SBI is the king of mobile banking

Mayur Shetty, TNN | Sep 15, 2014, 12.41AM IST

MUMBAI: The State Bank of India (SBI) has emerged a surprise market leader in mobile banking, accounting for half of all mobile transactions in the country. Although traditionally new generation private banks and foreign banks have been the early adopters of alternative platforms, the 208-year-old Indian bank is preparing to leapfrog its customers directly from branches to mobiles as part of its strategy to reach out to the unbanked and decongest branches.

The bank has over 1.15 crore mobile banking users, which is larger than the mobile banking customer base of large banks in the West. Only a couple of Chinese banks have more mobile banking customers. The number is expected to rise dramatically as the ratio of mobile banking customers rises from 4.5% at present to 12% in two years and possibly 60% after three years as the bank completes its channel integration.

"Message-based banking, where you don't even need smartphones, has just been launched (in India). I do believe that once this is understood by people, there will be an explosion of activity in the mobile space. This is what the future holds," said SBI chairman Arundhati Bhattacharya. She said mobile banking will also play a large part in the role of the yet-to-be-launched payment banks with which SBI plans to have tie-ups.


The aggressive promotion of alternative channels is part of the bank's strategy to decongest branches, which are expected to come under even more pressure as the bank opens over 1.5 crore new accounts under the Prime Minister's Jan Dhan Yojana .

At present, customers can access the bank through "State Bank Anywhere" - the bank's Smartphone app which is integrated with Internet banking. The service which is expected to be used by the masses is "State Bank Freedom", which can be accessed by all kinds of phones.

We see a business opportunity in payment banks as they can dovetail into the main bank by acting as a customer touchpoint for us. As to promoting a payment bank ourselves, we will see what the opportunities and regulations are like. If you are a promoter, there is a restriction on how much you can use it," said Bhattacharya.

To reduce the crowd at the branches, SBI has approached all state governments, asking them to accept payments online instead of insisting on a challan from the SBI.

"A lot of it is also for small value remittances. We are offering regular remitters a 'green remit card', which enables him to swipe his card in a cash deposit machine, deposit the cash and send money instantly," said Bhattacharya.

Make most of your EPF

TOI Babar Zaidi | Sep 15, 2014, 06.27AM IST

A recent survey by global professional services firm Towers Watson says that saving for retirement is a big concern for Indian employees, with 71% of the respondents worried that they are not saving enough. In another survey conducted by ET Wealth last year, respondents listed volatility of returns (32%), low savings rate (26%) and lack of reliable financial advice (25.4%) as their biggest retirement worry. 

That's surprising, because a majority of the respondents of both surveys were already investing in a product that takes care of all these concerns.The Employees' Provident Fund (EPF) managed by the Employees' Provident Fund Organisation (EPFO) ensures that an individual puts away enough for retirement every month. With 12% of his basic salary and a matching contribution by his employer, a subscriber to the EPF should be able to accumulate a decent amount by the time he retires. If someone started working at the age of 25 in April 2000 at a basic salary of `10,000 a month and got a raise of 10% every year, he would roughly have accumulated `16 lakh in his PF account by now. If the trend continues, he would have saved about `1.23 crore by the time he is 55 years old (see graphic) and more than `1.7 crore of tax-free money on retirement at 58. 

Despite the tremendous opportunity, most contributors to the EPF won't reach the `1 crore milestone. More than 13% of the respondents to the ET Wealth survey withdrew their PF balance each time they changed jobs. Withdrawing from the PF can be counter-productive on two counts. One, the withdrawn amount is usually blown away on discretionary expenses and retirement savings are back to square one. Two, if the individual withdraws his PF balance before completing five years, the amount becomes taxable.

Another 20% of the respondents to our survey said they dipped into the PF corpus for other needs.The EPFO allows an individual to withdraw from his PF account for specific needs, such as constructing or buying a house, children's education and marriage or a medical emergency. 

Should EPF invest in stocks? 

The other concern about volatility of returns is also not an issue with the PF. The EPF invests in debt instruments that deliver stable returns. EPFO rules allow the EPF to invest up to 15% of its corpus in stocks but the Central Board of Trustees has steadfastly ignored suggestions to this effect. 

Many financial experts, including Finance Ministry officials, have castigated the EPFO for this aversion to stocks. They say the EPF is a low-yield debt-based scheme that can never beat inflation.At a recent meeting of the EPFO, it was pointed out that the returns offered by the EPF since 2005, when adjusted to inflation during the period, were in the negative. The `100 put into the EPF in 2005, when marked to inflation, were worth only `97 now.Experts argue that the only way the EPF can beat inflation is by investing some portion of its gargantuan corpus in the stock markets. But while the inflow of fresh investments will be good for the equity markets, they may not have the same impact on investor returns. The New Pension System (NPS) funds for central government workers are allowed to invest up to 15% of their corpus in Nifty-based stocks in the same proportion as their weightage in the index. We looked at the SIP returns of these funds in the past 5-6 years and found that they were not significantly higher than what the 100% debt-based EPF has churned out. In fact, two of the funds have actually given lower returns (see EPF did better than NPS). This despite the fact that these funds have invested right through the bear phase of 2008-9 and the markets are at all time high levels right now. Our calculations are not based on point-to-point returns but on SIP returns. We took into account the NAVs of the first reporting day of each month and then worked out the internal rate of return. 

