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| November 07, 2014 |
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| Weekly Facts | | | Close | Change | %Change | | S&P BSE Sensex* | 27,868.63 | 2.8 | 0.01% | | Re/US $ | 61.42 | 0.03 | 0.05% | | Gold Rs/10g | 25,750.00 | -1200 | -4.45% | | Crude ($/barrel) | 82.76 | -3.10 | -3.61% | | F.D. Rates (1-Yr) | 8.00% - 9.00% | Weekly change as on on November 06, 2014
*BSE Sensex as on November 07, 2014 |
Impact 
Until a few years ago, you were allowed to make corrections on the cheque leaf ensuring that you endorse it by signing across. However, to avoid incidents of frauds, later the practice was discontinued. While you might feel that banks should allow minor cancellations when endorsed in a right way, it is important for you to understand the risk involved in doing so. It is possible that you might end up paying money to someone you never intended to pay. Or contrary to that, if you don’t take proper care to deposit cheques drawn in your name, your account may not get the credit for the money that should have belonged to you.
You see, in the past, India has seen a number of cases of misappropriation of funds using forged cheques, fake accounts or forged signatures on genuine cheques. In short, fraud can take place in any form. To minimise incidence of frauds, the Reserve Bank of India (RBI) has asked banks to take steps for fraud prevention.
RBI has instructed banks to solidify processes for better handling of cheques and monitoring of accounts. So now, a bank staff may give you a phone call for confirmation before clearing high-value cheques. The examination of cheques would be done under UV lamp for clearances above a sum of Rs 2 lakh. Also, an alert may be sent to you as the drawer by SMS. Moreover, for cheques worth Rs 5 lakh and above, a multi-level inspection would be done before clearing them.
RBI has suggested a number of measures which include: - Staff officials should deal meticulously
- Banks should ensure the beneficiary is KYC compliant (so that the bank has recourse to him / her as long as he / she remains a customer of the bank)
- Banks should ensure that customers use only CTS-2010 compliant cheques
- Close monitoring of credits and debits in newly opened transaction accounts based on risk categorisation
- Confidential information are neither compromised nor misused either from the bank or from the vendors’ (printers, couriers, etc.) side
- Exercise due care and secure handling in the movement of cheques from the time they are tendered over the counters or dropped in the collection boxes by customers
PersonalFN is of the view that, RBI has taken right steps by instructing banks to observe a vigil while clearing high-value cheques. The aforesaid steps may help banks curb frauds. Also, although banks have been held responsible for allowing encashment of fraudulent cheques on many occasions, it is equal responsibility of drawers of cheques and also in favour of whom cheques are drawn to keep a close track. We need to make sure that cheque reaches to the right person and is being deposited at right time. It may happen that, you paid someone by cheque but he / she happened to have missed depositing it or simply lost it; whereby it results in a scope for fraud. PersonalFN believes it’s a joint responsibility of banks and its customers to make the system fraud-free.
Do you think the Government would be able to privatise sick PSUs successfully ? Share your views
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Impact
The Government, be it of any party, receives a lot of criticism when it decides to use the money collected from tax payers for unproductive purposes. After all people paying taxes expect Government to make the best possible use of their money in building a strong nation. In honouring such expectations of people, now it seems that the Government may sell out (privatise) loss making Public Sector Units (PSUs) which otherwise need constant support of cash from the Government.
Speaking at India Economic Summit, India’s Finance Minister, Mr Arun Jaitley expressed the willingness of the Government to privatise companies which are surviving only on the support of the Government. As reported by the Business Standard dated November 06, 2014; there are about 79 loss making PSUs where public investments stand at around Rs 1.57 lakh crore.
PersonalFN is of the view that, the Government may not find it easy to privatise all loss making and unviable units as there may be stiff opposition from unions. One shouldn’t forget that mere talks divestment by the Government in Coal India was confronted by unions fiercely. Having said this, if the Government manages to sell sick sheep, it would raise substantial cash to shore up its finances. The Government has been trying to meet the tall target of fiscal deficit in the current fiscal.
