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| September 22, 2017 |
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Impact 
Indians are buying less amounts of gold.
The average daily demand for gold, historically, between the August-September period has been 2.50 tonnes or thereabouts. This year, it has fallen to 1.25 tonnes—a massive dip of 50% in volumes.
Bankers, jewellers, and bullion dealers are pessimistic about the revival of demand even during the festival season of Dussehra and Diwali.
The reasons are as follows:
- Government’s initiative— Operation Clean Money —seems to have made a huge dent in the gold demand. On August 23, 2017, the Government slashed the threshold limit required to furnish PAN details at the time of purchasing gold at value of Rs 50,000 and above. Earlier the limit was Rs 2 lakh.
- At the same time, the Government appointed Directorate General of Goods and Service Tax Intelligence——the newly established GST intelligence department——as the regulator for the gems and jewellery industry. This move is aimed at curbing money laundering activities. Jewellers doing business above Rs 2 crore in a financial year will be subject to surveillance under Prevention of Money Laundering Act, 2002 (PMLA, 2002).
Commenting on the widespread slack in demand for gold jewellery, Mr Surendra Mehta, national secretary at the India Bullion & Jewellers Association said, “There were very little footfall in jewellery exhibitions that took place in the last fortnight. For instance, the Jewellery Wonder Show held in New Delhi between September 16 and 18 did not evoke much response. So the drop is being noticed both in the B2C and B2B segments.”
A bullion dealer told media on the condition of anonymity, “There is a difference of almost Rs 625 per 10 gm between the official and unofficial gold.”
However, the Government’s move goes far beyond just curbing black money creation and circulation in the form of gold. As per the data released by the Ministry of Commerce, India’s gold imports surged to Rs 1.88 billion in August this year from Rs 1.11 billion in August 2016. Moreover, between April and August 2017, India’s gold imports have jumped 3 times as compared to the same period last year . High gold imports worsen the Current Account Deficit (CAD)—which stood at 2.4% of GDP in the Q1, FY 2017-18. It seems the Government wants to lower the CAD by slashing cash dominated sales of gold in India. The message is clear— Do you want to buy gold? Reveal your identity as it affects India’s foreign reserves directly.
The bullion industry and the retailers will be under severe pressure as the stockpile they have may now take longer to clear out due to newly imposed regulations. Relatively higher gold prices would be another damper for the jewellery demand.
You shouldn’t speculate on the gold demand or gold prices. From the portfolio diversification and asset allocation standpoint, you should have 10%-15% of your portfolio in gold. Keep buying gold in small quantities and preferably in the paper form. Sovereign Gold Bonds, Gold Exchange Traded Funds (ETFs), and Gold savings funds are smart ways to own gold.
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Impact 
Are you utilising any of the numerous apps for financial transactions?
With a host of payment e-wallets such as PayTM, MobiKwik, Airtel Money, Citrus Pay etc, almost every bank has launched a mobile application (app) for financial transactions. Some of these banking apps are based on NPCI's (National Payments Corporation of India) Unified Payments Interface (UPI), such as Axis Pay from Axis Bank, SBI Pay from SBI, and the list can go on and on.
Several private players, too, have launched apps that enable transactions using UPI, such as PhonePe, BHIM UPI App, among others. The latest one based on the UPI framework is Google’s Tez.
Tez is the latest digital payment app from Google. You can install the app on android phones or iPhones. As it uses the UPI, Tez works with your existing bank account, which means your money is safe with your bank and you’ll continue to earn interest. There’s no need to open a separate account or worry about reloading wallets. Tez works with all banks in India that supports the UPI. As with all other apps, you’ll need an internet connection.
To read more on Google Tez, please click here.
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Impact
If your financial dealings are inconsistent, they get reported to the regulators and other government authorities as “suspicious”. And you won’t even know about it until you land in trouble. In Financial Year (FY) 2016-17, reports of such instances touched the sky. Struck by the surprise move of demonetisation, many tax evaders resorted to misconduct in their financial dealings. Possibly, they left enough clues for the government authorities, which will continue to hound them in the future.
