3 Gold Schemes Lauched by Modi Sarkar

Gold schemes launched by Modi Sarkar

To curb the gold import and to control investors to invest in gold, the PM Narendra Modi has launched three schemes of gold. These schemes are known as gold monetization scheme, gold sovereign bond and gold coin and gold bullion scheme. According to government of India, gold bonds would be more beneficial than physical gold. Interest earned on gold monetization scheme will be exempt from income, wealth and capital gain tax. Now we will highlight main point of these schemes.

Gold Monetisation Scheme:

Under this scheme the minimum deposit at any one time shall be raw gold(bars, coins, jewellery excluding stones and other metals) equivalent to 30 gram of gold of 995 fineness. There is no maximum limit  for deposit under this scheme. The designated bank will accept gold deposit for the short term (1-3 year), medium term (5-7 year) and long term (12-15 year) under this scheme. Interest on deposits under the scheme will start accruing from the date of conversion of the gold deposited into tradable gold bars after refinement or 30 days after receipt of gold.

The gold will be accepted at the collection and purity testing centres (CPTC) certified by Bureau of Indian Standards and notified the central government. The RBI has notified the interest rate 2.25% for medium term and 2.5% for long term deposit. The bank will issue the certificate of gold deposit to the depositors. Premature withdrawal is allowed with minimum lock-in period and penalty determined by banks.

Gold Sovereign Bond Scheme:

The RBI (Reserve Bank of India) will issue gold bonds on behalf of the central government of India. RBI has fixed the price of first tranche of gold bond at Rs 2,684 per gram of gold. The minimum investment limit is 2 gram and maximum investment limit is 500 gram per person in one financial year.

The bond tenure will be 8 years with exit option beginning the 5th years onwards. These bonds will also listed in exchanges for trading. These bonds can be used as collateral for loan purposes. The rate of interest will be 2.75% per annum payable semi annually on the initial value of investment. These bonds will be available only to resident Indian individuals, HUF, trusts, universities and charitable institutions.

Indian Gold Coin and Bullion Scheme:

These coins will be the first ever issued by government and will be bear Ashok Chakra. It is being launched ahead of Dhanteras, a auspicious occasion for purchasing precious metals. These coins will be available in denomination of 5 and 10 grams. A 20 gram gold bars has also been launched. These coins will be available on all MMTC outlets.

The investor can earn some interest benefit for their idle gold which the investors kept in house or banks and gain nothing. However, gold bond will be taxable as per current income tax act. It has been stated the capital gain treatment will be similar as per current physical gold norms. Some experts says that the current scheme will not bring out much gold as people are more concern about tax provision and in future the tax department inquiry about the source of gold.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for conducting seminar in your city, just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

What should FD investors do in falling interest rate time?

What should  FD investors do in falling interest rate time?

Decreasing inflation rate and demand of growth are putting some pressure on RBI to decrease the interest rate. Calls for lower interest rate getting louder day by day as the industry and government both are seemed determined towards high growth. The big question what should the fix deposit investor in current environment who do not want risk of the share market’s ups and downs.

Many banks are offering 8.5% to 9.5% interest on fix deposit till tenure 5 years. If you want to take a little bit risk, you can earn more from companies fix deposit. There is much possibility of rate cut in 2015 by RBI. It is the right time to lock your money in these instruments.

The largest public sector bank SBI is offering 8.5% on its fix deposit. Of course you should go with high rated NBFC or companies fix deposit with a little bit of risk. For 3 year fix deposit, HDFC is offering 9.0%, Mahindra Finance is offering 9.75%, Shriram Transport FD offering 10.5%, Bajaj Finance is 9.65% offering and GATI is offering 12 % according to their credit rating.

Now a days many manufacturing companies are popular among investors. JK paper, Kores India, JK Tyres are offering between 9.5 to 12% return which is much higher than bank fix deposit. Many companies are offering monthly income option. Companies pay the interest every month or quarterly or half yearly as per your choice. Retired individuals and senior citizen often look for these options which give them fix monthly income.

Since fixed deposits are unsecured instruments, investor should go with high rated and well managed companies. AAA or AA ratings are consider very safe among investors in fix deposit.

