Harshala Chandorkar | Updated On: May 08, 2015 19:45 (IST) | NDTV Profit
Nita and Meerak, a young couple working in a BPO in Bangalore, used a water cooler at their home each summer. But with the rising heat and diminishing water supply at their place, they planned to purchase an air-conditioner (AC) for the bedroom.
During one of the weekends, they visited a popular electronic store in the mall near their house. But to their dismay, they realised that they did not have enough savings for purchasing the desired AC, as it was costing significantly higher than their budget. The young couple decided to postpone their AC purchase for another year and confided to the sales person at the store that it is out of their budget at the moment.
The sales person at the store then counselled Meerak and Nita on the available finance opportunities at the store which they could avail for purchasing the much needed AC. There was an in-house counter of a leading personal finance company at the store itself where the two went to understand the terms and conditions of the consumer durable loan for purchasing the AC. On discussing with the finance company representative, Nita and Meerak were pleasantly surprised to know that they could instantly avail a loan for purchasing the AC at feasible terms and conditions and take it home the same day.
Meerak then filled the loan application form and provided all the requisite details and proofs. The finance company representative instantly checked Meerak’s CIBIL TransUnion score on his computer. He found Meerak’s CIBIL TransUnion score satisfactory as it aptly met the company’s lending criteria for consumer durable loans. He then explained to Meerak and Nita that because Meerak had a high CIBIL TransUnion score and a good credit history, the finance company was able to provide them finance for purchasing the AC instantly.
Having worked in a financial BPO, Meerak had an understanding of the importance of a good CIBIL TransUnion score and a healthy credit report for availing credit cards and home loans. But only now did he realise the larger role that the CIBIL report and CIBIL TransUnion score played in his life. Due to a good CIBIL TransUnion Score, he and his family could now immediately enjoy the comfort of an AC without having to wait for another year to purchase the same.
Having experienced the benefit of financial discipline and a good CIBIL TransUnion score, the couple resolved to continue to maintain a good credit history and set down some ground rules on managing finances.
Here are a few things to remember:
1) Keep track of all loans and credit card EMIs: Keep a regular check on all the loans and credit cards and ensure that you make the payments before the due date every month.
2) Set payment alerts: In order to better manage payments of credit card bills, set up an alert on phone and email so that you are reminded of the dues even if you forget.
3) Keep track of guaranteed loans: If you have guaranteed a loan, do ensure that the payments on this loan are being made regularly and there is no delinquency or default on them. The guarantor’s CIBIL TransUnion score gets impacted if there is a delinquency or default on the loan repayments by the principal borrower.
4) Review CIBIL report and CIBIL TransUnion score: Before applying for any loan, credit card or finance for electronic goods, do make sure that you check your CIBIL report and CIBIL TransUnion score. This practice will help you avoid any unpleasant circumstances in the form of loan rejection. You can always work towards improving your credit history and CIBIL TransUnion score in case it is low and apply for loans or finance opportunities once it improves.
It is important to understand that a good CIBIL report and CIBIL TransUnion score is very critical for having access to finance when you need it. With availability of instant credit information and score from CIBIL, finance companies are able to assess an applicant’s credit discipline and are able to sanction the loan immediately. A good CIBIL report and a high CIBIL TransUnion score can be your gateway to building a prosperous future.
(Harshala Chandorkar is Senior Vice President-Consumer Services and Communications at CIBIL)
Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.
PTI | Oct 9, 2013, 02.20PM IST | Times of India
NEW DELHI: State Bank of India (SBI) on Wednesday reduced interest rates on loans for car and consumer durables and also decided to lower processing charges to cash in on the festival season demand.
SBI is the fourth bank after PNB, OBC and IDBI Bank to offer special interest rates for loans to buy automobiles and consumer durables like televisions, air conditioners and refrigerators.
The decision to cut interest rates on auto and consumer durable loans comes nearly a week after the government decided to pump in funds in PSU banks so that they can lower rates to stimulate demand in the targeted sector.
According to the country’s largest bank, interest rate on car loan has been slashed by 0.20 per cent to 10.55 per cent against the earlier 10.75 per cent.
“Processing charge has also been cut from 0.51 per cent of the loan amount with a minimum of Rs 1,020 to a flat rate of Rs 500,” it said.
The bank has also launched a special festival loan for its salary account holders for purchase of consumer durables and two-wheelers.
Attractive discounts are available under this offer resulting in effective interest rates starting from 12.05 per cent, it said.
This ‘Utsav Ki Umang SBI ke Sang’ offer is valid from October 7, 2013, to January 31, 2014, and covers the purchase of cars, two-wheelers and consumer durables, it added.
