Impact 
The second largest private sector bank - HDFC Bank Ltd., has decided to charge Rs 50 per month if a customer's savings or current account has remained inoperative for a year.
The bank has also decided to levy a penalty for non-maintenance of minimum balance on monthly basis instead of quarterly basis. Thus now, a regular savings deposit account holder in one of HDFC Bank's metro or urban branch will have to pay Rs 250 per month if his average monthly balance in between Rs 5,000 and Rs 10,000, while those having an average monthly balance of less than Rs 5,000, will be charged Rs 350 per month. Moreover if the average monthly balance is not maintained, customers will be permitted only three branch transactions through cheques and two cash transactions free of cost in a month. For every additional branch transaction there will be a charge of Rs 75 and the customer will have to pay Rs 100 for every additional cash transaction.
The bank will also charge its "non-managed" customers depositing a sum of money over Rs 100,000 in cash during a day in their savings account at the home branch. The customer will have to pay Rs 25 for every Rs 50,000 cash deposit in a day over Rs 100,000 in their home branch. It is noteworthy that "non-managed" customers are typically those clients who do not have a private banking or wealth management relationship with the bank.
The new service charges also include penalty if a standing instruction is rejected, fees on regeneration and physical dispatch of personal identification number (PIN) for phone-banking and internet banking, charges on any deliverable returned due to change in consignee's address.
We believe that the changes in the service charges and fees by the bank seems to be out of insecurity that the bank customers may be lured by other competitive banks who are offering higher interest rates on savings bank account post the deregulation of interest rate on savings bank account by the RBI.
Stringent charges levied on bank customers will not make them contented either and may prove to be detrimental in the long run for the bank itself. It is unfair for a bank to levy additional charges just to be in competition and protect its market share. | | Impact
The Insurance Regulatory and Development Authority (IRDA) is mulling ways to do away with the age limit for purchasing health insurance policies. At present, the insurance regulator has made it mandatory for policies to have a "life long" renewal clause, which enables you as policyholders to renew their policies at any age, but the "entry age" criteria remains. This means once you have bought your health insurance policy, the insurer will be obliged to renew it, irrespective of your age.
The main hurdle in achieving an ‘age free’ policy is the pricing issue. The real challenge will be underwriting such a product as the loss ratio beyond 80 years is high and most people of that age suffer from some illness. As a result, the pricing for a Rs 5-lakh policy (for persons over 70 years) may be around whooping Rs 60,000 - Rs 80,000 annually. In addition, there would be certain conditions, subject to the health of the individual.
While pricing may be challenge (as premiums get expensive over 70 years of age, we think that IRDA has been very thoughtful in planning to propose for ‘age free’ health insurance; because along with life expectancy having increased there are numerous senior citizens who still do not have an health cover. This initiative if taken, will certainly benefit them, as the chance of ailments increases as age progresses. But having said that one should not wait till age progresses, but instead buy a health insurance cover at an early age to avoid high premiums and stringent policy conditions.
| | Impact 
The mutual fund industry’s average Assets Under Management (AUMs) for the quarter ended December 31, 2011 stood at Rs 681,708 crore as against Rs 7,43,719 crore for the quarter ended April to June 2011, thereby taking a dip of 8.3%. The decline in the AUMs occurred due to high redemption pressure faced in the liquid and income fund category (which saw net outflows to the tune of Rs 48,839 crore and Rs 15,401 crore respectively), due to withdrawal from corporates to meet their advance tax obligation, and banks adhering to RBI’s regulation of restricting their investment amount in mutual funds not exceeding 10% their networth.
(Source: AMFI website, PersonalFN Research)
Equity funds’ AUM too fell by Rs 7,771 crore as redemption pressures were built in due to the nervous sentiments across the globe steered by Euro zone debt crisis, oil prices inching up and domestic pressures such as high inflation and political paralysis. But interestingly if we analyse the numbers over a 1 year period the mutual fund industry has done well though marginally.
We believe that the mutual fund industry should create more and more awareness and undertake investor education around investments through mutual funds. Investors should be made aware that disciplined and long term investments are a key to long term wealth creation instead of following the herd mentality of redeeming one’s investment because others are doing the same.
| | | | Weekly Facts |
| Close | Change | %Change | | BSE Sensex* | 16,154.62 | 286.9  | 1.81% | | Re/US$ | 51.58 | 1.4 | 2.64% | Gold /10g | 27,690.00 | 140.0 | 0.51% | | Crude ($/barrel) | 112.44 | 0.6 | 0.58% | | FD Rates (1-Yr) | 7.25% - 9.40% | Weekly change as on Janaury 12, 2012
*BSE Sensex as on Janaury 13, 2012 | | This Week's Poll !!!
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In an interview with the Business Standard, Mr. Pronab Sen - Former Chief Statistician shared his views on food inflation numbers, inflation in manufacturing sector and RBI’s monetary policy stance.
Mr. Sen believes that the food inflation falling in the negative territory can be credited to both high base effect and seasonal factors. But he feels that the food inflation numbers that we are seeing is a short-term trend and inflation in food articles will go back to 7% in a few weeks’ time, once the base effect wears away.
As far as inflation in manufacturing is concerned, Mr. Sen is of the opinion that it is a major concern. He also states that PMI (Purchasing Managers’ Index) announced by HSBC is not a good indicator of inflation but a good indicator of growth.
On the monetary policy stance adopted by the Reserve Bank of India, Mr. Sen thinks that there is no real reason for the central bank to cut rates unless we have credible evidence that inflation in manufacturing products is on a decline. "Like I said, as the base effect wears away in a few weeks, food inflation will be on a rise again. So we need to wait and watch more data," he added.
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Loss ratio:The difference between the ratios of premiums paid to an insurance company and the claims settled by the company. Loss ratio is the total losses paid by an insurance company in the form of claims. The losses are added to adjustment expenses and then divided by total earned premiums. So if a company pays $80 in claims for every $150 in collected premiums, then the company has a loss ratio of 53%.
(Source: Investopedia) | | | QUOTE OF THE WEEK
"Make a decision to be successful right now. Most people never decide to be wealthy and that is why they retire poor."
- Brian Tracy | | |