Tapping of HNIs for Retail Deposits _ Wealth Management Services

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Project Report on Tapping of HNIs for Retail Deposits
            Wealth Management Services in Delhi

                                Submitted to:

                     SBBJ Zonal Office New Delhi

A comprehensive project submitted as the fulfilment of the summer
                 internship for Two Year PGDM program.

Submitted by:

Vikas Sharma

Institute for Integrated Learning in Management

Graduate School of Management

16, Knowledge Park

Greater Noida.
                                                             pg. 1
This project is the outcome and result of the extensive work in the area of ―Wealth
Management Services”.

I would like to thank my project guide Mr. C. R. Das for his continuous support and guidance.
He had guided me about different aspects of working methodology in banking and help me to
develop profound understanding about various aspects.

I would like to give my heartiest thanks to my project mentor Mr. Rahul K. Singh for taking me
under his guidance and giving me his precious time for the successful completion of the project.

I also express my gratitude to the Mr. J. P. Chaturvedi, HR Dept. for his incomparable support
and addressing all my concerns and ensuring that my experience at SBBJ was free of hassles.

I like to thank Mr. N. K. Sudhanshu (Credit Officer), Mr. Vipin Tyagi (Credit Officer),
Mr. P. K. Sethi (Asst. Manager) and last but not the least Mr. M. L. Meena (AGM) for their
support in completion of my project.

I would like to thank my faculty guide Prof. Ritesh Srivastava for giving me the proper
guidance and providing me with new and innovative aspects to work on.

A well combination of theory and practical helped me in compiling this project on “Tapping of
HNIs for Retail Deposits and Wealth Management Services in Delhi”.

I am also grateful to all those people who directly or indirectly helped me in accomplishing this

Vikas Sharma

                                                                                           pg. 2
                                   Table of Content

Sr. number   Topic                                             Page number

1.           Introduction                                      4

2.           Objective of the study                            6

3.           Introduction of the Bank                          7

4.           High Net Worth Individuals                        13

5.           Common financial mistakes and how to avoid them   15

6.           Wealth Management                                 18

7.           Financial Planning                                22

8.           Cash Flow Management                              31

9.           Insurance                                         33

10.          Asset Allocation                                  39

11.          Retirement Planning                               46

12.          Taxation                                          48

13.          Estate Planning                                   52

14.          Deposits                                          54

15.          Loans and Advances                                56

16.          Conclusion                                        59

17.          Bibliography                                      60

                                                                      pg. 3
India is one of the fast growing economies in the world and hence it has a large pool of the
people whose net worth is high and very high net worth individuals. The number of the people in
these categories is increasing with a faster pace than any other country of the world. The main
stream of the growth the country is these HNIs and UHNIs (Ultra High Net Worth Individuals),
and because these have a large pool of money means they have investible money, every financial
institution try to get them as their clients so that by doing business with them financial
institutions can also get a strong base in the economy.

The financial institutions are providing various services to the HNIs and UHNIs to make their
investment decisions, such kind of services now a day are called wealth management services
and the financial planning. Today’s investors have become very sophisticated in their investment

Such sophisticated investors (HNIs) with a heightened interest in international investments are
determined to get the best return on their wealth. Thus, the wealth management and private
banking industry must offer their wealthy clients innovative and comprehensive strategies to
effectively organize their investments.

The financial planning and the wealth management services sound similar on the surface but in
the deep they are a little bit dissimilar also. In a broad view wealth management services is a part
of the financial planning services. But now a day wealth management services are restricted to
the sophisticated customers so that the term wealth is not used for each and every customer of
the financial institutions.

Wealth doesn’t mean that it is related only with the money, wealth can be the business, house
and property, gold, bonds, stocks, jewels etc. and to maintain and take care of this and as well as
to increase the worth of all of these people need assistance.

The financial institutions provide the assistance to those people who either want to proceed with
various phases of the financial planning and the wealth management.

                                                                                              pg. 4
State Bank of Bikaner & Jaipur is also one of the wealth management services providers and is
doing very well in this area. Some of its services are well known and as it is associated with the
State Bank of India it has a very strong reputation among the people.

In the later part of the project we will come to know that what various kinds of the financial
planning services and the wealth management services are provided by the financial institutions.

There are some findings and recommendations are also provided, that are the result of the survey
of the HNIs and the according to the responses provided by them to the different questions of the

                                                                                            pg. 5
                            OBJECTIVE OF STUDY

Financial institutions like Banks and other institutions need information on the needs and
requirements of the HNIs in the different investment objectives. In order to make sound decision
about providing best possible solution to the client’s financials needs and problems.

   1. To study the various wealth management services provided by the Bank.

   2. To know what are the primary investment objectives of the HNIs as no two people have
       same kind of service requirements.

   3. To know the existing level of satisfaction and dissatisfaction of the clients about the
       services provided by the Bank.

                                                                                          pg. 6
                             Introduction of the Bank:

State Bank of Bikaner and Jaipur was established in 1963 after amalgamation of erstwhile State
Bank of Jaipur (established in 1943) with State Bank of Bikaner (established in 1944) as a
subsidiary of State Bank of India.

The Bank took over the business of the Govind Bank Pvt. Ltd. on 25.04.1966. The Bank's main
area of operation is Rajasthan, with presence at all important centers in the country. The Bank
has 860 branches consisting of 849 business branches, 8 service branches, 2 asset recovery
branches and 1 treasury branch and has sponsored 3 RRBs. The Bank follows transparent
corporate governance policies and is preparing itself for smooth migration to Basel II. On
technology front, during 2005-06, the Bank has migrated all branches to Core Banking Solution

The bank has been amongst the first few PSBs in the country to migrate all the branches to Core
Banking Solution (CBS). The Bank has installed 453 ATMs and all ATMs are the part of over
10,000 ATMs of State Bank Group.

Internet Banking has been extended to all our branches for retail customers and select branches
for corporate customers. The Bank has rolled out Business Process Reengineering (BPR)
initiatives to improve operational efficiency and better customer service and is committed to
offer value added services to its customers.

The Bank has been earning profit continuously since its inception and the Bank's business
crossed the level of Rs 59,427 crore with a net profit of Rs. 315.00 crore at the end of

                                                                                         pg. 7
                                  Brief History of the Bank:

1944 - The Bank was incorporated at Bikaner. The Bank transacts general banking business of every
description. The Bank also transacts Government Treasury work. The name of the Bank at the time of
incorporation was The Bank of Bikaner Ltd.

1960 -The Bank became a subsidiary of the State Bank of India under the State Bank of India (Subsidiary
Bank) Act, 1959. The Bank assists small scale industries and co-operatives and grants advances against
warehouse receipts.

1963 - The State Bank of Jaipur with its 49 offices was taken over by the Bank and the name of the Bank
was changed to the State Bank of Bikaner and Jaipur.
The business of the Govind Bank (Pvt.) Ltd., Mathura was taken over by the Bank with effect from 25th

April, 1966. - The issued capital was raised to Rs 80 lakhs to enable the compensation to be paid to the
shareholders of the State Bank of Jaipur upon its amalgamation with the Bank.

1968 -The Bank formulated a scheme to render direct finance to small business which covered the entire
spectrum of financial assistance to the agriculturists. Under the scheme of provision of credit to transport
operators, financial assistance was extended to operators of taxis and auto rickshaws for meeting working
capital requirements and for purchase of new or second-hand vehicles.

1984 -The Bank opened another Regional Rural Bank in Ganganagar district under the name
Ganganagar Kshetriya Gramin Bank.

1985 - A Bank named the Bikaner Kshetriya Gramin Bank was opened in Bikaner district.

1995 - 15, 60,000 right equity shares issued (prem. of Rs 300 per share) in proportion to 3:4.

1997 -The Bank offered 13, 60,000 shares at a premium of Rs 440 per share. Of which 1,38,800 shares
were offered to SBI 1,22,100 shares were offered to employees, 1,52,700 shares were offered to NRIs,
OCBs, FIIs, and the balance 9,46,400 shares were offered to public. All were accepted.

                                                                                                     pg. 8
The State Bank of Bikaner & Jaipur (SBBJ), an associate bank of the State Bank of India (SBI), is
entering the capital market with a maiden initial public offering (IPO) to augment its capital base and its
long-term resources. The face value of the share is Rs 100. The shares will be listed at the Jaipur and
Mumbai stock exchanges, in addition to National Stock Exchange. The State Bank of Bikaner and Jaipur
is the latest public sector bank come to he primary market with a Rs 73.44 crore issue. The bank is
offering Rs 100 each for cash at a premium of Rs 440 per share.

- The equity issue of State Bank of Bikaner and Jaipur (SBB&J) has been oversubscribed by 1.5 times.
- During the year, the bank will also install an ATM at one of its branches.

