Pooja is a good friend of mine who lives in Mumbai. Having worked for me for over a year at an American Bank, she choose to be on her own and has been reasonably successful at that, with her fledgling entrepreneurial venture, her staffing consultancy.

Pooja was on chat with me the other day and said that her neighbor got married. I don’t know who her neighbor was, but wondered what was wrong with her! She went on and said, got married to a lady! I knew for a fact that Pooja had lost it! Wondering whether it was the effect of some weekend partying or the stress of being on her new venture that was getting to her, I kept getting on with work shaking my head in disbelief wondering if Pooja was mad before I hurriedly typed in a few notes to her before running off for a meeting.

I returned after a couple of hours and Pooja had left a series of messages for me. I read through and realized that her neighbor was actually a SHE and she had gotten married to another SHE! Her neighbor was also the HE in the marriage!

Being a very gracious person, she obviously went on to greet her neighbor and also had a chance to see pictures of the wedding. I don’t know if she got invited to the wedding or not, but what she had to say of the pictures she was very reminiscent of any other Indian women. Shaking her head in utter disbelief and wondering what the world was going to, she is a today a worried lady.

Chatting on, I asked her what was so “scary” about the whole thing. She said her little daughter; all of 3 odd years old was that neighbor’s favorite kid in the apartment complex. That put it in perspective for me. To make matters worse for her, her daughter happens to be in that stage of life where kids are all over us with questions! Questions that sometimes put us in a spot as we don’t know what to say when we get asked those questions! The little kid obviously heard that the aunty next door got married and was looking all over her house for the uncle!! No one told the poor kid that the aunty was actually the uncle in the wedding!

The news obviously spreads! In a society that is still waking up to the realities of homosexuality amid law makers around the world who are confused on whether to let this pass or otherwise, Pooja’s maid is one of those who is yet to recover from this shock. Coming from probably the lowest social strata of Mumbai, the maid apparently spent 3 hours in Pooja’s house holding her head in disbelief and wondering whether she needs to continue working for the neighbor, that she’s worked for nearly 3 years now. An educated Pooja and the worried mom that she is, is equally baffled and doesn’t know how to react.

I’m not out to pass a judgment on what is right or wrong! I just spare a thought for a good friend who’s been hit by a reality, a reality that you would typically hear / read of happening in California or somewhere else in Europe, but this time literally at her next door.

I once happened to stray off into the SOHO area of London on my last trip there, a short walk from the Oxford Street shopping area. It was one of those days when I just went wandering aimlessly, (certainly not looking for anything) when I quickly realized that I was on a street very popular for the gay men on London. Young boys were howling and screaming, expressing their love for each other on the streets. Waking alone, I felt my heart palpitating and the fear of being at risk, the risk of being physically assaulted maybe! Something that I’d never ever dreamt off ever. The ensuing 5 minutes were probably the scariest 5 minutes of my life.

More recently, we had an overseas visitor whom we were hosting. As a courtesy, my boss had to take him to dinner one of the days. My boss called me and asked me to join in. It was kind of last minute for me and I asked him why me? He explained that he was gay and my being along made him feel more comfortable! It was a hurried affair and both of us used the first available option to get back home early.

Being able to relate with what Pooja is going through as a result of my 5 minute trauma, I wonder how we are going to start accepting this new world reality. A recent Hindi movie, Dostana had my wife and me in splits. Being a very silent person, I’ve never ever seen my wife laugh so much ever! While the fun part of the movie has us in splits, we need to quickly understand that the changing preferences are probably a new world order. With laws likely to come in around this, we need to understand that people are people at the end of it and we need to respect individual choices. It’s probably a lot like someone smoking or drinking!

Incidentally, Pooja ensures that her doors are firmly bolted at all times and talks about this to all her friends. Amused at what we hear and enjoying a good laugh, we rag her saying “Pooja’s neighbor is gay!”. The trouble however is that the changing world can throw up one such neighbor for you anytime!

Image Credit: TNT Blonde

Popularity: 42%

What is the world’s largest prime number? Just kidding…this isn’t an article about math!

This is about RW Emerson’s quote: “Money often costs too much”; this is about the impact of the prime-lending rate (PLR) on the common man and its far-reaching consequences on the economic future of the country. To put it simply, this “prime” number is the interest rate that the central bank would charge for a loan that it lends to say, one of the banks.

