                                                                                     e r t b io w ec
                                                               Income               should                                                                         on ava he n o s a                                                                                       Pre                                                    not the residentia le only for wever, this         e

                                                                                                                                                                                                       fo aid uct ntly of s
                                                              limit be -tax initial ex not the                                                                       is at t ctio nse                                                                                    Inc sen                                                 missioe law be a l house. W vestmen  in
                                                                                            e                                                                          is stri xpe
                                                             the da realigned in tu mption

                                                                                                                                                                                                          p d e s
                                                                                                                                                                                                                                                                       th om tly,                                                capita n to the tamended              hy sho t

                                                                                                                                                                                                            de res rm
                                                             expend y to day m ne with                                                                                   re al e                                                                                     fer ere e e-ta as p                                        reside l gain amo x payer tto grant per

                                                                                                                                                                                                               p te
                                                                                                                                                                            ic                                                                                          en xi x          er

                                                                                                                                                                                                                                                                                                                                                                   o inve
                                                            this a iture of a pe inimum                                                                                                                                                                            es      t    sts R rule                                              ntial h
                                                                                                                                                                                                                                                                                                                                                      unt in
                                                                                                                                                                                                                                                                                                                                                              any n        st      -
                                                                                is tak
                                                                                                       If                                                                                                                                                        ren peci set       a c ules -3 o                                                      ?              umbe t h e
                                                                                                                                                                                                                                                               vid t fre ally of       om ,                                                                                   r of
                                                           imum e t, then surely en into                                                                                                                                                                     the ed b e ac with tax t ple 196 e
                                                                                                                                                                                                                                                                                                  f th
                                                                                                                                                                                                                                                                                                                 of th For all t
                                                                      xempti            the min                                                                                                                                                                                                                       eir o ypes
                                                           vidual ta          on limit                -             LTA granted to employees by the employer enjoy tax exemp-                                                                               pa go y th com re rea te d 2,                       acco        wn         of
                                                          2 lakhs x payers shou for indi-                           tion twice in a block of four years. However, the present                                                                             fro y lic vern e em mod feren tmen if-               allow mmod or for t tax pay
                                                         unreali     per ann           ld
                                                                              um. It is be Rs                       rules provide for travel in any part of India to the employee                                                                       ern m th enc me plo atio ce t,                        resp   ance ation he em ers w
                                                                                                                                                                                                                                                                                                                           ,          by         pl       ho
                                                         which a tic exemptio these                                 as also to the members of the family. Unfortunately, the                                                                          re me e ta e fe nt e yer. n pr to                      tion ect of th they all the emoyees do not
                                                        evasio      re resp           n limit                                                                                                                                                      da ceive nt s x ne e an mplo Whi o-                      Inco   is p      e ren can              ploy who a have
                                                                   n in the onsible for ta s                        exemption is not available for travel concession granted to                                                                  ta tion re ect t, th d a ye le                                         erm        tp       enj          er
                                                                                                                                                                                                                                                                                                           rent me-tax issible aid by th oy a sp as als not prohouse
                                                                                                                                                                                                                                                                                                                                                                    re        a
                                                        FM we
                                                                  re to co country. If th x                         employees for travel outside India. The Income-tax law                                                                      15 xed e on nt fr or e e non re o es                            paid      Act                   em f      ecia       o ho        v
                                                       istic sit
                                                                 uation nsider the rea e                            should be amended so as to provide the exemption of trav-                                                                 ing % o xor wh ee a mplo -go ut                             goo         up         wh in term          or t      l tax       us ided
                                                      the tax             an                    l-                  el concession even outside India. Moreover, as per the pres-                                                            to on       f th bit ich cc y v-                             ers d and in to 25% ereby o s of s he hous deduc e rent
                                                     the tax      rates, th d also realign                                                                                                                                                                  e a
                                                                                                                                                                                                                                          ing wn. U the salantly - the mmoes
                                                                                                                                                                                                                                                                               o e                      Rs 2 but the terestin of the in ne can ection e. The d tion in
                                                                evasion en obviously                                ent law what is exempted is only the value of travel con-
                                                     could b                                                                                                                                                                            sh sa        nif pop ry - 7. y a -                             last ,000/- p limit is g and bcome. T enjoy 80GG educ-
                                                    reduce      e a thin in the countr                              cession and not boarding and lodging. To make travel a
                                                                                                                                                                                                                                      pr   ou la orm ul -- d 5 % re
                                                                                                                                                                                                                                              ld ry               a       e
                                                                                                                                                                                                                                                                                                            so m er m
                                                                                                                                                                                                                                                                                                                  any       o
                                                                                                                                                                                                                                                                                                                                 rest                            d
                                                                                                                                                                                                                                                                                                                                      ric rings his rea educ f the
                                                              d the ta g of the pas y                               real recreational activity for the employee, the deduction                                                      fin ovisi be i an syst tion pen or                                                  year nth. The ted to d cheers lly soun tion for
                                                    always              x                   t.                                                                                                                                     Dir d pl ons t ntro d p em o of th d-                                                     s he        l        e         t           d
                                                               been h collection ha                                 should not only cover the value of travel concession but                                                                                                                                                       nce imit has duction o the ta s very
                                                                        igher.             s                        also the expenses on boarding and lodging. Likewise, this                                                         ec ace o th duc erq f t e                                                                          requ      b                    x
                                                                                                                    deduction should be tax exempted for the employees each
                                                                                                                                                                                                                                            ax rig      is e ed uis ax-                                                                       ires een the of maxi pay-
                                                                                                                                                                                                                                               es ht ffec and ites                                                                                 to b                  m
                                                                                                                    year,Hence the Direct Taxes Bill should make necessary                                                                        Bil no t sh the                                                                                       e ch same fo um
                                                                                                                                                                                                                                                     l.      w                  The author is tax & investment consultant at New Delhi                             ed. r the
                                                                                                                    amendment to this effect.                                                                                                                  in ould          for last over 40 years. He is also Director of M/s R.N.
                                                                                                                                                                                                                                                                   the          Lakhotia & Associates & The Strategy Group. E-mail:
                                                                                                                                                                                                                                                                      M. 9810001665