1998 - The State Bank of Bikaner and Jaipur (SBBJ) had issued 12.21 lakh shares at a premium of Rs
- State Bank of Travancore and State Bank of Bikaner and Jaipur shares' dematerialization is facing a
roadblock as a State Bank of India (Subsidiaries Banks) Act, 1959, clause says that no person can acquire
shares in excess of 200 units in any of the bank’s subsidiaries.

1999 -The bank is gearing itself to improve efficiency by technological up gradation, refinement of skills
and motivating employees to improve upon services and products.

2002 -State Bank of Bikaner & Jaipur has informed about that Shri S D S Minhas has taken over as
Director of the Bank in place of Shri V P Grover who has since ceased to be a Director of the bank w.e.f.
March20, 2002.
 -State Bank of Bikaner and Jaipur has informed BSE that Mr. K S V Krishnama Chari has taken over as
Director of the Bank as State Bank of India nominee Mr. L N Jalani has been allowed by the Ministry of
Finance to continue w e f July 09, 2002 as workman Director on the Board of the Bank.
 -State Bank of Bikaner & Jaipur has informed Mr. Ramesh Chand Bhandari was elected as Director of
the Bank for period of 3 years w e f August 09, 2002 in place of Mr. M K Patodia whose tenure of office
expired on August 04, 2002.

2003 -Appoints Mr. K R Srikantan as Managing Director.
-Mr. J. B. Bhoria takes over as the Director of the Bank as nominee in place of Mr. Karuna Sagar.
-Shri C Bhattacharya, Dy. MD &Group Executive (A & S group), SBI takes over as the Director of the
bank as SBI nominee.

                                                                                                     pg. 9
 -Shri A. R. Samajdar has since ceased to be a Director of the bank on account of his reaching
superannuation on September 30, 2003.

2004 -State Bank Of Bikaner And Jaipur has informed that Shri Yashovardhan Sinha, Dy. General
Manager (A&S), State Bank of India has taken over as Director of State Bank of Bikaner and Jaipur, in
terms of Section 25(1) (c) of the State Bank of India (Subsidiary Banks) Act, 1959 with effect from
January 1, 2004- Further informed that, Shri. S. Ramaswami, General Manager, Reserve Bank of India,
Rural Planning & Credit Deptt. Bhopal has taken over as Director of the Bank under Clause (b) of
Subsection (1) of Section 25 of State Bank of India (Subsidiary Banks) Act, 1959 with effect from
January5, 2004 in place of Shri. J. B. Bhoria, Regional Director, RBI, Jammu.

Presently Mr. Arun Shandilya is the Managing Director of the Bank.

                                                                                             pg. 10
Bank’s vision and mission:


―To be a values driven modern bank aspiring for excellence in customer service, perpetually
enhancing shareholders’ value and contributing to the economic development of society.‖

―To continue to be a premier bank of Rajasthan with all India presence, committed to empower
its personnel for providing excellent, personalized and quality customer service by adoption of
modern technology, achieving sustained and profitable growth in business thereby increasing
shareholders’      value   and    contributing    to    the   welfare     of    the    society.‖


The main objectives are

      Customer satisfaction- The Bank believes that a satisfied customer is a valuable asset of
       the bank.
      Building a strong base of core deposits- The Bank believes in developing a strong base of
       core deposits ensuring healthy rate of growth.
      Compliance of Directives- The Bank shall comply with the directives/ guidelines issued
       by RBI, IBA, Government of India and/or any other statuary authority/agency.

Thrust Areas:

                                                                                          pg. 11
• The Bank shall continue efforts to broaden its customer base, focusing on deposits of retail
customers,      and       shall   also      give    due    weightage    to     bulk    depositors.
• While mobilizing deposits, the Bank shall give emphasis on low cost deposits..


• The staff members posted at branches will be adequately trained to offer efficient and courteous
service to the customers and will educate them about their rights and obligations
• It will always be our endeavor to develop personalized banking relationship with the customers
• The Bank shall take care of the requirements of varied categories of depositors and shall
develop new innovative products and / or modify the existing products suitably
• The Bank shall aggressively market the various products but shall avoid mal-practices
• The Bank will provide ―May I Help You‖ counters / desks/ Grahak Mitra at its branches to
guide the customers properly.

•The    Bank      shall     pay   special     attention   to   senior   citizens   /   pensioners.
• The Bank shall extend full help to handicapped and disabled persons to perform their banking
• The Bank shall endeavor to provide services to the satisfaction of customers. However, in case
of any complaint, the Bank shall ensure its expeditious redressal.

• The Bank shall levy reasonable service charges for various services rendered to the customers
and shall inform about the same to the customers at the time of opening of the account. The
customers will also be informed of the various measures with regard to safety and use of
chequebook etc.

                                                                                           pg. 12
                                   High Net worth Individual:

There is no authenticated / accepted definition for HNIs. However, universally accepted practice is as
In USA they are defined as

        Individuals, having financial assets over $ 1 million are treated as HNIs &
        Individuals, having financial assets over $ 30 million are treated as Ultra HNIs.

But in India there is no clear definition of the HNIs, it differs from the financial advisers to the various
wealth management service providers, in nut-shells they are defined as:
        Individuals, having financial assets over Rs. 25 lacs are treated as HNIs &
        Individuals, providing business to the financial institutions of at least Rs. 3 lacs are treated as

And SBBJ considers the top 200-300 customers of the particular branch as the HNI because they believe
that branch can satisfy at most this quantity of the customers per annum.

Growth potential for HNI Segment:

As per World Wealth Report 2008 published by Cap Gemini Merrill Lynch & Co.:

        10.1 million People globally hold more than US$1 million in financial assets, an increase of 6%
         over 2006.
        HNI wealth totals US$40.7 trillion, representing an 9.4% gain since 2006
        Wealth generation was driven by real GDP gains and continued market capitalization growth
         India (22.7%), China (20.3%), Brazil (19.3%) and South Korea (18.9%) witnessed the highest
         growth in HNI population during 2007.

                                                                                                       pg. 13
       HNI financial wealth is expected to reach US$59.1 trillion by 2012, growing at an annual rate of

HNI segment in India is placed:

•HNI segment in India registered a growth of 22.7% during 2007 compared to 12.2% in Asia
Pacific & 9.4% world-wide.

•India accounts for more than 123,000 HNIs and about 1,000 Ultra HNIs.

•India has accounted for 20% of Asia Growth and 10% of World Growth during 2005.

•Mumbai, Delhi & Bangalore accounts for bulk of HNIs.

•Bangalore accounts for over 10,000 Millionaires with an investible surplus of Rs. 50 lacs to
Rs.4.5 Cr.

•7% of HNIs are in the age group of 30 years or younger.

•India’s millionaires on an average hold $ 3.5 million in assets.

•India’s millionaire club largely consists of young entrepreneurs and businessmen.

Sustainability of HNI growth in India:

This growth rate is likely to be sustained because of favorable demographic factors, rising opportunities
for job as well as self-employment and graduation of middle-income group into high-income group. HNIs
are unable to optimize their return on investments due to constraint of time and lack of proper advisory
support services. The growth trend indicates immense opportunities in this particular segment.

What are all the services HNIs normally expects?

The HNI client segment is in need of the following services.

• Advisory support on Investment decision.

                                                                                                 pg. 14
• Tax optimization.

• Wealth protection, Insurance advisory.

• Research support on different investment opportunities.

• Other requirements like succession planning, legal advisory services, etc.

