Bank Finance India: Aug 17, 2013

Saturday, August 17, 2013

How to close out your credit card

BL ;August 17, 2013:

Satish had applied for a credit card from ABC Bank about a year ago. Twelve months after getting the card, Satish realised that he did not receive much benefits and it was simply a headache. So he decided to cancel the card.

Satish first contacted the bank’s customer service by dialling the number given behind the card. He then found out the actual amount outstanding in the card, made an online payment and cleared all dues in the card account. Satish kept a record of his payment as proof.

On making a full payment of the outstanding balance, Satish contacted customer service again and placed a request for cancellation of the card. He made a note of the date and time of the call, as well as the name of the representative who took down the request. Satish also got a request confirmation number, as a reference for future correspondence.

Satish then wrote to the credit card company and sought verification that the account has been closed. He mentioned the details of his call with the customer service representative. He sent the letter through Registered Post, so that there is a legal record of the same.

After a few weeks, Satish received confirmation from the bank that the credit card has been cancelled and closed. He then proceeded to cut the credit card into small pieces across the magnetic strip.

Keep in mind

What Satish did was the correct step-by-step procedure in cancelling a credit card, which must be followed diligently. What are the points you need to note should you want to cancel your card?

The first and most important thing to remember is that the bank will not cancel your card unless you have paid all dues. This not only includes the expenses you incurred on your card, but also includes all interest, fees and charges on the card.

Sometimes, you may cancel your card after the billing date, and as a result, there may be a residue amount which is not reflected in your last statement. Other times, the amount outstanding may be quite large to pay it all at once. In such cases, if you make regular payments, either on a weekly or monthly basis, you will still accrue interest on the balance.

Many customers feel that some card charges are unfair and proceed to cancel the card without paying these.

However, the bank will not cancel the card unless these dues are cleared. Further, you will have to continue paying interest and late payment charges on these dues until you settle everything. Simply cutting the card at your end and mailing it to the bank will not cancel the card. Insist on getting a written acknowledgement from the bank that the card has been cancelled.

Non-closure

If you do not follow the proper steps in closing the card, there may be a case when it may result in an outstanding balance on your card. For instance, if you do not get an acknowledgement from the bank, the bank may charge renewal fees which will show up as unpaid dues, even though you may have cut the card. This will get carried on month after month, attracting penalties. This will automatically reflect in your credit score, affecting your future loan prospects. So remember to actively follow up with the lender and get your credit card closed.

Does closing a credit card affect your credit score?

By closing a credit card, you are reducing your overall credit limit. As a result, your credit utilization will go up on an overall basis and thus reduce your credit score.

Let’s say you have three cards with a total credit limit of Rs 1.5 lakh and you spend Rs 75,000 in a month. So your credit utilisation is 50 per cent. You close one of the cards which has a credit limit of Rs 50,000 as you are not using this card. In that case, your overall credit utilisation will be 75 per cent (75,000/100,000). This can suggest that you are credit hungry in nature.

Does this mean that you should not close unused cards? No. It is better to close unused cards to prevent misuse or fraud. However, if you wish to close more than one card, you should do so gradually and not all at once.

Further, the older the credit history, the better it is for your credit score. A long track record will help lenders judge your track record and hence determine future behaviour and default chances. Hence you must always look at keeping older credit cards alive, and close the newer ones if the need arises.

If you already have a weak score, then work on improving your score first before proceeding to cancel the cards.

(The writer is CEO, BankBazaar.com)

A leader must develop talent

Yasmine Hilton is the first woman chairman to be heading one of India’s biggest multinational energy companies - Shell India. After serving 30 years in the company in various roles, she says this will be her last job.

She spoke to Hindustan Times on the responsibilities and challenges faced by a leader. Excerpts:

How do you define a leader?
I think a good leader is someone who can inspire all the employees of an organisation to deliver exceptional results - now and in the future - sustainability is the key.

What are the three most important traits of a leader?
First, the ability to develop a shared vision, carrying everyone in the enterprise; second, being able to deliver results as promised, or beyond; and third, the ability to inspire and develop talent - recognising in people potential that they do not realise they have. If a leader can do this, it is tremendously motivational.

In the end it’s about inclusive teamwork – a good leader knows that to be successful he or she needs to have the whole organisation pulling together effectively.

As a leader of your group, how do you cultivate leaders?
By devoting a lot of time to working with people, observing and helping them - coaching, encouraging and giving honest feedback. Everyone needs help and support to grow and develop, and I enjoy this aspect of my job very much. Seeing people improve their skills and confidence gives me great satisfaction. It makes my job easier in the long run and is good for the enterprise. Time spent mentoring staff is rarely wasted.

Can leadership be learnt? In other words, how can a manager become a leader?
Yes, I believe so. People aren’t born to lead - a manager can become a leader provided that he or she has the drive, application and willingness to learn and adapt. It is important to be able to see the big picture over a longer time horizon to build a sustainable organisation. A little humility and empathy for people and above all an ability to be decisive, having listened to and considered other views, go a long way.

