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| March 31, 2017 |
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Impact 
Black-White-Black…
No, these are not racist comments
Rather this one is about how quickly money can change colour.
The Financial Year (FY) 2016-17 will be remembered in India for a long time; as the year when Modi Government took a radical step of discontinuing the circulation of over 86% of India’s currency overnight.
Demonetisation was portrayed as a decisive action against the black money stash. But it seems it was a misfired salvo. Total deposits in Jan Dhan accounts amounted to Rs 44,867 crore as on October 26, 2016.
By the end of November 2016, the deposit base in Jan Dhan accounts swelled to Rs 74,321 crore. In time, the cash crunch eased and the balloon of deposits was pricked. As on March 15, 2017, the amount parked in Jan Dhan accounts reduced to Rs 63, 836 crore.
Bankers don’t see anything wrong with this trend so far...
“We have seen some withdrawals in Jan Dhan accounts in the past two months. However, so far, it is not something alarming,”said Mr R K Takkar, managing director and chief executive officer, UCO Bank.
While, Pawan Bajaj, managing director and chief executive officer, United Bank of India said, “We will have to wait for the data after March 13, when caps on withdrawals were removed, to assess the extent of withdrawals.”
If you think poor families have no option but to withdraw their money from Jan Dhan accounts, as they survive with extremely scarce means, you are perhaps missing the bigger picture.
Let’s be clear, black money holders adopted the carrot-and-stick approach to channelise their ill-earned wealth to the Jan Dhan accounts of the poor; their rationale was, no authority would question the weaker sections of society. This will now prove a double whammy for those who literally ‘rented’ their Jan Dhan accounts to black money holders.
Why so?
At or against their will, Jan Dhan account holders will have to return the money to whom it belongs to. But if something goes wrong, they will suffer instead, and not the real perpetrators.
Out of 28 crore Jan Dhan accounts, nearly 17.8 crore accounts have already been linked to the Aadhaar databank. This means, tracking transactions in these accounts has become extremely easy. If it’s found that deposits in Jan Dhan accounts are disproportionate to the income profile of the account holder, he/she will face trouble.
The bigger question is how the Government will catch the ones moving their black wealth in and out of the system by exploiting gullible Jan Dhan account holders as scapegoats
There is a need for Modi’s camp to learn from its mistakes quick!
Mistake 1: Government assumed that the black money holders will struggle to to convert their black wealth into legitimate wealth.
Mistake 2:It also took for granted that illegitimate wealth earned over years can be either confiscated or legalized by intimidating black money holders. Failure of the Pradhan Mantri Garib Kalyan Yojana (PMGKY) and Income Declaration Scheme (IDS) suggests that black money holders are shamelessly adamant and won’t mind fighting with the Income Tax (I-T) authority.
What to expect now?
Although the Government has assured time and again that tax officials won’t harass innocents. As far as Jan Dhan account holders are concerned, it would be extremely difficult to judge whether a particular person allowed the black money holder to use her/his account voluntarily or involuntarily.
Over 90% of cancelled notes have already returned to the system and after remonetisation, even the bank deposits have started dipping. As said earlier, PMGKY is heading to a big failure. In a nutshell we are getting back to square one.
The black-and-white game will be played—right under the nose of the Government. For now, the black sheepis clearly winning. It will be interesting to see how the Government responds
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Impact
The Government has been serious about affordable housing projects. As it endeavours to provide shelter to economically weaker sections of society, it's been taking a number of steps to make affordable housing even cheaper.
Remember on New Year's eve, exactly 3 months ago, India's Prime Minister, Mr Narendra Modi had announced a home loan subsidy scheme under Pradhan Mantri Awas Yojana (Urban). The Central Government offered interest subsidy of 4% on home loans upto Rs 9 lakh and 3% on loans upto Rs 9 lakh. The Government recently issued the notification in this context which has revealed some interesting facts.
Those whose income falls in the range of Rs 6 to 18 lakh—called middle-income group—will be eligible to apply for the subsidised loans under Pradhan Mantri Awas Yojana. There are 4 conditions though:
- The beneficiary shouldn't own another/second house.
- The carpet area of the house shouldn't be more than 90 square metres for those earning in the range of Rs 6 lakh to Rs 12 lakh, and in case of those falling in the income range of Rs 12 lakh to Rs 18 lakh, the carpet area of the house shouldn't be more than 110 square metres.
- The tenure of the home loan shouldn't be more than 20 years. However, the buyer can opt for the shorter duration.