If you have doubt about investment product and want more information regarding investment or you need investment services, feel free to ask us. We also conduct the seminar on investment and financial planning. If you are interested for seminar in your city just drop the mail.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Declining Gold Prices

Biggest Fall in Gold Price

Yesterday, India has witnessed a biggest single-day fall in gold prices in 2014. The gold price has gone down up to Rs 800. The price has fallen after RBI eased import restrictions of gold. RBI had imposed severe restrictions on gold imports to reduce current account deficit (CAD) and control the sliding rupee in July last year.

In Mumbai, the gold price has dipped to Rs 27,840 per 10 gram. In world market, since last year the gold prices also has declined around 35% from 2000$ to 1300$. In India, due to weak rupee and import restriction the falling effect was not so intense. It may further go down till Rs 25,000 – Rs 26,000 level in near term if rupee get strong in next couple of months.

I have always written in my past articles that never over invest in this asset class. I still advise that do not invest more than 15% of your saving in the gold. In our Indian tradition, the gold needed in various auspicious occasion like birth, marriage etc. Only purchase as much gold as you required for those occasions and the rest of saving invest in equity and debt according to your financial requirement. My final word is on gold investment to stay away from it and keep investing in other asset classes.

If you want more information regarding investment or you have any other query about investment feel free to ask us.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

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Banks Role in Insurance Distribution Business

Banks role in Insurance Distribution Business

As the financial year 2013-14 is approaching towards its end. People are rushing for tax saving investment options and for tax saving insurance product is very popular among the investors. However, in my personal opinion it becomes very toxic product if you mix your insurance need and investment. Insurance mainly sell by individual agents, brokers, direct selling and banks.  

Banks are the main contributor in the sells figures of private insurance companies products. In India, people have immense faith on banks. They still prefer bank FD even the net inflation adjusted post tax return is very poor. Due to this blind faith on banks, common investors become a victim of mis-selling of these products. I met a lot of cases almost in every investor meet of mis-selling by the banks. The complaints of mis-selling by banks are increasing. Due to this mis-selling complaints, bank regulator RBI has proposed the new guidelines for selling of insurance products. The main RBI proposal as given below:

• ·         A bank’s NPA should be less than 3%
• ·         It should have made profits for last 3 consecutive years
• ·         A bank’s net worth should be at least Rs 500 crore

The government is also planning to mandate multi insurance companies sales for bank. At present banks are selling only one company’s products. The insurance regulator IRDA has also capped a bank’s sale of joint venture partner’s products at 25% of the overall.

In fact the aim of insurance sales by bank is to increase the reach among the maximum people as banks have wider branch network across the country. The above mentioned proposal by RBI, IRDA and govt are not fully implement. We hope that after implementing these guidelines mis-selling would be stop to some extent. However, insurer would not allow implement these guidelines in very smooth manner.

For more detail and any other query related investment, you can contact me through my email.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com 

RBI's Third Quarter Monetary Policy

RBI’s Monetary Policy

Yesterday’s RBI’s monetary policy has surprised almost economic experts and advisers as majority of them had not anticipated the increase in interest rate. In its third-quarter review of monetary policy RBI has hiked the repo rate to 8.0% . CRR has remain unchanged. RBI has emphasised on bringing down CPI (Consumer Price Index) inflation to 8% and further bringing down to 6% in next 24 months.

It clearly indicate that the future move of interest rate depend on CPI mainly. I expect CPI inflation would be around 8.5% during 2014-15. However, in December headline CPI came down due to falling vegetable prices but core CPI inflation was still high at 8%. WPI (Wholesale Price Index) had also picked up in December 2013.

Difference between Headline CPI and Core CPI:

Very often we read and listen about headline CPI and core CPI but many people do not understand it. Core CPI index mainly consist with housing, clothing, bedding, footwear & miscellaneous items but it does not include food and fuel item. In the other side headline CPI includes food and fuel item also.

Along with inflation there is some weakness in currency front so it is another important factor for RBI for further monetary policy. There are still downside risk of rupee against dollar exist.

