What are the banks offering Priority Banking / Wealth Management Services in India?
Priority Banking / Wealth Management Services have been there in India since a long time (atleast 6 years now). Almost all private banks offer this service, and some public sector banks all offer it.
Continuing further from our past article Priority Banking / Wealth Management Services: The reality of services offered, Here is the indicative list of banks which offer Priority Banking / Wealth Management Services in India
Showing posts with label Fixed Deposits. Show all posts
Showing posts with label Fixed Deposits. Show all posts
Monday, 24 September 2012
Priority Banking: The reality of services offered
I am fine with these indirect charges, as I will get Priority Banking / Wealth Management Services ?
That depends upon your personal expectations and comfort.
That depends upon your personal expectations and comfort.
Priority Banking: Hidden Cost & Charges with Examples
What is the cost and conditions for Priority Banking / Wealth Management Services ?
The cost and conditions vary from bank to bank.
The cost and conditions vary from bank to bank.
Priority Banking / Wealth Management Services: High Hidden Cost, Less Practical Use
Details about Priority Banking / Wealth Management Services and whether there is any real benefit or use of such services, and what is the hidden cost you pay (Unknowingly) when you opt for such Priority Banking / Wealth Management Services
Monday, 17 September 2012
List of Banks offering Flexi Deposits / Auto Sweep Fixed Deposits
Continuning further from Auto Sweep: Example of Axis & HDFC Bank Comparison, here is the List of Banks offering Flexi Deposits / Auto Sweep Fixed Deposits:
Auto Sweep: Example of Axis & HDFC Bank Comparison
Continuing further from previous article Auto Sweep-in Sweep-out accounts: Beware of conditions and restrictions, here is a comparative analysis of 2 common banks offering the Auto Sweep/ Flexi Deposit/ Super Saver schemes.
Auto Sweep-in Sweep-out accounts: Beware of conditions and restrictions
Details about conditions and restrictions in Flexi Deposit / Auto Sweep-in Sweep-out / Easy FD accounts
Continuing further from part I of this Flexi Deposits / Auto Sweep Fixed Deposits: A Good Banking Service here are details of conditions and restrictions in such scheme:
Continuing further from part I of this Flexi Deposits / Auto Sweep Fixed Deposits: A Good Banking Service here are details of conditions and restrictions in such scheme:
Flexi Deposits / Auto Sweep Fixed Deposits: A Good Banking Service
Details about Flexi Deposits / Auto Sweep Fixed Deposits / Easy Fixed Deposits or FD in India and how to use them for maximum benefit.
Since last many years, many Banks in India (and abroad) have offered flexi deposit or auto sweep saving schemes. In this article, we will cover all the details of such Flexi Deposits / Auto Sweep Fixed Deposit schemes and see how to utilize them for good benefit.
Since last many years, many Banks in India (and abroad) have offered flexi deposit or auto sweep saving schemes. In this article, we will cover all the details of such Flexi Deposits / Auto Sweep Fixed Deposit schemes and see how to utilize them for good benefit.
Monday, 10 November 2008
FMP v/s FD: Fixed Maturity Plan or Fixed Deposits? What to Choose?
In one of my previous articles, I'd given an Introduction to FMP Fixed Maturity Plans. In this article, let us discuss whether FMP or Fixed Maturity Plan a good investment, do FMP or Fixed Maturity Plan always guarantee good returns and what are the risks associated with investments in FMP or Fixed Maturity Plan.
We will also make a Comparison between FMP & FD or basically, Compare Fixed Deposits and Fixed Maturity Plan.
What is good about FMP or Fixed Maturity Plan as compared to FD or Fixed Deposits?
To put in simple terms, A Fixed Deposit is taxed to the maximum level depending upon the person's tax bracket while a FMP or Fixed Maturity Plan, the tax liability is not that high. If a person who is in the highest tax bracket of 30% when opens a Fixed Deposit, will have to pay 30% tax on his FD earnings. But it is possible that the same person may pay only 22% or so if he invests in FMP or Fixed Maturity Plan.
So why do people opt for Fixed Deposit as compared to FMP or Fixed Maturity Plan, when the tax advantage is available in FMP or Fixed Maturity Plan ?
The answer lies is No Risk, No Gain principle. Nothing in this world comes for Free - same is the case with FMP or Fixed Maturity Plan. FMP or Fixed Maturity Plan are comparatively riskier than the Fixed deposits so that offsets the tax benefits.
Can we have an example on how FMP or Fixed Maturity Plan are riskier?