Don't shun equities altogether 

Having said that, we must add that a certain portion of your retirement savings should certainly be allocated to equities. It's only that this equity exposure need not be through the EPF. Any retirement plan has to be a combination of several investments. Keep the EPF as the debt portion of your retirement plan and invest 5-20% in equities through a diversified fund. 

Interestingly, though the pension fund managers of these NPS funds can invest up to 15% of the corpus in equities, they have allocated less than 8% to stocks. "Pension fund managers have been conservative because markets have been volatile.The negative impact of equity is magnified in the short term so they have shied away from maxing the equity exposure to 15%," says Manoj Nagpal, CEO of Mumbai-based wealth management firm Outlook Asia Capital. 

Compulsory and linked 

The third concern about the lack of reliable advice is also laid to rest by the EPF. It is compulsory and an individual has no option but to contribute to it.What's more, it ensures regular savings. According to estimates by HR firms, the average hike this year was 10.5%. How much was your hike? More importantly, did you increase your SIPs by the same proportion? Not many people care to do that. They spend more, buy more, party more but keep investing the same amount. 

The EPF is different. Your contribution is linked to your income, so when you get a pay hike, your EPF contribution will go up in the same proportion.If your basic salary is `30,000 a month, you will be contributing `3,600 plus a matching contribution by your employer. If you get a 20% hike and your basic becomes `36,000, your contribution will automatically increase to `4,320. This is a great way to build a corpus in the long-term. 

The icing on the cake is that you can invest more than 12% of your basic salary. Millions of Indians welcomed the move when the budget hiked the annual investment limit in the PPF to `1.5 lakh. But Delhi-based PSU manager Naveen Parashar was not one of them. "I can't understand why salaried taxpayers are so excited about this development.They have always had the option to invest in the Voluntary Provident Fund (VPF) and get the same tax benefits offered by the PPF," he says nonchalantly. Parashar puts an additional `14,700 into the VPF every month, taking his overall contribution to the EPF to `31,700 a month. This forced saving has helped him build a sizeable corpus in the past 15 years. 

Central Provident Fund Commissioner K.K.Jalan echoes Parashar's views. "The VPF is an ideal saving instrument for high-income earners looking to build a tax-free corpus. Unlike the PPF, there is no limit to how much one can invest," he says (see interview). 

The new look EPFO 

The EPFO is fast shedding its dowdy image and using technology to turn into a more professional and nimble organisation. It has made several other investor-friendly changes in the past 12 months.Last year, it introduced the online facility for transferring the balance to a new account. This year, it has made it possible to check the account online.Going forward, all members are expected to have a Universal Account Number and this will be portable across employers and cities. In fact, UANs have already been allotted to 4.17 crore active contributors to the EPF. In the first four months of this financial year, the EPFO settled nearly 43 lakh claims. Of these, more than 68% were settled in less than 10 days.

Should you bet on banking sector funds?

ET Sanjay Kumar Singh | Sep 15, 2014, 06.31AM IST

Rajiv Rajendran, a 40-year-old Bangalore based IT executive, has for some time been hunting for investment products that will benefit directly from the eco nomic recovery . He has been advised to invest in banking and financial sector funds. But Rajendran has reservations about the prospects of these funds after the market's recent run-up.
Why invest 

The banking and financial services sector benefits directly from a pick-up in economic activity . According to Venkatesh Sanjeevi, fund manager, ICICI Prudential Banking and Financial Services Fund: "The Indian economy is at a stage where a number of macro-economic parameters like GDP growth, IIP growth, current account deficit and inflation are improving. With a new government in place we expect this trend to continue. The banking sector, being the economy's backbone, stands to benefit as the macro environment improves." 

In such times, a lot of equity and debt capital is raised as corporates undertake fresh capital expenditure. Being the conduit for these activities, the sector tends to benefit from these activities. 

From 2008 onward, investors had begun shifting away from financial assets and towards phys ical assets. But now with the environment turning conducive--equity markets are rising and real interest rates have turned positive--financial assets are expected to outperform gold and real estate. The banking and financial sector is expected to benefit from investors' shift towards financial assets. 

A few concerns 

One concern within the banking space is the high level of non-performing assets (NPAs), especially among PSU banks. You can circumvent this problem by opting for funds that have avoided banks which are hobbled by high levels of NPAs. 

Currently investors are also worried about whether they should take additional exposure to the banking, financial services and insurance (BFSI) space when they already have considerable exposure to it via diversified funds. Sanjeevi says that with these funds, apart from banks, you get exposure to the entire gamut of financial services, like life and general insurance companies, housing and vehicle finance companies and credit rating agencies. Vishal Dhawan, chief financial planner at Mumbai-based Plan Ahead Wealth Advisors, suggests that investors who already have a portfolio comprised of diversified equity funds should limit their exposure to these sector funds to 5%. 