- Loans applied after January 01, 2017 or proposals under consideration from the same date only, will qualify for the home loan subsidy scheme.
The Government will pay the entire subsidy amount upfront, which will help borrowers lower the EMI by Rs 2,062 on the loan amount of Rs 9 lakh, while the liability for those borrowing Rs 12 lakh will fall by Rs 2,019 per month. The assumed discounting rate is 9%. For this calculation, the tenure is assumed to be 20 years.
Although the Government has tried expanding the scope of the scheme to the middle income groups living in the urban areas, some practical aspects are missing. For example, why will a person earning Rs 19 lakh apply for the home loan of Rs 12 lakh? Secondly, in the urban areas where incomes are as high as Rs 18 lakh, they will seldom have property rates so affordable that one housing unit can be bought with a Rs 12 lakh home loan.
Nonetheless, the weaker sections, especially in tier 2 and tier 3 cities, are likely to benefit from this initiative.
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Impact
Will robots replace humans in the workplace altogether?
The question may sound blasphemous.
But unfortunately, some robo-advisory platforms are propagating a wrong message. Many of them are presenting robo-advisory solutions as a substitute to financial planners. While there is no denying that a basic financial plan can be designed with the online platforms; a detailed one is too complicated for it to handle. At best, robo-advisory platforms can deal with the quantitative aspects of financial planning, but they might fail miserably because they are incompetent to consider the qualitative aspects.
To read more about this story and Personal FN's views over it, please click here.
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Impact
“The Only Thing Constant Is Change”- Heraclitus (a Greek philosopher)
While we live in a dynamic world, everything around us is bound to change gradually. Not only the way we look at things, but also the way we do different tasks, including investments. The way we invest and the way we receive advice.
Over the past couple of years, a new form of investment advisory has emerged a new class of advisors known as robo-advisors. These online platforms use technology that runs complex algorithms to develop automated customised portfolio allocation and investment recommendations. Robo-advisors are able to attract clients with their attractive low costs. Some even claim it to be a free service or virtually free.
To read more about this story and Personal FN’s views over it, please click here.
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Impact
Robos are replacing humans in almost every field. The wealth management and financial services space too, is not consigned to oblivion — ‘Robo-Investing’ is a buzzword that’s doing the rounds these days…
Supported by technology and algorithm backed systems, most robo-investing platforms offer online wealth management solutions buttressed with ‘financial planning’. They make it appear as if you don’t require a financial planner, or a financial guardian any longer to meet your long-term financial goals. But, how many robo-investing platforms really render unbiased advice to you, the investor?
To read more about this story and Personal FN’s views over it, please click here.
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Impact
If you are a salaried employee, filing your tax returns before the due date is likely to become easier for you.
On April 01, 2017, the Government is mulling over introducing a single-page Income Tax (I-T) returns form. In his budget speech this year, the Finance Minister hinted at simplifying the tax compliance process, “To expand the tax net, I also plan to have a simple one-page form to be filed as I-T Return for the category of individuals having taxable income up to Rs 5 lakh, other than business income.” he said.
To read more about this story and Personal FN’s views over it, please click here.
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Impact
In the next couple of days the Financial Year (FY) 2016-17 will end, but still, there will be many taxpayers who are yet to make tax saving investments.
Sometimes, the last minute rush can cost you a pretty penny, especially when it comes to tax planning.
And, what do you think can be a reason for such exceptional delay to invest?
Lack of availability of money would be the last reason. Rather, it’s the other way round.
Those who can afford to invest Rs 1.5 lakh at one go, often dilly-dally throughout the year thinking they have a plenty of time to take advantage of tax exemptions. They get engrossed in their routine, the clock keeps ticking and days pass on one after the other. Come March, “lax investors” wake up to make investments
To read more about this story and Personal FN’s views over it, please click here.
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Small Savings Schemes (SSS) will now fetch you lower returns. The Government has decided to slash 0.1% interest on Public Provident Fund (PPF), Kisan Vikas Patra and Sukanya Samriddhi scheme. They will fetch you 7.9%, 7.6% and 8.4% respectively in the Q1 FY 2017-18.
For the common man, it’s becoming increasingly difficult to earn attractive returns on his investments.
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Data Breach: An unauthorized access and retrieval of sensitive information by an individual, group, or software system. A data breach is a cyber-security mishap which happens when data, intentionally or unintentionally, falls into the wrong hands without the knowledge of the user or owner.
(Source: Investopedia)
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Quote: "If you don't study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards." - Peter Lynch
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