First thing - a FD or Fixed Deposit will offer you the quoted returns for sure. If while opening the FD, you are told 11%, that means you will get 11%. However, on FMP or Fixed Maturity Plan, the returns are only INDICATIVE - though they may or may not be given the exact returns in terms of interest.
Apart from uncertain % indicative returns, what are the other risk factors associated with FMP or Fixed Maturity Plan?
The biggest risk factors are that FMP or Fixed Maturity Plan are offered by financial companies and they are not backed by the government as that in case of the bank account or Fixed deposits. FMP or Fixed Maturity Plan are offered by Mutual Fund houses or firms. If the Mutual Fund goes burst like Lehman brother did, then you dont have any safety for your pronciple or the interest amount.
Hence, say you decide to put your money in XYZ FMP from XYZ mutual fund. If the XYZ fund house is having a problem, then all your money will be gone.
So dont just jump in for a FMP or Fixed Maturity Plan because it is offering a higher rate of return (indicatively). Think before your leap. There are cases of investors who invested their money in debt based funds, which in turn invested that money in Lehman Brothers Bonds, but when the Lehman Brothers Collapsed, all the bonds and the debt based instruments value went to zero.
We will also make a Comparison between FMP & FD or basically, Compare Fixed Deposits and Fixed Maturity Plan.
What is good about FMP or Fixed Maturity Plan as compared to FD or Fixed Deposits?
To put in simple terms, A Fixed Deposit is taxed to the maximum level depending upon the person's tax bracket while a FMP or Fixed Maturity Plan, the tax liability is not that high. If a person who is in the highest tax bracket of 30% when opens a Fixed Deposit, will have to pay 30% tax on his FD earnings. But it is possible that the same person may pay only 22% or so if he invests in FMP or Fixed Maturity Plan.
So why do people opt for Fixed Deposit as compared to FMP or Fixed Maturity Plan, when the tax advantage is available in FMP or Fixed Maturity Plan ?
The answer lies is No Risk, No Gain principle. Nothing in this world comes for Free - same is the case with FMP or Fixed Maturity Plan. FMP or Fixed Maturity Plan are comparatively riskier than the Fixed deposits so that offsets the tax benefits.
Can we have an example on how FMP or Fixed Maturity Plan are riskier?
First thing - a FD or Fixed Deposit will offer you the quoted returns for sure. If while opening the FD, you are told 11%, that means you will get 11%. However, on FMP or Fixed Maturity Plan, the returns are only INDICATIVE - though they may or may not be given the exact returns in terms of interest.
Apart from uncertain % indicative returns, what are the other risk factors associated with FMP or Fixed Maturity Plan?
The biggest risk factors are that FMP or Fixed Maturity Plan are offered by financial companies and they are not backed by the government as that in case of the bank account or Fixed deposits. FMP or Fixed Maturity Plan are offered by Mutual Fund houses or firms. If the Mutual Fund goes burst like Lehman brother did, then you dont have any safety for your pronciple or the interest amount.
Hence, say you decide to put your money in XYZ FMP from XYZ mutual fund. If the XYZ fund house is having a problem, then all your money will be gone.
So dont just jump in for a FMP or Fixed Maturity Plan because it is offering a higher rate of return (indicatively). Think before your leap. There are cases of investors who invested their money in debt based funds, which in turn invested that money in Lehman Brothers Bonds, but when the Lehman Brothers Collapsed, all the bonds and the debt based instruments value went to zero.
Thursday, 24 April 2008
Banks Inflation & Interest Rates
RMathew has posted a nice article on his blog, mentioning that the Interest earned on the savings bank account should be exempted from tax, as the interest rate earned in the savings bank account is way below the rate of inflation.
To understand the concept, here is a simple example.
You have a savings bank account with XYZ bank. The bank pays you an interest of 3.5% per annum, as per the RBI or Reserve Bank of India policies.
Imagine you have 100 Rs. as spare for a year. You have 2 options:
1) Put the money in your savings bank account and let it earn 3.5% rate for 1 year. So at the end of the year, you will get 103.5 Rs. as returns
2) Use that money to buy something you need, say half a kilo of tea leaves. You may not use the tea leaves immediately, but after 6 months to 1 year, you may use it.
Now, the interesting case is with the inflation. Inflation measures the dearness or Mehengaai (Hindi). So, if the rate of inflation is 7%, then what costs 100 Rs. today, may cost 107 Rs. a year later, OR to be more precise, the present price as compared to last years price has increased by 7%, as inflation is measured on historical values.
