Wednesday, February 22, 2017

'Money order' days are coming back soon? India Post, the flag bearer of financial inclusion

Launch of #Indiapost #payments-bank and #aadhaar-based-money-transfer - and my childhood memories

I am born and brouht up in a semi-urban locality in Jamshedpur, Jharkhand, and hold some fascinating memories of childhood days with my grand-parents. Holding my grand-mom's hand, my tours to Post-office and banks comes flashing often. I remember my grand ma calculating her interest earnings, gifting us Indira Vikas patra, Kishan Vikas Patra certificates as birthday gifts. Urging my father to buy NSC certificates was a routine for her without having a proper understanding of product positioning but with a complete knowledge of how to "double" her savings with fixed income products.

Also Read - Airtel Payments Bank

I still vaguely remember, I would be about 8 years old when my cousin cleared his board exams with brilliant numbers. My family was thrilled. My Grand-father enthusiastically summoned my Grand-ma to send "money order" of Rs. 500 to my cousin as blessings. Sending any other gift through courier was a far-fetched dream at that time. And as usual, I enthusiastically accompanied my granny to the Post office and see her write neat requisition slip, speaking to the head post master, giving some extra money as a fee for transfer and done! We received a letter from uncle and brother in receipt and thanks within the month (we didn't have a telephone yet).

India Post was an important part of our lives with the Postcards and in-land letters, the deposit certificates and occasional money orders. It was a complete financial service destination for my grand mom with their monthly income scheme and senior deposit schemes. 
It was such a thrilling experience from my 'slo-mo' childhood memories. The visit to Post office was just fascinating!

It may sound weird for a bit that why I am detailing out my childhood experience in a finance-centric blog. Hold on! I will tell you. ☺ I just came across the news yesterday that India Post payments bank plans to launch Aadhaar based money transfer. Though the minute details aren't out yet, I just recalled the sweet childhood days! It will be fascinating to see how the whole process pan out. India Post one of the oldest entities in India, with more than 1,50,000 point of presence and 3 lakh postmen on its payroll clear winner in the outreach to the rural and remotest places in India. According to reports the India Post has more than 89% branches are in rural areas. 

Though #India Post temporarily lost its sheen during the late 90s and early 2000's, with many service running into losses, closure of its telegram services and thanks to the internet era, postcards and inland letters are history now. But great to see that the old champ is all set to get on with the modern times and give a high competition and contribution in the banking system of India

India Post, older than our formal banking system has served Indian population with various fixed income product and Many times higher return on fixed income products. The institution is a true symbol of financial inclusion in India, quietly working for decades humbly without hogging much lime-light. This is an ode to you India Post, the true torch-bearer of financial inclusion journey.

I welcome you whole heartedly for your newest venture of Payments banking. Despite strong opposition by the banking lobby, you made it there and you truly deserve it. I wish you write an amazing story of financial inclusion in India for people to acknowledge and remember you for your unforgettable contribution to rural India.

Saturday, February 18, 2017

Different kinds of lesser known bonds with interesting names

Before I resume to my usual dopes on personal finance, I thought today we will discuss something interesing and informative.  and stumbled upon an article which talks about some srikingly different names of bonds, very unusual of  such a strict financial instrument.

Till recently I thought it's only the phone makers who were obsessed with food or fruits who named their products as "Apple", "Marshmellow", blackberry and so on until I came across 'Masala Bonds'. But hold on, there are a host of it. On a newspaper, I found names like 'Panda', 'Samurai' and 'Kiwi' used for different bonds. I wished to dig further and present to you the list of such lesser known bonds from across the world with different names. 

These interesting bond names are popular in many countries - India, UK, China, Japan, etc. The common factor in these bonds is their features offering. These bonds are mostly used by either foreign country corporates or bonds are sold in foreign country denominations, however with some exceptions like ‘Kiwi’. The bond names amazingly express the love for food amongst the financial community across the globe (on a lighter note). Few names are also attributed to other important symbols of the nations. The cuisine or symbol reflects the connection with the country. And my obsession with financial market and personal finance both grows stronger J

Here I present to you the compiled list, sourced from Wikipedia, newspapers and my own memory. You may not require this list for investment purpose but can serve as informative and interesting read. I would like to go with chronology - 

Arirang Bond  -  Arirang is Korean folk song, used for a won-denominated bond issued by a foreign entity in South Korea. It is a very small segment of their bond market, the Asian Development Bank issued it in 1995.

Baklava bond – Name is taken from a Turkish dessert, Baklava is a bond denominated in Turkish Lira and issued by a domestic or foreign entity in Turkey. Turkish government allowed companies to issue these bonds in the year 2010.

Bulldog bonds – Taken from the national symbol of united Kingdom, Bulldog bonds are sterling-pound based bonds (the third largest reserve currency in the world) issued by non-British institutions that want to sell the bond in the United Kingdom.