          The common financial mistakes and how to avoid them

There are many financial mistakes that we all make, which are quite common and perpetuated
generation after generation. `Financial mistakes', which if avoided, can result in financial
freedom and wealth creation. The most common of some of the financial mistakes are as under:

- Overspending

- Delaying or ignoring a Will

- Insurance follies

- Not creating Contingency fund

- Putting Off Financial Planning

- Not starting savings early and not realizing power of compounding

       Overspending:
        While we seem to think overspending is normal, it is not wise. It can be disastrous. When
        we are young and start earning, we think that we will continue to earn same income and
        even more - forever! Excessive spending results into lower savings and rising level of
        debt. We tend to postpone investment and prepone expenses. In fact, we should be doing
        exactly the reverse i.e prepone investment and postpone expenses. Most of us do not have
        monthly expense budget. When we go out to shopping mall, almost everything on display
        seems like a necessity to us. Whenever there is a `SALE' we tend buy irrespective of the
        fact whether it is required or not, for immediate consumption. While it is not wrong to
        buy from `SALE', we should realize that we end up buying something which may not be

                                                                                          pg. 15
    required or which can be easily postponed. We also need to return to ground reality and
    make the crucial decision between a necessity and a luxury. If we want to reduce our
    debt, save more and achieve financial freedom, it is important to identify the root cause
    of overspending.
   Delaying or ignoring a Will: Updated nomination and the existence of a will is of
    crucial importance whether the person is single or married. Even if a person has
    nominated someone, it does not automatically mean that the concerned persons will get to
    own that asset. Nomination is the right to receive, not the right to own. For example, if
    the person has nominated his wife in various assets (bonds, bank deposits, shares, etc),
    the wife gets the right to receive the asset. But, in case there is no will, any other family
    member, for example his mother, has the right to take the matter to the court. A written
    will ensures that the asset goes to the person one desires. A will need not be drafted only
    with a help of a lawyer. One can draft it in own handwriting and the format / draft is
    simple and can be easily accessed on the net. A handwritten will, attested by two persons,
    preferably one of them the person's doctor, and would ensure that the will would not be
    challenged. Most parents leave the idea of making a will after their retirement. They feel
    that nomination or joint holding will serve the purpose. If a person dies intestate, then the
    possibility of legal disputes and division of assets under succession acts become a reality
    amongst the family members.
   Insurance Follies: Risk management is ensuring that health and life insurance is in place
    (and adequate too) and that there are no lapses in premium payments. Many of us take
    more than one insurance policy to provide maximum safeguards against risk. Instead of
    taking multiple policies, one should go for increasing life cover in the existing policy. We
    often have adequate life cover, but ignore to take a medical policy, which ultimately force
    us to shell out hefty sums out of our savings to cover medical expenses. We often forget
    to take medical policies for the kids or parents, leaving them exposed, in the case of
    eventuality. During the last couple of years, insurance products like ULIP have gained
    popularity because of the rising equity markets. However, such products are expensive
    and provide less life coverage. People end up buying products, which are inappropriate
    for their requirement. Investment is not an expense. It is money put away for future use.
    So, cutting down on investments is not a good idea.

                                                                                         pg. 16
   Not creating contingency fund: One should keep aside contingency fund for rainy days,
    part in form of cash and part in bank account. Contingency fund is required to take care
    of medical emergency, loss of income due to job loss etc. This amount should be roughly
    equivalent to three to five months of living expenses including funds required for
    emergency. Few people keep such emergency fund.
   Putting Off Financial Planning: Financial planning helps us to make provision for
    financial needs that will arise in the future. Financial planning involved setting up of
    financial goals and appropriate asset allocation. Without a proper plan, people often try to
    maximize returns and take undue risk. There is a danger of not achieving the life goals, if
    proper asset allocation is not adhered to. For example, if you set aside certain funds (and
    allocate to equities!) for your daughter's marriage, which is say one year away. If there is
    a crash in the equity market, the required funds cannot be made available to take care of
    marriage expenses. Such funds need to be parked in safe assets for short-term needs
    without taking any risk. The biggest mistake that people make is to ignore the value of
    financial planning.
   Not starting savings early and not realizing power of compounding: When we start
    our career and earn, we want to buy whole world from it. We get married; we buy home,
    have our family, expenses keep adding up. Our income increases but so does our
    expenses. When we start earning we don't think about savings. We tend to forget power
    of compounding. Because of the power of compounding specially over a long period of
    time, the difference between starting to invest early versus starting late can have a
    significant impact on your wealth. Benjamin Franklin described power of compounding
    as the eight wonders of the world'. Legendary investor and wealthiest man on earth
    Warren Buffet made his first investment when he was 11 years old and according to him
    he started late. Warren Buffest was millionaire by the time he was around 30 years old.

                                                                                        pg. 17
                                Wealth Management:

Wealth Management is defined as the complete blend of various asset classes, tax consultancy
and risk management strategies molded into a single cast normally targeted at High Net worth
Individuals. It normally addresses certain critical issues such as asset allocation, retirement
planning, estate and trust planning, business succession planning as well as equity planning.
HNWI   of today is technology-accessed global in outlook and is willing to learn from the
experience of the matured members of the club outside India. Apart from portfolio management
asset allocation techniques and retirement planning, his frightening concern is about the wealth
transfer or generational planning. Most of the wealth in the good old days was locked, mainly, in
two asset classes- property and precious articles like gold, precious stones and jewellery. The
nature of these holdings was low- income producing or rendered meaningless by the rigid
tenancy laws. A long drawn out legal battle adversely affected the gain of the assets only.
Substantial part of the asset holding today is financial in character with its inherent cash flow
feature encompassing both income and liquidity. Any prolonged legal battle today is likely to be
doubly painful in comparison. Wealth management services have been getting more attention
over the last two years. A booming economy, rising stock prices and an increase in salaries and
spending power have turned the spotlight on this sector. The wealth management space was
earlier the preserve of some foreign banks which offered these "exclusive services" to a select
few. This was not a service you could apply for. The unsaid tagline was "Don't call us. We'll call
you (if you are that wealthy!)." Today, a number of banks offer this service. Also entering this
arena and carving a niche for themselves are standalone entities that offer the full range of
services — investment advice, portfolio management, taxation advice etc.

Wealth management is just emerging in India. The growth of the economy has already been
widely showcased. Wealth and disposable income are growing substantially. For the first time
the ability to earn and save are slightly different. Earlier you just put away your money in some
guaranteed products. Today, when even the government is withdrawing from those products (it

                                                                                           pg. 18
recently stopped the maturity bonus on post-office savings), investors, whether they be doctors,
architects or anyone else, need professional help.

It can be represented in a time scale as under:

                                                                                         pg. 19
The gamut of product and services can be as under:

                                                     pg. 20
                         The need for financial advisory services:

In an ever changing and increasingly competitive world, one needs to navigate through a maze of
complexities to manage wealth efficiently and optimally. In today’s world of conflicting situations like
the tendency to spend vs. the need to save, ability to earn better earlier in life v/s chances of shorter
earning cycle with longer life span, complex and multitude of investment options v/s need for simple
investment solutions, planned and disciplined investing becomes a necessity. This requires attention away
from one’s profession. Assistance of experienced and committed professionals will make investment
process effective. Customers require financial planning for various below mentioned reasons as survey

                                                                                                 pg. 21
                                    Financial Planning:

Financial Planning is the process of meeting your life goals through the proper management of
your finances.

It involves the process of assessing your financial situation, determining your objectives and
formulating a plan to achieve them.

The objective of financial planning is to ensure that the right amount of money is available in
the right hands at the right point in the future to achieve an individual's life goals. It also allows
you to understand how each financial decision you make affects other areas of your finances.

The findings about the awareness of the wealth management services and the financial planning
and the satisfaction are given below-

                                                                                              pg. 22
          Awareness about wealth management services
                                              yes   no



Out of surveyed HNIs 87% replied affirmative regarding the awareness about the wealth
management and financial management services provided by the banks. Having a huge chunk of
investable money had enhanced their concern towards the proper investment and management of
the money and also compel them to be with the pace of the changes and improvement in this
wealth management and financial planning area. The wealth management provides the
opportunity to them to invest their money in efficient manner. The rest 13% people who are not
aware about services claimed that the level of publicity and advertisement is not the mark and the
service providers are unable to reach them some are not interested and they don’t want to invest
elsewhere other than their own business. By this kind of reply to the survey it is clear that there is
a need of sound publicity and advertisement of the different wealth management and financial
planning services provided by the banks with all specifications and proceedings.

                                                                                              pg. 23
                        Do you do financial planning?
                                            yes   no



From the next question another fact comes into light that the HNIs who are aware about wealth
management and financial planning they either themselves or from financial advisors do
planning of their wealth. Some of them said they know about the wealth management and
financial planning but they don’t do the financial planning, because of the stereotype thinking of
that the money generated from their business they do not want it to be risked on any other
financial instrument they think that the money is safe if it remains rotating in their business. As
the wealth management and financial planning don’t mean that the money should be invested in
other instruments it can be provided to those people who wish to invest their money in their own
businesses, there are many services regarding to their businesses for example: the mortgage loan
facility, the current and recurrent deposit facilities which may become either the contingency
plans for them or the alternate objectives to invest in their respective businesses. To make aware
the people about all such kind of services the bank may take some measures so that it can
enhance the understanding level of these traditional businessmen and more people can be
entertained by the wealth management services.

                                                                                           pg. 24
           Do you have investment plan for self/ family
                                           yes    no



The third questions clears that 81% of the respondents are cautious towards investments plans for
themselves and their family showing concerns towards security of them from any mishap. For
this type investment need people generally opt for insurance plan or any sort of fixed deposits so
that they can get security and good return. The Bank has to take steps so that it can eliminate this
type of thinking from the mind. As bank can also provide these type of services for instance take
SBI Life insurance (because the associate Banks of SBI also provide the SBI products to their
customers such as SBI Life and SBI Mutual Fund and many more), and the Bank also provide
fixed deposit scheme and other such schemes that can provide them a surety of the return to

                                                                                            pg. 25
              Satisfaction with present saving/investment
                                               yes   no



In present scenario people are more incline towards wealth creation and wealth preservation, in
process of wealth creation and preservation nobody is satisfied with his or her saving and
investment plans. People want to live happily after their retirement so they do savings and
retirement planning; as well they also want to see their families living happily after they are gone
so they prefer most kind of the insurance plans to secure their family’s future.