                 62   MONEY MANTRA    August 15, 2009                                                                                                                                                                                                                                                                                                            August 15, 2009     MONEY MANTRA   63
EP-46-90-kanchan-akm.qxd     7/25/2010      5:30 PM     Page 64

                 Asthdhatu: For Safety
                 And Prosperity
                      Harish Kumar

                         shthdhatu is considered very

                 A       pious in the Hindu religion. For
                         ages, the metal has been used
                 for making idols and jewellery.
                                                                                                                                                                                                                            Portfolio of Asthdhatu
                 Ashthdhatu is basically made up of
                 eight metals - gold, silver, copper, zinc,
                 lead, tin, iron, mercury - which are in                                                                                                                                                                     against Gold, Silver
                 mixed in equal proportion. It is a coin-                                                                                              ciency of that metal. In this context Dr Jaiswal says that
                 cidence that all but mercury are traded                                                                                               to meet the deficiencies, different metals are required.            Comparison of Asthdhatu with Gold and Silver on the
                 on one of the Indian commodity                                                                                                        Like a person suffering from mental disorder has the defi-      basis of prices between 2006 and 2010 brought following
                 exchanges, MCX. Anyone can do busi-                                                                                                   ciency of Lithium and Sodium and to cure this silver            things to light. During this period, prices of Gold, Silver and
                 ness in one or in all the metals.                                                                                                     and copper jewelleries are advised to wear. Now that            Asthdhatu saw an increase of approx 84.44, 48.63 and 83.80
                 Historically, some of these metals have                                                                                               Ashthdhatu has almost all the metals, wearing it is ben-        per cent respectively. Our study showed that had Rs 5 lakh
                 given good and moderate returns and                                                                                                   eficial to stay away from various ailments.                     invested in the three metals in 2006 their prices in 2010
                 some of them have also brought loss-                                                                                                                                                                  would have been like this:
                 es. This metal has always been used                                                                                                   Asthdhatu for investment
                 for sacred purposes and not viewed                                                                                                          Historically, metals have shown their importance              Metal              Year 2006                Year 2010
                 from investment point of view. So far,                                                                                                from an investment perspective too. People have opted
                 we do not have a clear picture of ashthd-    reason the metal is used in the making      Rahu is two, so these eight metals are       for Gold and Silver as an investing tool but not asthdhatu.         Gold               Rs 5,00,000              Rs 9,21,300
                 hatu as it is not traded as one metal.       of idols and people are advised to wear     considered to be representing the eight      In India, prices of Gold/kg and Silver/kg rose from Rs              Silver             Rs 5,00,000              Rs 7,43,154
                 Here we are trying to analyse the earn-      jewellery, generally in the form of ring,   planets." According to Jaiswal, "Venus       6.74 lakhs and Rs 11.18 thousand in 2005 to Rs 16.60
                 ing prospects of asthdhatu by making         made up of it. Jaiswal says that in the     (Shukra), Jupiter (Brihaspati), Moon         lakhs and Rs 26.39 thousand respectively in 2010. The               Asthdhatu          Rs 5,00,000              Rs 9,19,017
                 a portfolio of the metals that               Hindu religion idols are considered to      (Chandrama) and Mercury (Budh)               story had been the same for other metals too. But then
                 constitute it.                               be the expression of Parmatma Chetna        bring prosperity. Those who don't            it is also true that trading in metals involves immense risk        This shows that the performance of gold and asthd-
                                                              (consciousness of the Supreme) and          understand the minuteness as for which       as there remains high volatility in prices. The point of dis-   hatu remained somewhat similar. Also, gold and silver
                 Religious significance of                    Atma Chetna (consciousness of self).        planet which metal should be worn,           cussion is should an investor not diversify his investment      witnessed severe volatility in that period. If we talk about
                 Asthdhatu                                    As asthdhatu has almost all the met-        they should opt for Asthdhatu." It is        in all the metals than just depending on a single metal?        asthdhatu, then prices of zinc recorded a fall of 41.0 per cent
                     There is a traditional belief about      als, it is believed that idols made up      believed that the metal (ashthdhatu)               According to MD and CEO of Nikunj Stock Brokers           while it rose 300 per cent in the case of mercury. Likewise,
                 ashthdhatu that it brings happiness and      from it, represents the totality of such    saves from sudden loss of money.             Pramod Sultania, for successful investment diversifica-         while the increase in copper was a mere 0.30 per cent, prices
                 prosperity. Scholar, researcher and          an expression.                                                                           tion is important. If someone wants to invest in metal por-     of tin rose by 133.14 per cent. Going by the observation
                 astrologer Dr Arun Kumar Jaiswal says                                                    Ashthdhatu for health                        tion of the commodities, then to avoid risk investment          made above, we can make out that increase in the prices
                 that both human body and the universe        Ashtadhatu for prosperity                       Shashtriji says going by the belief      should be made in many metals. He says that when there          of one metal balanced the fall in the other. So, we suggest
                 are made up of five elements. One of            In the Hindu religion, all metals are    adorning Ashtdhatu or laying a statue        is a fall in prices, its degree varies in different metals.     that one can stay fit and avoid risk if he invests in the port-
                 them is earth and all the metals come        associated with some planet like iron       made up of it help in fulfilling the defi-   That is where diversification helps. But he advises that        folio of asthdhatu and boost his income too.
                 from it only. Scientifically, too, it has    is linked with Saturn (Shani).              ciency of metals in the body and envi-       too much exposure in metals can dim the prospects
                 been proven that metals spread positive      Astrologer Pandit Jaigovind Shastri         ronment. This is just like having food       of profits.
                 energy and absorb negativity. This is the    says, "Because out of the nine planets      made in iron utensil to meet the defi-

                 Gold          Silver                                     Copper                                        Zinc                           Lead                                 Mercury                                  Iron                                                  Tin

                 64   MONEY MANTRA    August 15, 2009                                                                                                                                                                                                August 15, 2009   MONEY MANTRA   65
EP-46-90-kanchan-akm.qxd     7/25/2010           5:30 PM       Page 66

              DR MENON'S CLINIC                                                                                                 GOALS
                                                                                                                                                                       HOW TO

                                                                                                                        Baby Future                       IInitial Observations:

