Know the Portions of Your Rs.100 Bank Deposit.

In all the noise about rising bad loans, a deposit deluge in the aftermath of demonetization and the collapse of credit growth, it’s time to take stock of where public funds are lying right now in the economy.

In a report from the Reserve Bank of India, the credit-deposit ratio as of the month of May was 72%, which means that out of Rs.100 deposited in the bank, Rs.72 used for lending and the rest Rs.28 was used to buy government bonds. In the same time of the previous year, banks have used Rs.76 out of Rs.100 deposit for lending and had left the rest Rs.24 in bonds. This is as per the stock of deposits on the 30th of the month.

1001Source : Centre for Monitoring Indian Economy

Taking a look at the additional credit-deposit ratio, which shows what portion of the new flow of deposits, is getting placed in the credit. And this reflects the slump in credit growth in 2016-17.

By the time of March-end the additional credit-deposit ratio was 42%, this shows that more than half of the deposits that came in were placed in government bonds. These are low-yielding and very safe assets. This could be easily understood by the fact that the deposit stream following the demonetization of Rs.500 and Rs.1000 currency bills left a little choice to the banks to buy nothing but the government bonds as the loan demand is very less. Moreover, during the demonetization period, this was even lesser in the month of November, it was 1% only which aroused to nearly 13% in the month of December.

Trouble in India’s Credit System of banks having foremost NPAs

Now, if we talk about the month of May where the credit-deposit ratio was 72%, the large amount of share is still placed with industry through the loans accompanied by credit to services as well as individuals.

Share/Portion of Rs.100 Deposited

Out of every Rs.72 lent, nearly Rs.17 only went to personal loans and services each, and approximately Rs.28 or 29 went to build or run the factories. A share of Rs.10 went to agriculture. The share of personal loans has aroused in one year to approximately 25% of total non-food credit from 21%. On the other side, the industry has dropped to 38% from 41% while farming maintained its portion of nearly 14%. Basically, only Rs.25 of every Rs.100 deposited in a bank comes back to the people in the form of loans like home loans, car loans and other credits.

It is known that the banks are burdened with a big heap of bad loans. Approximately Rs.14 of every Rs.72 lent is now classified as stressed portion, which means it neither originate any income for the banks or due to the late payments by the borrowers to lenders.

Bharat-22 ETF Complete Portfolio – Will u buy this basket?

Bharat-22 ETF Complete Portfolio to be launched on behalf of Govt by ICICI Pru MF Will u buy this basket?

The ETF will be a portfolio of six sectors–basic materials, energy, finance, FMCG, as well as industrial and utilities. There will be a sectoral capping of 20 percent and a single company stock cap of 15 percent.

Bharat22 is fairly diversified products which will represent the performance of India & Government’s agenda over the long-term.

Invest in 10 Maharatna’s and Navratna’s

ICICI Prudential AMC will be the ETF Manager and Asia Index Private Ltd (JV BSE and S& P Global) will be the Index Provider.

bharat22The government raised Rs 8,500 cr by divesting through CPSE ETF in the last financial year 2016-17.

For FY17, the government had revised the divestment target to Rs 45,500 crore and had over-achieved it by raising a total of Rs 46,247 crore.

If investors remember the first government ETF (CPSE ETF) was launched in March 2014. The fund has outperformed the index by a wide margin. It is up over 22 percent in the past one year, more than the near-18 percent rise in the Nifty50 index, and 17% which is the average of top 3 ETF linked to the index.

CPSE ETF Further Fund offer 2 (FFO 2) at 3.5% Discount

Globally, ETF assets have grown significantly. There is USD 4 trillion worth Assets Under Management (AUM) and are expected to touch USD 7 trillion by 2021.

“Bharat-22 is adverse to political risk, changes in government policy and governance of PSU which was less active historically.

DISCLAIMER

No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here.

Trouble in India’s Credit System of banks having foremost NPAs

To run the economy efficiently and for a proper growth of the economy, there must be a steady banking system in the country. But the continuous inflating of NPAs (Non-Performing Assets) is one of the major hindrances that obstruct the operations of Indian Lenders.

Here are the well-known and big Indian Banks and the total of NPAs they had on their accounts until quarter of March.