Source : http://goo.gl/k94sGC
BankBazaar.com | October 03, 2013 13:12 (IST) | NDTV Profit
New Delhi: Credit cards are as much a boon as they are a bane. Sure, they give u a sense of financial ease and security but if you don’t use your credit card prudently it can land you in a vicious debt trap.
Here are 10 situations when you should restrict the use of credit cards:
1. Using credit cards for everyday expenses: This is one of the most common instances when people use credit cards – to buy their day to day items. While using credit cards to purchase groceries and household items is not always bad, using it regularly may result in your over-spending and exceeding your monthly budget. Always draw up your budget for such purchases and use your credit cards within this limit. Beyond this, it is better to use cash or debit cards.
2. Using credit cards for cash advances: Withdrawing money from an ATM or automated teller machine through your credit card to meet emergencies is an easy way to combat cash shortage; but have you realised the impact it may cause on your finances? Not only is the interest rate charged on the advanced amount at 2.5-3.5 per cent every month, but this also gets charged from day one itself. Besides, you will also have to pay a flat transaction fee as well.
3. During the months you have restricted cash inflows: Credit cards come with a free credit period of 20-50 days. If you do not pay your bills within the due date, you will be charged a hefty late payment fee, high interest of 2.5-3.5 per cent every month and also taxes on these charges. Hence if you think you will not be able to generate cash flows to make payment on your credit card within the due date, it is best to refrain from using it.
4. Using credit cards when you travel abroad: When you use your credit card for transactions in a foreign country, you are usually required to pay a charge on foreign currency transactions. Also, do not forget the exchange rate fluctuations, which determine the amount you will have to pay. If you instead opt for a prepaid currency card, it will help you better.
5. Using credit cards only to accumulate reward points: In order to attract customers, credit card companies offer various offers and high reward points on purchases made. While accumulating reward points is good, spending on your card only for this reason is not very healthy. You will soon realise that even though you have high reward points on your card, you will have to pay hefty bills, sometimes even on unnecessary purchases made without forethought.
6. When you shop at unsecured websites: Online shopping, in recent times has become very popular. While it is a convenient way of shopping, you must refrain from using your credit card and sharing confidential information on websites which are not secure. Always check for security levels before making credit card payments in such cases.
7. When you cross your credit limit: It is best to stop using your credit card when you are close to your credit limit. This is not only good for your credit score, but also helps you keep a check on your expenditure levels.
8. When you see a discount sale: Do not use your credit card indiscriminately as soon as you see a discount sale. This is a sure shot way of you exceeding your budget and spending more than you can afford. Be prudent when you use your credit card in such situations and purchase only what you really want. When you use your card for unaffordable purchases, you will soon end up in a debt spiral, which affects your financial position gravely.
9. When you have multiple cards: When you have many credit cards, keep a note of the billing cycle and due dates of each card. Do not use the card which is closer to the billing date; instead use a card which has a farther off billing date. This will give you a higher credit period and makes more sense to your finances.
10. When you go partying or dining: When you go out partying or even for a dinner out, refrain from using your credit card, as you may end up spending more than your budget. It is always desirable to use cash or a debit cards in such situations, as it will help you keep your spending in check.
Source : http://goo.gl/J9BafK
Rajiv Raj of creditvidya.com explains the need to keep one’s utilisation under check despite bank’s decision to raise credit card limits. It will help in maintaining a healthy credit utilisation ratio.
Rajiv Raj | Moneycontrol.com | Sep 25, 2013, 04.13 PM IST
The dynamic nature of financial markets sometimes can be befuddling for many. Any new development in markets would have misinterpretations and there would be a large part of retail consumers who buy into anything remotely connected to negativity or loss.
Such tendency gains currency and many believe negative news easily than a positive development. The upshot of this is misinformation and resultant resistance among retail investors even to understand and ascertain the reality of things.
Take for instance, the recent increase in the credit limit by banks to credit card holders who have spotless repaying record. Recently, I received e-mail from S Rajashekar, a businessman from Chennai.
His credit limit was increased and he accepted it. However, as he started preparing his file for home loan, someone told him that such an enquiry would lead to lower credit score popularly known as CIBIL score. And a worried Rajashekar wrote to me.
Some banks are going for increase in credit limit on credit cards issued to their customers on the basis of good repayment track record. Such a hike in credit limit does not depress your credit score. So keep your cool.
Here, the bank is not evaluating your credit card account afresh. It may however check your repayment history. That does not mean an enquiry to CIBIL and it is not counted as a loan application. So your CIBIL score remains intact. There is nothing to get worried about if you get a higher credit limit without providing any new income document.