                                                                                                                        Rs 60 Lakh                           The investments made are lacking proper directions
                                                                                                                                                             and have been done in haphazard manner.
                                                                                                                                                             Investing in multiple financial products is not a good
                                                                                                                        YEAR                                 idea as every product entails a cost which could
                                                                                                                                                             allay overall returns.
                                                                                                                        2031                                 You are contributing approximately Rs 33,000 p.a.
                                                                                                                                                             as insurance premiums - this is an exorbitant
                                                                                                                                                             amount for meager risk cover of Rs 5.7 lakhs. This            Further, look for Health Floater plans to the extent
                                                                                                                                                             calls for complete restructuring in case of your              of Rs 5 lakhs, which would provide succor to the
                                                                                                                                                             insurance requirements.                                       entire family from any medical eventuality. You can
                                                                                                                        Term Policy                          The inherent style of investments needs a complete
                                                                                                                                                             revamp for accomplishing your financial goals.
                                                                                                                                                                                                                           also look to add critical and accidental riders with
                                                                                                                                                                                                                           the policy.
                                                                                                                                                             Let me share with you a streamlined investment
                                                                                                                        Rs 50 lakh                           strategy.
                  Let the money grow                                                                                                                      Contingency Funding

                                                                                                                                                             Let's start with most vital step of financial planning -
                                                                                                                                                                                                                                             T PLA

                                                                Insurance          Premium Time of     Sum Assured                                                                                                         Going by the current estimates, you require about
                  Dear Dr Menon,                                                                                                                             Contingency Planning.
                                                                Policies          (in Rs.) investment (in Rs.)                                                                                                             Rs 15,000 monthly to meet household expenses.
                  I am a regular reader of Money Mantra                                                                                                      The dearth of liquid assets can be addressed by
                                                                LIC-New           655 half Dec 1998 25000                                                                                                                  By the time you attain 60 years, the same monthly
              magazine. I eagerly wait for the magazine         Money Back        yearly                                                                     transferring an amount of Rs. 1 lakh from existing
                                                                                                                                                                                                                           expenses would soar to Rs 72,000 post tax.
              to read your column. The magazine not             Policy (25 yrs)                                                                              equity mutual funds to a short term FD or in a debt
                                                                                                                                                                                                                           If we take life expectancy of 85 years, then you
                                                                                                                                                             mutual fund.
              only focuses on financial planning but also
              keeps me updated about the latest products.
                                                                                           Nov 2005 1,00,000
                                                                                                                        Family                               This amount will take care of 6 months mandatory
                                                                                                                                                                                                                           would need a retirement kitty of Rs 1.81 cr by age
              Here is my question to you.
                  I, Vandana, 33, got married in 2006. I
                                                                Sneha (20 yrs)
                                                                                           Sep 2001 50,000              HealthCover                          expense.
                                                                                                                                                                                                                           This corpus can provide a monthly payout of Rs
              have one and a half year old daughter. My                                                                                                                                                                    90,000 increasing at the rate of 6% every year till
                                                                AVIVA-            25,000   Mar 2007 125,000                                                  Children's Education