1.Indian Overseas Bank

2. IDBI Bank

3. Central Bank

4. Bank of India

5. Punjab National Bank

6. Oriental Bank

7. Dena Bank

8. Canara Bank

And before reading any further,

There’s no need to panic as the Government of India remains committed to support these banks wherein it’s the single largest shareholder.

Indian Overseas Bank

IOBANK

The gross NPA of Indian Overseas Bank has risen to 22.39% of its total lending which is Rs.35,098.25 Crores.

The bank recorded a loss of Rs.646.66 Crores in the March quarter in comparison to the net loss of Rs.936.19 Crores in the March quarter previous year.

IDBI Bank

IDBI

The gross NPA of IDBI Bank has risen to 21.25% of its total lending which is Rs.44,752.59 Crores.

The bank recorded a loss of Rs.3,199.76 Crores in the March quarter this year which is almost double the net loss of Rs.1,735.81 Crores in the March quarter previous year.

Central Bank

CENTRAL

The gross NPA of Central Bank has risen to 17.81% of its total lending which is Rs.27,251.33 Crores.

The bank recorded a loss of Rs.591.77 Crores in the March quarter this year in comparison to Rs.898.04 Crores in the March quarter previous year.

Bank of India

BANK OF INDIA

The gross NPA of Bank of India has risen up to 13.22% of its total lending which is Rs.52,044.52 Crores.

The bank recorded a net loss of 10.46 billion INR for March quarter in comparison to the loss of 35.87 billion INR in the previous year.

Invest in 10 Maharatna’s and Navratna’s

Punjab National Bank

PUNJAB

The gross NPA of PNB is 12.53% of its total lending which is Rs.55,370.45 Crores.

The bank recorded a loss of Rs.22,415 Crores as a comparison to Rs.42,252 Crores in the March quarter last year.

Oriental Bank

OBC

The gross NPA of Oriental Bank is 13.73% of its total lending which is Rs.22,859.27 Crores.

The bank recorded a net loss of Rs.1,218.01 Crores for March quarter in comparison to Rs.21.62 Crores in the March quarter previous year.

Dena Bank

DENA

The gross NPA of Dena Bank is 16.27% of its total lending which is Rs.12,618.73 Crores.

The net loss of the bank has increased to Rs.575 Crores in the March this year in comparison to Rs.326 Crores in the March previous year.

Canara Bank

CANARA

The gross NPA of Canara Bank is 9.63% of its total lending which is Rs.34,202.04 Crores.

Surprisingly, the bank recorded a profit of Rs.2.14 billion in the March quarter this year as a comparison to a loss of Rs.39.05 billion in the previous year.

How to withdraw your PF for purchasing home

EPFO members can now access and use their retirement savings to buy a home for themselves. It seems like the government is very effectively trying to fulfill the words ‘housing for everyone in next 5 years’. This is one of the main reasons behind the action that EPFO has allowed its members or contributors employees of the PF (provident scheme) to use their accounts for payments and for EMIs of home loans. Employees can now use up to 90% of EPF accumulations to complete the payments on houses or to pay the EMIs of home loans.

Also, there are some new rules in withdrawing the money for purchasing a home or a real estate property that the PF member must also be a member of a housing society which includes a minimum number of 10 members. Any of the employees who has been allotted a number as a PF member is then considered as a PF member by the EPFO.

PF

The new rules are made for fulfilling of the existing rules for withdrawal of money from the provident fund by the employees for purchasing their homes. Also, it is essential information about the withdrawal that since the existing rules are considered as the important ones, one can withdraw funds according to his individual capacity even if he does not want to be a member of housing society after providing all the necessary documents in place. So, the PF member can avail a loan and can still withdraw funds to buy a house from the conditions and rules which already exist.

If one is the member then he can use the provident funds for various causes like the construction of a house, buying new plots, payments for home loans, paying EMIs for home loans. Also, the transaction can be made through any one of them like central government, private builders, and state government but there is a condition under which the member will be eligible for the scheme only if he has completed 3 years as a PF member.