But, you should be prudent enough while using increased credit limit on your credit card. Avoid borrowing too much on credit card. Banks typically offer you higher credit limit because you have been a prudent user of credit card. So, an increase in the limit of credit card must not serve as a convincing reason for you to change the way you would spend.
Stick to your spending patterns and maintain your credit profile. If you spend too much on your credit card, it works against you in multiple ways.
There are certain rules which you have to abide by to reap its benefits.
First, you have to repay all the money outstanding. If you fail to pay all your credit card outstanding, you end up paying interest. Second, failure to repay on time pulls down your credit score. Third is the credit utilization ratio. It simply means how much credit is availed by you as against how much is offered to you.
For example, if your card limit is Rs 100,000 and you spend Rs 80,000 on this card, then in that case your credit utilization ratio stands at 80 percent. High credit utilisation ratio, say more than 30 percent is not a good indicator for most credit bureaus. Consistently high credit utilization ratio pulls down the CIBIL score. So, to put it simply you should not be worried about such increase in credit limit on your credit card. Instead, be a judicious user of the increased credit limit. It is an additional leeway offered by the bank; use it to your advantage to pay for your bills or shopping without getting into a debt trap.
Also keep a track of your credit utilisation ratio. Do not fall prey to the baseless rumors about the CIBIL score. A good score is built over a period of time and can be protected at an attractive level of 750 and above, by being judicious with your use of credit.
Source : http://goo.gl/aBJuPB
There are no free lunches and contrary to the common perception, all the parties involved benefit from 0% EMI schemes.
By Sanjeev Sinha, ECONOMICTIMES.COM | 24 Sep, 2013, 01.08PM IST | Economic Times
The Reserve Bank of India has come down heavily on zero per cent or discounted interest rate schemes, and wants them stopped as it feels that consumers have been fooled by such schemes into believing that bank funding comes for free. “Such schemes only serve the purpose of (luring) and exploiting vulnerable customers,” it said in a confidential note to banks just a few days ago.
The central bank has also barred banks from charging discriminatory interest rates on loans for all product categories that don’t attract the zero per cent facility. It wants to stop the current practice where financing takes place on the maximum retail price of the product and not the market price, and wants banks to pass on benefits they get from retailers and brands to consumers.
Industry experts have welcomed the RBI move, but some of them have started questioning the timing of these measures as they believe that such schemes were driving the sales of consumer durables even in a dull economy, but sales may take an instant blow following the central bank’s move, particularly when the festive season is just round the corner.
Surprisingly, even consumers looking to buy consumer goods on easy monthly installments seem to be enjoying such schemes. After all, where else could they find a chance to stagger their payment without paying any interest on the loan amount?
However, before going overboard, you need to know the real cost of such schemes and also how do these schemes work.
“Zero percent finance schemes are quite popular with consumers, and companies use them in an efficient way to attract customers to make purchases, especially for consumer durables, during the festive season,” says Anil Sahgal, director, MAGI Research and Consultants, and co-founder of personal finance consulting portal ‘i-save’.
He says the festive season is a critical sales period for most consumer durable companies and the zero percent schemes play an important role in effective sales promotions. Since most customers do not understand the total cost of the scheme, they happily go for it as it seems like a genuine discount.
“You should, however, always remember that there is no free lunch in life. Therefore, contrary to the common perception, all the parties involved benefit out of such schemes. There is nothing like ‘zero’ or ‘free’ in anything you buy. Similarly, zero interest is nothing but higher discounts that the concerned company or manufacturer offers to the bank or the lender or the financier who in turn passes it on to the end buyer,” says a Mumbai-based financial planner.
These schemes are typically offered by finance companies or NBFCs in conjunction with a manufacturer or dealer network. The schemes basically offer a ‘zero percent’ finance, where a customer typically pays for the financing cost in an indirect manner. The indirect cost will include, for example, paying a processing fee and a significant amount as advance EMIs in addition to the minimum cash down payment. The biggest cost, however, is forfeiting a cash discount which might be available on a cash purchase.
For example, suppose Gopal wants to buy an LCD TV for Rs 36,000. At a major retail store, there is a cash discount of Rs 2000 available on the LCD. However, Gopal does not wish to pay the whole amount cash down and also does not want to spend on his credit card where the interest cost would be high. To avail of the scheme, Gopal will need to pay a processing fee of about Rs 1,000 to the NBFC. He will also have to forfeit the cash discount of Rs 2,000 since the discount is not available on a finance deal. Now, on a loan of 12 months, Gopal will have to pay 4 EMIs in advance, i.e. 36,000 / 12 X 4 = Rs 12,000. So, effectively Gopal has got a loan for Rs 24,000 only. His total cost of taking the loan was Rs 3,000 (processing fee + forfeiting the cash discount). So for 8 months, Gopal paid Rs 3,000 on a loan of Rs 24,000, paying an effective interest rate of 18.75% annualised.
