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India to save $8.5 billion by importing oil from Iran: Moily
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FIIs pull out $2.5 bn from Indian stocks in August
OVL Q1 profit jumps 72%
Tata group’s market value nears Rs 6 trillion
personal finance
Top-up health plans are worth buying
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India to save $8.5 billion by importing oil from Iran: Moily
New Delhi, September 1 In a letter to the Prime Minister, Petroleum Minister M. Veerappa Moily has said by shifting focus on importing oil from the Persian Gulf nation, India would be able to bring down the oil import bill. India would be renewing imports from Iran as unlike imports from other countries it pays the Persian Gulf nation in rupees. The Prime Minister had recently asked the Oil Ministry to cut the oil import bill by $25 billion. Detailing plans to save $20 billion in foreign exchange spending, Moily on August 30 wrote to the Prime Minister saying about 11 million tonnes of crude will be imported from Iran in the remainder of the fiscal. He said some other measures would be taken in the energy sector that could help the savings to be in the region of $20 billion. By paying Iran in rupees, as the country has a bilateral arrangement on payment in Indian currency with the Persian Gulf nation to bypass US imposed sanctions on sending euros and dollars there, India would be able to save over $8.5 billion in foreign exchange this fiscal. The country paid over $144 billion last fiscal for importing oil. Moily, who also wrote an almost identical letter to Finance Minister P Chidambaram, said he has worked out some concrete measures which could result in a saving of around $19-20 billion in the current financial year. In all, India will import 13 million tonnes of oil from Iran in 2013/14. It has already imported two million tonnes so far in the fiscal year that began in April. “An additional import of 11 million tonnes during 2013/14 would result in reduction in forex outflow by $8.47 billion (considering the international price of crude oil at $105 per barrel),” the letter said. The plans outlined by Moily are part of the government’s efforts to prop up the rupee, which has slipped 23 per cent against the US dollar this fiscal. The US and EU sanctions placed on Iran over its nuclear programme have reduced its oil exports more than half from pre-sanction levels of about 2.2 million barrels per day. India had imported 13.1 million tonnes of oil from Iran in the last fiscal and since July 2011 has been paying in euros to clear 55 per cent of its purchases of Iranian oil through Ankara-based Halkbank. The remaining 45 per cent due amount was remitted in rupees in accounts of the Iranian oil company opened in Kolkata-based Uco Bank. India imported nearly 58 per cent more oil from Latin America in the January to July period as its Iranian shipments dropped. Other measures suggested by Moily include asking state-owned oil firms to keep crude imports at 2012-13 level of 105.96 million tonnes that will save $1.76 billion in foreign exchange and a mega fuel conservation campaign to limit fuel consumption growth to last year’s 4.1 per cent that will save another $2.5 billion, he said. Oil Minister’s prescription
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biz
talk
The banking sector has been facing turbulence due to the fall of rupee and subsequent liquidity tightening and increase in short-term interest rates by the RBI. Rajat Monga, Senior Group President - Financial Markets & Chief Financial Officer, Yes Bank, talks to Sanjeev Sharma about how the current market disruption offers opportunities, market concerns over bulk deposits and how elevated interest rates for a longer period may hurt growth. Q. Yes Bank has lost a chunk of market value due to concerns over its bulk deposit model after the recent RBI measures. What are your comments? A. Yes Bank has a well diversified deposit franchise and our bulk deposits constitute 13% of the total deposit base of the bank as of June 30. Further, the concentration of the top 20 depositors of the bank is 15% which is comparable to large private sector banks. As of March 31, 2013, 86% of the bank deposits are from customers with individual ticket size of less than 0.20% of the bank’s deposit base. Also, Yes Bank’s retail deposits (retail + transactional deposits) stood at 38% of the total deposit base as of March 2013, highlighting strong traction with retail customers over the last few years on the back of a strong expansion of branch network. Further, the bank continues to grow its deposit franchise across retail, SME /micro SME, mid corporate, large corporate, PSUs, MNCs and government steadily and in line with overall growth in advances. The bank also has a high share of floating rate loan and 90% of the bank’s loan book is re-priceable in the very short term. Therefore, the bank has a positive (favourable) asset liability mismatch, negating the cost of increase in deposits, bulk or otherwise. Q. Analysts have raised concerns over the future profitability and growth prospects of the bank? A. Yes Bank has a steady track record on this account having delivered a return on assets (RoA) of 1.5% or better quarter-on-quarter consistently over the past 5 years and return on equity (RoE) of at least 20% or better over the same period. Despite the challenging economic condition, the bank has delivered a solid profit growth of 34% year-on-year in FY 13 and 38% in the recent first quarter of FY14. Yes Bank has also maintained fairly consistent net interest margins (NIM) in the range of 2.8 to 3.1 in both falling and rising interest rate cycle, between fiscal 2009 and fiscal 2010 to 2013 (respectively). The bank has close to 90% of its loan book either linked to the base rate or of a tenor less than 1 year, which allows effective transmission of increased