HNIs specially opt for the estate planning (wills and trusts) and investments in their own
businesses. Bank may increase their services in the areas of estate planning and the consultancy
services for the particular businesses according to the needs and the requirements of the HNIs.

The broad areas in which Financial Planning can be undertaken:

       Cash Flow Management
       Asset Allocation

                                                                                            pg. 26
       Investment Planning
       Retirement Planning
       Estate Planning

Who requires Financial Planning?

It is useful to everyone. Very few can consider themselves too rich to engage in Financial
Planning. There are many instances of highly paid employees who came to financial grief merely
because they did not plan for their post-career years. Similarly even people earning small
amounts of income should undertake this process, as it will help them in prioritizing their goals
so that their limited income can be used more efficiently.

Why should you make a financial plan?

Financial planning provides direction and meaning to your financial decisions. It allows you to
understand how each financial decision you make affects other areas of your finances. For
example, buying a particular investment product might help you save adequately to finance your
child's higher education or it may provide enough for a comfortable retirement. You can also
adapt more easily to life changes and feel more secure that your goals are on track.

Helping you in better understanding your present financial position:

The questions contained in the Financial Questionnaire require you to list down your assets,
liabilities, incomes and expenditures. This is a process of virtually drawing up your own Balance
Sheet and will help you gain a better grip on your present financial position.

                                                                                          pg. 27
Cash Flow and Debt Management

Incomes and expenditures can be better matched through the planning. It also will assist you in
identifying whether your borrowings are within prudent limits.

Risk Management

It can help you in identifying your life and property insurance requirements. Evaluating your insurance
needs is part of personal financial planning. Insurance usually takes care of your unpredictable needs and
as these needs can arise at anytime, insurance is extremely important.

Achievement of financial objectives

Various financial objectives whether it is financing your child’s education, a house of your own or your
post-retirement phase can be better met through systematic investing. A properly laid out investment plan,
prepared after considering your risk appetite, time horizons etc. go a long way in helping face the future
more confidently.


Often investors invest with the sole objective of saving tax. We believe that this is not the most desirable
method. Investments should be in sync with your requirements, the tax angle being secondary. However,
we do not ignore the tax aspect. Optimum Post tax returns are what all investors should be concerned
about and that is what we too strive for. It is important that financial plans are tax efficient. The financial
plan should help you in minimizing your tax liability and also maximizing your after-tax returns from
your investments.

Inter-generational transfers

Estate planning is arranging for the transfer of your property to your heirs and to other beneficiaries, in a
way that will, as much as possible, achieve your objectives. The most common vehicles for this purpose
are the drafting of Wills and setting up of Trusts.

The HNIs are concerned about various aspects of the investments and the responses of the
questions asked in this context are as the following charts-

                                                                                                       pg. 28
                  Aspect considered before investment
                       tax relaxation   wealth creation   risk and return     all





Before investment not only HNIs but a layman also thinks about the various aspects such as tax
relaxation, wealth creation, risk & return etc. out of the surveyed HNIs more than 50% have
chosen all these aspect to be considered before selecting any investment plan. The Bank may
provide services which can fulfill their preferences in these areas, SBI products are good
examples of such kind of services such as Magnum Tax gain (Magnum Tax-saver) and Magnum
equity’s diversified schemes.

                                                                                       pg. 29
                       Most importment in investment
                            return     safety of principal   diversification




As it is already clear from the previous question analysis people are opting for tax-relaxation,
risk & returns, wealth creation or all. From the response to this question we can figure out that
most of the responded (more than 62%) have chosen returns as the most preferred reason for
investments. During the economic slowdown and financial crisis in the market overall globe
investors prefer that at least they can recover their invested amount as well as some profit along
with. This is the effect of the financial crisis that 25% respondents have chosen safety of invested
principal amount. Bank may provide such services that give surety of return as well as safety of
principal invested by investors in order to fetch new segment of the market and to retain existing
customer base.

                                                                                            pg. 30
                       Preferred investment objective
              bank deposits     debentures        equity   mutual funds    gold   others





Economic growth of any industry depends on many factors and one major factor is political
influence on the financial structure, as a new government comes in power and it seems that this
will be a stable government in the years to come and it will give surety to the investments. After
this type of scenarios it is observed that HNI segment sensing this opportunity start shifting their
investment preference from secure instruments such as bank deposits and debentures, towards
equities, mutual fund sector and some new volatile instruments like futures and options. Bank
should consider these instruments also, in mutual fund area SBBJ and associate banks of SBI are
already active in figuring out new investment opportunities for their investors, like all of
associate Banks are providing SBI Mutual Fund schemes in various names and forms, but in
sector of equity market the bank is lagging somewhere behind. It had recently introduced SBBJ
Demat Accounts to its customers, in equity market a larger portion has been grabbed by private
sector players and it is the most challenging area where the bank has to give its full concentration
and have to figure out some new avenues to make a remarkable and unbeatable position in equity
trading market.

6% of the investors have chosen other investments like investing in their own businesses to
extend it.

                                                                                            pg. 31
                                  Cash Flow Management:

We hardly take time out to find out what are our sources of income and our expenses? Cash flow
planning refers to our inflows (income) and outflows (expenses) of money as mentioned below.

Sources of income may include the following:

       Salary, bonus or business income
       Interest, dividend from investments
       Rental income

Outflows may include the following:

       Living expenses including food, clothing, travel & entertainment
       Utilities and taxes
       Insurance premium (life, car, health)
       Charity, Gift
       Contribution to retirement assets – Pension, gratuity, PPF, superannuation
       Loan EMIs (House, car, credit card, personal loan)

Cash flow planning is a regular exercise for companies but at an individual level we ignore the
importance of the cash flow planning process. Companies need to have a positive cash flow for
expansion, diversification, distribution of earnings etc. Similarly, at an individual level cash flow
planning is required to identify the major income and expenditures in future (both short-term and
long-term) and making planned investments so that the required amount is accumulated within
the required time frame. Without having personal budget of income and expenditure, expenditure
may exceed income and our investment plan and financial goals may go for a toss. Without
proper cash flow planning one could easily get caught in the debt trap. Creating a plan is not
enough. One also needs to implement the plan, besides bringing about a change in the spending
habits. Cash flow planning is the preliminary step and it lays foundation in the financial planning
exercise. Cash flow planning is done prior to starting an investment exercise, because it gives

                                                                                             pg. 32
projection of finances and what is it that you can invest without causing a strain on yourself. It
also enables to understand if a particular investment matches with your flow requirement. Once
the financial goals are set, the amount of investment required to realize the goal are set aside
considering inflationary factor. Investment strategy can be worked out after cash flow planning
and risk profiling.

Cash flow planning is powerful tool as it enables to:

    Identify areas where expenses can be reduced and allocate money towards achieving
       financial goals, reduce debt level.
    Assess your ability to meet your financial goals.
    Positive cash flow helps in planning paying off costly loans like credit card and personal
    Project your future cash flow needs
    Enables one to take tax efficient decision depending upon your tax bracket and personal
       situation (carrying housing debt which is tax deductible vs. consumer debt which is not
       tax deductible)

                                                                                          pg. 33

Adequacy of Protection/Life Cover:

People do not think (or do not want to think) of what will happen to their family, if you are gone
-especially when you have not met all of life's responsibilities. Though the family goes through
emotional trauma, financial burden adds to the pain. One has no remedy for the emotional pain,
but    smart      financial    planning        can   certainly    ease     the     financial    pain.
If one is under insured, it could lead to a slip in family's lifestyle in case of an unfortunate death
of the breadwinner. The family may have to compromise on various fronts to make the ends
meet. These could include cutting down household expenses like food, medical, entertainment
expenses, marriage expenses of children or moving to lower grade school for your children and
many more expenses. While life insurance is critical to meet financial responsibilities, adequate
insurance cover is the key for meeting your responsibilities. So having a cover is not enough -
having adequate cover is critical. Also, investment planning is not enough because plan could
work only if funding the plan is regular and enough wealth is built up to take care of all life
stages responsibilities. What happens if the funding suddenly stops?