Thus, it goes without saying that “there is more than what is being communicated. It is more of a marketing activity with attractive packaging, rather than providing any real service to the customer,” says Kavi Arora, MD & CEO, Religare Finvest Ltd.
Therefore, buyers who can afford to buy with their own resources should not get lured by such schemes simply because they appear attractive. However, if you must go for any zero finance scheme, you need to take some precautions. For instance, you must check the amount of processing fee to be paid besides checking the advance EMIs required. Also, compare the total cost of the zero finance scheme with the interest cost if any other loan was taken to finance your purchase, e.g. a personal loan by your bank or on your credit card.
“Customers must be aware of the details of the scheme and make an effort to compare these with other options for borrowing. If a customer has a good credit history and is able to establish a personal loan with his or her bank, it may be available at a much lower cost than the effective cost of a zero finance scheme. Also, with a personal loan, a customer has no restrictions on the choice of the product,” says Mr Sahgal.
Thus, you should zero in on any zero percent finance scheme only if you are not being charged extra in the name of fees and charges, and if the cost of the product is the same without finance options. If not, it is better to look for some other options!
By ET Bureau | 12 Jun, 2013, 04.00AM IST0 comments |Economic Times|
NEW DELHI: The weakening of rupee is set to pinch the consumer. Prices of PCs, laptops, tablets, cars, TVs, premium food, luxury items and a slew of other consumer products are likely to go up, despite subdued demand, as a rapidly depreciating rupee takes its toll on high import-content industries. In certain high margin categories like smartphones, companies might absorb the impact of depreciation as they strive to increase market share, but this luxury is not available to all.
Car sales have dropped for seven consecutive months in the country but manufacturers say they have no option but to hike prices if the rupee continues to slide. The rupee has weakened by 7.5% against the US dollar since last month.
“A sustained depreciation of 10% in the rupee will lead to a 60 basis points increase in headline inflation. But it will be a lagged impact over 2-3 months,” said Shubhada Rao, chief economist, YES Bank. While Rao said weak demand would force companies to absorb higher costs and take a hit on their bottom lines, most firms that ET spoke to said they were considering price hikes. Desktops, laptops and tablets could get dearer by 5-12% by the month end. The industry works on an inventory period of just two-three weeks and new stocks will be brought at higher prices.
“In less than a month, the rupee has depreciated more than 8%. If it’s a gradual depreciation we can plan out better. This has been sudden and we will increase prices by June end by 5-8%,” said Amar Babu, managing director, Lenovo India. S Rajendran, chief marketing officer, Acer India said the combination of depreciation and higher costs would result in prices increasing by around 10% by the month-end. Adds Rothin Bhattacharya, head of strategy, HCL Infosystems, “For the hardware industry, its been a tough two years during which the rupee has depreciated almost 30% (from Rs 43 to Rs 58 now). This time around prices will increase by at least 8%.”
Television and white goods makers such as LG, Samsung and Panasonic said the price hike could be in the range of 2-5% but said they would monitor the situation for next 10-14 days before deciding on the quantum. “There is a rolling inventory of around 30 days in the market and hence we have sometime to decide on the price hike.
If the rupee does not gain, prices would definitely go up from next month,” said Panasonic India managing director Manish Sharma. LG India managing director Soon Kwon said if the rupee situation remains the same or worsen further, it will definitely have an impact on pricing. The consumer electronics companies are monitoring currency movements and prices for categories such as LED and Plasma television as well as premium home appliances such as side-by-side refrigerators, front-loading washing machines and inverter AC. These products are either fully imported or are assembled in India with imported components. The slump in sales over the last several months has resulted in car makers resorting to discounts and price cuts but the weakening rupee is likely to reverse this trend, even as companies admit that margins will be under pressure.
“We will be left with no other option, but to increase prices if this slide continues. We are going to review our car prices at the end of this month. In normal market conditions, you can take decision on price rise much faster. But when the market is not doing well, it is not only about how the rupee is moving.. we also have to see how the competition is reacting,” said Sandeep Singh, DMD and COO, Toyota Kirloskar. Similar sentiments were echoed by other car makers. “Car companies are left with no choice but to increase prices as they are not able to absorb the impact. The affect on demand depends on the quantum of price increase on the product .