Coming back to the example above, suppose you put your money in the bank and take out 103.5 Rs. a year later. You will find that the tealeaves that you could have bought for just 100 Rs. a year before are no more affordable, even with the 103.5 Rs. because due to inflation, the price has increased to 107 Rs.
Hence, this brings us to the concept of Real v/s nominal interest rates:
Real Interest Rate = Nominal Interest Rate – Inflation
What the bank is providing is only Nominal Interest rate (3.5%). What you actually get, in terms of purchasing power, is the Real Interest rate. In the above example, the Real interest rate will be negative, as Nominal – inflation = 3.5% - 7% = -3.5%
Hence, in essence the money you deposit is loosing value for purchasing power, due to inflation.
Moreover, even though you are earning nominal interest, you have to pay tax on it. So 30% of 3.5% is 1.05%. Therefore, after tax, all you get is just 2.45% which is well below the inflation figure of 7%!
Mathew is expecting the government to stop charging interest rate on this nominal value earning, as it is not a real profit. He also suggests that the money should not be kept in the savings bank accounts, but should be invested.
However, the question is about certainty. Today, everyone is talking about inflation, because it is high at 7%. While it was down at 3.5% to 4%, no one noticed that. Government cannot make a period based ruling, that if inflation is higher than the interest rate, then tax will not be charged. It all depends upon the market timing and that works randomly.
What can the investors do to fight such indirect losses?
Unfortunately, there is no sure shot way to fight inflation. Countries like Zimbabwe, which are witnessing a crisis have seen inflation at the rate of 20000% in one single year, if you want to talk about the extreme cases. However, the best bet is to keep money in Fixed Deposits, or get into tax saving infrastructure bonds, as explained in this article: Are we using the banks account effectively?
Unfortunately, there is no such thing like sure to get money – even with the bank rates. The Fixed deposit bank rates change ever now and then.
To understand the concept, here is a simple example.
You have a savings bank account with XYZ bank. The bank pays you an interest of 3.5% per annum, as per the RBI or Reserve Bank of India policies.
Imagine you have 100 Rs. as spare for a year. You have 2 options:
1) Put the money in your savings bank account and let it earn 3.5% rate for 1 year. So at the end of the year, you will get 103.5 Rs. as returns
2) Use that money to buy something you need, say half a kilo of tea leaves. You may not use the tea leaves immediately, but after 6 months to 1 year, you may use it.
Now, the interesting case is with the inflation. Inflation measures the dearness or Mehengaai (Hindi). So, if the rate of inflation is 7%, then what costs 100 Rs. today, may cost 107 Rs. a year later, OR to be more precise, the present price as compared to last years price has increased by 7%, as inflation is measured on historical values.
Coming back to the example above, suppose you put your money in the bank and take out 103.5 Rs. a year later. You will find that the tealeaves that you could have bought for just 100 Rs. a year before are no more affordable, even with the 103.5 Rs. because due to inflation, the price has increased to 107 Rs.
Hence, this brings us to the concept of Real v/s nominal interest rates:
Real Interest Rate = Nominal Interest Rate – Inflation
What the bank is providing is only Nominal Interest rate (3.5%). What you actually get, in terms of purchasing power, is the Real Interest rate. In the above example, the Real interest rate will be negative, as Nominal – inflation = 3.5% - 7% = -3.5%
Hence, in essence the money you deposit is loosing value for purchasing power, due to inflation.
Moreover, even though you are earning nominal interest, you have to pay tax on it. So 30% of 3.5% is 1.05%. Therefore, after tax, all you get is just 2.45% which is well below the inflation figure of 7%!
Mathew is expecting the government to stop charging interest rate on this nominal value earning, as it is not a real profit. He also suggests that the money should not be kept in the savings bank accounts, but should be invested.
However, the question is about certainty. Today, everyone is talking about inflation, because it is high at 7%. While it was down at 3.5% to 4%, no one noticed that. Government cannot make a period based ruling, that if inflation is higher than the interest rate, then tax will not be charged. It all depends upon the market timing and that works randomly.
What can the investors do to fight such indirect losses?
Unfortunately, there is no sure shot way to fight inflation. Countries like Zimbabwe, which are witnessing a crisis have seen inflation at the rate of 20000% in one single year, if you want to talk about the extreme cases. However, the best bet is to keep money in Fixed Deposits, or get into tax saving infrastructure bonds, as explained in this article: Are we using the banks account effectively?
Unfortunately, there is no such thing like sure to get money – even with the bank rates. The Fixed deposit bank rates change ever now and then.
| Though they are less volatile, but changes are expected. Don’t expect the government to do anything – you know who are sitting to make laws for citizens. | Table of Contents |
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