For more detail and any other query related investment, you can contact me through my email.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Do you know about Inflation- Indexed Bonds ?

Are Inflation-Indexed Bonds really helpful for the common investors..?

As per the promised by our finance minister Mr. P. Chidambaram in the budget speech, India’s first inflation indexed bonds to be launched on 4^th June. The objective of these bonds is to protect the savings of the poor the middle class as said by our finance minister. These 10 year bonds will have a fixed coupon rate and the principal value of the bond will be linked to the WPI (Wholesale Price Index). According to releasing RBI statement, these bonds will prove better option than gold and also protect the savings of poor from inflation.

In Inflation indexed bonds coupon rate will remain fixed but face value will be changed with the inflation. The RBI referred to a four-month indexation lag, which means January WPI would be used as a reference for bonds issued in June.

For example, if the face value of the bond is Rs 1,000, coupon rate 5% and maturity 10 year. So if inflation rises 8% then the face value will adjust to Rs 1080 and coupon rate 5% will calculate on new face value Rs 1080. So after adjusting the face value the investor will get Rs 54.

So now it has been clear that if inflation increases you will get higher coupon and higher principal as well at the time of maturity. If inflation drop then you will get less coupon but your capital is protected. It means you will get back your principal amount at the time of maturity if inflation drops.

Now come to the most critical part of this bond. These bonds are linked to the wholesale price index (WPI) and not to the consumer price index (CPI). At present according to latest govt. released data WPI is at 4.89% and CPI is 9.39%. Some analyst said that the government is not protecting the poor it is protecting itself from inflation and paying less then CPI to the poor and the middle class. WPI only include food, fuel and manufactured products but it does not include many all the common services.

Initially, the bond will be issued to only institutional investors. But after few months, retail investor having demat a/c can invest in it with minimum amount Rs10,000.

So in short, these bonds may not be fulfill its objectives to protect the poor and the middle class segment from inflation as it has not linked to the CPI and it is not available in simple medium like from banks, post offices.

For more detail about any other query related investment, you can contact me through my email.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Beware from MLM and fraud comanies with greed of high return

Beware Investor from MLM and fraud companies

I have said many times in past that keep away from MLM ( Multilevel Marketing Companies) or Ponzi Schemes and those companies agent who promise huge return in short period. Today, I have read Indian express newspaper and sharing some fact and figure with you about these companies.

 The government yesterday said it has found 87 companies across the country to have disappeared after raising funds totalling Rs 342 crore through public issues. In these companies most of established in Gujrat state. Besides, 87 other companies are also being probed by the government agencies for duping the general public through illegal Multi-Level Marketing (MLM) or Ponzi schemes and West Bengal tops this list with as many as 73 such entities.

The market regulator Sebi has also detected as many as 669 companies to have duped the investors of Rs 7,435 crore through illegal collective investment schemes, Corporate Affairs Minister Mr Sachin Pilot informed the Lok Sabha.

The entities are classified as 'vanishing companies' if they cease to file their balance sheets and other documents after raising capital and the whereabouts of their offices or directors become untraceable.

In the Ponzi or MLM investments, the companies generally raise the money from general public and ask each investor to lure others into these schemes with a promise of huge returns. However, the operators disappear after some time, leaving the gullible investors in lurch.

In reply to another query on vanishing companies, the Corporate Minister said that the government had initially identified 238 such entities that have raised money through public issues. Out of these, 119 companies were put under a 'watch list', as they began filing their balance sheets and other documents with the Registrar of Companies or stock exchanges. Out of the remaining 119 companies, 32 companies are presently under liquidation, while 87 others have been classified as 'vanishing companies', Pilot said.

As per the state-wise list, 26 companies out of the total 87 such untraceable firms were registered in Gujarat. Gujarat is followed by Andhra Pradesh (13), Tamil Nadu (10), Maharashtra (9), Delhi (5), West Bengal (5), Madhya Pradesh (5), and Uttar Pradesh (4) for such companies. Regions such as Chandigarh, Karnataka have two such firms each, while one company each are from Orissa and Punjab. FIR has been filed against all the 87 companies and prosecutions has been filed against 85 of them.