funding costs through re-pricing of loans. This ensures that NIMs stay consistent and profitability is maintained. Further, Yes Bank has also significantly improved its current and savings account ratio (CASA) which now stands at 20% of deposits. Further, the trend of improving CASA should continue given strong branch presence and distribution and differentiated offering on savings account. This should further improve margins. The bank continues to focus on the core business, as the operating environment has not been impacted significantly. In fact, the bank is looking at opportunities in this environment to do new business with good quality customers. Being a mid-sized and nimble bank, such market disruptions also present interesting opportunities. Q. How much has Yes Bank raised deposit rates? A. Yes Bank has revised its deposit rates by 0.25% to 0.5% in select tenors. This provides an opportunity for retail depositors to lock in higher rates on term deposits. Q. What are the challenges for the banking sector in view of the higher interest rates? A. The high interest rates do not pose a challenge to the banking sector as the sector would pass on the rates to the broader economy. However, higher interest rates for an elongated period may put strain on growth. However, in the current circumstances, it would be pertinent to highlight that the RBI has resorted to temporary measures to increase short-term interest rates and will have to eventually significantly lower rates to support growth. Q. There are huge concerns for the banking sector due to rising NPAs? A. Yes Bank’s position on asset quality continues to be robust - gross NPAs at 20 basis points - with close to 90% provisioning coverage ratio. In addition to general and specific provisioning, the bank has also taken provision of another (approximately) 40 basis points of loans as counter cyclical provisioning, which can act as a buffer. Additionally, concerns of NPAs in the banking sector are cyclical and there is a great degree of asset backed lending. With the macro economic improvement, the banking sector will witness a substantial improvement from current NPAs. As the government has recently given clearances to fast-track Rs 1.83 trillion worth of projects, it should further help alleviate concerns on the NPA. Q. How do you see the rupee volatility playing out? A. The RBI and the government have taken various measures to address the rupee volatility and bring in some stability in the currency. We believe that once the government measures to address the CAD take effect, the rupee should see some stability.
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No provision to carry forward LTA exemption
by SC Vasudeva Q. I have been reading your column for the past many years. I have a query relating to LTA. There is a block of four years i.e. 2010-13 for LTA. If an employee travels in 2011, can that be adjusted against LTA received in 2013. The rules don't say that travel and LTA should be in the same year. Can LTA's block concept override financial year concept.
A. Leave Travel Allowance received in 2011 can be claimed against the leave taken in the year 2011 itself. There is no provision to carry forward the exemption in respect of Leave Travel Allowance. My opinion is based on the contention that every year is an independent assessment year and, therefore, travel allowance received in a particular year should be accounted for in the year in which it has been received. Q. I retired from DHBVNL (a Haryana Govt. Company) and get monthly pension. I received Leave Travel Allowance (LTA) equal to one month's pension (Rs 34,000) during April 2011 for a block of 4 years. I visited Bhubaneswar with my wife in November 2011 and paid Rs 12,000 as air fare. I deducted this amount from total LTA amount and added balance amount (Rs 22,000) to my gross pension amount in ITR filed for AY 2012-13 and paid tax on it. I visited Mumbai with my wife in November 2012 and paid Rs 20,000 as air fare. I understand that amount of LTA actually incurred as travelling expenses on two visits during a block of 4 years is exempt from income tax. In view of this, kindly clarify whether I can deduct this amount (Rs 20,000) from gross pension amount of FY 2012-13 to avail exemption from income tax in the ITR to be filed for AY 2013-14. — RB Sharma A. Sub-Rule 2 of Rule 2B of Income-tax Rules, 1962 (The Rules) duly provides that exemption shall be available to an individual in respect of two journeys undertaken in a block of four calendar years commencing from the calendar year 1986. Accordingly, in case you have undertaken two journeys within the block of four calendar years, you should be entitled to claim exemption from tax in respect of the amount incurred towards the leave travel. However, you have already claimed exemption in respect of Rs 12,000 for one journey and included the balance amount of Rs 22,000 in your taxable income for assessment year 2012-13. It may, therefore, not be possible for you to deduct the amount incurred in the financial year 2012-13 relevant to the assessment year 2013-14 as Section 16 of the Act dealing with deduction from salary does not permit any such deduction. You may try your luck by revising the return for the assessment year 2012-13 for claiming the exemption of the entire amount of Rs 34,000 in that year. The return can be revised up to March 31, 2014. Q. I had filed my income tax return for the assessment year 2012-13 in July 2012 manually at the Income Tax Office claiming tax refund. I want to know whether I can file the same return for the AY 2012-13 now through e-filing. Please advise whether I can file revised return for the previous assessment year (2012-13) electronically (e-filing) without any notice or intimation from the Income Tax Department. — Anil Kumar A. You cannot file the same return again through e-filing. a) You can revise the return for the assessment