We do not expect any immediate impact on demand by the small price hike on Amaze and CR-V which came into effect from June 1,” said Jnaneswar Sen of Honda Siel Cars India Ltd. A Hyundai Motor India executive said margins of car companies will be under pressure in the medium term. “Any increase of input costs may lead to a further drop in already stagnating demand. Compounded with the depressed market conditions, margins also will be under squeeze in the medium term,” said R Sethuraman, director (finanace & corporate affairs) at Hyundai.
But its not just big ticket items like cars, TVs and laptops that could get expensive. Retail chains Future Group and Spencer’s said imported chocolates and spreads such as Ferrero Rocher, Nuttela, Orion Choco Pie, Snickers, Skippy peanut butter and American Garden will also see a jump in prices, once the current stock finishes in a few weeks time. Spencer’s Retail chief executive Mohit Kampani said for every 1% the rupee devalues, the end-price on imported food goes up by 3-4%. For imported liquor, the impact is 6% and 2-3% for imported homeware such as crockery, plastic products and home convenience products. “The net impact on consumer prices could be as high as 20-25% for imported products,” Kampani said. Sales of imported products, which were growing upwards of 20%, may sober down, he said. Foreign travel, too, has become more expensive.
“The rupee’s free fall has pushed up the cost of tour packages by 5% to 8% over the last month’s rates. Travel to regions like the UK, the US or Europe would cost around 8% more, affecting the overall budget of a traveller,” says Sunil Hasija, executive director, TUI India. Given the increase in cost of tour packages, travellers are shortening their holidays by a day or two or are rethinking their hotel options. Many tourists are opting for short haul destinations such as Thailand, Malaysia, Singapore, Hong Kong over long haul ones to offset the increase in cost.
Some travel companies insulate their customers from fluctuations in package costs due to currency pressures as they book at forward market rates to offset any actual fluctuation at the time of holiday.
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Before signing up for such a deal, understand that there is nothing as a 0% interest deal
Vivina Vishwanathan |First Published: Tue, May 28 2013. 07 02 PM IST | Live Mint|
On a Sunday afternoon Krishna Daswani, assistant vice-president (programming), Zee Entertainment Enterprises Ltd, walked into Croma, Tata group’s consumer durable and electronics chain, at High Street Phoenix Mills in Mumbai to buy an iPhone—a product that he had eyed since 2007. This time there were two differences since 2007. One, it was the latest version from the Apple stable, the iPhone 5, and two, he could buy it on an installment plan. Says Daswani, “I have the money to make the complete payment right now. However, payment in installment looks easy on pocket as I have to pay it over a period of time.”
We’ve all faced this dilemma because since January this year, we’ve been flooded with the equated monthly instalment (EMI) schemes for smartphone deals. Considering the advertising push of mobile manufacturers and financial institutions, we go behind the buzz and decode the offers.
What’s on offer?
Apple kicked off the deal mania when it began the EMI scheme on iPhone 5 in December. Samsung immediately followed suit and aggressively started marketing the staggered payment scheme on selected products. On 24 May, BlackBerry stated that it would sell BlackBerry Z10 and BlackBerry Curve 9220 on “easy” monthly instalments. The schemes vary for each model and brand, but the essential feature is a staggered payment plan wherein you pay for the phone over a period of months rather than at one go. There are various options for different products on offer. For example, you need to make a downpayment of Rs.16,990 upfront for a 16 gigabyte iPhone 5 that costs Rs.45,500. The remaining Rs.28,510 can be paid through EMIs of Rs.4,752 for six months or a 12-month deal wherein you pay Rs.2,376 each month.
Another offer allows you to make the entire payment through EMIs making no downpayment, but these have a processing charge sitting on the cost. Samsung is seeing the deal do brisk business for phones including Samsung Galaxy Note II, Samsung Galaxy Grand and Samsung Galaxy Note 800.
Says Himanshu Chakrawarti, chief executive officer, The MobileStore Ltd, “At present, almost 30% of our smartphone sales come through EMI.” Anything that breaks a larger number into smaller bits makes a deal look cheaper. But is it really so? Read on to find out.
Though the mobile manufacturers and the banks advertise that there is no processing charge, if you read the fine print you will find that banks have started charging a processing fee on select smartphone products and for select tenor. Processing fee adds to the cost and makes the 0% interest claim false. It varies from bank to bank and even store to store. In the Mumbai outlets of The MobileStore, an Essar-group owned mobile handset and accessories chain, you will find the list of processing charges for each bank.