The state-wise list of the companies indulging illegal Ponzi schemes is topped by West Bengal (73), followed by Delhi and Tamil Nadu with five each such companies. Besides, two such companies were found in Rajasthan and one each in Karnataka and Uttar Pradesh.

"Out of these companies, 75 have been wound up and the money refunded to the investors. 552 companies were prosecuted (and) convictions have been secured in 124 cases," Pilot said.

The Minister further said that various regulatory agencies are also taking steps to sensitise the public against such schemes, while newspaper editors are also sensitised to exercise caution in accepting advertisements pertaining to acceptance of deposits of un-incorporated bodies.

While Sebi is also conducting various investor awareness programs in this regard, the RBI is in process of undertaking a comprehensive campaign aimed at alerting the public against falling prey to Ponzi schemes and other monetary malpractices.

If you have some queries about investment and financial plan please feel free to ask.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Impact of RBI's rate cut

Impact of RBI’s Rate Cuts on the common person

Yesterday, Reserve Bank of India (RBI) has slashed repo rate and CRR 25bps point each on the occasion of its 3rd quarter monetary policy review for FY 2013-13. How can the investor get benefit from it. On short, Repo rate is the rate at which banks borrow from the central bank (RBI in India) and CRR (Cash Reserve Ratio) is the amount of deposit which banks keep deposit with RBI. After cut the rate now repo rate and CRR are at 7.75% and 4% respectively.

Interest rate factor play very significant for home loan borrower, equity investor, debt fund investor and fix deposit investors. Indian banks has given already some indication about base loan rate cut yesterday. After the base rate cut all home loan borrower will get benefit definitely but it depend on the timing of the rate cut announcement of the particular bank. If your bank is charging already high interest on home loan then it would be better transfer your balance loan amount to other bank. The bank would charge some minimal conversion charges for the loan amount transfer.

The equity investor would also get benefit of rate cut. As corporate will borrow at lower cost and it would increase profitability of the companies. It means working capital will available to companies at cheaper rate compare with earlier cost. Equity investor should invest through SIP.

Fixed income investors have better option to long term bank FD and long tenure income fund with a 12 -24 months time horizon. There is much expectation rate cut further within 1 year point of view so bond investor can make a capital appreciation with interest income. Bond investment is very suitable option for higher tax bracket investor in tax saving point of view.

Feel free to ask any queries related investment

 Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

                                          RBI Monetary Policy Update

Today the Reserve Bank of India (RBI) cut the repo rate by 50 basis points from 8.5 per cent to 8.0 per cent but did not touch the cash reserve ratio, which remains at 4.75 per cent. The cut in the repo rate is an indication that banks could reduce the interest rates on home and car loans.

Today's rate cut announced by the RBI in its annual monetary policy for 2012-13 is the first one in the last three years. The reverse repo rate under the liquidity adjustment facility, determined with a spread of 100 basis points below the repo rate, stands automatically adjusted to 7.0 per cent.

In another good news for the consumers, the RBI has abolished the pre-payment penalty on home. Accepting the Damodaran Committee recommendations to abolish foreclosure charges levied by banks on prepayment of home loans, the RBI has instructed permit banks to not levy foreclosure charges/pre-payment penalties on home loans on a floating interest rate basis.

While announcing the credit policy RBI Governor D Subbarao said that the liquidity conditions were moving towards RBI's comfort zone and added that there was a need to increase fuel prices for macro economic stability.

After hiking policy rates for 13 consecutive times between March 2010 and October 2011, the regulator took a pause to support India’s falling growth momentum. On April 21, 2009; the apex bank had last reduced its key policy rates by 25 basis points. But, it cut the CRR by 125 bps so far in 2012 to ease the tight liquidity situation.

The latest rate cut move came in line with market expectation. Many felt, RBI would give equal importance to growth after a series of rate cuts to stem the rising rate of inflation. Consequently, the rate of inflation eased to 6.9 per cent in March from 10 per cent during the fiscal year. The average inflation rate in India was 7.99 per cent between 1969 and 2010.

Regards,

Arvind Trivedi