No resale transactions

Any of the rules do not invigorate any kind of secondary market as well as the resale transactions regarding real estate properties. EPFO make payments directly to the state government, any housing agency, any builder, the central government in one or more installments in any case maybe.

EMI VS SIP ( Be controlled or take control )

Lump sum amount limit

The maximum limit of withdrawing the money is 90% of the PF account balance or the cost of acquisition of the property considering whichever is less. The balance of account includes the shares of contribution of the member plus the interest in addition and share of contribution of employee plus the interest. If the case is about constructing a house and the construction is done in the lower cost than prescribed and if the member does not get any allotment then the amount has to be refunded back to the EPFO within the time period of 30 days.

Paying EMIs through PF

According to new rules, a PF member who is also a member of a housing society can use the provident fund to pay the full payment or the EMIs for a loan in the name of the member after fulfilling the details in a given format. Also, there is now an easy option to repay the installments to society from the future contribution of the member in PF which was not at all available in the past. The installment or the EMI will be paid by EPFO to the bank or the government, as per the case.

Format of applying

If a member has already become a member of a housing society, then he can apply through housing society in a prescribed format for the completion of getting a certificate from EPFO.

Annexure I form

In the beginning, a form is issued in which the employees come to know about the deposits and balance made in the last 3 months, with the help of which EPFO determine about the EMI. Also, the employee has to mention the name and other details about the bank or any housing society to whom the certificate is being issued.

Download (PDF, 273KB)

 

Annexure II form

After the first form, EPFO issue another form showing the balance and the amount deposited in the account in last 3 months.

ANE 2

Annexure III form

If any of the members is willing to use the PF account to pay the EMIs, then along with annexure I form, an authorization by the member is to be filled.

Download (PDF, 300KB)

 

In the case of leaving a job

The clear sign has been made by the EPFO that if the employee leaves the service, the member is then completely responsible for repaying the loan. EPFO will not act as a third party in any case between the society and the member. EPFO will not be liable for any kind of payments then. Also, in the case of provident funds, the employee must arrange the funds on his own to complete the EMIs.

Already existed rules

According to the existing rules for purchasing of a house from any builder, the minimum time period of membership required is 5 years. Also, the limit of withdrawal from the PF account is wages of 36 months or the share of employee and employer plus interest or total cost, whichever is less.

RERA Takes Real Estate Sector to the Another Level

The real estate sector enters into the next level and became more effectual in all over the country. It got its own regulator from May 1, 2017. All the states and Union Territories in India will have its own Regulatory Authority (RA) which will make rules and regulations as per the amendments to the Act. But, unfortunately, till few of the states haven’t notified the rules in their state and many have not yet established a Regulatory Authority too. Few of the states have even reduced some of the provisions of the Act.

Till May 1, 2017, only 13 states and Union territories had notified their final rules. And it has been said that if the states will not establish the regulatory authority, the government will designate any officer or most probably the secretary of housing department.

Real Estate Regulatory Agencies (RERA) came to help the buyers to get their own property at the right place and at a right time.

RERA

About Advertisements made by the builders

When the projects get over then the builders were supposed to get the completion certificate and occupancy certificate and the selling of the property would take over the next step through advertisements. It has been declared that suppose if completion certificate is to be given in 3 months from the starting date, then the builder should have to register if they want to sell the property post-May 1, 2017

In the projects which are going on or are in the process, the builder can advertise but with the permission of state government. As in Maharashtra RERA, the section 3 of the Act suggests that registration is must until and unless they are not allowed to advertise the projects or sell, market, offer it one or the other way. And they have got only 90 days to book without obtaining a registration number.

Projects which are being worked on

The promoter of the project is required to apply for registering the incomplete projects within a period of 3 months from the date of commencement of the Act which is applicable to all the projects which are going on or being worked on or for which the completion certificate has not been issued as on the date of commencement of this Act.

Also, even if the properties are booked earlier but not got the possession yet, then it should be first registered by the RERA.  And in this case, the promoter or the builder or the seller is required to give a revised date of completion which should be equivalent to the amount of development completed.

How REITs and InvITs will be a game changer for Indian real estate and Infra sector.

How in some states the ongoing project is not considering RERA?