Though the prime is an index measured in basis points, it’s a metric decided upon by the powers that manage the central bank, and it is adjusted every once so often. Barring economic casualties that seem to arise often of late, there is a specific schedule to evaluating and adjusting this rate.

There are various factors that go into how this rate is determined, and how it is altered, but that’s beyond the scope of this short article. When looked at a consumer’s perspective, the prime rate determines how the banks that deal with individuals (the ICICI’s and SBI’s of the country) go about lending money.

For example, if a private bank is aggressive at handing out loans, these loans might be offered to the customer at prime rate or just above it, with a marginal profit. This is where it all gets interesting – the banks in India currently don’t seem to distinguish between the individuals’ ability to pay off the loans and their past history at doing so, when doling out loans.

Of course, there is the lien that people need to provide and records of assets owned, etc to back up claims for loans at the higher priced housing levels, like those seen in the millions of rupees range. At certain lower levels like automobile loans or consumer purchases in the lower hundreds-of-thousands, there seems to be a near free-for-all eligibility to get hands on one of these loans.

There’s a very thin line that divides the consumers’ desire to upgrade their lifestyles with borrowed money and, to put it simply, the greed to not be able to distinguish between wants and needs depending on affordability.  The US economy, beginning with the sub-prime housing crisis, and now extending to credit difficulties caused by very poor liquidity at all levels imaginable, should be an important lesson for India.

As the saying goes, it is best to learn from the mistakes of others, and not repeat it oneself. The law makers need to encourage good, responsible behavior while at the same time make it difficult for people to stretch their economic freedom to levels where they can no longer sustain it. I am sure there are conflicting opinions between achieving rapid economic growth vs. sustained growth at slightly lower levels, by controlling credit, but this balance might be important to ensure the long-term health of the economy. This is where utilizing the “power of the prime” to ensure adequate liquidity levels becomes very important.

Unlike some of the developed Western economies, India doesn’t (yet) have a centrally reported “credit score” for every individual. To establish such a system, there needs to be a central database that pretty much tracks the “credit history” of every individual. This would mean tracking all transactions wherein there is not cash or an instant money transfer (debit purchases) involved. In other words, transactions that require borrowing of money would need to be reported by all the banks that offer credit cards or loans, to the central reporting / monitoring agency. This bipartisan agency would then come up with a ‘score’ for every single individual based on his / her past record with loans and promptness in paying off debt. I hope this system is included as part of the e-governance transformation the country is undergoing.

Given a transparent setup that everyone has access to, the lending institutions wouldn’t fall over one another in doling out sub-prime loans (and then have people head over heels in paying off these loans), and banks would really understand the risks behind each loan made. This results in accountability getting built into the system at all levels.

More importantly, it is never too late to reward good behavior!

Image Credit: Woodley Wonderworks

Popularity: 9%

If you invest in tax saving schemes right now, you can get your money back early. For example: If you have planned to invest in Fixed Deposit which can’t be withdrawn for 5 years, if you deposit today you will get your money back in 2013 December and you can use this money for tax investment again. Where as if you save it in March, you will get it back only in 2014 March and you will have to again go in search of cash.

Most of us spend all the cash in hand all through the year and try to find some cash in March. If we don’t find cash in March then your tax plan will go wrong.

Some people are of the opinion that even if I save on 31st March it will still come under this financial year, but this is not clever thing if you are trying to invest in Tax Saving Equity linked funds (ELSS) or Public Provident Fund. You will stand to loose 4 months of interest free income.

Some of us will wait till the year end to submit the medical bills or bills of books purchased for research etc. There is a chance of bills getting lost. It’s better to submit these bills every month to the concerned department in your office.

What about the investments I have made in the financial year ?

Before making any tax saving investments, it is always better to review the investments you have already made in the current financial year. In case you have made investments through Systematic investment planning (SIP), or already contributed to PPF, add all the amounts and plan for the remaining amount.

Get your calculations right:

• For employees there is PPF and it will anyway come under Section 80C. Some employees also would have taken health insurance, life insurance, or group insurance policy. First calculate the amount you have already paid towards premium.
• For those who have taken home loan, calculate the EMI you have paid for all the months. See the interest and principal component in that. You can get the principal paid on the loan exempt under Section 80C. You can claim exemption on interest up to 1.5 Lakh per annum.
• Also take into consideration, the tuition fee you have paid for your kids (allowed only for 2 kids).
• Take into consideration all the above and then decide on the amount for which you have to do tax planning.

