NTH :: In a first, Citi launches T-bill rate linked home loan

PTI | March 5, 2018 | India Today

NTH

Mumbai, Mar 5 (PTI) Even as rivals continue to be reluctant about adopting external benchmarks for setting lending rates, American lender Citi today launched the countrys first market benchmark rate-linked lending product.

The bank has introduced a home loan product that will be linked to the rate of treasury bills, which is used by government for its short-term borrowings.

The lender, which already has similar external benchmark-linked products in other markets like the US and Singapore, said it does not see any impact on net interest margin (NIM), a key determinant of profitability, because of the launch of the product where a borrowers rates will be reviewed every three months.

Frustrated at poor transmission of its policy moves into lending rates for borrowers, the Reserve Bank had last October mooted the idea of moving to a market-linked benchmark and suggested three such instruments, including the T-bills rate, the rate for certificate of deposits and its own repo rate to determine the interest rate.

Bankers, led by their lobby grouping Indian Banks Association, had opposed such a move, claiming that the existing marginal cost of funding based lending rates is working well and also pointed out that deposits are not linked to any market benchmark.

Citis country business manager for global consumer banking Shinjini Kumar, said a shift to a market benchmark like the T-bill is transparent, simple and will also help with better transmission.

Loans will be sold at a fixed spread above the T-bill rate which will be maintained throughout the loan tenure, she said, adding there will be quarterly readjustments for the borrower.

There will be a range of spread above the T-bill rate which the bank will follow, its head of secured lending Rohit Ranjan said, adding the average spread will be 2 percentage points. Existing customers will also be able to move to the new product without any refinancing costs, he added.

The banks country treasurer Badrinivas NC sought to downplay concerns surrounding customers being exposed to T- bill rate volatilities, which may happen due to external events like the taper tantrum in 2013 and hinted that the rates also reflect the policy decisions at a particular point of time which get captured through the quarterly resets.

He said the bank has a diversified liability profile, including a high 60 per cent composition on the low-cost current and savings account deposits and also other retail term deposits, which will make it possible for it to offer such a product.

The bank feels the RBI will be on a long pause and may go for a hike in rates only if there is a surge in inflation, he said.

In a few cases, especially concerning top corporates, the bank has been benchmarking rates against market benchmarks but those were deals done on a one-on-one basis, and this is the first time that any lender is going to the market with such an offering, Kumar said.

The bank had a gross home loan book of Rs 9,000 crore, while the overall India book stood at Rs 57,000 crore as of December 2017. Even as rivals struggle with dud assets, its NPAs on the mortgage lending is a healthy 0.05 per cent, the bank said.

Commenting on the recent changes in priority sector lending (PSL) requirements for foreign banks, Kumar said Citi is already compliant on PSL requirements, including the sub- categories and in some cases it uses priority sector lending certificates.

The bank will be resorting to use of digital technologies and tying up with partners to comply with the new requirements, she said. PTI AA BEN BEN SDM

Source: https://goo.gl/fMCc2X

 

NTH :: EMIs to rise as SBI, ICICI and PNB hike lending rates

Sidhartha | Updated: Mar 1, 2018, 17:41 IST | Time of India

NTH

NEW DELHI: Several lenders, including State Bank of India, ICICI Bank and Punjab National Bank on Thursday announced an increase in lending rates, a move that may make your home loans a little expensive.

The hikes come amid tightening liquidity or cash supply in the banking system, accentuated by the year-end rush that prompted SBI, the country’s largest lender, to raise deposit rates by up to 50 basis points for retail borrowers.

On Thursday, SBI increased its marginal cost of lending rate, which is linked to the interest rate on funds raised by a bank, by 20 basis points (8.15% from 7.95%).

Like SBI, starting March 1, ICICI Bank and PNB increased their MCLR but by a slightly lower magnitude of 15 basis points. Some lenders such as HDFC Bank will review rates next week.

Typically, while extending a home loan, banks keep a spread over the MCLR which results in a higher interest rate on these loans. PNB said that its home loans will cost 8.6% for most borrowers, while women will get it at 8.55%.

SBI has a spread of 40 basis points over the MCLR for most borrowers and 35 basis points for women borrowers (100 basis points equal a percentage point).

While the government has been seeking a lower interest rate and has repeatedly prodded the Reserve Bank of India to pare policy rates, the central bank has resisted a softer interest rate regime, arguing that there is a risk of higher inflation given the recent rise in global crude petroleum prices as well as the impact of domestic measures such as higher allowances for government employees following implementation of the seventh pay commission recommendations. Besides, it has pointed to higher food prices to refrain from cutting policy rates.

With economic growth picking up, RBI may not move that path now and last month the government’s chief economic adviser Arvind Subramanian had acknowledged that the scope to lower rates may have narrowed.

Source: https://goo.gl/6yyBG9

NTH :: SBI raises interest rates on bank FD and home loans: What should you do?

After a few hikes in marginal cost based funding rate (MCLR) by some banks in past two months, banks first raised the rates on bulk deposits.
Nikhil Walavalkar | Mar 01, 2018 01:13 PM IST | Source: Moneycontrol.com

NTH

The largest public sector bank in India – State Bank of India – has decided to increase the interest rate payable on retail deposits, followed by an increase in MCLR (marginal cost of funds-based lending rate) – the rate charged on loans – by up to 20 basis points. As the largest lender revises its interest rates, should you be worried with your financial plan?

Before getting into corrective measures and means to exploit the rate action, you should spend a minute understanding why rates have gone up.

“Towards the end of the financial year the liquidity in the market has gone down. The banks are keen to raise money. The rates are hiked as a lagged response to the rising bond yields,” said Mahendra Kumar Jajoo, head – fixed income, Mirae Asset Management.

For the uninitiated, the benchmark 10-year bond yield has moved up to 7.78 percent from a low of of 6.18 percent on December 7, 2016.

Banks typically take time to raise their fixed deposit rates. After a few hikes in MCLR by some banks in past two months, banks first raised the rates on bulk deposits. Now interest rates on retail fixed deposits are being hiked. This is a sign of relief for most fixed deposit investors who were forced to consider investing in the volatile stock markets through mutual funds.

Though the interest rate hike on fixed deposits is good news for conservative investors, one should not expect fireworks in the form of aggressive rate hikes in near future.

“As of now the liquidity tightening is the cause behind the fixed deposit rate hikes. RBI has maintained its neutral stance on the monetary issues. This may change to hawkish over next six months,” said Joydeep Sen, founder of wiseinvestor.in, a Mumbai-based wealth management firm.

Though the interest rates are set to go up and others are expected to follow SBI, the process of rate hikes will be gradual. “Bank fixed deposit investors may see higher rates over next six to twelve months. You can consider opting for six months to one year fixed deposits and rolling it over at higher rates when they mature,” Sen advised.

Rising interest rates, however, ring alarm bells for both bond fund investors and borrowers. The increase in yield suppresses the prices of bonds and thereby hurts investors in bond funds as net asset values of the bond funds go down. Recent spike in bond yields have taken a heavy toll on bond funds. Long term gilt funds lost 2.1 percent over past three months, on an average.

The prevalent bond yields are a result of the market discounting RBI’s hawkish stance one year down the line, according to experts. Although opinions are divided on the extent of a further surge in yields, there seems to be a consensus when it comes to volatility in the bond market.

If you are not comfortable with the volatility, you should stay away from long-term bond funds and income funds that invest in longer-term paper.

“Short term bond funds are good investment option at this juncture as they invest in bonds maturing in two to three years, where the yields are attractive,” said Jajoo. If you are comfortable with some amount of volatility and expect a sideways move in yields, you may consider investing in income funds and dynamic bond funds.

While fixed income investors see a mixed bag in the rising interest rate regime, borrowers, especially those on floating rate liabilities, are expected to see tough times ahead. The banking sector is undergoing a situation of extreme pressure on margins due to an increase in non-performing assets like never before.

The rise in yields and fixed deposit rates will ensure that banks will be forced to raise their MCLR. This will result in an increase in the floating rate for home loan borrowers. For example, if you have a Rs 50 lakh home loan for 15 years and the rate is hiked to 8.45 percent from 8.25 percent, then the EMI changes to Rs 49,090 from Rs 48,507, an increase of Rs 583. You may ascertain the possible impact on you using EMI calculator.

“Other banks will definitely follow the MCLR hike action of SBI. The rates on home loans may be hiked by the end of this month or in early April,” said Sukanya Kumar, founder of RetailLending.com.

Banks may postpone their rate hikes to attract home loan volumes and close the financial year with good numbers. But home loan borrowers should be prepared to pay higher EMIs in the near future.

Rates will be revised depending on the MCLR time frame. For example, if your home loan is linked to 6-month MCLR, you can expect rates to change after six months from the last reset. The 6-month MCLR prevalent at that time will be applicable to your home loan at the time of reset.

If interest rates continue their journey northward, cash flows do change for you. Account for them well in advance to ensure that you do not get caught off guard.

Source: https://goo.gl/RbU7Gt

Interview :: Guide to smart banking: ‘Credit scoring is good for both borrowers and lenders’

RADHIKA MERWIN Interview with Harshala Chandorkar, COO, TransUnion CIBIL

Published on February 25, 2018 | The Hindu Business Line

Arguably no single data point determines your credit-worthiness, or your prospect as an entity worthy of a consumer loan or a business loan, as your credit score. TransUnion CIBIL is one of four credit bureaus in India that assess you for that. There are currently about 37 crore retail borrowers and about 1.3 crore commercial borrowers on the TransUnion CIBIL Consumer and Commercial bureau. That portfolio also gives it a vantage view of the banking and economic landscape. Excerpts from an interview with Harshala Chandorkar, Chief Operating Officer, Transunion CIBIL:

What is your sense of corporate lending trends, which appear to be recovering?

The NPA woes of the banking industry in the commercial lending space indicate that the mid-corporate and larger SME segments have taken the biggest hit. TransUnion CIBIL Commercial Data analysis highlights a significant chunk of accounts that are bad in one bank but not bad in another. The latest FIBAC report on Productivity in Indian Banking states that a significant part of latent NPAs could slip in the next few quarters. The revenue pool of mid and large corporates will probably stay subdued for the next 4-5 years due to stress in the portfolio.

The banking industry needs to invest in new credit models for commercial customers that rely on commercial credit information from TransUnion CIBIL and analytics to complement banks’ capabilities in credit assessment and detecting early warning signals.

What’s the outlook on retail credit? Consumer loans seem to be driving overall lending.

With the availability of credit information and progressive policies on financial inclusion, retail lending has grown profitably. Over the past five years, there has been an estimated 16 per cent annual growth in disbursement and over 30 per cent annual growth in bureau enquiries. At the same time NPAs and delinquencies on retail lending have been historically low.

The nature of retail credit is changing rapidly in India as the share of products in new accounts opened has evolved, with gold loans and consumer durables gaining significant volumes and accounting for almost 50 per cent of all new accounts opened. This growth has been accompanied by a significant drop in ticket sizes as financial institutions are becoming more and more willing to extend low-value loans. With certain other retail products, the ticket sizes have actually increased, prominent among them being personal loans — indicative of the increasing credit-willingness of the Indian borrower and a supply-side push — and home loans and auto/two-wheeler loans – indicative of the overall increase in the values of the underlying assets funded. In addition, the share of youth in retail credit is growing: millennials’ share of accounts opened has increased to 40 per cent.