              monthly income is Rs.45,000. My hus-                                                                                                                                                                         age 85.
                                                                Freedom Life      yearly
              band's financial contribution is nil as his       Plan-Unit                                                                                                                                                  To amass this kitty, you need to contribute Rs
                                                                                                                                                             Your child is young and planning right away for his
              business is in a growing phase. I stay in a       Linked                                                                                                                                                     7,500 per month growing @ 12% p.a. for the next
                                                                                                                                                             education needs will stand you in good stead.
              joint family and have been struggling to          AVIVA-Life        4,500     Nov 2007 2,70,000                                                                                                              27 years.
                                                                                                                                                             You aim to build a corpus of Rs 60 lakhs by the time
              manage expenses.                                  Saver Plus (for   quarterly
                                                                                                                                                             your child attains 21 years.
                  My monthly household expenses range                                                                                                        You need to deploy Rs 7,000 per month growing @
              from Rs.10,000 to Rs.15,000. I don't have              ing in various instruments such as mutual
                                                                                                                                                             12% p.a for the next 19 years.
              any liquid assets. Currently, I am invest-             funds, insurance policies, PPF etc. All these
                                                                                                                                                             Invest in diversified equity mutual funds and eschew                     HOT
              MF Scheme          Amount invest- Time of invest-      investments are for more than 15 years. I pay
                                                                     home loan instalment of Rs. 5000 per month.                                             Child Plans.                                                 SNAPS
                                 ed (in Rs.)    ment
              HDFC Tax           10,000         Feb 2007             It will continue till 2023. Now, let me tell you
                                                                                                                                        OSIS              Life Insurance                                                The above goals will be met provided;
              Saver (G)                                              about my goals. First, I want to save at least
              SBI Magnum         10,000             Jan 2007         Rs 60 lakh for my baby. Second, I would
              Tax Gain (D)                                           like to know whether I should take a term pol-                                          It is recommended to desolate insurance and                   You immediately start contributing in diversified
              Reliance Diver.    5,000              Jan 2008         icy or not. Also suggest the best health cover                                          investments needs.                                            equity mutual funds.
              Power - RP (G)                                         for three of us. Do you think I should con-                                             The existing LIC policies are money drainers and it           Get life insurance requirement in order.
              Reliance Equity    5,000              Jan 2008                                                             Mrs Vandana, 33, stays in a                                                                       Create a contingency fund.
                                                                     tinue with two Aviva ULIP plans or should                                               is suggested to make these policies paid up.
              Fund - RP(G)
                                                                     I invest the same amount in a better yearly         joint family. She brings in Rs      Unit linked policies are loaded with high upfront
              Sundaram Tax       1000               July 14, 2008                                                        45,000 per month and the
                                                                     insurance plan?                                                                         costs and takes at least 5 years to reach breakeven.       Then sit back and watch your money grow.
              Saver (G) (8)      (SIP/month)
                                                                         Baby's future- Rs 60 lakh                       expenses are capped to max-         It is suggested to discontinue further premiums to
              SBI Magnum         100                Aug 25, 2008
              Sector Fund        (SIP/month)                             Suitable Term policy                            imum Rs 15,000 per month.           these policies and divert the amount to diversified        Satish Menon is a Financial Planner & con-
              Umbrella -                                                 Health cover for me, my husband &               She aims to build a sizeable        equity mutual funds.                                                 sultant with Transcend Consulting
              Contra - Gr                                                baby                                            corpus for child's education.       You should seek a risk cover of Rs 50 lakhs. The                                           (I) Pvt. Ltd.
              DSP BlackRock      1000/month         May 5, 2009          Investing ULIP amount in a better               She wants to reassess the           same would take care of child's education needs                            If like Vandana, you would
              Top 100 Equity                                             insurance plan                                                                      and lifestyle expenses in your absence.                      also like to share your financial story
              Fund Gr                                                                                                    investments made in mutual                                                                            with us and have a plan made by
                                                                     Regards,                                            funds, insurance policies and       Stick to Pure Term Insurance plan with highest
              Reliance           15,000 (one        July 7, 2009                                                                                                                                                             Satish Menon, do write to us at edi-
              Infrastructure     time)                                   Vandana Gupta                                   other instruments.                                                                               
              Fund - Retail Gr

