FRDI bill: Your deposits are safe and banks cannot use them without your consent

Bank deposits are the one true friend of a middle class Indian and any threat to their safety is terribly upsetting. The government will introduce a new bill in Parliament in the winter session called the Financial Resolution and Deposit Insurance (FRDI) bill. One section of this bill is causing bank depositors to fear for the safety of their money. I read the bill over the weekend and this is my understanding of what the aim of the bill is and what it means for you.

Read more

 

Move over NPS, ETFs will eat your lunch

ICICI Prudential Mutual Fund’s new fund offer (NFO) of Bharat 22 exchange traded fund (ETF) is in the market this week seeking investor money for the government’s disinvestment programme. Looking through the document, I was struck with the expense ratio of this fund. At 0.0095% per year, this is the cheapest ETF in the market today. Understand what this cost means first. The expense ratio describes the price you pay for the facility of handing your money over to a fund manager and it is charged on your funds under management. For example, a Rs10 lakh corpus, with an expense ratio of 1%, will cost you Rs10,000 a year. You don’t have to cut a cheque for this cost since it is taken by the fund house out of your corpus—that’s why it is called net asset value, it is ‘net’ of costs. Expense ratios have a big impact on investor returns over a lifetime of investing. At 0.0095%, Bharat 22 will cost you Rs95 a year. Reliance AMC’s CPSE ETF (the first government disinvestment fund) costs 0.07% or Rs700 a year. A 2% managed fund expense ratio costs you Rs20,000 a year.

Read more

 

Demonetisation, one year later. Success or failure?

Most people have a “where I was” story about the night of 8 November 2016. Some of us also have a story on ‘how much money I had’ on the night that Prime Minister Narendra Modi invalidated 86% of Indian currency. I was just dragging myself back home after my Iyengar yoga class (those who join the Beginners will identify with my use of the word ‘dragging’), ready to eat some dinner and collapse. But of course, the team and I were up until midnight, reporting and writing on the biggest news of a personal finance journalist’s lifetime. How much money did I have? I had three Rs500 notes that day. Having moved to cards and then digital, I’d moved my household staff to bank accounts and electronic transfer of salaries some years back. Cash was needed for everyday buying of milk, bread, eggs, vegetables kind of stuff. The local Mother Dairy booth was accepting old notes for future purchases, so I was spared the lines to deposit my money. We all have our stories of what happened that night. This was mine.

Apart from the personal shock to our money lives, demonetisation quickly became a huge political, social and intellectual battle. The battle lines got drawn deep in the ground and your pro- or anti-Modi stance decided where you stood on the demonetisation debate. I wrote a column one day after demonetisation in which I said that the step will raise the cost of black money, it will not eliminate it. That it is one step in a larger plan to go after corruption. You can read it here: bit.ly/2mmdYeZ. How does it look a year later? Modi gave four reasons for demonetisation: to curb corruption, black money, fake notes and terror finance. To judge the success or failure of demonetisation on these four metrics is almost impossible because demonetisation was one of the several weapons the government has deployed against these issues. But let me try and unpack them.

Has there been a dent in corruption and black money? Anecdotal stories say that high-level corruption in the central government is gone, but the cancer of graft elsewhere in the system still thrives. It is unrealistic to expect the deep-rooted habit of graft to disappear overnight, but at least there is serious political will behind the anti-corruption war in India today. What of black money, or money on which income tax has not been paid? Black money is back in the system—talk to any builder (real estate is the biggest sump of black money and talking to builders is a quick way to figure out if cash deals are back) and they say it is as if demonetisation never happened. But they admit to the cash ratio going down and the fear factor lurking at the back of every deal.

Read more

 

How are mutual funds preparing for growth?

Are mutual funds ready for exponential growth?

Speakers:

Anuradha Rao, managing director and chief executive officer, SBI Funds Management Co. Ltd

Kalpen Parekh, president, DSP BlackRock Investment Managers Pvt. Ltd

Milind Barve, managing director, HDFC Asset Management Co. Ltd

Nilesh Shah, managing director, Kotak Mahindra Asset Management Co. Ltd

Nimesh Shah, managing director and chief executive officer, ICICI Prudential Asset Management Co. Ltd

Swarup Mohanty, chief executive officer, Mirae Asset Global Investments (India) Pvt. Ltd

Moderator: Monika Halan, consulting editor, Mint

Edited excerpts of the discussion:

Monika Halan: I want to actually start with a small story. This is ending 2010. I am at an airport. I will not name the person but it is a life insurance industry CEO who met me at that airport and said, “Ye to khatam ho gayi industry (This industry is finished).” 2009 was when the front load of the mutual fund product was taken away by Mr. Bhave (ex chairman of Securities and Exchange Board of India). So he said we will just come and clean up this industry. It’s over. Fund managers will just go home.

That was 2010 and today in 2017, we’re looking at a Rs20 trillion industry. So I just want very quick opening statements to say that should we have the question mark in the topic today. This is financial year 2018. So, are we asking a question or should we be making a statement?

Let’s just start with you Swarup and just walk down the panel.

 

Read more