• After all your tax planning is done if you are falling under 10% tax bracket and tax payable is not less than two to three thousand, it’s better to pay the tax instead of making investments only for saving these two or three thousands.
• Accounts folks in your office would have already informed you the amount of tax payable. Once you have calculated the amount invested so far, return from the amount invested, and the amount to be invested, all that you need to decide is to where to invest.
• If you don’t have the appetite to take risk invest in National Savings Certificates and Bank Fixed Deposits and if you are planning to invest for long term, put your money in Public Provident Fund.
• If you have the ability to bear risk, invest in Tax Saving Funds or ULIPs.

Instead of investing your money at once, it’s better to choose SIP and invest in 5 equal installments.

Image Credit: Kevin

Popularity: 21%

Whole world is reeling under economic crisis. Growth rate of countries is slowing down. While some sectors have lost heavily, other sectors have revised their targets. Amidst all this turmoil, there is one industry that is making profits and guess what this could be?

It’s the epicenter of the financial tsunami-It’s the banking industry… The very cause of the turmoil in the world is now making money in India.

Is it the strict regulation of RBI or the traditional way of running the business that has helped the banks to be in profit ? Or is it the foresight of Indian banking system that has ensured that domestic banks are not heavily exposed to the credit derivatives like US banks ? The fact is that the Indian banks have not incurred huge losses unlike their counterparts in the US and rest of the world.

Banks which faced pressure on their margins till a couple of months back are now on their way to making money. With the RBI’s initiative to increase liquidity in the system, banks got huge amounts at their disposal for lending. Even the money that was lying with RBI and yielded very little profit is now available for banks for lending at higher rates. Banks are lending at higher than PLR to corporates due to the changes in circumstances and all these are helping banks to boost their bottom line.

Quite a few factors have contributed to the profit margin of banks:

1. Reserve Bank of India has cut CRR by 3.5 % and brought it down to 5.5%
2. It has cut the repo rate by 1.5 % and got it to 7.5%
3. RBI cut the SLR by 1% and got it to 24%.
4. Banks used to lend to companies at below BPLR but now they are lending at higher than BPLR as the risk profile has increased due to the hit on the margins of the companies.
5. Banks used to shell higher deposit rates. But with the markets falling, people are finding deposits as a safe place to park their money and banks have cut down the deposit rate.

All these have increased the profit margin of the banks by 3%.

While all sectors of the economy are facing the heat of economic meltdown, it is surprising to see that our domestic banks are really making money.

Banking in India has been indeed a blessing in disguise. What do you think ?

Popularity: 16%

I often wonder when I read about the bailout packages dished out by Governments all around the world to aid banks and other financial institutions that are on the verge of bankruptcy especially the amount of money spent in bailouts in last couple of months is staggering. I am even surprised that there was not a single protest from anywhere and these financial criminals go unpunished. It is the common man who is going to bear the burden of additional tax and increased debt.

Why should tax payer’s money be used for bailing out greedy banks and corporations that have done business only with profit as motive and no concern for morals or ethics and absolutely no concern for the consequences for their acts. Putting public money in corporate coffers is just not acceptable. Financial crisis that has happened is a man made crisis done through substandard policies, deregulation and greed. I can understand putting in public money for natural disasters like earthquakes or folds. Governments all over the world have spent trillions of dollars on bailouts already

This kind of bailout is ABSURD!

We must collectively protest this .This is real money, my money, your money, our money which is hard earned paid in the form of tax.

Why should banks and financial institutions which never cared about the creditworthiness of people who lined up for loans or the soundness of derivatives business be rewarded. We should not allow government to write checks on tax payers’ account. This measure will increase the budget deficit by a significant amount, with no guarantee of recovering the amount and not holding anyone accountable for the misdeeds they have done.

What is the signal you are sending to the corporate world and investors through these bail outs? Do your businesses as you like and we will reward you for the blind errors you might commit. Is this the right way?

As far as I am concerned, there should be a thorough probe into the events that have led to this disaster and every CEO, Executive or Government who were part of this financial carnage should be jailed, their assets sold and put in a bailout fund.