The ongoing project simply means the project which is in the process of their completion or the project whose certificated are not yet issued. These exclude the projects which attain the following point of reference:

  • It may be the state where common areas and facilities have been handed over to the association of allottees or the competent authority, suppose for maintenance of the areas.
  • Where sale or possession letter of minimum 60 of the apartments in the project have been carried out.

More than 4 lakh Pune flat buyers are victims of the builders

How to register for ongoing projects?

The builder or the promoter of an ongoing project has to requisitely register it within 90 days from the date of commencement of the Act in the state and must give the following details:

  • The promoter is required to give every detail to the Regulatory Authority about the total amount collected from the allottees and the total amount spent till now and the total balance left to him.
  • The running status of the project that is development till date and the pending information should be provided by the promoter.
  • The promoter must open up about the exact size of the apartment based on carpet area even if sold on any other basis such as super area, super built up area, built up area etc.
  • The promoter has to deposit 70% of the amounts already collected from the allottees but not been utilized for construction of the project or the land cost for the project in the different bank account.

Always ensure it as a builder

 Firstly the thing which any builder must ensure that the ongoing projects in the state are been registered by RERA or not. If not, it shouts immediately get registered.

Then the builder should check the required completion date and the date of commencement of the project so that proper certificates would be provided.

CPSE ETF Further Fund offer 2 (FFO 2) at 3.5% Discount

CPSE ETF is an open-ended index scheme listed on the Exchange in the form of an Exchange Traded Fund (ETF), which tracks the Nifty CPSE Index.

An offer of units of Rs. 10/- each for cash (on allotment, the value of each Unit would be approximately 1/100th of the value of Nifty CPSE Index) to be issued at a premium, if any, approximately equal to the difference between face value and FFO 2 Allotment Price during the Further Fund Offer 2 (“FFO 2”) and at NAV based prices thereafter.

For the existing CPSE ETF the Ongoing Offer Period for the Scheme started from April 04, 2014.

Nifty CPSE Index

The Nifty CPSE Index is created in order to assist the Government of India’s (GOI) initiative to disinvest some of its stake in selected Central Public Sector Enterprises (CPSEs) through the ETF route. The index consists of 10 CPSEs with the base date of 01- Jan- 2009.

As on February 28, 2017 the one-year CAGR^ return of Nifty CPSE TRI* is 55.30% against 28.87% given by Nifty 50 TRI*.

Past performance may or may not be sustained in the future.

CAGR^ – Compounded Annual Growth Rate

TRI* – Total Returns Index reflects the returns on the index arising from:

  • Constituent stock price movements and
  • Dividend receipts from constituent index stocks.

Period – Feb 29, 2016 to Feb 28, 2017

Background: Government of India (GOI) used innovative route to divest its holding in CPSEs via ETF

New Fund Offer (NFO): Launched initially in March 2014, NFO received the awesome response; with the collection of Rs. 4363 crores out of which Rs.1,363 Crores was refunded to investors due to limited issue size of Rs.3,000 Crores. It witnessed participation across various categories of investors. Units of CPSE ETF were listed on 04th April 2014 on NSE & BSE.

Invest in 10 Maharatna’s and Navratna’s

Further Fund Offer (FFO): Launched initially in January 2017, FFO received an overwhelming response; with the collection of Rs 13,742 Crs, out of which Rs.7,742 Cr was refunded to investors due to limited issue size of Rs.6,000 Cr. FFO also witnessed participation across various categories of investors. FFO units of CPSE ETF were listed on 04th April 2014 on NSE & BSE.

FFO 2 Investment Rationale:

  • Portfolio diversification through investment in blue-chip Maharatna and Navaratna CPSE stocks which are sector leaders
  • Play on India’s growth story through investment in the large CPSE stocks at attractive valuations
  • FFO 2 offers upfront discount to all categories of investors
  • Attractive Valuation and Dividend Yields: P/E ratio and dividend yields better compared to broader market index
  • Flexibility of trading on real time basis
  • Lower expense ratios and transaction costs
  • Enabling Investors to diversify exposure across a number of Public Sector companies through a single instrument

Attractive Valuation

Attractive Valuation and Superior Dividend Yield – Compared to Other Broader Indices