Another concern is whether after the sector's recent run-up--the S&P BSE Bankex is up 79.33% (26 August) over the past one year--there is any upside left. Sanjeevi contends that to look at only one-year return is misleading. "Last year most macro parameters were at a weak level. The oneyear return has got affected by the low base," he says. In his view, current valuations are fair. He believes that as the economy improves, the sector will witness considerable upside, both via earnings growth and valuation re-rating. Says Dhawan: "Investors should not expect past returns to be repeated in the near future. And investments should be made via SIPs, and not lump sum, and for 3-5 years." 

Selecting the right fund 

Compare a fund's one-, threeand five-year trailing returns with its benchmark and category average returns. Also evaluate the fund for consistency by looking up its performance vis-a-vis benchmark and category average returns over the past five calendar years. Next, examine the fund's portfolio.It should not be too heavily concentrated in the top one or three stocks--a common failing among sector funds. It should also be diversified among all the sub-sectors within the BFSI space. Finally, an exposure to a sector fund should be tactical.When interest rates are rising or when the economy is at the peak of a cycle, this sector tends to underperform. Dhawan advises investing via shorter-duration SIPs of one or two years. When an SIP ends, decide afresh whether you want to invest more, leave the money already invested with the fund, or withdraw it.

Manmohan Refuses to Join Issue with Rai

By Express News Service

Published: 15th September 2014 

NEW DELHI: Former Prime Minister Manmohan Singh on Sunday refused to comment on controversy following former CAG Vinod Rai’s allegations on 2G and coal scam saying that he had “done his duty”.

“I, indeed, did my duty. Well, I do not want to comment on other people what they have written,” Manmohan said on Sunday after the celebration of release of a book titled ‘Strictly Personal: Manmohan and Gursharan’, written by his daughter Daman Singh.

The former PM was asked about the scathing criticism by Rai who held Manmohan responsible for the controversial decisions to allocate 2G spectrum on a first-cum-first serve basis and coal blocks without auction.

The former PM’s daughter also refused to react to the latest controvery arising out of Rai’s book that chronicles some of the recent corruption scandals investigated by the audit body.

“Actually, I do not know anything about that. So, I cannot comment. I have no idea about that. I have not heard what they have said. I cannot say anything. I really do not know and I have not heard what they have said. So, there is no point in saying anything,” Daman , who teaches history at Delhi University, said.

In her book, Daman has showcased the journey of her parents and provides new insights into the couple but keeps away from the last 10 years when her father headed the UPA Government.

RBI may issue final norms on small, payments banks in 2-3 months

PTI Sep 14, 2014, 11.46AM IST

The Reserve Bank is likely to issue final guidelines on small and payments banks within 2-3 months, paving the way for corporates to enter these two segments.

The final guidelines on small and payments banks are expected in the next 2-3 months, sources said.

Draft guidelines for small and payments banks were issued by the RBI in July and comments were invited till August 28.

It is examining the suggestions received and is in the process of finalising the norms for such banks, sources said.

The final norms will allow micro finance institutions, telecom players, non-banking finance companies (NBFCs) and public sector companies eligible to apply for bank licences once RBI invites applications for the same.

The proposed small banks will provide a whole suite of basic banking products such as deposits and supply of credit, but in a limited area of operation.

On the other hand, payments banks will offer a limited range of products such as acceptance of demand deposits and remittances of funds. They will have a widespread network of access points particularly in remote areas, either through their own branch network or through Business Correspondents (BCs) or through networks provided by others.

"Both payments banks and small banks are 'niche' or 'differentiated' banks, with the common objective of furthering financial inclusion," the RBI had said while issuing the draft guidelines for licensing these banks.

Small banks can collect deposits and disburse small-ticket loans to farmers and small and medium businesses, unorganised sector through high technology-low cost operations, as par draft norms.

Payment banks will cater to marginalised sections of society, including migrant labourers, for collecting deposits and remitting funds. They would, however, not be allowed to indulge in lending operation.

Such banks can be set up with a minimum capital of Rs 100 crore as against Rs 500 crore required for normal commercial banks, as per the draft norms.

Top CEOs Name Their Favorite Books - Part -2

Coca-Cola CEO Muhtar Kent: "The Ascent of Money: A Financial History of the World" by Niall Ferguson

Kent recommends "The Ascent of Money," by British historian Niall Ferguson. The book traces the role of cash from Mesopotamia to today.

 

"I love books on economic observations," he said. "This is one of the best."

OWN Network CEO Oprah Winfrey: "To Kill A Mocking Bird" By Harper Lee

Since Winfrey was a little girl, her favorite book has been Harper Lee's staggering coming of age story.

 

"I remember reading this book and then going to class and not being able to shut up about it," she said. "I read it in eighth or ninth grade, and I was trying to push the book off on other kids. So it makes sense to me that now I have a book club, because I have been doing that since probably this book."

Facebook CEO Mark Zuckerberg: "The Aeneid" by Virgil

Zuckerberg may be a poster boy for millennial progress, but the Facebook founder's reading taste skews classical.

 

His favorite: "The Aeneid" by Virgil, an epic poem that tells the the story of Aeneas, a legendary hero associated with the birth of Rome and the fall of Troy.

BI 14 Sep 14