How do you see the bureau evolving in the near future?

The next stage of evolution of India’s credit information infrastructure will be the usage of credit information data, insights and solutions for further expanding access to credit, driving credit penetration and financial inclusion.

Demonetisation has paved the way for a cashless and digitised economy. Bureau solutions for instant verification and ‘decisioning’ are paving the path for driving digitised, quick, easy and affordable access to finance. Verification solution enables credit institutions to authenticate the identity of the consumer in real time at the point of application. As a result consumers are able to get the loan approval within minutes of applying. Yet another advantage is cost-effectiveness while establishing a consumer’s identity. Bringing down this cost can help banks and credit institutions make lending decisions quickly, at cheaper KYC costs, and thereby increase business growth and credit penetration.

The potential of alternative data usage for credit decisions is another significant domain. To expand and increase the breadth of information for making lending decisions even more comprehensive, we are in discussions with regulators to allow for contribution of ‘post-paid’ information on telecom customers. Several World Bank studies have indicated that inclusion of reporting of non-financial payment data (alternative data) proves extremely beneficial for making lending decisions, specifically for the segment that does not have access to credit. With access to affordable credit, new credit consumers are able to build assets. Those financially underserved consumers who have a positive payment records in non-financial obligations like telecom will have the ability to access affordable credit.

The extension of the credit information bureau to cover a larger population will enable a majority of Indians who are self-employed, or employed in the unorganised sector, to get a credit history and enhance their eligibility for credit from banks. Incorporation of telecom and electricity bill payment records into the credit information bureau can unleash this enormous potential to extend the penetration of banking in India. There is compelling business logic for utility and telecommunications firms to begin fully reporting customer payment data to credit bureaus.

But only a few banks use credit score to offer differentiated rates to customers.

Risk-based pricing in still at a nascent stage in our country. Both in the commercial as well as retail segments, pricing offers an opportunity to strengthen performance in the short term. Some progressive lenders have initiated a disciplined approach to risk-based pricing and this could improve banking profitability by 20-30 basis points. Further, at the bank level, banks need to deploy models to estimate customer price elasticity to introduce value-based pricing.

Risk-based pricing of loans helps both the lenders and borrowers alike: the lender can assess the risk value of a customer before deciding to offer a loan at a particular rate, while customers with a higher CIBIL score benefit by getting lower rates as compared to customers with a low scores. The benefits thus ensure that customers work towards keeping their scores and credit-worthiness high.

Source: https://goo.gl/tDHhyC

 

NTH :: Paytm to launch ‘Paytm Score’, its own credit rating product

Paytm will give a rating to users on its platform based on their digital transactions online.
M Devan | Monday, February 26, 2018 – 09:04 | The News Minute

NTH

The Digital India push may receive a fillip through the efforts by Paytm to launch its own credit score Paytm Score, very much on the lines of the CIBIL credit rating that has been the only parameter on which the Indian banking system has been approving loan applications.

The record of digital transactions users have carried out within the digital payments major’s ecosystem will be the basis on which it will make the evaluation of creditworthiness of an individual. Paytm has its e-wallet, Paytm Mall and also the booking platform across which customers use their digital payment modes to make payments.

These transactions will form the basic data which will be fed into the appraisal system and the ratings given. These ratings can then be shared by Paytm with lending agencies with whom it has already entered into partnerships and it has already added to its stable, a lending vertical Creditmate, which it acquired organically a few months ago.

Apart from this, Paytm has an agreement with ICICI Bank for offering short-term credits on an interest-free basis and these loans are sanctioned without any delay.

The credit rating program may itself become a financial product for Paytm and it is learnt that it has offered this to some online lending agencies and NBFCs interested in moving away from CIBIL.

The demonetization move by the Indian government, in late 2016, has helped Paytm expand its business and that has, in turn, brought in high profile investors, such as SoftBank. With that backing, the company is now able to focus its attention on growing all the verticals under its management.

With Paytm Mall and Paytm Payments Bank already doing well Paytm has expanded into new segments such as insurance, online grocery delivery with BigBasket, online ticket booking, initiatives to set up a money market fund, the partnership with PVR and more. The firm might want to evolve into a large conglomerate of services.

Source: https://goo.gl/kq6DTR

ATM :: Buying a home prevents you from achieving other goals

By Vishwas Mudagal|Feb 27, 2018, 06.17 AM IST | Economic Times

ATM

Someone once asked me, “What is the biggest hindrance to entrepreneurship?” I replied that there are many, but the key reason is a home loan. He was surprised. I’m sure you are too, but let me explain the correlation.

As a child, from the time we start school, we are told to score well in exams so that we can get admission in a good college. Once we enter college, we are told to work towards getting a good campus placement. Once you get married, they want you to have a child. Once you have a child, they say, “One is not enough! Have a second one.”

Between the push to take up a job, get married and have children, people also ask you, “Do you have your own apartment?” Saying that you don’t is not an acceptable answer. They make you feel that if you don’t have a house of your own, you are worthless. Such is the pressure from parents, relatives and acquaintances that you eventually succumb to the constant nagging and buy yourself an apartment.

To buy this house, you take a loan and commit yourself to paying a large amount as EMI for the next 20-25 years. Here is where your ability to take risks goes for a toss.

It’s not easy to quit a job and launch your own venture when you are servicing a home loan EMI. You need a fixed inflow of money every month to ensure that the EMI cheque does not bounce. Your dreams go out of the window.

Now, do you get the correlation between home loans and entrepreneurship?

When someone asks me, “What does it take to become an entrepreneur?” I just tell them one thing: It requires a lot of courage and the ability to face failures and bounce back.

There is nothing wrong with buying your own house, but don’t do it just because society expects you to. Remember, if you take a home loan early in your career, you would find it extremely difficult to take risks. But if you take risks early in your career and become an entrepreneur, you may never need a loan to buy your dream house.

Society has created a system to produce people who blindly follow the tide. It’s time to break away from dogma and do what you love. Have the courage to find your passion and follow it. Don’t waste your time on thinking about what “those four people” will say about you. You have one life, make it worth it.

(The author is an angel investor and CEO of Goodworklabs AND Goodworks Cowork)

Source: https://goo.gl/t1Pgkm

ATM :: How to make your EMI affordable

A prudent borrower will plan it wisely to make his home loan EMIs affordable.
Ravi Kumar Diwaker | Magicbricks | February 23, 2018, 18:21 IST

ATM

Home loan is a long-term financial commitment and it is important to ensure your EMIs are within your budget and do not impact your monthly income. It is seen as a financial burden which has to be planned very carefully.

A prudent borrower will plan it wisely to make his home loan EMIs affordable. Often, home buyers choose a long-term home loan in order to pay a lower EMI but end up paying more interest.

These easy steps can help you reduce the total interest on your home loan.

Short-term loan

Buyers should choose a short-term for their home loans as it ensures a reduced long-term financial commitment. A 15-year loan is better than a 20-year home loan as it results in a lower interest rate on your total amount. Your monthly EMI may be higher but interest will be less. A short-term tenure means the principal amount of your loan is paid faster leads to lower interest rate because interest is calculated on the outstanding principal amount.

Reduce interest rate

You must always choose the lowest interest rate home loan and go ahead with refinancing of your loan if your interest rate is coming down.

Pay the principal

Make sure that you are paying the principal as quickly as possible as the lesser principal amount means lesser interest to be paid to the bank. If you have extra cash in hand then try to give it to the bank and get your principal amount reduced. Some buyers do that so that the EMI interest can come down.

More than one EMI

You can also pay more than one EMI every year. This will reduce your loan tenure and interest cost as well. It is very important to calculate your finances based on your income. It will make you pay more but ultimately you will be benefited.

Higher EMI

With rise in your salary, you can choose to pay a higher amount of EMI. It is good to reduce your home loan interest burden. You can calculate the interest rate as per your home loan amount, tenure and interest to find out how much amount you are paying less by this step.

Compare interest rates

Banks will not reduce the interest rate to the existing home loan borrowers till you go there and ask them to do it and fill a form for the same. If your existing bank does not reduce the interest rate then find out which bank is offering you lower interest rate and get your loan refinanced. You must also find out the charges for switching the loan before going ahead with refinancing.

These are some tips for home loan borrowers to help them reduce the burden of home loans. The government is already giving the CLSS benefit to buyers purchasing affordable homes. You can also opt for that so you pay less amount of EMI. A short-term loan may reduce your interest payout but it will increase your EMI and may impact your monthly income. You need to choose the EMI amount that is affordable to your pocket.

Source: https://goo.gl/anrzoi

ATM :: Does a failed credit card payment pull down your credit score?

It helps to know exactly how a single missed payment can affect your finances and your CIBIL Score.
By Hrushikesh Mehta | Feb 23, 2018 10:10 AM IST | Source: Moneycontrol.com

ATM

If you ever wondered whether a single failed credit card payment can pull down your entire credit score, the answer is YES. While a failed payment may be a mistake or the inability to pay (we all go through financial difficulties), lenders view this negatively and it can impact your access to credit in the future. Note that this doesn’t just apply to your credit cards; it holds true for add-on cards, where you’re accountable for others’ spending habits.

Impact on your finances and your CIBIL Score

It helps to know exactly how a single missed payment can affect your finances and your CIBIL Score.

Firstly, always remember that the interest on your missed payments (including the late payment fee) is compounded daily. Monthly interest rates on credit cards can range from 3-4% per month on the outstanding balance (principal, interest and late fees). So, even though you think you missed your payment by a day or a week, your interest liability may be larger than you anticipated. Paying just the minimum due or not paying for a few months will see your amount due balloon significantly.

Let’s take an example of only paying the minimum due for 6 months. On May 1, you make a purchase of Rs. 1,000 on your credit card that has a 3% per month interest rate. You then choose to only make minimum payments due (5% of the outstanding amount at the end of the month) for the next 6 months and spend no additional money on that credit card.

When clearing your balance at the end of 6 months (December), you will end up paying Rs. 1,560 — 56% more than the original amount spent.

Even without making any more purchases on the card, opting for minimum payments will stretch your repayment period to almost 9 years!

If you choose not to pay minimums, not only will you be delinquent and affect your CIBIL Score, but you will end up paying more than double the amount you had spent.

This is why it’s critical to read the fine print whenever you avail of a credit card, and it’s even more important to always pay on time.

On the other hand, your CIBIL Score is calculated based on the last 24 months of your credit history, and the four major factors that can affect your Score are as follows:

cibil1

A missed payment can impact your score for as far ahead as the next two years. While it will remain visible on your credit report for 36 months, remember that it will always be a part of your credit history. This is why a credit score is like a reputation that takes years of discipline and patience to build, and just a single instant to get impacted.

Rebuilding your Score

There are ways to get back on the road to good credit health. Here are two ways to help build your credit score:

1. Ensure you clear outstanding dues on credit cards fully. Part-payments or minimum payments indicate difficulties in repaying dues. What’s more, if your amount overdue snowballs it will not only negatively affect your CIBIL Score but you also risk falling into a debt trap. Also, if a pending credit card payment is reported as “Settled” or “Written off”, this will affect your access to credit in the future.