PEPortfolio Constituents & Industry Allocation

Asset allocation

Details of Further Fund Offer (FFO 2)

  1. Opening and closing dates
  • For Anchor Investors
  • FFO 2 opens on March 14, 2017
  • FFO 2 closes on March 14, 2017
  • For NonAnchor Investors
  • FFO 2 opens on March 15, 2017
  • FFO 2 closes on March 17, 2017
  1. Benchmark Index – Nifty CPSE Index
  2. Pricing: 1/100th of Nifty CPSE Index
  3. Fund Manager: Payal Kaipunjal
  4. Load Structure: Entry and Exit load- Nil
  5. Category of Investors (During FFO 2)
  • Retail Individual Investor
  • Qualified Institutional Buyers or QIB
  • NonInstitutional Investors
  • Anchor Investors

Industry break up

  1. Minimum Application Amount (During FFO 2)
  • Retail Individual Investors- Minimum amount Rs 5000 and in multiples of Re 1 thereafter.
  • NonInstitutional Investors/QIB- Minimum amount of Rs 2,00,001/- and in multiples of Re 1/- thereafter.
  • For Anchor Investors- Minimum amount of Rs 10 Crores and in multiples of Re 1/- thereafter.
  1.  Minimum application amount (During ongoing offer period)
  • Directly with the Mutual Fund: Create / Redeem in exchange of Portfolio Deposit and cash component in Creation Unit Size of 1 lakh units of the scheme.
  • On the exchange: 1 (one) Unit and in multiples thereof.Plans: Growth
  1. Listing: FFO 2 Units offered pursuant to the FFO 2, listed on NSE & BSE on or before April 07, 2017. However, Units of the existing CPSE ETF Scheme were listed on 04th April 2014 on NSE & BSE.
  2. Maximum Amount to be raised during FFO 2: Rs. 2500 Crores.
  3. Discount offered by GOI: Discount of 3.50 (Three and a half) % on the “FFO 2 Reference Market Price” of the underlying shares of Nifty CPSE Index shall be offered to FFO 2 by GOI.

 

Your first home loan could cost Rs 2.4 lakh less

Planning to buy home for the first time? Well here’s some good news for you. If your income is up to Rs. 18 lakh per annum, your first house will cost about Rs 2.4 lakh less as the government will subsidise a part of your home loan interest. 

The government has reportedly worked out on the two new subsidy schemes which were announced last year, under the Prime Minister Awas Yojana (PMAY). These schemes until now available only to those earning up to Rs 6 lakhs per annum, will henceforth apply to all buyers based on the income bracket under which they fall. The scheme will apply to loans taken for a period of up to 20 years, as against the earlier set limit of 15 years.

The aim of this initiative is to accelerate the real estate market and achieve “Housing for all by 2022”.

The schemes are being governed by the two agencies namely, National Housing Bank (NHB) and the Housing and Urban Development Corporation (HUDCO).

Benefits for homebuyers

EMI Benefit

The homebuyers will get subsidy at different rates as per the income bracket they are in.

People earning less than Rs 6lakh per annum will get a subsidy of 6.5 percentage points on a principal component of Rs 6 lakh, irrespective of their total loan amount. For instance, if a person borrowed money at 9% interest, he will pay only 2.5% interest on Rs 6 lakh, and 9% on the remaining Rs. 3,00,000.

EMI VS SIP ( Be controlled or take control )

The next group of people earning up to Rs 12 lakh per annum will get interest subsidy of 4 percentage points on a principal component of Rs 9 lakh and under the highest income category of Rs 18 lakh per annum, home-buyers can avail a subsidy of three percentage points on a principal component of Rs 12 lakh.

Assuming an interest rate of 9%, the net benefit to all the three categories over a 20-year loan tenure is roughly Rs 2.4 lakh, with a reduction of around Rs. 2200 in the monthly Instalments. These PMAY subsidies will be in addition to the income tax benefits on home loans which can go up to Rs 61,800 per annum for someone in the 30% tax bracket.

For the low-income group, the government has subsidised around 18,000 first time homebuyers, at a cost of around Rs 310 crore. However, with the inclusion of the middle-income category, the disbursal rate is expected to rise.