Huge rise in the suspicious transaction reports filed
(Source: Economic Times, PersonalFN)
Demonetisation effects were as follows:
- Cases reported by banks jumped from 61,361 in FY 2015-16 to 3,61,214 in FY 2016-17—a rise of 489%
- The number of suspicious transactions reported by eight RBI-regulated financial institutions such as insurance companies, housing finance institutions, and Non-Banking Financial Institutions (NBFCs), among others, rose by 135% in FY 2016-17 on a Year-on-Year (YoY) basis
- Intermediaries such as stock brokers, portfolio managers, merchant bankers, etc. reported 270% rise in suspicious transactions in FY 2016-17 as compared to those in FY 2015-16.
The Finance Minister, Mr Arun Jaitley, made a revelation in the parliament that the Government has discovered 18 lakh cases, where the income profile of a person was incongruent with his/her bank account profile.
To read more about this story and Personal FN’s views over it, please click here.
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Impact
There are several benefits of investing in mutual funds through a Systematic Investment Plan (SIP). Many of you might be well versed with the features and benefits of a mutual fund SIP.
But unfortunately, some opt for mutual fund SIPs in the spur of the moment, without any focus or plan in place. This can lead to a lack of adequate investments.
Many randomly invest Rs 1,000 or Rs 5,000 per month even when they can save much more. They may invest the balance of their savings in inefficient products like recurring deposits, bank fixed deposits, or insurance-cum-investment products. This can do more harm than good to one’s long-term financial wellbeing.
Therefore, before you invest, you need to first decide on the purpose of starting an SIP. Whether it is to invest for accomplishing certain financial goals or if it is just to invest the surplus amount in your bank account.
For each of these purposes, apart from picking an appropriate scheme, you need to define the monthly or quarterly investment amount and tenure. In addition, ensure that the asset allocation conforms to your risk profile.
To read more about this story and Personal FN’s views over it, please click here.
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Impact
Our cell phones have pre-installed social media apps, but why don’t they have digital payment apps which could be more productive and beneficial to smart-phone users?
Perhaps, the Government thought about this and as a result, recently asked mobile manufacturing companies to include the Bharat Interface for Money (BHIM) app offered by National Payments Corporation of India (NPCI) in the list offered as in-built apps with new phones.
Recently, the Telecom Regulatory Authority of India (TRAI) chairman, Mr R.S. Sharma, evoked the need to make digital payments cheaper—a must to promote digital payments, he thinks. Commenting about this he said, "If we want to have a sustainable digital transactions system, we must ensure MDR (Merchant Discount Rate) is zero, especially for small-value transactions because that is where the tipping point will come."
He further added, "We are a frugal country in the sense that we don't want to pay anything for digital services, especially when there is an alternative not to pay."
To read more about BHIM, please click here. |
Nearly 80 lakh borrowers are likely to get a bonanza from bankers. Leading private sector banks ICICI Bank and HDFC Bank have found innovative ways to allow easy credit options to their debit and credit card holders. While ICICI Bank is betting on cashback offers, HDFC bank is providing quick, convenient, and paperless loans to their select debit cardholders. The eligible customers can just swipe their debit card or even use it online for availing this overdraft-cum-pre approved loan and repay with the ‘EasyEMI’ option. Taking a cautious stance, ICICI bank is extending cashback facility on credit cards only to those borrowers who’ve availed of new home loans or have refinanced home loans of other banks by availing of the mortgage loans at ICICI Bank during a specified time period.
It seems banks are trying to cross-sell their liability products to retail customers in the absence of any revival in corporate lending. You should be careful before availing such lucrative credit offers. Irrational exuberance can throw your financial plan out of whack.
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Tax Haven:A tax haven is a country that offers foreign individuals and businesses a minimal tax liability in a politically and economically stable environment, with little or no financial information shared with foreign tax authorities. Tax havens do not require individuals to reside in or businesses to operate out of their countries to benefit from local tax policies. Due to the globalization of business operations, an increasing number of U.S. corporations, including Microsoft, Apple and Alphabet, are keeping cash in offshore tax havens to minimize corporate taxes.
(Source: Investopedia)
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Quote: "Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.”- Warren Buffet
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