Dim sum bond – A popular appetiser even in Indian Chinese restaurants, these are bonds issued outside of China but denominated in Chinese renminbi, rather than the local currency listed in Hong-kong, not in mainland china. 

Formosa bond - Formosa, is an alternative name for the island of Taiwan. These bonds issued in Taiwan but denominated in a currency other than the New Taiwan Dollar.

Huaso bond,- Derived from the term referring to Chilean cowboys, a Chilean peso-denominated bond issued by a non-Chilean entity in the Chilean market.

Kangaroo Bond – The name deriving Kangaroo, a national animal from Australia, is the type of bond issued by foreign entities, traded in the Australian market, is denominated in Australian currency, is subject to Australian laws and regulations.

Kimchi Bond - kimchi, name derived from a Korean side dish, is a non-won-denominated bond issued in the South Korean market.

Kiwi Bonds – Derived from the famous fruit from New Zealand, Kiwi bonds are bonds offered directly to the public and available only to New Zealand resident investors, redeemable on maturity or at the option of the bondholder and are issued in 6 months, 1 year or 2 years 

Lion city bonds – The name derived from the national symbol of lion head, Lion City bond foreign currency denominated bond issued by foreign company in Singapore

Maple bond – I just love the maple syrup over a hot pancake on breakfast. However, we are here talking about the Canadian dollar-denominated bond issued by a foreign entity in the Canadian market.

Masala bonds – Derived from the Hindi word for spices, these are rupee-denominated bonds 
issued outside India.

Matrioshka Bonds – Name derived from the famous Russian dolls, these bonds are referred the Rubble denominated bonds, issued by foreign entities for reaching Russian investors.  

Panda Bond - A Panda bond is a Chinese renminbi-denominated bond from a non-Chinese issuer, sold in the People's Republic of China.

Samurai Bond – a term referred for military nobility from Japan of medieval and early-modern Japan, a samurai bond is a yen-denominated bond issued in Tokyo by a non-Japanese company and subject to Japanese regulations.

Shibosai Bond - yen-denominated bond sold directly by issuing company, a bond denominated in yen sold directly to investors by the foreign issuing company.

Shogun Bonds – The term ‘Shogun’ is used for Japan’s supreme military leaders from 1603-1869. It is used for the non-yen-denominated bond issued in Japan by a foreign institution or government.

Yankee Bonds - The word is derogatory a term used to describe Americans by the Brits, Canadians, Australians and the like. A Yankee bond is a bond issued by a foreign entity, such as a bank or company, but is issued and traded in the United States and denominated in U.S. dollars. 

Uridashi Bonds – A Japanese word for ‘Sale’, Uridashi Bonds are the secondary offering of bonds, denominated in Yen or issued in a foreign currency. These bonds are sold to Japanese local/ individual investors

Hope it made an interesting read. will soon be back with my new post. Till then.. enjoy! A very happy weekend to all of you :) see you soon

Monday, February 13, 2017

Pay Taxes, for a better India!

Following the demonitisation spree, we had the union budget session 2017-18, where taxation was one of the most debated topics. Its been more than a month of concluding 50 days period of complete withdrawal of Rs. 500 and Rs. 1000 currency notes. We must understand that the primary reason of the demonitisation was to fight corruption and black money, which primarily arises from illegal income and tax evasion. As we are just fresh out of budget announcement, I thought it would be only appropriate to share some thoughts on the importance of taxation for any country. 

Government as an entity doesn’t have any money of its own; taxes are the main source of funding for the government. In India, we have two types of taxes, direct and indirect. Direct tax comprises of income tax, surcharge, gift tax, wealth tax, corporation tax etc. Indirect tax is a component added on a particular expense incurred by individuals on service received or buying goods, collected by the service providers or seller of goods in form of service tax or VAT.

The tax earnings are used for administration, infrastructure, education, security and defense amongst others. Government-run hospitals provide services for almost free of cost, government-run schools across the country educate children for negligible fees; provide cooking gasses for subsidized prices.  A major part of our tax contribution goes into our security and defense system. The taxes are utilised for maintaining law and order in the country, maintaining cleanliness by the municipal corporation etc. A major area of spending of these tax monies are towards healthcare and medical expenditure of the less-privileged children. All of these things cost money and while not everyone uses them every day, most of us use or benefit from them over time.

What government takes from in form of direct and indirect taxes is spent on the common development areas of the country. So, with increased tax income government can allocate more funds towards social benefits. 

India vs. developed countries
One may argue that Indian government doesn’t provide for medical and social securities like other developed countries, but we need to have a fair base for comparison. We must appreciate the fact that the developed countries have higher income tax earning. According to government data, only 4.1% of total Indian population pays taxes, while in the US, 45% population pays tax. The tax rates in these countries are comparable and higher than India.