Investing in debt mutual funds is good for your wallet

Debt mutual funds turn out to be a profitable venture due to the drop in fiscal deficit and chances of reduced interest rates in the upcoming RBI monetary Policy.

These two factors will lead to an increase in Net Asset Value (NAV’s) of Debt Mutual Funds.

Decrease in fiscal deficit could lead to a downfall in yields from government bonds and the fall in yield will further be followed by an upward movement in its price.

The RBI policy review is scheduled on Wednesday and  the interest rates are likely to be cut down in the new policy changes. There exists an inverse relationship between interest on bonds and their prices, that is, when interest rates rise, bond prices fall and vice versa.

BEWARE! ANOTHER FINANCIAL CATASTROPHE IS READY TO HIT GLOBAL ECONOMY

The expectations of lower interest rates scenario are also driven by targeting a fiscal deficit equivalent to 3.2% of the GDP by the finance ministry. They further aim to bring it down to 3% in 2018-19.

The lowered fiscal deficit is an outcome of lower government borrowings and to bridge this deficit government is likely to issue fewer bonds. A fall in bond issues will accelerate demand for bonds in circulation and the extra demand would push the bond prices up.

An increase in the prices of both government and corporate bonds would enhance the status of debt mutual funds.

Debt MF

Short term gains are certain

The current changes will have a positive impact on bond funds in the very short term. But the results for the long term are uncertain. The impact is expected to last for around 3 to 6 months.

Reasons affecting the long term forecasts are:

  • Uncertainties related to Foreign Institutional Investors.
  • If the CPI remains sticky, continuity in rate easing may become a challenge.

This situation will be profitable for investors who have held their funds for three long years as it will qualify for long-term capital gains tax of 20 per cent with indexation benefit.

At this point, the retail investors should avoid investing in long term bond funds and existing investors in dynamic bond funds should also lower their expectations for returns.

7 lacs investors were cheated by Noida based company: Rs 3700 crore online scam!

The Uttar Pradesh Special Task Force (STF) caught a gang of scammers who cheated on 7 lacs people through an online trading sites like socialtrade.biz , freehub.comintmaart.comfrenzzup.com in the name of ‘Earn Rs 5 per click’ investment scheme. The company offers Rs 5 per like to investors and claims they used to get Rs 6 from the concerned companies for every like. However, the links sent to them were fake.

Fraud alert

Investors declared that the deposit made of Rs 6 crore in a bank account set income tax detective on the trail of a Noida based company and led to the raid of a Rs 3700-crore online scam. The task force has also sealed the bank accounts of the company, based in Sector 63, which had a total balance of Rs 500 crore.

MLM

Uttar Pradesh police, who had launched simultaneous investigations, on Thursday arrested three employees who that reportedly deceived nearly 7 lakh people who were promised to get handsome returns by clicking on web links.

The 3 accused company’s director Anubhav Mittal, CEO Shridhar Prasad and technician Mahesh Dayal are in jail on a 14 days confine.

Income Tax department officials said the company deposited the large amount in bank after the government’s November 8 announcement recalling 500 and 1000-rupee notes i.e. demonetisation.

Be alert Bitcoins are not approved by RBI

The Reserve Bank recently stated that it has not approved the use of virtual currencies, and had warned people to invest in the instruments like Bitcoins.

They also urge that it doesn’t have any license or approved authorization to any entity or company to operate such schemes or deal with Bitcoins or any virtual currency. And if any user, holder, investor, trader etc. dealing with virtual currencies, they are doing it on their own risk.

RBI also says that the person investing in such virtual currencies is revealing themselves to potential financial, operational, legal, customer protection and security related risks.

bitcoin ponzi scam

The apex bank also made a deep observation to the notification made on December 2013, which alerts the investors regarding the same.

RBI also reveals that the virtual currencies stored in e-wallets were opened to hacking and users were opened up to lack of money in case of any problems or disputes in the absence of any regulations.

The central bank had also indicated issues surrounding valuation, and reveals that there was no latent asset and there was lots of supposition made on it. And also added in his words, that the people who trade on uncontrolled platform will definitely face legal and financial problems very soon.