2. If you have amounts pending on multiple cards, taking a personal loan at a lower interest rate to pay off your cumulative dues can be an economical option to avoid ballooning debt balances. Alternatively, you can borrow money against your gold, take a loan against your fixed deposit (without breaking it), or even get a loan of 50-80% of your asset value from investments in LIC, mutual funds and securities. The lower interest rate will make for more manageable monthly payments without the problem of an exponentially ballooning debt burden.

While these measures help rebuild your credit health after missed payments, adopting a proactive approach to financial discipline is always more prudent:

1. Make sure you always pay on time.
2. Don’t take on more debt than you can reasonably afford.

Why maintaining a high CIBIL Score is important

A higher credit score can lead to better loan offers at competitive interest rates primarily because lenders are keen to reward consumers who have demonstrated financial discipline. In addition, emergencies don’t always announce themselves before they arrive and having a high CIBIL Score will ensure that you are able to secure funding quickly (especially in a medical emergency). So, while missed payments can negatively affect your score, regular payments and credit-healthy habits can improve it.

The writer is VP & Head – Direct to Consumer Interactive of TransUnion CIBIL

Source: https://goo.gl/DS6CsE

ATM :: These are best equity mutual funds to invest in 2018

TIMESOFINDIA.COM | Updated: Jan 10, 2018, 14:44 IST

ATM

NEW DELHI: Markets in 2018 are continuing its bull run with both BSE Sensex and NSE Nifty crossing the psychological levels. The 50-share barometer Nifty on Monday breached the 10,600-mark and the 30-share Sensex rose above the 34,350-mark. With the markets outperforming, investments in equity funds are also giving pretty good returns, a data from Value Research showed.

Let us take a look on which funds can be your best bet amid this bull run:

As per the data, these are top bets in equity funds:

Equity: Large cap
* Mirae Asset India Opportunities Fund: With 36.6 per cent return for a year followed by 15.17 per cent and 20.17 per cent in three and five years respectively. (Note: Three-year and five-year returns are annualised.)
* JM Core 11 Fund: 38.91 per cent in the first year along with 14.76 per cent and 17.31 for the third and fifth year.
* Kotak Select Focus Fund: Returns of 31.99 per cent for one year. 14.21 per cent and 19.84 for three and five years respectively.

Equity: Mid Cap
* Mirae Asset Emerging Bluechip: 46.22 per cent for the first year. 23.22 per cent and 30.19 for three-year and five-year respectively.
* L&T Midcap fund: 1-year investment fetched 50.13 per cent returns, while three-year and five-year drew 22.24 per cent and 28.53 per cent returns.
* Aditya Birla Sun Life Pure Value: 52.46 per cent in first year. 20.59 per cent and 29.65 for three-year and five-year respectively.

Equity: Multi Cap
* Motilal Oswal Most Focused: 40.2 per cent returns for a year and 20.06 per cent for three-year.
* Reliance ETF Junior BeES: One-year investment garnered 43.92, while three-year and five-year fetched 18.41 per cent and 20.05 per cent respectively.
* ICICI Prudential Nifty Next 50: 43.3 per cent returns in the first year. 18.06 per cent and 19.77 per cent in the third and the fifth year.

Equity: Tax Planning
* Tata India Tax Savings Fund: 42.95 per cent in the first year followed by 17.9 per cent in third year and 21.17 per cent in fifth year. Also, the fund has given 18 per cent returns in the past three years and its three-year is the highest in the category.
* IDFC Tax Advantage Fund: 51.71 per cent in one-year, while 17.56 per cent and 21.48 per cent for three-year and five-year respectively.
* L&T Tax Advantage Fund: Returns of 42.43 per cent in one-year. 16.36 per cent and 19.47 per cent in the third and fifth year.

Hybrid: Equity-Oriented
* Tata Retirement Savings Fund: 36.56 per cent, 16.09 per cent and 20.05 per cent returns in first, third and fifth year.
* Principal Balanced Fund: Returns of 35.65 per cent, 15.56 per cent and 17.26 per cent for one, three and five-year.
* L&T India Prudence Fund: 26.52 per cent in the first year, while 13.27 per cent and 18.01 per cent returns in three and five-year respectively.

Debt: Income
* Franklin India Income Builder: 7.52 per cent, 8.39 per cent and 9.03 per cent for one, three and five years.
* SBI Regular Savings Fund: Returns of 7.35 per cent, 9.28 per cent and 9.56 per cent in first, third and fifth year.
* Invesco India Medium Term: 7.1 per cent, 8.17 per cent and 8.12 per cent for one-year, three-year and five-year respectively.

Source: https://goo.gl/LyPuJJ

NTH :: Budget may set aside more for home-loan sop

RADHIKA MERWIN |Published on January 8, 2018 | Business Line
Despite a weak start, industry expects better response to PMAY(U) in FY19

NTH

January 8, 2018: In Budget 2018-19, the Centre may have to redo its math on the allocations to the interest subvention scheme on housing loans.

While the credit-linked subsidy scheme (CLSS) under the Pradhan Mantri Awas Yojana (Urban) [or PMAY(U)] for the middle-income group (MIG) is off to a weak start, the number of beneficiaries for the economically weaker section (EWS) and low-income group (LIG) has shot up in the past year.

MIG beneficiaries numbered a mere 9,944 and received a subsidy of ₹204.6 crore till date, Union Minister Hardeep Singh Puri told the Lok Sabha last month. However, Budget 2017-18 had allocated a larger sum of ₹1,000 crore as interest subsidy for MIG beneficiaries.

Interestingly, the number of beneficiaries under CLSS for EWS and LIG — the beneficiaries originally envisioned under PMAY(U) — rose sharply from 17,634 in 2016 to over 53,000 accounts in 2017. The ₹400 crore earmarked in last year’s Budget for this segment appears to grossly fall short of the actual disbursement.

With industry players expecting a better response to the scheme in the middle-income category, too, the Centre could end up allocating a far higher amount for CLSS in the upcoming Budget.

BUDGETARY ALLOCATION

In June 2015, the Centre had launched the CLSS under PMAY(U) for EWSs and LIGs. However, to placate the common man reeling under the impact of demonetisation, Prime Minister Narendra Modi had extended the scheme to middle-income home buyers.

Budget 2017-18 had reduced the allocation to the EWSs and LIGs to ₹400 crore from ₹475 crore in 2016-17, and instead, apportioned ₹1,000 crore to MIGs under the CLSS.

Given that a total of 80,680 beneficiaries have availed interest subsidy under the CLSS schemes for all categories until now, it would seem that a little over 53,000 EWS and LIG beneficiaries claimed interest subsidy in 2017.

This would imply a subsidy of around ₹1,300 crore disbursed against the budgeted ₹400 crore for the EWS and LIG category (assuming an average of ₹2.5 lakh per beneficiary).

The Centre had recently increased the eligible carpet area from 90 sq m to 120 sq m for MIG I and from 110 sq m to 150 sq m for MIG II.

“Based on the feedback given by industry players, the Centre has fine-tuned the scheme to cover more beneficiaries under the MIG scheme,” says Sriram Kalyanaraman, Managing Director & CEO, National Housing Bank (NHB).

He adds that there has been a significant step-up in the pace of construction of houses under the scheme, which should lead to more takers in 2018.

The NHB, one of the Central Nodal Agencies to channel the subsidy to lending institutions, has covered 42,481 accounts and disbursed ₹906 crore subsidy between April 2017 and 5 Jan 2018 under EWS and LIG.

Sudhin Choksey, Managing Director, Gruh Finance says: “The CLSS under PMAY (Urban) has been a vast improvement over the earlier schemes. Higher awareness and increase in supply of houses should see more beneficiaries being covered under the scheme”.

Gruh Finance continues to focus on the EWS and LIG segment, which constitutes 85 per cent of their loans. In 2017-18 (so far), it disbursed 25,768 loans, of which 40 per cent have availed of the interest subsidy under CLSS.

Source : https://goo.gl/PfV1mE

 

NTH :: Affordable home-loans next threat to banks:Moody’s-ICRA report

PTI | Updated: Jan 9, 2018, 16:01 IST | Times of India

NTH

MUMBAI: Even as a lot of thrust is being given to the affordable housing segment, a report has flagged concerns about the growing delinquencies in this segment, which are expected to continue in 2018.

Competitive pressures and larger exposure to the self-employed are the prime reasons for the build-up of stress in the segment, a joint report by Moody’s and its domestic affiliate Icra said today.

“While asset quality is expected to remain stable in the traditional housing segment, delinquencies could further build up in the affordable segment in the calendar year of 2018,” Icra’s structured finances head Vibhor Mittal said.

In a note on asset backed securities (ABS) co-written with its parent Moody’s, the report said gross-nonperforming assets in the affordable housing segment have inched up to 1.8 per cent as of September 2017.

The average cum 90+ days past due level for affordable housing was nearly seven times the level observed for traditional housing loan pools, it said.

Going into the reasons for the higher stress in the low ticket size loans, Mittal said, “this would be driven by factors like intensifying competition– resulting in some easing in lending standards — and a higher share of lending to the self-employed segment.”

It can be noted that the Modi government is targeting to ensure that there is a house for all by 2022 and has provided a lot of incentives for the affordable housing segment, including making it as a priority sector lending for banks and huge interest subvention and direct cash subsidy.

However, housing loans continue to be seen as the best performing retail loan asset class in the country, demonstrating low and stable delinquencies over the years, in 2018, it said.

This is possible because of the underlying collateral, which is self-occupied residential property, absence of steep correction in property prices and moderate loan to value ratios, the report said.

Moody’s said the impact of demonetisation and the implementation of the goods and services tax (GST) will lead to higher delinquencies in ABS for loans against property (LAP) to small and medium enterprises.

“Introduction of a GST in July 2017 and demonetization have placed stress on the SME sector,” Icra’s assistant vice- president Dipanshu Rustagi said.

The report also said auto ABS-backed by commercial vehicles loans will remain stable on the back of healthy domestic economic growth.

Icra said the microlending segment is on a “road to resurgence” after the note-ban setback with an increase in repayment rates to 94 per cent in September from the low of 87 per cent seen during December 2016 during the peak of the note-ban move.

Source:

ATM :: When home loan tax deductions can get revoked

There are lock-in periods that need to be observed in case you have claimed deduction against repayment of home loan
Ashwini Kumar Sharma | Last Published: Mon, Jan 08 2018. 08 20 AM IST | LiveMint.com

ATM

There are various income tax sections under which you can claim deductions for expenses and investment incurred by you during the relevant financial years. Such deductions help you to bring down the taxable income for the respective fiscal and consequently reduce your tax liability.

However, in many cases, a lock-in period is specified—under the section of the Act as well as the instrument against which you may have claimed a deduction. If you fail to observe the lock-in period, the deductions that you availed can be revoked.

Let’s read more about the lock-in periods that need to be observed in case you have claimed deduction against repayment of home loan principal amount.

The deduction on home loan

If you take home loan for purchase or construction of a house, the capital repayment and interest paid on the home loan qualify for deduction under separate income tax sections. While principal repayment qualifies for deduction under section 80C of the Income-tax Act, 1961 and has an overall limit of Rs1.5 lakh a year, the interest payment on home loan qualifies for deduction under section 24(b) of the Act, with an overall limit of Rs2 lakh a year. There is an additional deduction of Rs50,000 for interest payment on home loans under section 80EE for the first-time homebuyers.