It is time to wake up and realize that greed is the basis for all the financial disasters and find a way, may be strict disclosure norms, increasing the transparency in strategic decision making, making one responsible for his actions and

Few weeks back Finance Ministers of several Asian, Europe and Americas countries met and decided to act rapidly on the financial crisis

And now stock markets are being artificially manipulated by bailouts by governments.

When corporations see that the demand is coming down , it is natural for the stock to take a beating. But every other day we see CRR, SLR rate cuts which means our money is loaned back to us and the market stages a rally of any significance. FIIs and Badla traders slowly and routinely remove their money from our markets to invest elsewhere leaving the retail investor in a fix.

It is certainly not a good thing for a responsible, saving, taxpaying citizen, with no defaulted loans or credit card debt to compensate for the that Wall Street gamblers will go bust on their stupid and greedy bets, over-leveraged and poorly managed businesses with huge losses.

Let me tell you some interesting fact. Lehman has set aside $2.5 billion as bonus for their employees even as they went bankrupt for the great performance they showed in pushing the bank to bankruptcy.

What do you call this?

Popularity: 24%

My history teacher used to say that “In India agriculture is neither meant for the farmer nor the consumer but the Middle men”. Be it vegetables or Mutual funds these words hold good.  Intermediaries always make money

Many of us want to put our savings in Mutual Funds.  But most of us don’t know how to buy or where to buy.  We don’t know where applications will be available, whom to submit etc and end up contacting an agent or an intermediary.

What most of us don’t know is that if you buy units directly from fund house, we can save 2 to 6% of the money.  How is this possible?  Let’s see.  When you buy Units of any fund, you will have to pay Entry load.

For example:

You want to invest Rs 10,000 and have chosen a fund and 2% is entry load on it. If you buy this from an intermediary, fund house takes out Rs 200 and invests only Rs 9.800. Where as if you buy the units directly from fund house, you can save this 200 as Fund house will not charge entry load from investors who buy directly from them and invests the entire amount.

How do I buy it from fund house?

Today mutual funds are sold by almost all banks and are even available in post offices. Don’t be under the impression that since bank is selling funds, they are maintained by the bank itself.  SBI Mutual Fund is not same as SBI bank.  SBI is an agent selling the products of SBI mutual funds and makes money as an intermediary. It gets its commissions.  If you want to buy, buy it directly from SBI Mutual Fund.

Most of the Cities have offices of almost all Asset management companies.  You can get the forms at Mutual fund collection centre or at the fund house, fill them up and submit them to the fund house and get the units allotted without any entry load.

If you are using internet it is even easier.  Just log onto the website of the fund house/AMC, choose your fund, amount, fill in your personal and payment methods like check, D/d etc – Voila ! You are done. If you want to invest in a systematic investment plan, choose Electronic Clearance Scheme (ECS).  With this, you can directly transfer money from your bank account to the fund house.

But not all fund houses sell systematic plan units (SIP) online. So, depending on the plan  and the fund house, you make your choice.

Image Credit: NikkiNoguer

Popularity: 15%

Till now your cell phone was only a mini computer… from now it will be your wallet…. means you can carry your account in your pocket. Days are not far when you can use your cell phone as an ATM card.  Several banks are in the processes implementing these services by October.

Bangalore based company Mcheck has developed a software which can be used for this. Already software developed by this company is being used for paying bills through phone, for paying insurance premium, buying Air tickets, Movie tickets etc.

What do you do to withdraw money: You go to an ATM centre and insert your debit or credit cards in the machine… enter your PIN number.  Your card number and your pin number will together will access your account to which they are mapped. If everything is correct, you can withdraw money. All this happens in few seconds. But with the new mobile technology you will no more need your card to access your ATM.

How does it work?

Banks will integrate your mobile number with your Account number. Also they will give you a PIN. You can visit any ATM and punch your mobile number and then your PIN number. These two numbers will be verified and they will access your account. You can then continue with your transactions.

What are the advantages of this? 

You don’t have to worry about forgetting your card in the machine or about losing it.  You don’t have to worry about safeguarding your card.  As you will always have the mobile with you can use it for all bank transactions.

Benefits for the banks:

Banks also stand to benefit a lot from this.  They don’t have to issue physical cards and maintain them.  It costs them 100 to 200 rupees to issue a card.

Popularity: 17%