year 2012-13 up to March 31, 2014, but such revised return should also be filed manually. Q. My queries are related to problems arising due to e-filing of income tax return. I filed my return for AY 2012-13 online. But after a year I got a notice to deposit a big amount. On cross-checking with Form-26AB, I found that TDS deduction made by a particular bank (shown in 26AB) has been skipped in their calculations. I made rectification appeal for mismatch category but instead of doing the correction, they slapped another heavy amount. I again made an appeal for correction. Had it been local, I would have convinced them personally but CPC Bangalore is too far to visit. Kindly suggest what I should do next to get rid off this problem. This year Form 26AB for financial year 2012-13 is not showing all the TDS made by the pension giving office. I know the Incom Tax Department will not give me TDS credit till it is shown in 26AB. Please guide. — Praveen Kaur A. You should approach the bank which has deducted tax at source. It is a possibility that the bank has not reflected such deduction in the TDS return filed by them. There is also a possibility of mismatch of your Permanent Account Number which is required to be indicated in the TDS return. In case there is a mistake at the level of the bank, the bank should be requested to rectify the said TDS return and file a revised TDS return so that TDS deducted on the interest paid to you is duly reflected in Form 26AS. In case you possess a correct tax deduction certificate reflecting your Permanent Account Number as well as correct TAN of the deductor, you should approach your assessing officer who should allow you the refund on the basis of such tax deduction certification in accordance with the recent instructions issued by the Board in response to Delhi High Court decision on this issue. The relevant paragraph of such instruction No. 5/2013 dated 8th July, 2013 is re-produced hereunder:- “In view of the order of the Delhi High Court (reference para 50 of the order), it has been decided by the Board that when an assessee approaches the Assessing Officer with requisite details and particulars in the form of TDS certificate as an evidence against any mismatched amount, the said Assessing Officer will verify whether or not the deductor has made payment of the TDS in the Government Account and if the payment has been made, credit of the same should be given to the assessee. However, the Assessing Officer is at liberty to ascertain and verify the true and correct position about the TDS with the relevant AO (TDS). The AO may also, if deemed necessary, issue a notice to the deductor to compel him to file correction statement as per the procedure laid down”. You may therefore approach the assessing officer for granting the refund in case the TDS certificate is in order.
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FIIs pull out $2.5 bn from Indian stocks in August
New Delhi, September 1 The outflows were about Rs 9,773 crore ($1.55 billion) from the debt market and Rs 5,922 crore ($902 million) from equities translating into a net outflows of Rs 15,695 crore ($2.5 billion), as per latest data available with SEBI. This is the lowest net outflows from the Indian capital markets since June, when Foreign Institutional Investors (FIIs) had pulled out a record Rs 44,162 crore ($7.5 billion). In July, FIIs had withdrawn over Rs 17,000 crore ($3 billion) from the debt and equities markets. Foreign investors continued to pull out of India, which has been facing stiff economic challenges, depreciating rupee and volatile global markets, however, outflows have slowed, market analysts experts noted. According to the US-based fund tracker EPFR, "redemptions from fund groups tied to two markets attracting more than their share of negative headlines, India and Indonesia Equity Funds, were moderate." The rupee slumped to a lifetime low of 68.85 (intra-day) against the US dollar on August 28. Since April 30, the rupee has depreciated by about around 22 per cent. The currency closed at 65.70 against the dollar on Friday. There has been turmoil in the global markets after the US Federal Reserve said it may taper the USD 85-billion-a-month bond purchase programme later this year and end it next year if the US economic recovery is up to its expectations. — PTI
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New Delhi, September 1 Net profit in April-June quarter rose by 71.9 per cent to Rs 837 crore from Rs 487 crore in the same period a year ago, the company said in a statement here. Crude oil production rose 15.7 per cent to 1.335 million tons in Q1 while natural gas output rose 18.7 per cent to 0.807 billion cubic meters. "Oil production is higher mainly due to production from newly acquired ACG fields in Azerbaijan and resumption of production from South Sudan," OVL said. — PTI
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Tata group’s market value nears Rs 6 trillion
New Delhi, September 1 The cumulative market capitalisation of all 32 listed companies of the Tata group has risen to nearly Rs 5.90 lakh crore as on Friday — the highest for any business house in the country and almost double the market value of the second ranked Mukesh Ambani-led Reliance Industries Group. The total market value of Tata group exceeds the combined market value of at least Reliance Industries, Aditya Birla Group and Anil Ambani-led R-ADAG. — PTI
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Retirement planning
Starting early gives you the benefit of time, which coupled with the power of compounding, enables you to create a sizeable corpus that can enable an individual to take care of his expenses after retirement Niraj Shah We have seen India change over the past two decades and notably there has been a change in the lifestyle of working population. Purchasing power has increased considerably and so have the expenses.