Lock-in period

While there is no lock-in period for deduction claimed against interest payment on home loan under section 24(b) or 80EE, the section 80C(5) (relating to repayment of principal) of the Act stipulates that if you sell your house within 5 years from purchase or date of possession, the deduction claimed on principal repayment during previous years gets revoked. In this case, all the deductions claimed for home loan principal repayment under section 80C during the previous years too have to be clubbed together and added to income of the year of sale, and be taxed accordingly.

Let us assume you had bought a house in May 2014 with a home loan, and had claimed about Rs4 lakh under section 80C over the last 3 financial years—FY2014-15 to FY2016-17. If you sell the house now, the entire Rs4 lakh claimed earlier as deduction under section 80C will get added to your income for FY2017-18 and you will have to pay tax on the total income as per the income tax slab applicable to you.

Apart from home loan principal amount, the stamp duty and registration fee paid for registration of property also qualify for deduction under section 80C in the year of purchase. If you had claimed stamp duty and registration fee as deduction, you need to observe the 5-year lock-in in these cases too.

If the property is sold before 5 years, the deductions claimed against stamp duty and registration fee will get revoked and get added to the income of the year of sale and tax accordingly.

So, before you decide to sell your house, keep the lock-in criteria in mind. Else, your tax liability may increase considerably in the year of sale.

Source: https://goo.gl/9fHJsS

ATM :: 5 rules to keep in mind after your loan is sanctioned

Jan 08, 2018 04:27 PM IST | MoneyControl.com

ATM

The following article is an initiative of BankBazaar.com and is intended to create awareness among the readers

Applying for a loan can be nerve-racking, with a number of formalities expected to be completed. Most of us think that our job is done once the loan is sanctioned, but this is not the case. The real story, in most cases, begins once the loan is disbursed, for this is when we encounter problems with the repayment.

So if you are someone who has recently applied for a loan, (be it a home loan, a personal loan, car loan, medical loan, or any other loan), you should consider these 5 rules to ensure that you get the most out of the money.

1. Never miss your EMI – Taking a loan is a huge financial responsibility. Banks sanction loans for a specific time period (the tenure), charging interest rates on the amount loaned. The borrowed money is expected to be repaid within the given time, with the entire sum and the interest component split into EMIs. Paying the EMI on a monthly basis is not merely a requisite with regards to the legalities, it also helps in building a good credit score.

A missed payment is reflected on the credit report, which could make it difficult to get a loan sanctioned in the future. Missing successive payments could result in lenders blacklisting one, which could ultimately lead to the borrower being labelled a defaulter.

A borrower should ensure that he/she has sufficient funds to repay the loan on time. In certain cases, banks can charge a fine for late payment, which can be a considerable sum in case of high loan amounts (for example a home loan).

2. Never use your savings to repay the loan – Most of us invest in certain saving schemes like PPF, fixed deposits, mutual funds, etc. These funds are ideally designed to help us during emergencies. Utilising them to repay a loan is an absolute NO-NO. Similarly, digging into your retirement fund to meet your EMI obligations should be avoided at all costs, for this can have a huge impact on your future, where you might find it hard to have a regular source of income.

3. Take an insurance cover for the loan amount – Certain loans can be of extremely high values. This is especially true in the case of home loans, where the loan amount is typically in excess of Rs.10 lakh. This can be a significant sum for most people, with it taking years to repay it. Given the unpredictability surrounding life, one should always take an insurance policy which covers the loan liability in case of the borrower’s death. A number of life insurance policies come with this option, wherein the outstanding loan amount (in case the insured passes away) is paid by the insurer. This can limit the financial strain on the family members of the borrower. One could also consider taking an insurance policy in case of other loans, if the repayment amount is significant.

4. Avoid taking additional loans while a current loan is active – Banks and NBFCs often come up with attractive offers to promote borrowing. A number of us can often give in to the lure of extra money, applying for additional loans even when we don’t need them. This should be avoided at all costs, for any additional loan increases the financial burden when it comes to repayment. Also, applying for multiple unsecured loans like personal loan or travel loan while already paying EMIs can come across as sketchy, in addition to having an impact on the credit score. Banks would be wary of offering loans in the future in such instances. If one truly is in the need of additional financial resources, he/she should first close an existing loan before taking a new one.

5. Make prepayments when you have extra money – There are a number of times when we come across additional income. Returns from investments, a bonus from the office, an increase in your salary, etc. can be used to prepay a loan. This can help one save money on the interest payable, in addition to offering peace of mind, knowing that one’s liability is reduced.

A loan, when used effectively can help us out during financial emergencies, but being frivolous once it is sanctioned could lead us towards additional turmoil.

Source: https://goo.gl/enBVeJ

NTH :: SBI extends home loan processing fee waiver to March-end, cuts base rate by 30 bps

PTI | Published Date: Jan 02, 2018 07:52 am | FirstPost.com

NTH

Mumbai: In a major boost to homebuyers, the country’s largest lender State Bank of India has extended the processing fee waiver till March-end and also reduced the base rate by a sharp 30 basis points to 8.65 percent.

The reduction in base rate, effective from Monday, is going to bring relief for nearly 80 lakh customers of the bank whose loans are still linked to the base rate and not the marginal cost of funds-based lending rates (MCLR).

Flushed with excess liquidity, SBI had announced processing fee waiver for auto and home loans late August. In fact, since last fiscal, and especially after the November 2016 note-ban, all the banks have been saddled with excess liquidity amidst continuing degrowth in industrial credit.

For the first time in over two years, credit uptake by corporates entered the positive terrain but with a paltry 1 percent growth in November this year. “We’ve decided to extend the ongoing waiver on home loan processing fees till March 31, 2018 for new customers and others looking to switch their existing loans to us,” SBI said in a statement on Monday.

Managing director for retail and digital banking P K Gupta said that with stability returning to the realty space after the implementation of the Real Estate Act (Rera), he sees lots of demand for home loans going ahead. “With most states having the realty regulator Rera now, stability has returned to the market in terms of project approvals. The teething troubles of the initial Rera months are behind the market. So, we foresee lots of demand for home loans. So, we think this is the right time to continue with that waiver to enable people for buy homes,” Gupta said in a concall.

The bank revised down the base rate to 8.65 percent for existing customers from 8.95 percent, while the BPLR (benchmark prime lending rate) is down from 13.70 percent to 13.40 percent.

The bank, however, did not change the marginal cost of funds-based lending rate (MCLR). The one-year MCLR of the bank stands at 7.95 percent.

“We had done the rate review in the last week of December, and based on whatever deposits rates we had, our base rate was brought down by 30 basis points to 8.65 percent now,” Gupta said.

The move is going to give nearly 80 lakh customers of SBI who were on the old lending rate regimes and have not moved to MCLR. Banks review MCLR on a monthly basis, while the base rate revision happens once a quarter.

“The MCLR was reduced earlier also as the gap between MCLR and base rate had become quite wide. This reduction will help in reducing that gap,” he said.

Due to weak transmission of policy rate by banks under the base rate system, the Reserve Bank had introduced the MCLR from 1 April, 2016.

With the banks not fully passing on the rate cuts that the central bank has done in the past two years, the regulator is not happy even with the base rate regime and has mooted an external benchmark to better reflect market realities and speedier transmission.

Gupta said the current revision of base rate will ensure transmission of the policy rate cuts in the recent past.

Source: https://goo.gl/cQ2sV2

ATM :: MFs invest Rs 1 lakh cr in stocks in 2017; remain bullish

The high investment by mutual funds could be attributed to strong participation from retail investors.
PTI | Dec 31, 2017 11:15 AM IST | Source: PTI | MoneyControl.com

ATM

Domestic mutual funds pumped in a staggering over Rs 1 lakh crore in the stock market during 2017 and remain bullish in the New Year to maximise the returns for investors.

Mutual funds invested Rs 1.2 lakh crore in equities in 2017, much higher than over Rs 48,000 crore infused last year and more than Rs 70,000 crore pumped in during 2015, latest data with the Securities and Exchange Board of India (Sebi) showed.

“We are seeing a clear shift in preference for financial assets over physical assets such as real estate and gold, which is likely to continue even going forward.

“Apart from this trend, the consistent delivery of returns by the mutual fund industry, prudent risk management and increasing initiatives on enhancing investor awareness assisted in increasing the penetration of mutual fund products,” Kotak Mutual Fund CIO Equity Harsha Upadhyaya said.

The high investment by mutual funds could be attributed to strong participation from retail investors.

In fact, retail participation is now providing the much needed liquidity to the stock markets that have been largely driven by Foreign Portfolio Investors (FPIs) for the past few years.

The investment by mutual funds in equities have outshone those by FPIs.

FPIs have infused close to Rs 50,000 crore this year after putting in over Rs 20,500 crore last year and nearly Rs 18,000 crore in 2015. Prior to that, they had pumped in over Rs 97,000 crore in 2014.

“This year the domestic institutional investors have pipped FPIs on net inflows, thus making the market less dependent on FPI money.

“This has also provided greater stability to the market as during the times when FPIs were pulling money out of the Indian equity markets, the stock market continued its upward march with the support from the flows by domestic institutional investors,” Morningstar India Senior Analyst Manager Research Himanshu Srivastava said.

Retail money flew into equities through mutual funds supported the benchmark indices — Sensex and Nifty — that surged by 28 percent and 29 percent respectively this year. Further, retail investor accounts grew by 1.4 crore to 5.3 crore.

The spike in bank deposits and consequent decline in interest rates following demonetisation on November 8, 2016 has also helped mutual funds.

“Mutual fund distributors too have played a key role in connecting with their existing and new customers. This has not only resulted in his increasing wallet share of customer, it has also helped the distributor in getting new customers to the industry,” Amfi Chairman A Balasubramanian said.

“It is also believed that investors are no more interested in buying into traditional asset classes such as real estate and gold, thus moving to financial asset class,” he added.

Source: https://goo.gl/ibBNN3

Interviews :: Alpha generation in large-cap funds would compress going ahead

Mahesh Patil, Co-CIO, Aditya Birla Sun Life AMC on how he is creating alpha in the large cap space, his contra calls and more.
By Morningstar Analysts | 27-12-17 |

The asset size of Aditya Birla Sun Life Frontline Equity Fund has crossed Rs 20,000 crore. Do you see size posing an issue to manage this fund going forward?

We maintain a good diversification in this fund by having exposure across sectors. We aim to beat the benchmark consistently and incrementally rather than taking very large sectoral bets. Given that the fund invests at least 80% of its assets in large cap stocks, we don’t see size posing as a challenge. Besides, the core of the portfolio has very long term holdings. That said, as the fund size increases it becomes slightly more difficult to build or unwind positions in stocks and needs more effort. But it is part of the process and does not affect the performance significantly.

We have a large number of stocks (60-70) in the portfolio as compared to other similar funds in the industry. Before deciding the quantum of exposure warranted in any stock, we take a close look at the liquidity of the stocks. This strategy allows us to manage large size.

It is becoming difficult for managers to generate alpha in the large cap space. How do you overcome this challenge?

We are seeing a huge rally in the mid and small cap stocks and large cap funds obviously can’t take exposure to such stocks. So multi-cap funds have been able to generate decent alpha by maneuvering where the opportunities are.

As markets mature and price discovery happens across stocks its going to become difficult to generate alpha in large caps. The alpha generation which we saw in the last three to four years would compress going ahead. This is because the alpha was high as compared to the historical average, especially during calendar year 2014-16.