What is the role of a professional leader in a promoter-driven company?It is not a role I am familiar with. But any large successful organisation has to attract and retain talent and that cannot be done effectively without professionalism and good stakeholder management. It’s a universal truth.

Since September 2008, the world has fallen into a maelstrom of serial crises. What is the role of a leader in these times?
It is a volatile world and there have been serial crises before 2008 as well; the energy business has had many shocks over the years. Keeping the big picture and longer term vision in mind are important. Leaders need to be able to respond calmly in a crisis, steady the ship and act decisively. Being prepared, using scenarios and crisis management techniques are important.

What has been the biggest leadership challenge you’ve faced?
Well, there have been many - that’s what I love about working in Shell. You get the chance to move across functions, businesses and countries. My previous role was chief information officer (CIO) of Shell’s global retail business, stretching over five continents. We had a poor track record at delivering major multi-million dollar global projects on time and on budget. My team turned this around, and we were benchmarked at top quartile after three years. Reaching this milestone proved a tough challenge – and it was a proud moment for the organisation. It is now in their DNA.

Do you think the role of business leaders has come under cloud -globally and domestically - of late?
Every era has its challenges and every company has problems from time to time, no matter how well-run they are. In Shell, we have a strong code of conduct and everyone must comply with ‘Shell Business Principles’, with their emphasis on health, safety, security and the environment (HSSE), ethics and compliance. For me, this makes life simpler.

Leaders have to often carry the cross of others’ wrongdoings and inefficiencies - the global banking sector today, for instance. What role can a good leader play to counter balance this image?
I think good leadership means running your own business well in the interests of all your stakeholders, communicating clearly what you are doing, while playing the role of a good citizen within the community. Reputation is built over decades and can be destroyed in a moment. It’s the responsibility of every business leader to be aware of this and act accordingly.

What is your one-line leadership mantra?
Always deliver on your promises.

Who are the leaders who have inspired you?
There have been many in my own company, who are not household names. I have learnt more personally from people that I worked with than iconic industry leaders, much as I may admire them. Shell is a company that offers many opportunities, takes some risks with appointments and supports people while they develop and are growing in the job. I was the first professional woman to work part-time while my kids were young and even reached the position of CIO in Shell UK on this basis. I am inspired to do the same for others so that they too can fulfil their potential.

Who is a leader in your industry whom you respect?
With my original information technology background, I would say Bill Gates and Azim Premji — both for their creativity and their philanthropy.

What is the biggest leadership lesson that you have learnt?
Treat people with respect and support them, but do not tolerate underperformance.

What is the best leadership decision you have taken?
All the tough ones. You never regret taking tough decisions and those are usually the best ones, when you look back.

What is the worst leadership decision you have taken?
The ones I did not take quickly enough, allowing situations to run on for too long. Lesson learned.

Do you see India as a challenging market vis-a-vis other markets?
I believe India has huge potential, with exciting, innovative young talent emerging all over the country. It’s challenging, yes, and India may not be the easiest country to do business in. However, it is slowly, inexorably moving to a level playing field where open access, deregulation and a consistent and transparent framework will become the order of the day. I believe Shell’s technical and commercial best practices can make a real contribution to meeting India’s energy challenges. India has some way to go to become a place where foreign investors feel welcome. Business growth and people growth go hand-in-hand. That’s why I believe India has a bright future – and why I was delighted to take on this job.

Debt of 1,000,000,000,000,000 yen? Not a problem

Live Mint :William Pesek :Fri, Aug 16 2013. 12 29 PM IST

The 15 zeros now needed to express Japan’s national debt

almost have a dark-arts quality all their own

Haruhiko Kuroda doesn’t wear a wizard’s hat when he arrives at Bank of Japan (BoJ) headquarters each morning. Once inside, I do wonder if he dons a cloak, waves a magic wand and concocts mysterious potions.

Kuroda has done something truly supernatural in his five months as governor of the central bank. The more yen he conjures up to produce inflation, the more he mesmerizes markets. Investors are more bewitched by Kuroda than they are by the number 1,000,000,000,000,000. The 15 zeros now needed to express Japan’s national debt almost have a dark-arts quality all their own. Yet a week after Japan’s IOUs reached the 1 quadrillion yen ($10.28 trillion) mark, yields have actually declined.

What is Kuroda’s secret? Ben Bernanke at the Federal Reserve would love to know as he fends off bond vigilantes, that mysterious cast of characters who protest fiscal or monetary policies they deem dangerous. Kuroda is winning bondland’s full obedience with two forms of trickery. The first is what economists call financial repression—essentially transferring money via monetary policy from citizens to the government. The second is outright monetization of public debt.

Of course, Kuroda can’t admit he’s engaging in either practice. The first would anger Japan’s 126 million people; the second might have hedge funds the world over shorting Japanese government bonds and credit-rating companies pouncing. So far, Kuroda is getting away with it. The longer he does, the better the chances Prime Minister Shinzo Abe can pull off his own miraculous feat of deregulating the economy.