The responses of the questions about the insurance services are given below-

                Do you have insurance plan?
                                    yes   no



                                                                                               pg. 34
This is obvious that in today’s time nobody is sure about their own life so for the safe future of
them and their family, most of the people including common people as well as HNIs have
insurance policies. The Bank provides SBI Insurance policies in insurance products. Bank has
one of the most prominent insurance plans but because of poor publicity and peoples high trust in
LIC plans lag bank behind and also people are little bit hesitant investing in banks insurance
plans. The Bank provides one of the best retirement plans floating in market under the umbrella
of SBI Life.

           What kind of insurance/retirement plan
                          you have?
                     sbi life    lic   icici prudential     other




Insurance and retirement plans that are opted by HNIs are mostly government backed plans and
are from the umbrella of LIC. Almost 56% have responded that they would like to have LIC
insurance plans and 12% have chosen that they would like to have SBI Life insurance plan. Rest
remaining 32% want to choose private sector Insurance companies plans. The reason behind this
have been seen is the recent Bail outs of many banking sector companies in USA and other parts
of the world and this has proved that if anything wrong happens with public institutions there is a
big government support behind them. This strengthens the trust of people on the public sector

Bank should do some efforts to introduce products or services that give good returns to investors
in the long run and try to build a robust goodwill in the eyes of investors. SBI Life products have

                                                                                           pg. 35
such kind of potential but lack of awareness about these products is becoming a huge hindrance
for these products.

Life insurance has moved from protecting life to protecting lifestyle. Financial needs can be
classified broadly into following two categories.

       Protection: if anything happens to the breadwinner, the family continues to be financially
       protected and maintain the same life style.

       Savings: one should be able to generate required corpus to meet milestones such as
       education / marriage expenses of children, buying a house etc.

The first step in buying insurance cover (Life Protection cover) is to adequately assess your need
and responsibilities. One should ask the following questions:

       What is my life stage? (Age, family etc.)
       What are my responsibilities? (Buying a house, children's education / marriage expenses,
       protecting my income etc.)
       How much corpus I require to meet the above financial responsibilities?
       What is my current corpus / net worth?
       What are my liabilities (like car loan / housing loan etc)

How do I plan (including selection of insurance plan) so that even if I am not around, my family
can still sail through milestones?

                                                                                           pg. 36
                                          Term Plan:
It's an Insurance only product without the complexities and high costs associated with traditional
permanent policies. Term plans have no investment component and provide insurance cover
only. Term life insurance is the original form of life insurance and is considered to be pure
insurance protection because it builds no cash value. This is in contrast to permanent life
insurance such as whole life, ULIP, Endowment plan etc. if you have a family or dependents,
term insurance is a must. Term insurance provides death protection to the owner of the policy or
to the beneficiary / beneficiaries named in it should the insured die within the term of the policy.
No other policy will offer you as much value for money as this one. Let's say your current age is
30 years and you bought a term insurance policy for Rs 25 lakh. The term of the policy is for 20
years. If you pass away during this period, your family will be richer by Rs 25 lakh. But, if you
outlive your policy, all your premiums (money that you pay to the insurance company to
maintain your policy) would have gone down the drain. Term plans have many attractive
Term plans provide life cover for different periods or terms at the lowest possible premium. For
instance in the above illustration a person can get a Rs 25 lakh cover for an annual premium of
Rs 5,505 for 20 years, a coverage that will cost him about Rs 1,12,850 and Rs 197,300 in
endowment and money-back policies, respectively.
Term plans are especially beneficial for young people with dependents. Low premiums set you
free to invest in high-growth assets such as equity, equity mutual funds, real estate etc.
Income and assets are generally not high in the early stages of one's career or marriage, but there
may be dependents to care for. Later on, as assets build up, one can withdraw from this facility.
As the premium is low, it is easier to keep the policy running even during career breaks.

The drawbacks of term plan are as under:
       Cover is for a fixed term.
       The cost of cover increases with the insured's age.
       There are no bonuses and no cash value to accumulate within the policy.
       The policy lapses unless the premiums are paid.

                                                                                             pg. 37
                       ULIP (Unit Linked Insurance Plan):

ULIP is a scheme, which in addition to a life cover gives you an opportunity to make
investments. It's a two in one plan that offers benefits of life insurance plus savings. In ULIPs, a
part of the investment goes towards providing you life cover. The residual portion of the ULIP is
invested in a fund which in turn invests in stocks or bonds; the value of investments alters with
the performance of the underlying fund opted by you. It is critical to understand how money gets
invested once you purchase a ULIP. When you decide the amount of premium to be paid and the
amount of life cover you want from the ULIP, the insurer deducts some portion of the ULIP
premium upfront. This portion is known as the Premium Allocation charge, and varies from
product to product. The rest of the premium is invested in the fund or mixture of funds chosen by
you. Mortality charges, ULIP administration charges and ULIP fund management charges are
thereafter deducted on a periodic basis. Since the fund of your choice has an underlying
investment – either in equity or debt or a combination of the two – your fund value will reflect
the performance of the underlying asset classes. At the time of maturity of your plan, you are
entitled to receive the fund value as at the time of maturity.

Investment in ULIP makes sense:
Flexibility: You have an option to switch between the investment funds to suite the changing
requirement in life. One can switch from high risk to low risk fund option. There is an added
advantage of switching between funds, which offer different rations of equity, and debt, a few
times without paying any extra fees. These options are designed to help you choose an option
fitting your risk appetite, investment horizon, financial goals and life stage.
Multiple Investment options: If you are a risk adverse investor and believe in goal based
investing, ULIP is an ideal financial product where you can park your funds. Depending on your
life stage, you can decide on equity and debts mix in your plan.

Tax benefit: your investment is eligible for exemption under Section 80C of the Income Tax Act
(subject to a limit of Rs 1 lakh). Besides the premium, the maturity amount in ULIPs is also tax-
free, irrespective of whether the investment was in a balanced or debt plan.

Goal based investment: ULIP gives you a platform to plan for your child's education or child's

                                                                                            pg. 38
marriage or your retirement needs. Since there is a life cover, in case you are not alive to take
care of your family, your family financial goals remain intact and on track.

The Flip side of ULIPs: High cost product: ULIPs are quite expensive, as most of the charges
are recovered at the start of the tenure—usually in the first three years when your money is
locked in. Insurers levy enormous selling charges, averaging more than 20 to 40% of the first
year's premium, and dropping to 10% and 7.5% in subsequent years. So very little is actually
invested during those years. Most investors discontinue early, or sign up for five- to 10-year
terms, thus suffering high costs and poor returns. ULIPs make sense only if investments are
made for a long tenure—say, 15 or 20 years—thus defraying initial costs.

ULIPs score low on liquidity: According to guidelines of the Insurance Regulatory and
Development Authority (IRDA), ULIPs have a minimum term of five years and a minimum
locking of three years. You can make partial withdrawals after three years. The surrender value
of a ULIP is low in the initial years, since the insurer deducts a large part of your premium as
marketing and distribution costs. ULIPs are essentially long-term products that make sense only
if your time horizon is 10 to 20 years.

Death benefit: In case of ULIPs, policy holders get either the sum assured or the value of the
units one holds, whichever greater, in case of death. In case of mutual funds + term insurance,
one avails the benefits of both; fund value and the sum assured in case of death. ULIPS are
subject to the vagaries of the market. Recently most of the ULIPs have underperformed Nifty.
ULIPS     does     not    fit   into      for   investors   with    active     fund    management.
ULIPs are sold by agents promising very high return, which may not be achievable.

                                                                                             pg. 39
                                      Asset allocation:

Times have changed and so has the thinking. It is essential to recognize the power of asset
allocation all times, including tough times. Investors are now giving more relevance to asset
allocation and planning of investments keeping in mind the long-term financial goals. Asset
allocation refers to the process of allocating your investments between different asset classes.
Asset allocation means diversifying your money among different types of investment categories,
such as stocks, bonds, gold, property and cash. The goal is to help reduce risk and optimize
returns. The goal of asset allocation is to create an optimum mix of asset classes that have the
potential to appreciate while meeting your risk tolerance level and financial goals. Most investors
prefer equity for their core portfolio, adding bonds to reduce volatility and downside risk. With
low real returns in debt instruments and rising inflation levels, there is a danger that investors
may not meet some of their long-term financial goals. Goals for an individual could be meeting
child's college education five years hence or buying a house ten years from now. Different asset
categories behave differently in terms of risk - return profile. Stocks, for instance, offer potential
for both growth and income, while fixed income instruments offer safety of capital and steady
income. The benefits of different asset categories can be combined into a portfolio with a level of
risk one finds acceptable. Establishing a well-diversified portfolio may allow you to avoid the
risks associated with putting all your eggs in one basket. There is no simple formula that can find
the right asset allocation for every individual. However, the consensus among most financial
professionals is that asset allocation is one of the most important decisions that investors make.
Your selection of individual securities is secondary to the way you allocate your investment in
stocks, bonds, and cash and equivalents, which will be the principal determinants of your
investment results.