                 66   MONEY MANTRA        August 15, 2010                                                                                                                                                                                            August 15, 2010    MONEY MANTRA   67
EP-46-90-kanchan-akm.qxd            7/25/2010       5:30 PM    Page 68

                   KNOW YOUR INSTRUMENT

                Travellers Cheque                                                                                                                                              The
                                                                                                                                                                      should immediately
                                                                                                                                                                     write his or her signa-
                                                                                                                                                                       ture usually on the
                                                                                                                                                                                                                                                        Difficult to steal: The most important advantage of using travellers cheque is
                                                                                                                                                                                                                                                        that it is near impossible to use a stolen travellers cheques. This is because the
                                                                                                                                                                                                                                                        cheques are signed at the time of purchase, and then must be countersigned
                                                                                                                                                                                                                                                        when they are redeemed with a vendor or bank. With copying a sign not being
                                                                                                                                                                                                                                                        an easy affair, thieves do not find the cheques as striking as credit or debit cards.
                                                                                                                                                                                                                                                        Get the best rate: Travellers cheques can also allow the international traveller
                                                                                                                                                                         cheque's upper                                                                 to take advantage of attractive rates of exchange. This is because many servic-
                                                                                                                                                                             portion.                                                                   es will issue the cheques in any currency desired. The appeal of travellers cheques
                                                                                                                                                                                                      When                                              is that people can lock in the cash rate, so regardless of movements in the econ-
                                                                                                                                                                                                 wanting to cash a                                      omy and when trips are taken, the value of travellers cheques is retained. By
                                                                                                                                                                                             travellers cheque while                Travellers          investigating the current foreign exchange rates, it is possible to purchase the
                                                                                                                                                                                             making a purchase, the            cheque are given         cheques in a relevant currency and lock in an attractive rate that will not change
                                                                                                                                                                                            purchaser should counter-        unique cheque num-         at any time during the trip, regardless of what shifts occur in the valued rate for
                                                                                                                                                                                           sign the cheque in the indi-    bers, similar to a normal    the currency.
                                                                                                                                                                                             cated space, usually on       cheque. When a lost or
                       Renu Baliyan
                                                                           Features of                                                                                                          the cheque's lower          stolen cheque is identi-    Easy replacement: Replacing a lost or stolen travellers cheque is also much
                           re you traveling abroad and                     Travellers cheque                                                                                                         portion.             fied, it is simply canceled   easier than replacing most credit and debit cards. All that is required is contact-