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Impact
India has been struggling to curb inflation for more than 4 year now and until lately it appeared that inflation may not go away easily. Even now inflation has just started cooling off but whether it settles lower is something that remains to be seen. On the other hand, some major developed economies of the world have been trying to push the inflation up in their respective countries. Develop countries also face a problem of stagnated growth and fragile recovery. To fight deflation or to raise inflation and revive growth, develop countries have adopted expansive monetary policies keeping interest rates near zeros. Going one more step ahead, they also have pumped in huge money in their respective economies. Unfortunately that money flows all over the globe and gives undesirable results.
Recently, monetary authorities of two big nations, the U.S. and Japan have taken important policy decisions which may have impact not only on their own economies but also on emerging market economies including that of India’s. Federal Reserve (in U.S.) discontinued its bond buying programme withdrawing monetary stimulus. In the nick of time Bank of Japan (BoJ) announced a launch of a monetary stimulus package worth Yen 80 trillion (around USD 709 billion), which exceeds by nearly Yen 10 trillion hinted earlier. With this move, BoJ surprised investors. As results, global equity markets went up on the announcement. Indian equity markets too reached to their life time highs and Foreign Institutional Investors (FIIs) which appeared to be booking profits in India over past one month, pumped in fresh capital.
Are FIIs coming back in a big way?
Data from September 30, 2014 to October 31, 2014 has been considered
(Source: ACE MF, PersonalFN Research)
How India is affected by the Japanese stimulus?
To understand how India is affected we first need to know what the Japanese stimulus means for global currencies and commodities. The Japanese Yen fell sharply against U.S. dollar reaching its 7-year low. Strong dollar means weak commodities since most of commodities are dollar denominated. Strong dollar resulted in unprecedented fall in gold and silver prices. Moreover, the money that will be pumped into Japanese system as stimulus may also flow in equities, in and outside Japan. The spike in FII flows in Indian markets over last few trading session of October 2014 hint that FIIs may come back to Indian markets in a big way after taking a brief pause.
To read more about this news and PersonalFN’s views on it, please click here.
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Impact
When it comes to borrowing money, be it individuals or companies we all expect interest rates to come down. But we quickly change our expectations when we are depositors. So, needless to say interest rates affect a lot of our decisions.
During the festival of lights – Diwali, often many splurge even on credit buying expensive things. But this year non-food credit growth was unusually low. You see, this time of the year usually sees credit growth of banks pick-up which often reaches its peak in the last quarter of the financial year. But this year, the data for September 2014 was not encouraging. The data for non-food credit slipped to 8.6% from 10.2% reported in the month prior. You see last year in September 2013, non-food credit had grown to a roaring 18.2%. While personal loans grew at 13.0% in September this year (from 12.8% in the month prior), the data in this segment too was far lower than 17.9% clocked last year in September.
To read more about this news and PersonalFN’s views on it, please click here.
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- The Pradhan Mantri Jan Dhan Yojana, a programme that targets to increase penetration of banking services seems to be on the track. The initial target of opening 7.5 crore accounts before January 26, 2015 is within reach. As per the data released by the Finance Ministry recently, 3.689 crore accounts have been opened with an average amount of Rs 750 each. The public sector banks have managed to achieve this number within first 3 months of commencement of the scheme. So now that the target looks well within reach, the Government is planning to double the initial target of 7.5 crore accounts to 15 crore – which is to be achieved before January 26, 2015.
The PersonalFN is of the view that, success of the scheme would be misleading if banks don’t manage to keep these accounts active. The Government is hopeful that, direct cash transfer may help keep accounts active. Past experience with similar no-frill accounts is not very encouraging. Only 20% of such accounts remained active, as revealed by the study jointly conducted by Boston Consulting Group, Ficci and the Indian Banks' Association.
PersonalFN also believes, instead of setting huge targets, the Government should try to focus on reactivating no-frill accounts that have been already opened. Furthermore, banks, RBI and the Government have to make sure that, no compliance related requirements are compromised to attain targets.
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Currency Carry Trade: A strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. A trader using this strategy attempts to capture the difference between the rates, which can often be substantial, depending on the amount of leverage used.
(Source: Investopedia)
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Quote : "Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell." - Warren Buffet
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