If a person spends Rs 25,000 a month today, assuming an inflation of 7%, his expenses after 25 years would increase to Rs 1,36,000 a month. Add to this medical expenses, which increase with age and occasional expenses such as gifts — it could actually exceed Rs 1,50,000 a month. Most private sector companies do not provide pension. Additionally, the rising trend of nuclear families, increasing cost of healthcare, inflation etc. make it necessary for an individual to plan for retirement. The objective is to have a regular flow of money after retirement that will enable one to manage the increased expenses without compromising one’s lifestyle. Today, consumers have access to products which enable them to plan for their retirement. While the awareness for retirement planning is increasing, most of us delay investing for it. Starting at an early age can significantly enhance realisation of an individual’s dream to achieve financial independence in the golden years. When is the right time to start retirement planning?
Well, in case of retirement planning it is said ‘the earlier the better’, however, it is never too late either. Starting early gives you the benefit of time, which coupled with the power of compounding, enables you to create a sizeable corpus that can enable an individual to take care of expenses after retirement. Though the amount required to be invested is more if you delay your planning, the key word is ‘regular investment’. It is only through regular disciplined investments that you can put aside a corpus that will generate enough income to enable you to live your life comfortably after retirement. How to plan for retirement
Retirement planning can be done in three simple steps: Step 1:
Calculate your expenditure post retirement Take into account your current expenses and factor in aspects like inflation, increased medical costs, vacations, gifts for family etc. You will then arrive at an amount that you will require for living comfortably once you have retired. You need to keep in mind that inflation will cause your expenses to increase (even if you are spending on the same items). One can eliminate costs like children's education and rent, if you own a home. Step 2:
What will be the savings pool I need to build? Once you have an idea of your expenses, you can accordingly establish the quantum of amount (corpus) required to be built — the amount that you need for meeting the expenses. This savings pool will be created taking into consideration the inflation factor. Step 3: How much do I need to save now? Depending on your financial status, determine the funds which can be put aside for building the desired retirement corpus. Start saving now so that you have time on your side and can enjoy the power of compounding. For example, if a 35-year-old person wants Rs 50,000 every month for meeting expenses after retirement, he needs to start planning now. A corpus of Rs 75,00,000 will be required to generate the desired amount. For this purpose, one needs to invest Rs 10,000 every month in a retirement plan. How to choose a retirement plan
Studying the features and the charge structure of a retirement plan is important. Ideally, selecting a plan which has a low charge structure will enable you to contribute more towards your investment. A good retirement plan would:
The author is SVP & Head Products, ICICI Prudential Life Insurance. The views expressed in this article are his own |
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Top-up health plans are worth buying
He was already paying premium of Rs 18,000 p.a. and it was not possible for him to allocate more than double amount immediately. He curiously asked: Is there any way out? The question was very genuine and relevant to all of us as we have to cover for each and every uncertainty in our life. To begin with, most of people who have opted for at least Rs 3 lakh sum assured policy are now realising that the cost of the medical treatment is rising at higher percentage. This amount may be sufficient for minor surgery or illness but not for critical illness or major accident. The rising medical expenses need also to be considered while opting for health cover. This is when the new version of health insurance plan, i.e. Top-up plan should be considered which covers higher sum assured. The premium payable is also low, hence, it becomes affordable. Top-up plan is add on health insurance plan which comes into picture only when the single claim is above certain deductible limit. The plan comes with minimum deductible of Rs 1 lakh to Rs 5 lakh depending on the plan. Deductible means the policy will be eligible for claim only above deductible limit. Normally, deductible does not reduce sum assured. Deductible is the amount over which the claim for each hospitalisation is reimbursable. For example: You have a basic health insurance of Rs 3 lakh and also buy a top-up policy of Rs 10 lakhs with deductible of Rs 3 lakh. In