Suspending disbelief

It all depends on how long investors are willing to suspend their disbelief over the facts in Japan: an impossibly large debt load, an aging population and a propensity for political paralysis. Were that moment of clarity to arrive, the global economy would be shaken by the worst debt crisis in history. Forget Greece—Japan’s debt burden is larger than that of Germany, France and the UK combined.

The entire world has a vested interest in Kuroda keeping the magic alive. Last month, deputy economy minister Yasutoshi Nishimura admitted something quite profound: This is the last chance for Japan’s economy. Many worry Kuroda is hastening what they see as Tokyo’s demise. Hedge-fund manager J. Kyle Bass, whose Hayman Capital Management LP has been predicting a Japanese collapse since 2010, is now surer than ever in his bet.

The usual argument against a crash is that well over 90% of government debt is held domestically, eliminating capital-flight risks. But that doesn’t explain how Kuroda has so masterfully silenced the vigilantes. Remember the violent yield swings of May and June? Ten-year yields now sit docile at 0.74%. That compares with 2.76% in the US, which prints the world’s reserve currency, holds a higher credit rating and boasts a growing population.

Sure, Kuroda crushed the skeptics with overwhelming monetary force. But the powers of financial repression deserve far more credit. The yield volatility that accompanied the first wave of Kuroda’s doubling of the monetary base in April shook Japan Inc. to its core. Government bonds are the main financial asset held by banks, companies, pension funds, universities, endowments, insurance companies, government-run institutions, the postal-savings system and individuals. Rather than reduce their debt exposure, the Japanese doubled down.

Kuroda didn’t exactly tell them to do so—it was more a matter of spin, with no direct Bank of Japan fingerprints. Bondholders got the message that it would be in everyone’s best interest to keep a lid on debt yields. What some might label a pyramid scheme, Japanese view as financial security. This dynamic is accelerating a huge redistribution of wealth within society from creditors (the people) to debtors (Japan’s ministry of finance). That’s pushing inflation-adjusted interest rates even further into negative territory and giving the government cheaper financing.

Japan’s ATM

Monetization is clearly part of the mix. Again, Kuroda can’t admit to being the ministry of finance’s ATM. But the BoJ is buying up ever-bigger portions (more than 70%, in many cases) of government debt at auction. What the BoJ does with much of that debt might never be known. Kuroda admits that he’s learned from Korekiyo Takahashi, the 1930s finance minister whose unorthodox policies earned him a reputation as Japan’s answer to John Maynard Keynes. In June, Abe said Takahashi’s exploits emboldened him to get radical.

Monetizing debt is the worst scenario economists like Milton Friedman could imagine. But then, who really thinks an aging nation carrying a debt approaching 250% of gross domestic product can ever repay it? Who actually thinks doubling the consumption tax to 10% will slay this beast? That’s why Kuroda’s end goal may justify the means.

Things could still go terribly wrong. If Abe’s big talk of structural reform isn’t met with action, then Kuroda is creating the biggest bubble in history. Should the bond vigilantes get a peek behind the curtain at what the wizard of Tokyo is really up to and panic, then Japan will face devastating problems. For now, though, Kuroda’s magic tricks are working, and they’re a wonder to behold. Bloomberg

William Pesek is a Bloomberg View columnist.

RBI bans FIIs from buying shares in Axis Bank

Indian Bank to open branches in Sri Lanka and Singapore

Expanding its international footprint, the city based Indian Bank is opening four new branches in Sri Lanka and Singapore.

With the proposed launches, the presence of Indian Bank in the international territories would rise to six (branches).

“I am going to meet the Indian High Commissioner in Sri Lanka on August 27 in this connection. Three new branches would be established in Batticaloa, Hambantota and Trincomalee at Sri Lanka by June 2014,” T M Bhasin Chairman & Managing Director of Indian Bank told the media.

He was speaking on the sidelines of the launch of centenary year celebrations of Indian Bank’s Triplicane branch here on Wednesday. Indian Bank is already running two branches in the island nation at Colombo and Jaffna since 2011, he added.

Asked about recovery of Non Performing Assets (NPA), he said that Indian Bank has the lowest NPA rate of 2.3 per cent in the industry. With aggressive recovery drive including Lok Adalats, he said, the net NPA would be brought down to less than two per cent before March 2014.

Earlier, while addressing the gathering on the occasion, Bhasin stated that Indian Bank was growing at a rate of anywhere between 18 and 20 per cent.

“Though the growth in the industry is from 12 to 13 per cent, we are growing at the rate of 18 and 20 per cent. The business has reached about rupees two lakh and sixty thousand crore,” he noted.

The Triplicane branch is one among the first few branches to be opened by the bank.

Commencing its business in 1914, the (Triplicane) branch has stepped into 100th year of banking service.

A road show, marking the centenary year celebrations of the branch, was also flagged off on the occasion.