Asset allocation decisions depends on the following factors:
- Time frame
- Risk tolerance
- Personal circumstances
- Liquidity needs
- Tax consideration

                                                                                              pg. 40
Depending on your age, lifestyle and family commitments, your financial goals will vary. You
need to define your financial goals like buying a house, marriage of son/ daughter, paying for
your children's education or retirement. Besides defining your objectives, you also need to
consider the amount of risk you can tolerate.

For example, when you retire, you might want to earn steady income from bonds / deposits,
financial advisor might recommend say 100% debt portfolio. On the other hand, for young
investor, if he does not need money for 20 years and is comfortable with the volatility in the
stock market, a financial advisor might recommend an asset allocation of 80% in stocks.
Once the asset allocation is done, it does not mean that you just set it and forget it. Reviewing
your portfolio regularly with your financial advisor to monitor and rebalance your asset
allocation   can     help    make     sure    you    stay    on    track   to    meet     your     goals.

Relevance of `Risk Profiling' in the financial planning process: There are different life stages
for an investor and at each life stage his risk profile could be different. Risk profiling helps
investor to find appropriate asset allocation strategy at different stage of life. Like fingerprints,
investment profiles of people are always unique. Age, Life stage, income, savings, dependents
and mindsets are factors that define a person's attitude towards investments. Risk taking ability
and mental frame of mind plays a key role in determining where the investor ultimately puts his
money. The first step in asset allocation is `Risk Profiling'. Risk Profiling combines two key
1) Estimating financial risk-taking capacity and
2) Understanding the (psychological) risk tolerance level of an individual.

Risk profiling can unlock far more value for both investor and financial advisor. It provides
advisor clear understanding of investor's mental frame of mind and his personal and financial

Risk Tolerance test helps financial advisor to make judgments about investor's financial
possibilities. It helps to understand investor's attitudes toward investment risk. Many advisors
collect data that helps to assess investor's attitude towards Risk. As investor's asset allocation is
chalked out as per the risk tolerance it is important to get the basic facts right through series of

                                                                                                 pg. 41
detailed questionnaire. Analysis of risk profiling can generate following risk tolerance level. The
range is indicative only.

Conservative = highly risk averse
moderately conservative = Risk Averse
Moderate = Risk Neutral
Aggressive = Risk tolerant
Very Aggressive = Risk seeker

The response of the HNIs for the risk is as under

                     Attitude towards investment risk
                       low sensitive   moderate sensitive    highly sensitive



There are many kind investors who see investment risk as the major factor at the time of
investments. Some are risk averse (conservative) investors, some are risk neutral people and few
are highly aggressive (risk takers) in their investments. There is a large number of respondents
who opted moderate risk attitude this means HNIs are risk neutral and 19% opted for highly
sensitive attitude towards investment risk, this is why because a large number of customers in
bank is middle age or upper middle age who are not aggressive investors, their main
consideration is towards the safest areas of investments.

                                                                                           pg. 42
Bank should consider the younger segment as profitable segment as this segment is low sensitive
towards investment risks; they want to go for speculative investments than to go for fixed return
bonds or accounts. The Bank has introduced its Demat services to its customers that is a good
move towards attracting young generation. But the problem comes that the Bank products are not
very well advertised into market and to the customers so that they can enjoy services in the full
flow. In the recent time SBI Mutual funds are providing very good return and dividends paid to
customer are also very high. If this product is very well advertised then it may become more
beneficial for bank as well as to its customers.

Recent studies by marketing research companies have proved that HNIs are willing to invest in
those areas from where they can get maximum returns. But as all we know that risk and returns
are associated with each other, means higher the risk then higher will be return too.

The Bank is a public sector bank and it has back hand of SBI that’s why it is easier to convince
customers that their investment will be in safe until unless some major calamity does not happen.


Investor's existing investment can be altered based upon the outcome of Risk Profiling. e.g. An
investor Mr. A (age 30 years) has 90% investment in fixed income securities and 10%
investment in equities. He has a steady job in a multinational pharma company, no liabilities, two
dependent in his family (wife & a son), adequately insured for life and health. Although, Mr.A is
a risk taker, his investment is tilted towards fixed income, returns on which may not be good
enough to achieve financial milestones set by him. His existing investment can be restructured to
include more of equity component and his investment in fixed income can be reduced. Risk
profiling exercise reveals that he falls into `Aggressive category' but his existing investment is
into `Moderately conservative category'.

Another investor Mr.B (age 58 years) has 80% investment in equities, 15% in fixed income
securities & 5% in gold. He is planning to retire in next two years. As per the latest valuation of
his overall portfolio, he has almost achieved the retirement corpus that he planned for retirement
at the age of 60 years. He wants to maintain the same lifestyle post retirement. He has no
liabilities and his only son is well settled abroad. He does not have steady income stream (apart

                                                                                           pg. 43
from his salary income, which he is going to lose after 2 years) from any other source. As per his
Risk profiling, he falls into `Moderately conservative' category. However, his existing
investment is `Aggressive' in nature as his exposure to equity is quite high. Considering the fact
that he requires steady inflows post retirement, he needs to sell substantial part of his equity
holdings and move funds to debt investments.

                                                                                           pg. 44
Asset Re-balancing and how it is done?

The Process of rearranging assets to bring allocations to predetermined original level as per Financial
Plan. Over time some of your investments may become out of alignment with your investment goals.
You'll find that some of your investments will grow faster than others. By rebalancing, you'll ensure that
your portfolio does not overemphasize one or more asset categories, and you'll return your portfolio to a
comfortable level of risk. Asset Rebalancing forms part and parcel of every Financial Plan. While a lot
has been written about asset allocation and about the virtues of having the correct asset mix, very
little of an investors’ attention goes to asset rebalancing. Also as part of reviewing your portfolio
it is necessary to periodically check your portfolio's asset allocation and ensure it's still in line
with your goals.

Let us explain in detail with an example:

Mr. Suresh owns a 10 lakhs portfolio as on June 2007 with 50:50 in debt and equity. He has five
years to retirement and needs to build on his debt portfolio. His aim is to maintain 5 lakhs in
equity and all excess funds in debt. He rebalances his portfolio every six months. In Dec 2007 he
checks valuations of his portfolio to find that during the market boom of 2007 his equity
portfolio recorded a gain of 40%. Total portfolio value is Rs.12.3 lakhs in Dec 2007. He sells Rs.
2 lakhs worth of shares and invests the same in debt. Now his portfolio in equity is valued at 5
lakhs again while the debt portfolio is at Rs 720000 (520000+200000) accounting for an 8 %
interest on debt. Next Rebalancing is scheduled for June 2008. Equity portfolio has corrected by
30% to 3.5 lakh, while debt portfolio stands at 750000. Mr. Suresh switches back 150,000 into
equities. He now holds 6 lakhs in debt plus 5 lakhs in equity. His annual return is 10 % despite
market correction. Mr. Ramesh too holds 5 lakhs in equity and 5 lakhs in debt as on June 2007.
He does not rebalance his portfolio. By December 2007 he too sees a 40% jump in equity
portfolio but does nothing. His Portfolio value in June 2008 would be 10.3 lakh - a mere return
of 3% . The example above covers a very small period of time i.e. one year .Also it gives an
example of an investor wanting a fixed sum in equities. You could devise your own plan and
criteria and there are many ways of doing it. Over long periods of time asset rebalancing has
proven to substantially contribute to better average return and hence to the success of your
financial plan. The biggest advantage of this exercise is that it helps you sell overvalued assets
and buy undervalued ones. Assets mostly owned by investors are Cash/Debt, Equities, Bullion,

                                                                                                  pg. 45
Real Estate and Alternative investments like Art/ Private Equity etc. Except for the super HNI,
lay investors would typically hold a portfolio of debt, equity, and real estate. Rebalancing can be
done with almost any asset class, depending on its weightage in an investor’s portfolio. However
some assets are easier to transact in as compared to other. For example bullion is mostly held in
the form of jewelery and sentiment value does not allow us take economical decisions when it
comes to these investments. Real estate too has its drawbacks in terms of limited liquidity,
difficulty in part selling (Can't sell half a flat can u?) and high transaction costs. Also most real
estate held by the middle income and upper middle income investors will be for self
consumption. Equities debt and cash become the best choices for an asset rebalancing exercise.
Because Equities are prone to irrational ups as well as down, a mere mechanical asset
rebalancing between the three asset classes can give superior returns.