We never target to generate superlative alpha in large cap funds. Instead, we endeavor to find some new stock ideas every year which keeps the portfolio fresh. If there is a serious underperformance, we are nimble enough to take corrective action. While everything is fairly priced in the market at this juncture, we try to continuously look out for undervalued companies. Some amount of contrarian investing and moving away from the crowd helps to spot early turning points in stocks/sectors. Similarly, we maintain a discipline to trim exposure in certain stocks that have overshot their valuation target. This strategy enables us to buy stocks which are relatively cheap in terms of valuation. So some amount of active management is also required at this juncture to generate alpha in the large cap space.

In which sectors/themes are you deploying the steady inflows coming in equity and balanced funds?

We have been overweight on banking and financial services. Financial services sector has had a good run and the valuations have moved up. Hence we are more discrete now in choosing the right segments that offer better growth. While we prefer private retail banks, we are slowly warming up to corporate banks because of some clarity emerging on resolutions of bad debts and a cyclical recovery in economy.

Besides, we are positive on consumer discretionary space. We are seeing a higher demand for discretionary consumption as the per capita income is moving up in India. Further, the implementation of GST will benefit players in the building material, consumer durables and retail space. Rural consumption is also starting to improve with normal monsoons and government focus on stepping up rural spending.

We are fairly overweight on metals. Metal prices are steady as China is cutting down capacity on the back of environmental issues which is supporting price. Indian companies are also deleveraging which will increase their equity value.

Another sector where we are taking a contrarian call is telecom. We are seeing consolidation happening faster than we expected in this sector. While there is still some pain for a few quarters, over a three-year time frame it could be a good time to look at some leading telecom companies.

We are selective in the infrastructure space. Road, railways and urban transport are some pockets where there is significant traction. Companies positioned in this sector are expected to see good increase in their order books.

Post SEBI’s diktat on scheme categorization, how are you restructuring your funds? Are you planning to merge smaller schemes?

Fortunately, we have been working on consolidating schemes much before the SEBI circular came out. Most of our equity funds are aligned as per SEBI categorization. We would look to merge some thematic funds.

Overseas fund of funds category is seeing continuous outflows. What are the reasons for the waning demand for this category.

The awareness level about this category is low. Domestic market has been doing well so people are preferring to invest in India. Overseas fund of funds have done well though.

As markets mature and you see enough ownership of domestic funds, people would look to invest outside India. There are a lot of new generation companies which investors can take exposure through these funds.

Though taxation of this category is an issue, you need to realize that if you are making good returns it should not be a problem. HNIs who already have a high exposure to India can look at these funds. Also, those wish to send their children overseas for education can consider these funds because the underlying returns are dollar based. To some extent, you are taking the currency hedge through these funds.

When do you see private-sector investment picking up?

Private sector investment has been elusive. But there are a couple of factors which indicate that investment will pick up one year down the line. Firstly, capacity utilization has bottomed out and is showing early signs of improving. Secondly, while a lot of large corporates in metals and infra space are saddled with high debt were are seeing the deleveraging cycle has started for some companies. Corporate debt to GDP which peaked out in 2016 is starting to come off. Finally, bank recapitalization would enable corporates to re-leverage and begin the next capex cycle. Sectors like Steel, Oil and Gas, fertilizer and auto are the first to see a revival.

During every budget we get to hear about suggestions to reinstate long-term capital gains (LTCG) tax on equity investments. Some say that exemption of LTCGT can lead to market manipulation. What are your views? If the government introduces LTCGT what would be the impact on markets?

The exemption of LTCGT has helped attract investors in equities. But that’s not the only reason why people invest in equities. They invest because they expect better returns. If there is money to be made in markets, I don’t think it would deter investors from this asset class. So introduction of LTCGT would not have an impact on long term investors. However, it could hurt the sentiments in the short run. We could see some curb in short term speculative money moving in stocks having weak fundamentals.

How has your investment philosophy evolved over the years?

While our broad philosophy has remained the same, we have started giving more attention to management quality while evaluating companies. Our time horizon of owning stocks has also increased and we are evaluating companies with a three-year perspective. There is a larger focus on how companies are generating free cash flows and how it is being utilized. These factors impact the PE multiples. So we are willing to pay a premium if these factors are favorable. To sum up, we have been incorporating these factors in our philosophy.

Your favorite book

One book which I found interesting is ‘Good to Great’ authored by Jim Collins. The book gives good insights into building an organization and focuses on what really matters to not only to survive and endure but to excel.

Source: https://goo.gl/i9ro1V

ATM :: Things to know before investing in ELSS

India Infoline News Service | Mumbai | December 30, 2017 18:41 IST
Learn about ELSS investment & answer to all your questions like what is ELSS, how to invest in ELSS, tax benefits in ELSS at Indiainfoline

ATM

Equity Linked Savings Scheme or ELSS funds are a type of mutual funds whichbase their returns from the equity market. These funds are tax saving in nature and are eligible for a tax deduction of up to Rs1.50 lakhunder Section 80C of the Income Tax Act. Below are a few things that an investor must know before investing in ELSS funds.

What is ELSS?

ELSS schemes are a category of mutual funds promoted by the government in order to encourage long term equity investments. Under this scheme, most of the fund corpus is invested in equities or equity-related products.

Types of ELSS:

There are two categories in ELSS mutual funds i.e. dividend and growth.

The dividend fund is further divided into Dividend Payout and Dividend Reinvestment. If an investor opts fordividend payout option, he receives the dividend which is also tax-free,however,underthe dividend reinvestment option, the dividend is reinvested as a fresh investment to purchase more shares.

Under the growth option, an investor can look for longterm wealth creation. It works like a cumulative option whose full value is realized on redemption of the fund.

How to invest in ELSS?

One can invest in ELSS via two methods i.e. lumpsum or SIP.

SIP or Systematic Investment Plan, is a process where an investor needs to invest a fixed amount of money every month at a specified date. SIP inculcates a disciplined approach towards investing in an investor. SIP also gives the benefit of rupee cost averaging to an investor.

What is the lock-in period in ELSS?

ELSS funds have a lock-in period of three years. Whencompared to EPF, PPF, NSC and other prevalentinvestments under Section 80C, ELSS has the shortest lock-in period.

What is the benefit of tax in ELSS?

The primary purpose of any investment is to gain deductions under income tax for wealth creation. ELSS funds fit that bill perfectly. An investor gets a doubleedged benefit of tax saving and wealth creation at the same time. Dividends earned from ELSS funds are also exempted from tax. ELSS funds also provide the benefit of long term capital gains as they have a lock-in period of three years.

What is the investment limit of ELSS funds?

One can start investing in ELSS mutual funds with a minimum amount of Rs500, and there is no upper limit on how much a person can invest in ELSS funds. However, the tax saving ceiling is only up to a maximum of Rs1,50,000 a year.

What are the risks involved in ELSS funds?

ELSS mutual funds do not have ironclad guarantee over returns, as theygenerate their earnings from investments in the equity market. Nevertheless, some of the best­ performing ELSS mutual funds have given consistent and inflationbeating returns in the longrun. This quality is not possessed by the other fixed income tax­ saving investments like PPF andFD.

Conclusion

ELSS mutual fund investment has now become a popular tax saving investment under Section 80C, and it is also ideal for retirement planning and wealth creation coupled with the benefits of lower lock-in period, SIP method of investment, rupee cost averaging risk and no tax on dividends or the benefit of capital gains. ELSS funds should be taken into account by every investor while planning their investment goals.

Disclaimer: The contents herein is specifically prepared by ‘Dalal Street Investment Journal’, and is for your information & personal consumption only. India Infoline Limited or Dalal Street Investment Journal do not guarantee the accuracy, correctness, completeness or reliability of information contained herein and shall not be held responsible.

Source: https://goo.gl/wGHgDF

Interviews :: Home prices, loan rates unlikely to fall in 2018; time to buy: Harshil Mehta

Several cities under the Smart Cities initiative hold a distinct advantage and can be safe bets for ‘smart’ real estate investments, say Mehta.
Sarbajeet Sen | Retrived on 1st Jan 2018 | MoneyControl.com

The real estate sector has seen some major changes in 2017 including ushering in of RERA. It also had to bear the impact of demonetisation, which slowed down sales. In an interview to Moneycontrol, Harshil Mehta, Joint MD & CEO, DHFL, tells how he sees property prices and home loan rates moving in the New Year.

Year 2017 saw the Real Estate Regulation Act (RERA) coming into play. How has the new Act impacted the real estate market?

RERA is a well-timed effort by the government and a good step towards accomplishment of ‘Housing for All by 2022’ and other housing and housing-development related initiatives. Several states have implemented RERA and has positively impacted buyer sentiments as a result of the mandatory disclosures of project details and strict adherence to project deliverables such as the area, legality, amenities and the quality. It has also ushered a more transparent ecosystem for developers and housing finance companies. DHFL has also undertaken a drive to assist developers in various states to help them understand the regulatory implications of RERA and become RERA compliant.

How do you see home prices moving in 2018, especially in the affordable segment?

We do not foresee any reduction in prices in the affordable housing segment because of the increasing demand and the limited supply to meet this demand. To attract buyers and maintain sales volume, developers are launching attractive offers and other benefits to encourage customers to fulfill their aspiration of owning their dream home.

Home loan rates have come down substantially. Do you think there is a likelihood of further lowering of rates by lenders?

Owing to the last few monetary policies, home loan rates have stabilised and we do not foresee any further reduction.

So, for those waiting to buy property, do you think this is a good time?

Yes, it is a good time for the buyer.

What is the loan bracket that you are seeing the largest offtake?

We have been seeing a steady offtake in the affordable housing segment that ranges from Rs 15-30 lakhs. The affordable category has received a strong boost led by the government’s various incentives and efforts to stimulate the industry. All these efforts have started to show visible impact on the ground. Benefits from the recent Credit-Linked Subsidy Scheme (CLSS) under PMAY and lower interest rates have further given a boost to the consumer’s loan eligibility.

What is the home price segment DHFL is targeting?

Since inception, DHFL has always targeted the affordable housing finance segment catering to the low and middle income in the semi urban and Tier-2 and Tier-3 towns. This has remained unchanged for the last 33 years. As we mentioned earlier, we are witnessing strong uptake in the affordable finance segment driven by the incentives and conducive industry dynamics particularly from Tier 2 and 3 towns and cities which are emerging as India’s new growth engines.

Is government’s push for affordable housing having a bearing on loan offtake?

The Indian housing finance industry and, in particular, the affordable housing segment, is witnessing one of the most exciting times. Over the last few months, the Government has been taking several significant, growth-oriented steps to develop demand as well as generate greater supply through impacting policy frameworks towards greater financial inclusion. Granting infrastructure status to the real estate industry, announcing the extended CLSS to include MIG 1 & 2 and most recent announcement on RERA, are some commendable efforts to stimulate demand of affordable housing. These customer friendly measures and efforts have definitely given a strong fillip to loan offtake.

What are the market and sub-markets where you are seeing a high demand for home loan?

Affordable Housing has clearly been a central growth agenda for the Government. Initiatives such as ‘Housing for All by 2020’, PMAY, CLSS, home loan rate cuts and housing regulations such as RERA has considerably sparked interest for affordable housing options across the consumer pyramid. Most of the first-time home buyers fund their property purchase through home loans. As a result, there has been a surge in home loan demand across India specifically the Tier-2 and Tier-3 markets.