the event of a serious hospitalisation with a claim of Rs 13 lakh; Rs 3 lakh will be paid by your base plan and Rs 10 lakh will be paid by your top-up plan. The plan is normally beneficial for those who already have a basic health plan individual or group and want to enhance their sum insured at an affordable premium amount. It is not compulsory to have a base health insurance plan to buy a top-up plan, but it is always advisable to take a base policy first before opting for top-up plan. The only difference between a normal mediclaim plan and a top-up plan is the deductible amount. Policy holder has to opt for deductible amount at the time of buying the fresh plan. Higher the deductible, cheaper the plan. But top-up health plans should be bought to bridge the gap between existing policies and actual costs. Also, in top-up policies, most insurers do not ask for medical check-ups up to the age of 55 years. In reimbursement plans, this is usually 45 years. It is advisable to buy a top-up plan from the same insurer from which you have bought individual or group health insurance. This saves time and documentation work at the time of claim. Normally, it is better to coordinate with one insurer for reimbursement of claim, than to coordinate with two different insurers. The premium for 30-year-old male for Rs 3 lakh sum assured is around Rs 3,000 p.a. in base plan. If the same person buys the top-up plan of Rs 10 lakh with deductible of Rs 3 lakh, the premium will be around Rs 3,000 p.a. So by paying just double premium you can increase your health insurance cover by four times. It is advisable to buy base plan as individual cover for each member of family and top-up plan as family floater as the big claims happen rarely. So the chances of big claim are unlikely to happen to all family members except when all are travelling together and God forbid meet a major accident. Both your indemnity policy and the top-up plan can be claimed together for single hospitalisation. The first condition to be met is the threshold of the top-up plan. Another criterion is that a top-up plan normally works only on a single incidence of hospitalisation. This means that you can use the top-up plan only if your medical bills exceed the deducible amount during a single hospitalisation by a single member. If relapse happens within 45 days of discharge from hospital, it is usually considered single illness. However, if the customer is hospitalised again for the same illness but after 45 days from discharge, it is usually considered a fresh illness. So, the deductible has to be crossed for every single illness for policy benefits to commence. There are few plans which do not have the limit of single claim but can be claimed for any illness over deductible amount for entire year. These plans are known as super top-ups. So top-up plans are the need of the hour and avoiding it can cost you a lot and can also spoil your financial freedom. The author is Head, Financial Planning, ApnaPaisa. The views expressed in this article are his own
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what are Options & Futures*
An option gives you the right to buy or sell the underlying asset . A call option gives you right to buy the underlying asset while a put option gives you the right to sell. An option contract specifies the strike price, that is, the price at which you can buy or sell the underlying asset. In Futures, you buy a contract which will have a specific lot size of shares. When you buy a Futures contract, you don’t pay the entire value of the contract but just the margin. Open interest is the the total number of contracts not closed or delivered on a particular day. |
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Further, suppose an employee receives an LTA of Rs 30,000 per year and he receives the LTA of Rs 60,000 for 2012 and 2013 in July 2013 and his travelling expenses were Rs 40,000 in 2011. Can this Rs 60,000 be adjusted against Rs 40,000.
— Manish K Joshi
An improved lifestyle and better medical facilities have led to increase in the lifespan of an average Indian. In the past, a salaried person would retire at 60 and live up to the age of 67. However, now the lifespan of an individual post-retirement has increased by at least 20 years. This implies that an individual needs to have sufficient funds to be able to lead a comfortable life once he or she stops working.
One afternoon, a friend of mine came to my office to clear his doubts on health insurance cover. Looking disturbed, he narrated his story: “Look, I and my family are covered for Rs 3 lakh health insurance individually, but I think the same is not sufficient.” The reason behind this concern was his recent trip to a hospital where one of his relatives was admitted for the past 10 days. He had met with a major accident and the total hospital bill till date was approximately Rs 13 lakh. He wanted to know how much cover one should have.