                                                                                                pg. 46
                                   Retirement Planning:

Retirement is the period of your life when you are no longer working and you need to fund your
day today expenses from your savings. Retirement planning is a part of overall financial
planning process and it enables a person to enjoy the desired post retirement lifestyle. When you
stop earning, you would certainly want to maintain the same (or even better!) standard of living.
Post retirement, a person does not have his monthly paycheck and will have to depend on the
annuity he receives from his investment corpus. Planning for the sunset years acquires added
importance because people over-estimate what they have and under-estimate how much they
need post retirement. People live longer today and are lot healthier today. They spend more years
in retirement and therefore they need to save more to cover the risk of living more than their life
expectancy. Retired people love pursuing new interests such as playing golf, going abroad etc
and therefore post retirement life style is extravagant than those prior to retiring.
When planning for retirement we do not know how much is enough? Although, we can draw up
a plan that includes future cash flows, savings and spending assumptions, it is not always
possible to accurately assess this corpus amount. To compute retirement corpus, following
variables are considered:

          Life expectancy
          Rate of return from existing equity and fixed income securities.
          Annuity from insurance schemes, pension schemes from Govt. / Pvt. sector etc.
          Tax slabs.
          Rate of inflation.
          Growth rate in salary / business income.
          Household expenses and saving rate.

To achieve your life dreams, even when you stop working, one should follow the under
mentioned basic principles.

    It is a myth that one should start planning for retirement when you are 40 plus. If you start early,
       you can build large corpus for retirement.
    Define your needs and financial objectives.

                                                                                                 pg. 47
     Diversification and optimal asset allocation is accordance with one’s risk appetite is a key to
        successful financial and retirement planning.
     Review your plan at a regular interval to ensure you are on track.

Retirement is an exit time, but it can be a scary one unless you have a retirement plan.

                                                                                             pg. 48

Taxes are said to be as inevitable in life as death and it is our social responsibility to pay them.
Taxes are burdensome for all taxpayers. Saving money in taxes is high priority in financial
planning exercise. There are legally permissible ways to reduce taxes and retain more of your
hard-earned money in your savings kitty. There are various tax deductions available under the
present Income tax act and you should take advantage of them.

Deductions under Section 80C: Section 80C tends to be most popular since you can get an
exemption of up to Rs 1 lakh on contributions to a wide range of investments. Broadly these
deductions can be classified into two options:

          Investment Oriented &
          Non Investment Oriented

Investment Oriented options would comprise of the following.

      Premium paid on life insurance policies
      Payment for deferred annuities
      Contributions to provident funds
      Contributions to super-annuation funds
      Contributions to Unit Linked Insurance Plans
      Subscription to notified security
      Subscription to NSC
      Payments towards annuity plans of LIC or other insurers
      Subscription to notified mutual funds or UTI
      Subscription to Home Loan Account Scheme of National Housing Bank
      Investment in companies engaged in providing infrastructure facilities
      Term deposits (5 Years).
      Senior Citizens' Saving Scheme.

Non -Investment Oriented options would comprise of the following.

                                                                                            pg. 49
          Payments for acquisition of a residential house
          Tuition fees paid for education of children

Section 80C provides for an outright deduction on certain contributions/payments subject to
following conditions:

      The contributions/payments must have been made during the relevant previous year
      The aggregate amount qualifying for deduction should not exceed Rs.1 Lakh.

Section 80 D - Medical insurance

      If you take a medical insurance plan for yourself, your spouse, dependent parents and
       dependent children, you can under Section 80D claim deduction up to Rs 15,000 for the
       premium paid. A bonanza is available in the form of an additional deduction of Rs.15,
       000 towards medical insurance premium paid for your patents. For senior citizen
       taxpayers, the limit now has been enhanced to Rs.20, 000. One condition being that the
       premium should be paid through a cheque.
      In case you have paid any amount for the medical treatment of any disabled person
       dependent on you then again you are entitled to a deduction in the range of Rs. 40,000 to
       Rs. 75,000.
    However, to claim any deduction under this section, certification by a medical authority
       is mandatory.

Interest component of home loan - Sec 24 (b)

Your home is not only your living shelter but also your tax shelter. You can claim a deduction
for the interest paid on a housing loan, even on loans taken for repair, renewal or reconstruction
of an existing property. The interest component of home loan is allowed as a deduction under the
head 'income from house property' under Section 24(b) up to a limit of Rs 1.5 lakh a year in case
of self-occupied house. One condition being that your house must have been financed by a
housing loan taken after April 1, 1999. It is also essential that the acquisition or the construction
of the property is completed within three years from the end of the financial year in which the
loan is taken.

                                                                                             pg. 50
Cash gifts
Cash gifts received from specified relatives are exempt from income tax, and there is no upper
limit also. Similarly, cash gifts of any amount and from anyone received during your childbirth,
marriage or any other specified event are totally tax-free. However, if you receive a cash gift of
more than Rs 50,000 from a friend, you are required to pay tax on the excess amount exceeding
Rs 50,000.

Charity - Sec 80 G

You get a tax relief if you donate to institutions approved under Section 80G of the Income Tax
Act. The rate of deduction is either 50 or 100 per cent, depending on the choice of fund. There is
no restriction on the amount of charity. However, donations must be made only to specified
trusts. Also, only donations of up to 10 per cent of your total income qualify for such a

Education – Sec 80 E

In case you have availed of a loan for higher education of your child or your spouse, then you
can claim a deduction of the interest paid on such loan.

Tax Liability for A.Y 2009 - 2010

Taxable income slab (Rs.)                                                            Rate (%)
Up                                   to                                  1,50,000 Nil
Up               to              1,80,000                  (for           women)
Up to 2,25,000 (for resident individual of 65 years or above)
1,50,001 - 3,00,000                                                                  10%
3,00,001 - 5,00,000                                                                  20%
5,00,001 upwards                                                                     30%
*A surcharge of 10 per cent of the total tax liability is applicable where the total income exceeds
Rs. 1,000,000.

Education cess is applicable @ 3 per cent on income tax, inclusive of surcharge if there is any.

                                                                                            pg. 51
On the question of the extent of the tax relief the response of the HNIs was as follows-

                                   Extent of tax relief
         not concerned    slightly concerned   concerned    very concerned   most concerned





HNIs are concerned or very concerned about tax reliefs and the tax benefits whatever they can
get from their investments. The extent to which the relief is given in the interest paid in the EMI
of the Housing Loans, Education Loans and Mortgage Loans. Tax relief on the premium paid for
insurance (either life insurance or the non-life insurances). The Bank can provide instruments
which can entertain maximum tax benefits to customers so that more customer base can be
created that can strengthen customer’s loyalty towards bank.

                                                                                              pg. 52
                                           Estate Planning:
Will or Trust:-

The asset of someone who dies without a Will or a Trust is disposed of by operation of law,
which may not be according to the wishes of the deceased person. Estate planning is a process of
arranging and planning your succession for management and distribution of your wealth in a
systematic and pre-determined manner to your heirs and to other beneficiaries. The most
common vehicles for this purpose are the drafting of Wills and setting up of Trusts. Estate may
include any movable and or immovable property like equity shares, bonds, deposits, jewellery,
cash, bank balance etc that then gets passed on to the next generation. In order to make the
optimum use of wealth created over a period of time and to protect it for the near and dear one's
it becomes crucial to plan. Both wills and trusts are designed to do the same thing - to pass on
assets at death. Both can be very effective, but they use different methods to do it. Wills and
trusts are essentially two different tools that accomplish the same goals. Deciding which tool is
better for you, it depends on personal situation. What is right for one person might be very wrong
for another person. Therefore, you need to fully understand these differences in order to decide
which method is better under your circumstances. Many assume that they only need a simple will
to best take care of their affairs when they pass away, and that only the wealthy need to have a
trust. Estate planning through Trust involves much more than merely making a Will. Trust is
effective not only during the lifetime but also after death. Estate Planning through a trust route is
one of the most reliable ways to assure that your assets will be managed for your family and
loves ones as you had intended. In Estate Planning through Trust route, the person who owns the
estate sets up a Trust appoints trustees to manage the trust, transfers his estate to the trustees and
names the beneficiaries of the trust.

There are certain advantages on why one should opt for a Trust over Will:

          The primary disadvantage of a Will over is that it can be disputed after the death of a
           person making the Will. Even the best-drafted Wills can be challenged. Also, mental
           soundness of a person making the Will can be challenged in the court of law.

                                                                                               pg. 53
           Disposition of assets through Trust ensures passing on assets without causing any
           untoward problems for your heirs.
          Will is a legal declaration of your desire to distribute property during the lifetime of a
           person but intended to take effect after his death. Trust involves transfer of your
           estate to a trustee for the advantage of certain beneficiaries while you are alive. Trust
           leads to efficient management of your estate during and after your death.
        A trust is not subject to probate and can be kept confidential, whereas a Will becomes
           public document once probated.
        A Trust saves some Probate Court expenses.