What according to you are the best emerging real estate investment destinations across the country?

Post the launch of the Smart Cities Mission in 2015, the Government shortlisted cities from all regions of India having high economic and industrial potential. Smart cities will become catalysts in improving the quality of life and give a major fillip to the real estate in urban locations. Considering the upcoming infrastructure projects and other growth drivers, several cities under the Smart Cities initiative hold a distinct advantage and can be safe bets for ‘smart’ real estate investments.

What more, according to you, needs to be done to boost the housing sector?

For all the benefits to make real impact, customer centricity is becoming key. Financial institutions and HFCs need to focus on making the entire experience of home purchase more seamless and customer friendly. Companies need to think how we can address their financial needs across their whole financial life cycle through customised products.

To further boost the affordable housing sector, external commercial borrowings (ECB) should be extended to housing finance companies to enable onward lending to developers in the segment. Also, single-window clearances is another step towards increasing development in the affordable segment and ensuring timely delivery.

Source: https://goo.gl/S2NiV6

ATM :: How to become rich fast at a young age in India: 5 amazing investment strategies to follow before you turn 30

Everyone wants to be financially secure and well off by the age of 35-40. However, when we are in our 20’s, we tend to live life in the moment and forget saving for the future.
By: Sanjeev Sinha | Updated: November 27, 2017 2:25 PM | Financial Express

ATM

All of us have various financial goals in life. Everyone wants to be financially secure and well off by the age of 35-40. However, when we are in our 20’s, we tend to live life in the moment and forget saving for the future. This is not the right approach towards creating wealth. Therefore, to ensure that you are financially secure and on the right track with your money, here are 5 important investments that you must make before you hit your 30-year milestone:

1. Investment towards tax saving
Considering that you are working and earning, it is important for you to assess your tax liability and take advantage of tax deductions available under Section 80C of the Income Tax Act. “By proper tax planning, you can not only reduce your tax liability but also save some more to invest towards your other goals. One of the best tax-saving instruments is Equity-Linked Savings Schemes (ELSS). It is a type of open-ended equity mutual fund wherein an investor can avail a deduction u/s 80C up to Rs 1.50 lakh for a financial year,” says Amar Pandit, CFA and Founder & Chief Happiness Officer at HapynessFactory.in.

2. Investment towards emergency corpus
There are various events like accidents, illnesses and other unforeseen events that we may encounter in our lives. These events should never occur, but if they do, one needs to be adequately prepared for the same. In critical cases, such events may hamper one’s ability to work and may even lead to a loss in earnings for a few months or years. Hence, “it is advisable to build a contingency corpus, which is equivalent to at least 5-6 months of living expenses. Further, your emergency fund should be safe and easily accessible (liquid in nature) at short notice, in case of an emergency. Hence, savings bank accounts and liquid mutual funds are two options for setting aside the emergency corpus. However, considering that liquid and ultra-short term mutual funds are more tax efficient in nature, it is advisable to park a major portion of your corpus in the same,” says Pandit.

3. Investment towards long-term goals
It is very important to save and invest towards your long-term goals such as marriage, buying a house, starting your own venture, retirement, and so on. You must start with determining how much each goal will need and the savings required to achieve the goal. Once the corpus is fixed, you can invest towards the goal regularly. As an investment strategy, start fixed monthly investments – SIPs (Systematic Investment Plan) in mutual funds. Always remember, the earlier you start investing towards your goals, the longer time your investments will have to grow and the more you will benefit from the power of compounding. Equity mutual funds which are growth oriented are a preferable investment option for long-term goals.

4. Investment towards short-term goals
There are many short-term goals that are recurring in nature, such annual vacation, buying a car or any asset in the near term and so on. For such goals, you are advised to park your funds in liquid or arbitrage mutual funds rather than a savings account. “Mutual funds are more tax efficient than savings accounts and also there are different funds for different time horizons. For example, for goals to be achieved within a year, you can opt for liquid or ultra-short term funds whereas for goals to be achieved post one year, you can opt for arbitrage funds,” advises Pandit.

5. Investment towards health and life cover
Life and health insurance typically are not supposed to be considered as investments. However, both are very important and must be considered as one of the priority money move to be made before turning 30. If you are earning and have a family dependent on you, you must assess and buy the right life insurance term cover for yourself. Further, with costs of health care and medical on the rise, any untoward illness without sufficient cover will have you dip into capital which is unnecessary. Hence, there cannot be any compromise on health insurance. Thankfully, there are various health covers available in the market today. You should opt for the right cover for yourself, depending on your needs and post considering all the options.

Source: https://goo.gl/Abf7TR

ATM :: The quick and safe way to build a credit score

There are many easy ways to quickly improve your credit history and score. But if you are not careful, these measures may even jeopardise your financial security
Shaikh Zoaib Saleem | First Published: Mon, Nov 27 2017. 12 37 AM IST | Livemint.com

ATM

If you need a loan to buy something you cannot fund immediately, you approach a financial institution—typically a bank or a non-banking financial company (NBFC). When you do that, the financial institution runs a background check on you, from its own database (if you are an existing customer) and also from a credit information bureau. The credit information bureau is authorized by the Reserve Bank of India (RBI) to gather information on loans and borrowers from banks and analyse it to arrive at a score of creditworthiness of an individual. If your creditworthiness is good, you would get a loan relatively easily and at better terms. If not, either the loan will be rejected or you will be charged a higher interest rate. This is especially true in case of personal loans. The institutions’ decision to lend is based in large measure on the credit score and the credit report.

What is a credit score?

It is a number based on your credit report, which is a summary of your past and current borrowing and repayment history. If you were regular with repaying loans, including your credit card bills, your credit score is likely to be higher. This score helps banks assess your loan repayment capacity and your chances of defaulting on it. “Credit score is derived from the credit history of an individual. A consumer needs to have a minimum of 6 months of repayment track record on a loan or credit card or closed credit accounts less than 2 years old before a credit bureau can generate a credit score,” said Hrushikesh Mehta, vice-president and head of direct-to-consumer business, TransUnion CIBIL. A credit score is created as your lending and repayment relationship with financial institutions evolves. However, if you are new to credit, here are some ways you can quickly start to build a credit score.

Credit cards or personal loans

If you are new in the workforce, you can start by getting a low-limit credit card from the bank where you have a salary account, said Sumit Bali, senior executive vice president and head-personal assets, Kotak Mahindra Bank Ltd. “Based on their income, banks can give them a card with low limit. Use that card sensibly and build a credit history,” he said.

In the past, people considered taking personal loans to build their credit score. However, with a personal loan you will necessarily have to spend your money in paying the interest, whereas with credit card repayments within the stipulated time, you do not have to shell out extra money. For slightly older professionals, about 35 years old, credit history is not much of a worry if their bank account status and average balance are good, and investments and tax returns are in place. They “don’t really need a credit card to prove credit worthiness. Any bank would sensibly look at it and take a call,” Bali said.

Peer-to-peer (P2P) lending platforms are an emerging option for creating and enhancing your credit history. The RBI has recognized these platforms as special category NBFCs and has mandated them to share lending data with credit information bureaus. “Once the P2P lenders receive their licence, they will be able to begin data submission. Once that happens, P2P lending will become a viable option in helping one build a credit score,” said Mehta. However, in this case too, you will have to pay an interest on the borrowed amount.

In some cases, especially where customers have a long relationship with their bank, the banks may also look at own data to determine creditworthiness, Bali added. “Credit score by and large is a good indicator but it may not be the only indicator,” he said.

Alternative credit scoring

Evaluating someone who has never taken a loan can be difficult. This is where alternative credit scoring comes in. Here, instead of relying on a credit score, lenders consider your transactions and behavioural data like bill payments, online buying behaviour and information from your social media platforms to understand your repayment capacity.

“Often people are refused big-ticket loans like a home loan for the lack of credit history, even if their finances are in order,” said Abhishek Agarwal, chief executive officer and co-founder, CreditVidya, a credit advisory that also works on alternative credit scores.

While the RBI-regulated credit bureaus are currently not allowed to use alternative data for credit scoring; in other developed markets parameters like utility bill payments, insurance premium payments have been used for credit scoring (read more on it here.

However, financial institutions including top public and private sector banks and NBFCs in India, have started using alternative data in multiple verifications and validations across the credit value chain, Agarwal said. “Innovative offerings like pre-approved offers or instant loans are leveraging alternative data from multiple sources to provide seamless customer experience,” he said, adding that leveraging alternative data for credit risk assessment of secured loans is still distant. Banks use the alternative scores “in conjunction with other things, like data that you have about the customer. This is happening for personal consumption products like credit cards and salaried personal loans. We are putting it to use but what is the outcome from that, it is too early to say,” Bali said.

While credit cards and loans help to build a credit history and score, caution needs to be exercised. If used carelessly, these can put you in a debt trap, and ruin your credit history too.

Not just that, you should also keep your digital and transactional behaviour in check, as going forward more and more data could be used to assign you a credit score.

Source : https://goo.gl/m7Ns7g

Interviews :: Home loans slowdown driven by RERA will reverse in 8 months: ICICI Bank honcho Ravi Narayanan

Interview: Ravi Narayanan, senior general manager and head – retail secured assets, ICICI Bank.
By: Shritama Bose | Updated: November 28, 2017 12:20 PM | Financial Express

The home-loan market seems to have slowed down, first because of some postponement of demand with demonetisation, and then with the implementation of RERA. Where do you see things going from here?
The supply in the system had anyway started reducing in the last two years. Between September 2016 and September 2017, supply has dropped by over 10-12% in residential real estate in the top 40-45 cities. Till a year back, the inventory overhang used to be about 18-20 quarters in the industry. Along with supply, absorption of units was also coming down because of various reasons, one of which could be demonetisation. People expected a price correction. With RERA coming in, my estimate is that the supplies will go down still further because the act has put in various guardrails as to how the builder must manage the finances available for the project. This augurs well because inventory overhang should not be so much. The second outcome of RERA will be a rise in customer confidence. So once this whole dust settles, we will see pick-ups rising. So there will be a decrease in inventory and an increase in sales and that should be good for the industry.

Won’t that also cause asset prices to rise?
It will follow a pattern. There is an oversupply right now. If the demand-and-supply gap comes down drastically, then the prices will go up. In the next six to eight months, a lot of consolidation might happen in projects underway, which may not be amenable for prices to go up. Prices will remain, more or less, at the same level or there may be some fall in prices. Also, in the last six-seven years, real estate has seen a slight downturn. Typically, the industry follows an eight-to nine-year cycle. So in my opinion, 2018 will again see a rise in sales.

A development that followed demonetisation was the expansion of the credit-linked subsidy scheme (CLSS) for housing. Are you seeing supply and offtake picking up in that category?
Over 60% of new home launches in the industry in the first half of FY18 had ticket sizes under Rs 25 lakh. Because of this scheme under the Pradhan Mantri Awas Yojana, a lot of projects have started coming up in this category. Builders are also entitled to certain benefits if a part of their projects are of sizes below a certain threshold.

So is the phenomenon of builders allocating more space to smaller units a countrywide one?
This is happening primarily in Mumbai and Pune. Some of it is happening in Chennai and Bangalore. But, it is not happening across the country as yet. That’s partly because you have to keep operating costs and land cost under control to be in affordable housing. It is a very price-sensitive market. However, given the focus on this sector from this government, there’s bound to be more players flocking to it.