                   A       don't want the trouble of car-
                           rying cash? The travellers
                   cheque is the right answer for you!
                                                                              Protect your travel money.
                                                                              Travellers Cheques can be
                                                                             refunded if they're lost or stolen,
                                                                           So you can get your money back
                                                                                                                                                                                                                              and the individual is
                                                                                                                                                                                                                                re-issued a new
                                                                                                                                                                                                                                                        ing a local service provider or bank and report the stolen or lost cheque num-
                                                                                                                                                                                                                                                        bers. The numbers are immediately cancelled and replacement cheques issued.
                                                                                                                                                                                                                                                        It is not unusual for the traveller to have new cheques in 24 hours or less.
                   Hitherto, plastic money was consid-                     quickly.                                                                                                                                                                     Simplify payment: One other advantage of travellers cheques is that they make
                   ered the most common tool of carry-                        Protect yourself against identity                                                                                                                                         it possible for two people to combine their funds into one set of cheques. This makes
                   ing cash. "I was supposed to go to                 2       theft. If they're lost or stolen,                                                                                                                                         it possible for couples travelling together to simplify paying various types of trav-
                   China on a business trip. But, instance                  don't worry-travellers cheques                                                                                                                                              el expenses by combining their travel money in the form of the cheques. While
                   of credit card theft discouraged me to                  aren't tied to your bank account or                                                                                                                                          not an ideal option for everyone, this can be an excellent strategy when there is
                                                                                                                                                                                      A                                                                 a need to control the spending of one or both the travellers. In most cases, trav-
                   carry one. Then I came to know of trav-                 any personal information.                                                                           hologram is a
                                                                              Saves money compared to other                                                                                                                                             ellers cheques are offered by various institutions for a modest fee. Providers
                   ellers cheques through my friend. She                                                            ty                                                       type of image that                                                         also usually supply the purchaser with contact information in the event of any
                   told me the chances of it being stolen             3       payment methods. Unlike using         and securi-                                            appears three-dimen-                                                         questions or concerns that come to mind at a later date. It is also not
                   are very less. I used travellers cheque                  an ATM, there are no withdrawal         ty. Unlike cash, if                                   sional even though it is
                                                                           fees. You can easily cash in your                                                                                                                                            unusual for providers to supply travellers with information about offices
                   and did dealing worth crores,” says                                                              your TCs are lost or                                rendered on a two-dimen-                                                        and contacts in any countries included in the travel itinerary.
                                                                           cheques for local currency wher-                                                              sional surface. Hologram
                   Sakshi, a businesswoman.                                ever you are.                            stolen, they can be replaced
                                                                                                                    within 24 hours anywhere in the                        is used as a security
                   Travellers Cheque                                  4       Make budgeting easier. Spend                                                                  feature on travelers
                                                                              a fixed amount by only using          world by most banks, service estab-