Probate is a sometimes a big hassle for survivors. There are numerous filings and notices, and
sometimes delays occasioned by the necessity of getting Court approval for so many things.

                                                                                             pg. 54

Types of Deposit Accounts:-

While various deposit products offered by the Bank are assigned different names. The deposit
products can be categorized broadly into the following types. Definition of major deposits
schemes is as under: -

   1. "Demand deposits" means a deposit received by the Bank which is withdraw able on
   2. "Savings deposits" means a form of demand deposit, which is subject to restrictions as to
       the number of withdrawals as also the amounts of withdrawals permitted by the Bank
       during any specified period;
   3. "Term deposit" means a deposit received by the Bank for a fixed period withdraw able
       only after the expiry of the fixed period and include deposits such as Recurring / Special
       Term Deposit / Short Deposits / Fixed Deposits etc.
   4. Notice Deposit means term deposit for specific period but withdraw able on giving at
       least one complete banking day's notice.
   5. Comparison between the deposit rates of the various banks is given as under and it
       shows that SBI and the Associate Banks are among the banks which provide higher
       interest rates on the deposits.
   6. One of the important functions of the Bank is to accept deposits from the public for the purpose
       of lending. In fact, depositors are the major stakeholders of the Banking System. The depositors
       and their interests form the key area of the regulatory framework for banking in India and this has
       been enshrined in the Banking Regulation Act, 1949. The Reserve Bank of India is empowered to
       issue directives / advices on interest rates on deposits and other aspects regarding conduct of
       deposit accounts from time to time. With liberalization in the financial system and deregulation of
       interest rates, banks are now free to formulate deposit products within the broad guidelines issued
       by RBI. This policy document on deposits outlines the guiding principles in respect of
       formulation of various deposit products offered by the Bank and terms and conditions governing
       the conduct of the account. The document recognises the rights of depositors and aims at
       dissemination of information with regard to various aspects of acceptance of deposits from the
       members of the public, conduct and operations of various deposits accounts, payment of interest

                                                                                                    pg. 55
        on various deposit accounts, closure of deposit accounts, method of disposal of deposits of
        deceased depositors, etc., for the benefit of customers. It is expected that this document will
        impart greater transparency in dealing with the individual customers and create awareness among
        customers of their rights. The ultimate objective is that the customer will get services they are
        rightfully entitled to receive without demand. While adopting this policy, the bank reiterates its
        commitments to individual customers outlined in Bankers' Fair Practice Code of Indian Banks'

State Bank of Bikaner & Jaipur offers various deposit plans that anyone can choose from
depending on the nature of deposit, term period, unique saving and withdrawal features. Apart
from competitive interest rates and convenient withdrawal options, SBBJ deposit plans offer
other features such as overdraft facility, outstation cheque collections, safe deposit lockers,
ATM's                                                                                                       etc.
Savings and Current deposits are ideal for individuals who wish to take advantage of multiple
benefits within the same plan and even be eligible to opt for overdrafts. Depending on the nature
of the account and the governing terms and conditions, SBBJ offers you under Savings
Accounts, a choice between Savings Bank a/c or No frill Saral Bachat Khata A/c.
SBBJ also offers SBBJ Flexi Deposit scheme, where funds in your savings bank account earn
term deposit interest subject to terms and conditions."Current Account" means a form of demand
deposit wherefrom withdrawals are allowed any number of times depending upon the balance in
the account or up to a particular agreed amount and will also include other deposit accounts
which are neither Savings Deposit nor Term Deposit.

                                                                                                     pg. 56
                                 Loans and Advances:

A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial
assets over time, between the lender and the borrower.

In a loan, the borrower initially receives or borrows an amount of money, called the principal,
from the lender, and is obligated to pay back or repay an equal amount of money to the lender at
a later time. Typically, the money is paid back in regular installments, or partial repayments; in
an annuity, each installment is the same amount. The loan is generally provided at a cost,
referred to as interest on the debt, which provides an incentive for the lender to engage in the
loan. In a legal loan, each of these obligations and restrictions is enforced by contract, which can
also place the borrower under additional restrictions known as loan covenants. Although this
article focuses on monetary loans, in practice any material object might be lent.

Acting as a provider of loans is one of the principal tasks for financial institutions. For other
institutions, issuing of debt contracts such as bonds is a typical source of funding.


A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as
collateral for the loan.

A mortgage loan is a very common type of debt instrument, used by many individuals to
purchase housing. In this arrangement, the money is used to purchase the property. The financial
institution, however, is given security — a lien on the title to the house — until the mortgage is
paid off in full. If the borrower defaults on the loan, the bank would have the legal right to
repossess the house and sell it, to recover sums owing to it.

In some instances, a loan taken out to purchase a new or used car may be secured by car; in
much the same way as a mortgage is secured by housing. The duration of the loan period is
considerably shorter — often corresponding to the useful life of the car. There are two types of
auto loans, direct and indirect. A direct auto loan is where a bank gives the loan directly to a

                                                                                            pg. 57
consumer. An indirect auto loan is where a car dealership acts as an intermediary between the
bank or financial institution and the consumer.

A type of loan especially used in limited partnership agreements is the recourse note.

A stock hedge loan is a special type of securities lending whereby the stock of a borrower is
hedged by the lender against loss, using options or other hedging strategies to reduce lender risk.

A pre-settlement loan is a non-recourse debt, this is when a monetary loan is given based on the
merit and awardable amount in a lawsuit case. Only certain types of lawsuit cases are eligible for
a pre-settlement loan. This is considered a secured non-recourse debt due to the fact if the case
reaches a verdict in favor of the defendant the loan is forgiven.


Unsecured loans are monetary loans that are not secured against the borrower's assets. These
may be available from financial institutions under many different guises or marketing packages:

      credit card debt
      personal loans
      bank overdrafts
      credit facilities or lines of credit
      corporate bonds

The interest rates applicable to these different forms may vary depending on the lender and the

When it was asked about the various kinds of loan facilities provided by the SBBJ the HNIs have
been responded as following percentage breakout. The choice was home loan and then education
loan because of their low interest rates and the tax relaxation on the interest paid. Then it comes
for the personal loan segment because the borrowers don’t have to put anything as a mortgage

                                                                                            pg. 58
                         Loan wish to avail in future?
                    personal     home      education   mortgage   car   other


                                     15%                    20%


                                     15%                   35%

From the chart it is already clear that how many people want which kind of loan for them in near
future. The Bank has various schemes for each kind of loan desired by respondents. Even interest
rates on loans are lower than other banks either from public sector banks or private sector banks.
The bank provides education loans without any mortgage or guarantee for a certain limit (up to 4
lacs), and then from 4 lacs to 7.50 lacs it provided only on the third party guarantee and above
7.5 lacs mortgage is required and home loan have lower interest rates and tax relaxation. Private
banks don’t provide education loan without mortgage. And from the data of previous year it is
clear that the number of education loans sanctioned by the Bank in Delhi has increased.

                                                                                          pg. 59

This is well known that not two people have similar kind of financial needs and requirements, at
every stage of the age needs changes.

The starting stage of life put a force on people to create wealth so that gradually with the pace of
life they should not face any sort of financial problem. With the phases of life the needs change
and so their financial management need and here the preplanned financial planning helps to
overcome and satisfy any sort of financial needs.

Bank provides many wealth management services to the HNIs. These HNIs are those customers
who have huge investible money but need some assistance to invest their money for higher
returns in present unstable market scenario.

Some services provided by the Bank are good and giving good business to bank but for few
products, it needs to concentrate a lot and properly mold its approach and strategies to attain and
cater to the investors who are still not aware of the stupendous services offered by the bank. And
also the equity market and in Foreign Exchange market are still untapped by the Bank which also
need proper heed.

To compete with private wealth management service providers the Bank has to take some
innovative steps and measures. Increase level of services, decrease response time for any
requirement of clients these are concluded after the responses and feedbacks of HNIs to those
questions asked to them for wealth management services. The banks shouldn’t only ponder its
core banking activities and should take sound and firm steps to enhance the other wealth
management and financial planning activities to provide profound customer satisfaction.

The Bank has introduced Business Process Re-engineering (BPR), and is providing value added
services makes it the leading player in market. The Bank is doing cross selling of the SBI
products that is also enlarging the customer base for the Bank.

Overall the Bank is performing well in some areas but to sustain in the competitive market it is
essential to be innovative and aggressive.

                                                                                            pg. 60



Reference Books:-

  I.   Personal Finance

       Author – Jeff Madura

 II.   Foundation of Financial Markets and Institutions

       Author – Frank J. Fabozzi

III.   Guide book to the certified financial planer

       Published By – IMS Proschool

                                                          pg. 61

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