In mortgages, banks have continuously been losing market share to housing finance companies (HFCs). Have they actually weaned away bank customers for their growth?
No, because the mortgage industry is really big. The mortgage book of the country is now at Rs 15 lakh crore; over the next few years, at a CAGR (compound annual growth rate) of 20%, it should go up to Rs 50 lakh crore. When the pie is so large, everyone will have a share. It’s just a question of how each player orients themselves. Today, most banks are focused on the metros, while HFCs are operating in the peripheries (of cities). So we are not meeting each other much. But very soon, it will all become one playground. Banks venturing into the peripheries will be much faster because we anyway have branches.

ATM :: How to choose Mutual Funds or Stocks for your investments

By pooling a lot of stocks or bonds, mutual funds reduce the risk of investing.
By ZeeBiz WebTeam | Updated: Wed, Nov 29, 2017 12:59 pm | ZeeBiz.com

ATM

Both stocks and mutual funds market are booming in India, but as an investor, we are often confused to choose between the two for our investment plans.

Investment in equity, bonds or funds comes with higher risk and higher reward, therefore, it is always better to first study about the scheme we plan to invest.

Mutual funds:

Mutual fund scheme is a pool of savings contributed by multiple investors. The term ‘mutual’ fund means that all risks, rewards, gains or losses pertaining to, or arising from the investments made out of this savings pool are shared by all investors in proportion to their contributions.

There are wide-range of mutual funds in India like – equity, debt, money market, hybrid or balanced, sector-related, index funds, tax-savings fund and lastly fund of funds.

Stock Market

Stock market are usually interesting source of income for both companies and share holders. Under the stock market, anyone can buy stakes of a company in whom they have faith.

Companies which have received better ratings by agencies are generally preferred the most. No matter what may be the circumstances, an investor holds on to the company’s stake for their regular source of income.

Which one is better for investment?

According to Motilal Oswal, if you are typically in your 20s to 30s belt, you can start building your investment portfolio with the help of mutual funds. You need to start off with a very minimum capital and you can find that your investment keeps growing at a gradual space.

The agency believes that for first-time investors, the mutual funds offer a tremendous scope for growth as your funds are invested in diversified forms of revenue generating sources.

On the other hand, Motilal believes that if an investor belongs to late 40s up until 70s of their age and are also seasoned investors, then investing in stocks is a good idea.

It further said that decades of exposure to the financial market helps you gauge the right type of equities, shares or stocks, you need to invest your money in.

Among many advantages of investing in mutual funds is that you can appoint fund managers to select funds, track performance, make appropriate asset allocations and cash-in your profits for you.

These managers try to ensure that an investor’s portfolio consists of well-performing funds, rather than those that might drag down the overall investment returns.

In case, you are stock market investor, and sell your holding within a period of one year, then you have to pay 15% as short-term capital gains tax.

As for mutual funds, there are no gains tax levied on the stocks that are sold by the fund. But one needs to remember that an investor must hold equity funds for a minimum of one year (the longer, the better, really) if they want to avoid paying capital gains tax on the investments.

If you venture into stock investments on your own, brokerage costs of 0.5-1% will be a common expense. Apart from this, you will also have to pay for demat charges.

BankBazaar stated that mutual funds pay only a fraction of the brokerage costs compared to what is charged to individual investors. Investors in Mutual Funds do not need demat accounts.

A well-diversified investment portfolio ideally has around 25-30 stocks, and this kind of portfolio is only achievable with a sizable corpus.

With investment in mutual funds, an investors can buy a certain number of funds which can be invested in various stocks.

Source: https://goo.gl/8BtHrp

NTH :: Will 2018 be a good time to invest in real estate?

From the past few quarters, the real estate markets in India have been going through a phase of massive change.
Kanika Gupta Shori | Retrived on 1st Dec 2017 | Moneycontrol.com

NTH

How do you time your entry in any investment channel — whether it is equities or real estate? Is it the juncture when the markets are booming and everyone is joining the fray? Does that make for a sound investment decision? Probably, not!

Most retail investors and homebuyers make this mistake. They buy when the prices are peaking. Naturally the returns are not as expected. Am I right?

Well, I am citing the basic principle of investing here. If you are on board, I would further explain why 2018 should be the year you should enter the real estate market.

From the past few quarters, the real estate market in India has been going through a phase of massive change. The regulatory reforms implemented through frameworks defined under the Real Estate Regulatory Act (RERA), and Goods & Services Tax (GST) to an extent, have led the sector in a certain direction.

It is mandatory for all the real estate projects to be in compliance with the provisions of RERA, which attempts to make sure that projects are delivered in time and the money paid by buyers for certain projects is not squandered for other purposes.

In short, RERA protects consumers’ interests. It will be impossible for fly-by-night operators to be in the market and only the most-committed players will be able to navigate the roadmap. This will benefit both buyers and sellers, in the long term.

It is a buyers’ market

The combination of excess supply, high prices and low consumption has translated into huge inventories across the country. The consumption side has also been impacted by demonetization. Clearly, it is a buyers’ market for now – and for the next few quarters. But not for long!

With RERA in place, developers are now focusing on completing their existing projects. The new home launches, across top eight cities in India, have gone down by more than 75 percent in the third quarter of the current fiscal, as per industry research reports. The overall number of project launches has gone down by more than 40 percent in the first nine months of the current calendar year. These trends imply that the supply side will gradually find some equilibrium with demand, and prices will subsequently start picking up pace.

However, in the present environment, there is a situation of excess supply and property buyers are in a better position to negotiate, and grab a great deal.

As per industry reports, the National Capital Region (NCR) and Mumbai Metropolitan Region (MMR) have around 2 lakh and 1.8 lakh unsold units respectively.

Home loan interest rates are at all-time low

The excess liquidity in the banking system have led the RBI rejig the key lending rates. Resultantly, the home loan interest rates that were recorded at around 9.5 percent a year in 2016 have now been floating in the range between 8.3-8.4 percent.

That makes for considerable savings in the EMI costs; enabling people to avail of low-cost home finance, and become a home owner. It is expected that the home loan rates will remain low for the next several quarters and may even come down further.

Considering the average annual rental yields at 5-6 percent, there is not much difference between the costs of rent and owning a home.

Steady revival of interest from global investor fraternity

The implementation of overarching regulatory mechanisms has instilled a much higher level of confidence in the global investor fraternity. The real estate sector is projected to receive Private Equity (PE) investments to the tune of US$4 billion during this fiscal year, as per industry reports.

Not just the PE funds from the US, Canada and Singapore are interested in infusing capital in the sector, but countries such as Japan, China, Qatar, Hong Kong and the Netherlands are also poised to invest in the sector.

At the same time, global sovereign wealth funds—that are otherwise known for their risk-averse, conservative approach—have been increasing their exposure to the market and it proves that the sector is headed in the right direction.

As for property buyers, it is a sign of revival on the cards.

In overall, the current environment presents an opportunity to buy property and make the best out of the coming year.

(The author is COO of Square Yards)

Source: https://goo.gl/4Vgxoe

NTH :: Home loan growth down, shows RBI data

Growth in mortgages in the banking sector slipped to 11.4% year-on-year (y-o-y) in October from 12.8% in September, data released by the Reserve Bank of India (RBI) on Thursday showed.
By: FE Bureau | Mumbai | Published: December 1, 2017 4:51 AM | Financial Express

NTH

Growth in mortgages in the banking sector slipped to 11.4% year-on-year (y-o-y) in October from 12.8% in September, data released by the Reserve Bank of India (RBI) on Thursday showed. Home-loan outstandings at banks had grown 16.6% y-o-y in October 2016. The total outstanding on mortgages in the banking system stood at Rs 9.03 lakh crore as on October 27 this year. Retail loans as a category grew 16% y-o-y in October, a shade slower than 17% in October 2016. Outstanding retail loans as on October 27 stood at Rs 17.45 lakh crore. Loans to individuals had been clocking growth figures in the mid-to-late teens since May 2015, before signs of a slowdown began to surface in November 2016.

In September, outstandings on credit cards grew the most, at 37.7%, among all categories of loans to individuals. Vehicle loans grew 7.4%, significantly slower than 23.5% in September 2016, while consumer-durable loans dropped 9.4%, as compared to a year-ago growth figure of 20.3%. Credit to industry contracted on a y-o-y basis for the thirteenth straight month in October, falling 0.2% y-o-y to Rs 26 lakh crore. In October 2016, the corresponding figure stood at Rs 26.05 lakh crore, 1.7% lower than the October 2015 level.

Industrial credit has been falling almost consistently since August 2016, with September 2016 being the only month of positive growth ever since. Credit deployment in industry fell 13.5% y-o-y in the medium industry segment. However, loans to large industry and micro-and-small industry recorded positive growth, rising 0.2% and 1.2%, respectively, over the year-ago period. Bank credit to industry has been muted for the past couple of years as lenders turned cautious amid worsening asset quality and well-rated corporates chose to raise money from the bond market.

Loan growth has been suffering partly due to capital-starved public sector banks. Analysts expect the recapitalisation of state-owned banks to fuel credit growth in the months ahead. In a recent note, Kotak Institutional Equities wrote that lenders like Bank of Baroda, Canara Bank and Union Bank of India should see loan growth improving. “Loan growth for PSU banks is also partly supported by loan buy-outs from NBFCs and private banks. Retail cycle continues to hold up well, prompting many banks to pursue this segment more aggressively,” Kotak said. Trends in the corporate loan growth appear anaemic, according to the brokerage, with few signs of a turn in the capex cycle.

Source: https://goo.gl/jbmLdS

ATM :: 5 smart ways to get the best deal on home loan

Updated: Nov 03, 2017 | 11:07 IST | ET Now Digital

ATM

Good news for State Bank of India (SBI) customers and for those willing to take a home loan in the near future. SBI, the country’s top lender by assets, has made its home loans cheaper. The bank has reduced home loan interest rates by 5 basis points to 8.30 per cent per annum. With this reduction, SBI’s offering in the home loan segment has become the lowest in the market, as the bank claims.

The new rates are effective November 01.

The effective interest rate for all eligible salaried people will be 8.30 per cent per annum for loans up to Rs 30 lakh. Rates have been reduced by 5 bps point in all the brackets. Over and above of 8.30 per cent rate, an eligible home loan customer can also avail an interest subsidy of Rs 2.67 lakh under the Pradhan Mantri Awas Yojana scheme.

At present, for a new customer there’s now the possibility of taking bigger loans or incurring lower interest costs in making their dream home purchase a reality.

Before you finalise the loan ask these five key questions to get a good deal on your home loan

1. Negotiate rate of interest
Lenders mostly define the interest rate in a minimum and maximum range, the actual rate charged depends on your eligibility criterion. As a borrower you have the ability to negotiate a better interest rate.

Financial advisers say you can do this not just by comparing your loan options, but also by improving your eligibility by adding a co-borrower and combining the co-borrower’s income with your own.

2. Buy a home loan only after comparing
Before you zero in on a loan, compare between the different loan products available in the market.

Look at the equated monthly installments (EMIs), the interest rates, the processing fee and other related charges to choose the perfect loan. These days home loans offered online, you can always explore with a few clicks.