The average processing charge is in the range of 1.00-8.75% on the principal amount for three months to nine months period. So for a phone costing Rs.45,500, the processing charge can go as high as Rs.3,982, or 8.75%. Also it varies across tenor. So check with the store and the bank about the details of the processing charge. Chances are that the companies that recently started offering this service will give you a better deal. Ask the question: Is there a processing fee for this deal and how much it is?
Payment option matters
Payment option can also make a difference to the final cost of the phone. Initially you could go for these schemes only through credit cards. But now companies are providing these schemes on debit cards as well. Says Devang Mody, president-consumer business, Bajaj Finserv Lending, “Many financial institutions do this as they can use up the customer’s credit limit for the EMI.”
So if you are using your credit card for a purchase of Rs.45,000 and you credit limit was Rs.1 lakh, it will get reduced to Rs.55,000 till the amount is cleared. Since March, Bajaj Finserv has been providing the scheme on debit card with no processing charges as of now.
The scheme varies from credit card to credit card too. An HDFC Bank Ltd credit card, for instance, gives you an “at no extra cost” offer. At present there is no processing charge on this scheme on certain models. An ICICI Bank Ltd credit card offers a cashback offer on the same Samsung smartphone that gives you a cashback of Rs.5,665 on your credit card if you purchase a phone for Rs.37,900. But remember that only certain ICICI Bank credit card customers will be eligible for this (cashback) offer.
The card you swipe matters for lower processing fee too. For instance, on the same product Axis Bank Ltd charges a processing fee of Rs.3,791 for a 12-month EMI while ICICI Bank charges Rs.4,163 for the same period. However, if you swipe HDFC Bank card you will get the lowest processing charge of Rs.3,640.
If you are using your card to buy, ask the question: What is the benefit or cost of this deal if I use my credit card? Name your card to make sure you get the right deal.
Compare for best pricing
If you buy a phone on EMI the salesman will sell it to you at the maximum retail price (MRP). However, if you buy it with cash down, most retailers sell it below MRP. You get a discount of 3-5%. Also you can get a cheaper deal at online shopping sites such as Ebay.in and Snapdeal.com compared with the retail outlets. Says Tony Navin, vice-president—business development, Snapdeal.com, “Online retailers will give you a cheaper deal as there is no cost overheads such as rental and inventories and hence the benefit can be passed on to the consumer.” Says Mody, “Processing charges and pricing depends on the manufacturers need to sell the product. If he (manufacturer) wants to get rid of a certain product, you may get a cheaper deal. Also it depends on the business proposition between the manufacturer and the financial services provider.”
Always remember that haggling, even at fancy looking stores, always gets you a lower price.
What should you do
Convergence Catalyst, a research firm, estimates that smartphone sales will be in the range of 44 million to 48 million in 2013 in India compared with 20 million to 22 million in 2012. And some of these sales will be nudged through the EMI route.
Before you sign up for such a deal, understand that there is nothing called a 0% interest deal. You will pay, one way or another. If the deal still works for you, go right ahead and get the phone home.
Nidhi Nath Srinivas, ET Bureau Apr 21, 2013, 06.53AM IST
Think you know all about Gold? Think again. Here are 10 facts that will give you a better understanding of the gilded stash in your locker. And, in case you didn’t cash in on the tumble in prices earlier this week, fret not: the gold story isn’t over.
1) We still don’t own enough gold
If all the gold ever mined was made into bricks it would end up in a block 20 metres cubed or around 60 ft wide, high and deep. This means if all the gold in the world was gathered in one space it would fill just one large house. At the price of $1,500/troy ounce, reached on April 12, 2013, one tonne of gold is worth approximately $48 million. The total value of all gold ever mined would exceed $8 trillion at that price. Though it sounds like a lot, there is actually little to go around. India owns 18,000 tonnes of above-ground gold. Distributed equally, each Indian would barely get half an ounce of gold, a figure significantly below consumption in Western markets.
2) Gold reserves will last another 12 years, but…
The volume of gold available for mining is a product of both geology and economics. Measuring the volume of gold ore available for mining will depend on what quality of gold ore grade is classed at a specific time as a viable ‘reserve’ ore that can be economically mined at the current or expected gold price. The US Geological Society estimates global gold reserves at around 51,000 tonnes. On this basis, if mine supply were the only source to satisfy current levels of demand, these reserves would last 12 years or so. Known reserves have remained fairly constant over recent years since production from new sources has replaced reserves that have been exploited.