Tax is the price we pay to live in a civilized society. An increase in a number of taxpayers is only a sign of prosperity of the country. The temptation towards evading tax is a crime (in making) towards the society. There are advocates of lower taxes who says, it helps in economic growth by reducing cost, it only benefits the traders and the upper segment of the society. In a holistic growth of socio-economic environment, taxes pay a key role.

Make use of 80C benefits
Image taken from wealth18

This union budget, the thresold limit for taxable income has been set above 2.5 lakh. Also, an additional benefits of making the first tax slab to 5% and for tax payersearning upto Rs. 3.5 lakh will get a rebate of Rs. 2.5 thousand. A majority of population within the 5% tax bracket, earning up to 4.5 lakh can completely save taxes by the 80C investment instruments. A fair exemption upto 1.5 lakh rupee can be claimed on various investments and expenditure listed by income tax department. Earning arising from long-term equity investment doesn’t attract any taxes, similarly for equity mutual funds. Also, ELSS schemes managed by mutual fund companies are specifically designed to get triple tax benefits with only 3 years lock in period. There are also other investment options like – PPF, Tax Saving Deposits, NSC and few more dedicated towards tax-saving purposes. Additionally, there is a special exemption up to Rs. 50 thousand for citizen who contributes towards NPS. Government also encourages taxpayers to build their homes by offering exemption towards repayment of loan and interest payout. One must utilize these benefits for saving taxes, creating wealth, securing health and donating for good causes. 
Higher income from taxes reflect a good health of the economy of the country, similarly, an individual who needs to pay tax only signifies that his income is high enough to contribute towards the wellbeing of the country. Discussion on positives and negative about taxes are debatable, we must look at taxes in a rational and positive light and its contribution towards the country as a whole.  The culture of paying taxes need to imbibed in our lives.

Sunday, February 12, 2017

What is Payments bank? Let us see how AIRTEL Payments Bank work

what are the features? what you can and cannot do at payments bank!

A #Payments bank is a bank where you can deposit money, earn interest on it, use it for remittance services, Payments, transfer, net-banking and third party transfer. However, Payments banks cannot give out loans, issue credit cards. The maximum amount deposit is capped at Rs. 1 lakh.
The main objective of launching these banks is to reach out to the maximum population without much infrastructure requirements, with help of technology. These banks are beneficial for small businesses, low-income households and places where the full-service banks are not present or unable to address the needs of the low-income or small business owners, migrant workforce etc. With this initiative, RBI aims at reaching the remotest areas of the country. For ease of use and stay away from ambiguity, RBI has made it mandatory to use “Payments Bank” mandatorily in the name. As per RBI guidelines, Payments Banks must of 25% of its branches in the un-banked rural area.
Payments Banks work very well in the rural India, complementing government initiatives of financial inclusion. It will empower those citizens who have only transacted in cash, to head towards formal banking.

Presently, we have Airtel Payments Bank and soon PayTM is launching PayTM Payments Bank and IndiaPost Payment Bank.  

As Airtel Payments Bank is already functioning, let us just have a glimpse of what it offer?


You have to enter your Aadhaar No. to get started.

Then the page takes you o register your PAN details, annual income and profession

Then next page you have to fill in the nominee details
It takes you to page – Banking points near you

1. An account can be opened with Rs. 100, can deposit upto Rs. 1,00,000. No charges on cash deposits, in case of cash withdrawal,
2. Customers can withdraw money as low as Rs. 10
3. Fee for withdrawal is Rs. 5-25, if the amount is between Rs10 and Rs4,000
4. 7.25% interest on savings account
5. Free accident insurance worth 1 lakh
6. Can be used for mobile recharge, sending money, paying utilities bill, pay in shop etc
7. Intra-bank transfer within Airtel Paymentss Bank via Internet banking, mobile app or USSD is free
Freebies along with it
1. 15% cash back on CCD
2. 5% Extra cash back on Apollo Pharmacy

Convinience come with some charges - 
1. Withdrawal charges for customers have to pay Rs5-25 for withdrawal of Rs10 to Rs4,000
2. Customers have to pay 0.65% of the withdrawal amount above Rs4,000, for withdrawing Rs. 10,000, customer needs to pay Rs. 65.
3. Digital transfer of money from Airtel Bank to other bank will charge 0.5%
      4. Intra bank transfer to Airtel Payments Bank using bank point – 0.5% 
      5. Money transfer from Airtel Payment Bank to any other bank using bank point  1%
      6. Account closure charges Rs. 50

What you can’t do with Payments Bank?
1. No credit card
2. Cant avail loan
3. No deposits over Rs. 1 lakh

4. NRI deposits will not be accepted.