Look at the base rate, the margin offered, what is the maximum tenure offered, and how is the eligibility calculated and most importantly whether a property similar to yours has been funded by this lender earlier.

3. Fixed rate or floating?
Home loans can be extended either on fixed or on floating rates. If a home loan is taken on fixed rate then the interest rate will not change during the entire loan period and the borrower continues to pay the same EMI throughout the loan term.

All new floating rate bank loans today are linked to the MCLR, whose interest rate automatically resets at fixed intervals. This is beneficial for customers since interest rates have been trending downwards of late.

If the interest is expected to fall then opt for a floating rate and if it is expected to rise then opt for a fixed rate loan.

One can pre-close the loan ahead of its original tenure. If you are on a floating interest rate, no charge will be applicable. If you are on a fixed rate, there may a charge applicable.

4. Understand your borrowing capacity
People often decide to pay high EMIs thinking the loan load would come down with time due to annual increases in their income. However, their incomes may or may not rise with time. Therefore, they must borrow to the limit where paying EMIs would not stretch their finances.

5. Additional costs
When you take a home loan remember that interest is not the only cost you have to bear; there are certain additional costs too.

Every time you apply for a loan with a bank or non-banking financial institution, you are charged a percentage of your loan amount as processing fee. The amount may vary from 0.5 per cent to 1 per cent of your loan amount.

Legal fees are charged by banks or NBFCs to ascertain the legal status of any property. Usually, legal fees are applicable for home loans or loan against property.

Depending on your loan type, you may be charged an amount for prepayment of your loan. If you do not repay your loan EMIs on time, you will be charged a late payment fee. The late payment fee will depend on your lending bank or NBFC and the type of loan.

Source: https://goo.gl/Gd2mUR

NTH :: Tata Housing Offers 3.99% Home Loan Rate For New Buyers

By Staff Reporter | Published On: Mon, Nov 13th, 2017 | Accommodation Times Bureau

NTH

NEW DELHI: Tata Housing said they are partnered with Indiabulls Housing Finance on Friday to offer home at 3.99 percent interest rate for those home buyers who buy flat in ongoing 11 projects. In the current scenario, the home loan rates are around 8.5 percent.

On Friday ‘Monetize India’ campaign was launched by Tata Housing in partnership with Indiabulls Home Loans.

The company said in a statement, it gives more opportunity to home buyers to own Tata Housing property “at a special, one-time home loan rate of 3.99 percent. This special home loan rate would be valid for the first five years.”

“It has been an eventful year for the sector in India which is standing on the threshold of change…We hope that this will stimulate fence-sitters to act on their need or wish to invest in real estate, as it continues to be one of the best forms of security and wealth generating assets,” According to Tata Housing Head – Marketing and Sales Tarun Mehrotra.

The scheme, valid from today until December 12, 2017, would be offered across 11 projects by Tata Housing in seven cities.

Source: https://goo.gl/SNN7vP

NTH :: Seven people get Rs. 34.65-lakh home loan with fake documents in Mumbai

The police are interrogating bank employees to find out how the loan was approved despite forged documents.
Farhan Shaikh | MUMBAI | Updated: Nov 10, 2017 18:29 IST | Hindustan Times

NTH

The Santacruz police are investigating a cheating case where seven people allegedly conned Bombay Mercantile Bank to the tune of Rs. 34.65 lakh. The police registered the case after bank employee, Abuzar Rizvi, 53, lodged a complaint against seven people for fraud.

The accused allegedly forged documents to get a loan worth Rs. 34.65 lakh cleared for two flats in Malad. Senior inspector at Santacruz police station, Shantanu Pawar said, “The accused applied for a loan for two flats in Vijay Properties’ Pride Building a couple of months ago.” To find out how the loan was approved despite forged documents, the police are interrogating bank employees who were involved in the process.

The illegal nature of the documents was noticed at the Santacruz (West) branch of the bank, following which the bank officials alerted the Santacruz police station. The case was registered on Thursday under relevant sections of the Indian Penal Code (IPC) for criminal conspiracy, cheating, and forgery. The police have booked the loan applicant along with six others, including the middlemen involved in the forgery.

Bank officials at the Santacruz branch were not available for comment.

Source: https://goo.gl/Sis9UT

ATM :: Mistakes to avoid while investing in ELSS mutual funds

The primary objectives of ELSS investments are long-term capital growth and tax saving.
Navneet Dubey | Nov 10, 2017 09:47 AM IST | Source: Moneycontrol.com
ATM
Most investors who invest in equity-linked savings scheme (ELSS) do so to save taxes under Section 80C of Income Tax Act. However, they tend to forget that the ELSS schemes can also help them to achieve their financial goal if they remain invested for a long time.

“The primary objective of ELSS investment is long-term capital growth and tax saving. Superior long-term growth is facilitated by the power of compounding. Power of compounding works best over a long investment horizon when gains are reinvested every time they accrue,” said Rahul Parikh, CEO, Bajaj Capital.

The schemes under ELSS category also gives you high inflation-beating returns, similar to PPF they also provide you EEE (exempt-exempt-exempt) benefit.

However, make sure you don’t commit the usual mistakes while investing in ELSS. Here are some of the common mistakes investors make while investing in these schemes:

Trying to time the market: Do not try to time the market when you are investing. Unless you have seasoned investors with a phenomenal understanding of the market, the chances are that you might not be able to identify the precise time to invest.

Ajit Narasimhan, Head – Savings and Investments, BankBazaar said that there is a high amount of uncertainty which makes it next to impossible to correctly predict events or their impact on the market and hence to time the market. Instead, focus on identifying a few good funds. Once you invest, have the patience to ride through the rough and tumble of the stock markets. “Equity investments grow by staying systematically invested for the long run. This is what makes SIP a good option as it averages the cost of investment over time and cancels out the effect of price fluctuation in the market,” he said

Not understanding the fund category: It very important to understand that most of the AMC’s design their ELSS tax saving mutual fund scheme on the basis of large cap, mid cap/small cap and accordingly their risk and returns vary. Here it is vital to first know your risk taking capacity that whether you will be able to risk or not. Take help from your financial adviser to know all holdings mentioned in your scheme and then choose the fund accordingly.

Investing at the last minute: Investment should be a planned activity and not at the spur of the moment.
Narasimhan points out for investments to be successful and provide the required returns, investors should have a financial goal in mind and a plan to work towards it. Leaving it to the last minute can lead to insufficient time to set your goals or create a viable investment plan. “Lack of time may imply that you may have to cut down your research and depend on someone else’s research and opinion to base your investment. This can be very dangerous as the goals, requirements, and risk appetite may not match. It may also cause the investor to invest in one go instead of small regular SIPs. This is an important factor as SIPs provide price averaging and take away the need to time markets,” he said.

Redeeming soon after the lock-in period ends: Minimum investment time period in equities should ideally be for 5-7 years and when you take a decision of redeeming your units before time as mentioned thereon, you may not gain much from it. The longer you remain invested, the more you gain from compounding effect and rupee cost averaging principle. You should always link your investment with a long time horizon financial goal.

Investing in too many funds: ELSS funds have a lock-in of 3 years, If you are investing in too many funds of the same category then it may become difficult for you to review your portfolio since you cannot exit before 3 years. Moreover, too much of diversification may also not help you in proper asset class analysis.

Choosing the dividend option: You should opt for growth option while investing in ELSS mutual fund schemes because if you opt for the dividend, you can lose on gaining from compounding effect. Parikh also said that investing in a growth option ensures that gains are reinvested and grow at the same rate as the principal investment. “However, in dividend payout option, the gains are not reinvested but are paid out and hence not available for compounding, resulting in lower long-term returns. When investing for long-term capital growth in any of the equity mutual fund, one should opt for the growth option,” Parikh said.

Source: https://goo.gl/C2WCyP

ATM :: Here is the impact of Goods and Services Tax on home loan customers

By ZeeBiz WebTeam | Mumbai | Updated: Tue, Nov 14, 2017 04:48 pm

ATM

If you are willing to get a home loan in the future, it is extremely important to understand the impact of the Goods and Services Tax (GST) that came into effect on 1 July 2017 in India. GST is a unified indirect tax levied on the consumption, sale and fabrication of all types of goods and services at the domestic level. It is the India’s largest tax reform since independence.

The GST Council has been formed to administer the system. The four tax brackets have been fixed at 5%, 12%, 18% and 28% for various types of commodities and services. The new tax system has a direct impact on home loan seekers and the entire real estate industry in India. Let’s discuss.

Real estate before GST

Property builders and house buyers had to remit multiple central and state levies such as stamp duty, Value-added Tax (VAT), registration tax and service tax. The imposition of these taxes was based on the locality and construction phase of properties. For instance, the buyers of under-construction properties were required to pay the whole gamut of levies. Conversely, registration charges and stamp duty were imposed on the sale of ready-to-move-in properties. Paying several types of taxes was the biggest challenge faced by the stakeholders of the real estate industry. The complicated tax system has led to the disparity in property rates across the nation.

Real estate after GST

The Indian real estate sector comes under the purview of GST, which excludes ready-to-move-in properties and residential schemes sponsored under the Pradhan Mantri Awas Yojana (PMAY). Under-construction properties are taxed at 18% that will be applicable only to 2/3 of the value of the property. The remaining cost of the property is considered the value of the land. Excluding stamp duty and registration charges, the actual tax rate will be 12%. Realtors or property developers can benefit from input tax credits, which ought to be transmitted to customers.

GST impact on home loans

When a home loan is obtained, interest is paid on the principal amount. The interest remitted on the principal amount is considered the cost of the loan. Besides, the loan borrower pays property valuation charges, advocate charges and processing fee. The home loan service was taxed at 15% under the previous tax regime. Currently, it is taxed at 18% and thus, the loan will be expensive by 3%. GST is not applicable to prepayment fee for an MCLR-linked mortgage, but prepayment fee for a fixed rate mortgage is taxed 18% instead of 15%. The borrower is taxed at 18% on any charges recouped by lenders.

Home market

The Indian real estate segment has been experiencing significant transformations recently. The new Real Estate Regulation Act (RERA) has addressed the problem of non-transparency. In India, as far as the residential segment is concerned, the implementation of GST is undeniably an affirmative sentiment booster among potential customers. The system may not be helpful in diminishing the prices of properties in the short-term. The simplicity of the system will benefit all the industry stakeholders including property developers and buyers.

GST advantages for property developers

GST has turned out to be a better option from the stance of property developers who had to pay multiple taxes under the previous tax regime. Currently, they are taxed under the unified tax system. As far as building materials are concerned, the new tax system brings no major changes. Let’s consider a few building materials. Under the previous tax system, pillars and iron rods were taxed at 20% that has been reduced to 18% currently. Cement is currently taxed at the highest rate of 28%, which is more than the previous rate. The tax rate on fly ash bricks and sand-lime bricks has been reduced to 5% from 6%. These marginal variations can make a big difference.

Bottom line

Affordable housing schemes have been kept outside the purview of GST. Needless to say, the unified tax system has been a much-needed reform. Industry experts and tax practitioners in the country have accepted the system that impacts the real estate industry as well. Home loans will be marginally expensive as discussed earlier. The current tax regime has brought transparency and simplicity in the housing loan services and real estate sectors. It is likely to be a boon for all industry participants.

(This article was authoured by Bank Bazaar.)

Source: https://goo.gl/hScyZZ