3) We are close to gold’s minimum support price
The global average production cost of gold is about $1,200 an ounce. It was quite stable in the 1990s but has risen by almost 70% over the past five years. So, this month’s drop to $1,360 an ounce brings gold closer to the global average production cost. It couldn’t have been worse timed for gold companies such as Barrick Gold Corp and Newmont Mining Corp, the world’s two largest producers. Despite 12 consecutive years of rising gold prices, shareholders have lost faith in the gold-mining industry, which has seen soaring production costs and made money-losing acquisitions. If prices stay low, the smaller players that carry out exploration and development will get squeezed out, eventually affecting gold supply.
4) Now gold too is made in China
Just 20 years ago, that country wasn’t even on the gold map. Yet China set out to build up its gold mining capacity and succeeded to the extent that it’s now the world’s biggest gold producer. China produced 400 tonnes in 2012 , and expects to touch 450 tonnes by 2015. None of the metal ever leaves the country. According to the World Gold Council, China is the world’s sixth-largest holder of monetary gold. The collapse in bullion prices will encourage China’s top gold producers, Zijin Mining and state owned Shandong Gold Group, to prowl around for cash strapped small- and mid-sized miners overseas.
5) Americans are going back to gold as money
More than a dozen states in the US, led by Utah, Arizona, Kansas, Texas and South Carolina, are preparing to adopt gold and silver coins as money, like the dollar. Lawmakers in these states distrust the Federal Reserve and fear that the greenback may become worthless. The US Constitution bars states from coining money and also forbids them from making anything except gold and silver coins. Advocates say that opens the door for the states to allow bullion as legal tender. How will it work, given gold’s fluctuating prices? The process is being finalised. Gold is mined both in Arizona and Utah, while Nevada is the largest US producer.
6) There is gold in your smartphone
After silver, gold is the best conductor of electricity. It also doesn’t corrode or tarnish whenever it comes in contact with water. This makes gold the perfect, albeit expensive choice, for the consumer electronics industry. There are 10 troy ounces (1 troy ounce =31.1034768 gms) of gold per tonne of smart phones. Some 10,000 phones weigh one tonne. With gold selling for about $1,500 per ounce, that would yield $15,000. Two hundred laptops would yield five troy ounces of gold. Recyclers typically burn circuit boards and use cyanide on the ash to separate the gold. British luxury designer Stuart Hughes has created a luxury iPhone 5 for $15.3 million, which is coated in solid gold and features both black and white diamonds.
7) Here lies the gold, just as Die Hard showed us
New York Fed’s vaults hold about 23% of the world’s official gold reserves. The secretive vault situated 80 feet below ground level round the block from Wall Street stores gold belonging to several foreign governments. Vaults belonging to the Bank of England at Threadneedle Street in London contain the second-largest stash of gold reserves. The Reserve Bank of India owns 557.75 tonnes of gold. Of this, 265 tonnes is lying in the vaults of the Bank of England and the Bank for International Settlements. Countries across the world have been concerned about their gold deposits stored abroad. Hugo Chavez brought back Venezuela’s gold reserves from the Bank of England last year.
8) Make sure your gold is not tainted
There exists a shadowy chain of smuggled gold that stretches from the conflict zones of the Democratic Republic of the Congo to the markets of Dubai and jewellery shops in Mumbai and Delhi. More than $600 million worth of gold is estimated to leave Congo every year, and armed groups are funding their operations through control of a significant percentage of that amount. The WGC (World Gold Council) and other industry bodies are now enforcing standards for greater traceability in supply chains. Under the Dodd-Frank financial regulation act, US-listed companies that source gold, tungsten, tantalum and tin from Congo or its neighbours must assure the US stock exchange regulator that their business is not helping fund conflict.
9) Silver still packs a punch
The price of silver has risen over 100% during the past four years, and it has risen more than 500% over the past 10. Silver has been in a long-term bull market that has only recently paused to consolidate its tremendous gains after peaking at $49/ounce level in April 2011. The silver market is seeing a new wave of buying emerge once again as prices soften. Regardless of price, metallic silver has strategic importance in industrial and medicinal applications for which it cannot be readily replaced.
10) Yes, gold story is still alive
Physical demand has picked up momentum. India was the first to respond, followed by Dubai, Japan, Europe and China. The US Mint has sold 147, 000 ounces of gold coins in April so far. This is already nearly as much as in the whole of January, when coin sales peaked since the summer of 2010. Since the price slide, nearly 100,000 ounces of gold coins have been sold within just three days — the last time such a high volume was sold was in 2008 following the collapse of US investment bank Lehman Brothers. Central banks bought 534.6 tonnes in 2012, the highest level since 1964. Private investor demand for gold bars and coins in 2012 was 20% above its 5-year average.