                       Travellers cheques (TCs) date back                   Travellers Cheques.                     lishments and even by a large number
                   to the end of the 19th century with                      Choose the currency you need.           of merchants. You can encash them
                                                                              Get them in US currency, or
                                                                                                                                                                                                             Black market                                                  rs
                   American Express and Thomas Cook                                                                 only when you need to, and only against                                                  One of the main advantages
                                                                      5       choose from 5 other currencies:
                   as the first issuers. The world's first                                                          your signature. In a way, TCs block your                                              travellers cheques provide is the
                                                                                                                                                                                                                                                            es of t
                   travellers cheque was issued by                          Euro, Canadian Dollar, Australian       funds because you pay first, encash later.                                      replacement if lost or stolen. This feature
                                                                           Dollar, Pound Sterling, and
                   American Express in 1891. The indus-                                                                  TCs are recognised worldwide.                                                has also created a black market where
                                                                           Japanese Yen.
                   try grew keeping pace with the travel                                                            They can be used like cash at many                                             swindlers buy travellers cheques, sell them
                                                                              They never expire, so if you don't
                   industry. The need was clear: They                 6                                             locations, or exchanged for local cur-                                         at 50 per cent of their value to other people
                                                                              use them, you can save them for
                   were safer than carrying cash while                                                              rency at banks, currency exchanges,                                            (such as travellers) and falsely report their
                                                                            your next trip.
                   travelling.                                                                                      and travel service locations.                                                     travellers cheque stolen with the bank
                                                                           When travelling abroad, avoid fluc-
                                                                                                                                                                                                      which issued it. As such, they get back
                       If you happen to travel abroad, you                 tuating exchange rates. When you              They are available in US Dollar,
                                                                                                                                                                                                         the value of the travellers cheque
                   can opt for Travellers Cheques (TCs)                    buy travellers cheques in other cur-     Great British Pound, Euro, Australian                                                    and make 50 per cent of the
                   as substitute for cash. These are                       rencies, you lock into the rate when     Dollars, Canadian Dollars and Japanese                                                                                                           Disadvantages of travellers cheques
                                                                                                                                                                                                                    value as profit.
                   cheques issued to you that offer safe-                  you buy.                                 Yen.
                                                                                                                                                                                                                                                                1    Increasing numbers of foreign retailers and merchants are not
                                                                                                                                                                                                                                                                     accepting travellers cheques, instead preferr credit cards or cash.
                                                                                                                                                                                                                                                                     Hence at many places, travellers cheques are only useful for
                                        We should buy travellers              Bank," says an SBI official.              charge is Rs 50 while in foreign                                              How to get a Travellers Cheque?                                changing into local currency in banks.
                                    1   cheque of only those banks                 Always cheque tie-up of bank         country, service charge varies from
                                   which have wide network or maxi-                   from where you buy TCs with       location to location. It remains between                                         The procedure of buying a travellers cheque is sim-    2    The range of currencies offered as travellers cheques is
              Travellers Cheque:
              before purchasing

                                   mum branches. "If you want to buy            2     other banks so that it is easi-   one per cent to three per cent,” says                                        ple. The user has to present his passport, ticket and           limited.
              Things to check

                                   travellers cheque in Indian currency,      er for you to encash them. Make sure      Dorairaj, Branch head of UAE Xchange.                                        visa to associated banks or travel agents. When pur-
                                                                                                                                                                                                                                                                     You have to pre-determine their value; you can't just withdraw
                                   then SBI Bank has maximum num-             you buy TCs only from those banks         Of late, the use of travellers cheque is                                     chasing the cheques for the first time, they have to       3    what you want.
                                   ber of branches. Punjab National           which has large tie-up.                   declining in India, because of debit card,                                   be signed at a specified place. This is to ensure that
                                   Bank falls at number two as far as            You can also get your TCs encash       credit     card       and      Centralise                                    in case of being lost or stolen, they can be reimbursed.        It can also be challenging finding an outlet where you can encash
                                   branches are concerned whereas if                 from money          exchang-       Banking Solution (CBS). The trend of                                             The user can purchase the cheques by paying            4    your travellers cheques, which makes them harder to use quick-
                                   you are looking to buy travellers            3    er.                                plastic money is eating into the busi-                                       the amount in cash for amounts less than Rs 50,000              ly or in an emergency.
                                   cheque in foreign currency,                     Charges: There are no charges        ness of TCs abroad as well,                                                  (which is about a thousand US dollars). In case of larg-
                                                                                                                                                                                                                                                                     In a year, the amount on these cheques is limited.
                                   American Express has the maxi-             as such to encash travellers cheque       Dorairaj added.                                                              er amounts, the payment has to be made through             5
                                   mum branches. Next comes City              except service charge. "In india the                                                                                   cheques or demand drafts.

                   68      MONEY MANTRA     August 15, 2010                                                                                                                                                                                                                                            August 15, 2010   MONEY MANTRA   69
EP-46-90-kanchan-akm.qxd    7/25/2010       5:30 PM   Page 70

                70   MONEY MANTRA   August 15, 2010             August 15, 2010   MONEY MANTRA   71
EP-46-90-kanchan-akm.qxd     7/25/2010     5:30 PM     Page 72

                                                                          Define your
                                                                                                                                                   STOCK MARKET
                                                                          Style                Oscar Z1
                                                                     Consumer electronics brand OSCAR has entered into the cellular phone          & Mutual Fund
                                                                 market of India. Oscar will launch a total of 10 handsets priced between Rs.

                                                                 1700 to Rs. 4500 in the next 2 months. All Oscar mobile phones support
                                                                 Dual SIM GSM connectivity to allow customers to manage their personal
                                                                 and professional numbers efficiently and come with a 1 year warranty. Of
                                                                 the 6 that have been already launched, the base model N1 has a vibration speak-
                                                                 er, a first for an entry level phone at that price point. But the higher end
                                                                 model currently on offer from the company is Z1, which is an aspirational
                                                                 Qwerty Keypad Handset based on a very fast processor and comes with a front
                                                                 and back camera. It comes loaded with a plethora of multimedia options includ-
                                                                 ing FM Radio, MP3, MP4 player, access to various social networking sites
                                                                 and 1.3 MP camera.

                                     TOUGH-30000                                         Alpha keypad phones                                                Inside
                     Olympus recently introduced its new all-weather cam-                Lava launched a
                 era Tough-3000 with a number of exciting features, includ-          few phones recently                                                    Dividends or scrip quot-
                 ing resistance to water. The new TOUGH-3000 is water-               with innovative key-                                                   ing cum dividend
                 proof to 3m, shockproof to 1.5m, freezeproof to -10°C.              pad called Alpha
                 The 12 Megapixel model features a 3.6x wide optical zoom            Key-pad. This key-                                                     Bonus or scrip quoting
                 (28-102mm) lens, a 6.9cm/2.7inch Hyper Crystal III LCD,             pad is neither tradi-                                                  cum bonus
                 1GB internal memory, SD Card compatibility and Dual                 tional multi-tap nor
                 Image Stabilisation. The camera offers HD movie record-             QWERTY; rather                                                         Rights or scrip quoting
                 ing and the movies can be shown on a TV connected via               the      keys      are                                                 cum rights
                 HDMI. There are 15 scene modes in Olympus Tough-                    arranged in ABCD
                 3000 and it can record in VGA, QVGA and in HD (720                  order to provide                                                       IPO in 2009-2010
                 p). Olympus Tough -3000 is a good choice in mid-range               convenience to the
                 cameras with a price tag of Rs 12,999 only.                         users. Lava has                                                        Indices Performance
                                                                                     introduced        this
                                                                                     unique keypad in its
                                                                                                                                                            Bulk Deals
                                                                                     new B2 & B5 hand-                                                      Sensex based compa-
                                                                                     sets. This is the first
                                                                                     time that any mobile
                                                                                                                                                            nies P/E
                                                                                     handset player has                                                     World Market Indices
                                                                                     offered an option to
                                                                                     a large segment of
                                                                                     mobile users who                                                       The Best & The Worst
                                                                                     were not familiar or
                                                                                     comfortable with QWERTY or Multi-tap keypads. If we
                                                                                                                                                            Performance A,B & S
                                                                                     look into the details of Lava B5, it has a number of fea-              group
                                                                                     tures like AB C keypads with QWERTY looks, Dual SIM,
                                                                                     2.2'inch QVGA TFT, E-mail support, Mini Opera,
                                                                                                                                                            Volume gainers
                                                                                     Nimbus, Skype, MSN and JAVA. In addition, the phone                    India's top 50 compa-
                                                                                     is equipped with MP3, MP4, FM, 2 Mega Pixels Camera,
                                                                                     Multi Format Video & Audio Player, T Flash Card support
                                                                                                                                                            nies based on market
                                                                                     up to 8 GB and 3.5mm universal audio jack. With all these,             cap
                                                                                     the phone is priced at Rs.4399.
                                                                                                                                                            BSE 500 Companies
                 72   MONEY MANTRA   August 15, 2009                                                                                                        MF Gallery

To top