August 15, 1971: Gold standard abandoned
Struggling to pay for the cost of Vietnam war, President Richard Nixon abandons the so-called “gold standard”. The dollar had been fixed at a rate of $35 to an ounce. That peg is dropped and gold starts to rise.
A look at the rise in gold prices since 1979:
Jan 31, 1979 – Rs 595/10gm
Soviet invasion of Afghanistan in January 1980 – International political tension soars after the Soviet invasion of Afghanistan. Gold hits a record of $850 an ounce on January 21.
Confidence returns in 1981-82: Gold prices begin to fall as investors regain some confidence in the US economy and the dollar. Inflation also begins to slow.
Jun 30, 1982 – Rs 954/10gm
July 31, 1985 – Rs 1,221/10gm
July 1986 – South Africa: Western nations impose sanctions on South Africa in protest over its apartheid laws. Gold prices jump 23% between July and October as traders fear that South Africa might cut gold exports in retaliation.
1987 – Inflation returns: Gold price hits $500 per ounce for the first time in five years as inflation accelerates again in the US.
Jan 31, 1989 – Rs 1,722/10gm
July 30, 1993 – Rs 3,955/10gm
Banks start selling gold in July 1996-99 – Gold prices fall on news that the International Monetary Fund had been considering selling 5 million ounces to help pay for debt relief in the developing world.
Jun 30, 1997 – Rs 3,921/10gm
In July 1999 gold hits a 20-year low of $252.8 an ounce.
Central banks start to follow the IMF’s lead. The Swiss National Bank announces a plan to sell 1,400 tonnes of gold, Australia also sells a large part of its reserves.
Oct 29, 1999 – Rs 4,340/10gm
The British government sells more than half of its gold â€” almost 400 tonnes â€” between 1999 and 2002 raising $3.5 bn.
Feb 28, 2003 – Rs 5,509/10gm
May 31, 2005 – Rs 5,896/10gm
August 2005 – Hurricane Katrina: Hurricane Katrina boosts oil prices and raises fears that a period of quicker inflation was returning. By December 2005 gold is at $536.50 an ounce, the highest level in 24 years. The weak dollar also helps boost gold throughout 2006.
May 31, 2006 – Rs 9,844/10gm
Jul 29, 2007 – Rs 8,595/10gm
Credit crisis in August 2007 – Investors buy gold as a safe haven amid the growing financial crisis. The falling dollar and rising global inflation also boost the metal.
2008: The world’s central banks sell gold.
Mar 31, 2008 – Rs 12,559/10gm
Oct 31, 2008 – Rs 12,597/10gm
Dec 31, 2010 – Rs 20,184/10gm
Jul 29, 2011 – Rs 22,457/10gm
Nov 30, 2011 – Rs 28,378/10gm
2012: Central banks become aggressive buyers, purchasing a record 534 tonnes to replace the paper currency in their national reserves.
Sep 28, 2012 – Rs 30,566/10gm
2013: Short selling triggers gold market crash
Apr 20, 2013 – Rs 26,475/10gm
Sumant Banerji, Hindustan Times, New Delhi
The winter sale may have ended, but for car buyers, this may be the best time to hunt for a bargain. In fact the March, which traditionally sees the best monthly sales, may be significantly better than December and January for auto hunters.
From a low Rs. 10,000 to a phenomenal Rs. 3.75 lakh, everything can be bought at a bargain, barring a Renault Duster here and a Swift diesel there.
The reasons are not far to seek. High interest rates, fuel prices and an overall slowdown in the economy has spooked car buyers and kept them away from showrooms. The uncertainty in the economy has resulted in consumers postponing their purchasing decisions, at best an uneasy situation for the industry.
“The industry is under pressure on account of economic slowdown which has effected disposable incomes,” said Rakesh Srivastava, vice president marketing and sales, Hyundai Motor India Ltd. “This has affected sales, leading to negative growth. In these difficult and challenging times we have undertaken aggressive and segment focussed sales promotion campaigns to improve sales and increase market share.”
The problems are also exacerbated by the fact that March is always the best month for car sales and manufacturers generally jack up production and increase inventory both at factories and dealerships.
Early indications, however, are that this year the March automobile sales may be even lower than frightful February, which saw a steep sales fall of 26% year-on-year — the worst decline in 12 years. The mismatch has led to many companies to temporarily shut down their factories to ensure that inventory does not pile up more than can be avoided.
“It is not easy to quickly realign production targets with the demand on the ground, especially in such months that traditionally see very good growth,” said Jnaneswar Sen, senior vice president, sales and marketing, Honda Cars India. The company is set to launch several new models this year.
Source : http://goo.gl/DsmxX