MNREGA

On September 5th 2005 with assent of the president of India a new policy came into existence which worked towards providing livelihood security in rural areas of India. It started with the name “NREGA” which stood for National Rural Employment Guarantee Act and then an additional letter “M” was prefixed making it “MNREGA” Mahatma Gandhi National Rural Employment Guarantee Act. MNREGA is an employment scheme which provides social security by guaranteeing a minimum of 100 days paid work per year to all the families whose adult members opt for unskilled labor-intensive work.

History

After three years of observation, the government launched schemes like Jawahar Rozgaar Yojana, Food for Work Programme, Sampurna Grameen Rozgaar Yojna. These acts were predecessor to Mahatma Gandhi National Rural Employment Guarantee Act, which was a legal title. This act was firstly initiated in Maharashtra in 1970’s by Former Chief Minister of Maharashtra Vasant Rao Naik. NREGA act resulted in a boon for millions of farmer families. This act was accepted by Planning Commission and later on accepted nationwide. Such acts gave lessons to government regarding ‘Rural Manpower Programme’ ‘Crash Scheme for Rural Employment’ ‘Drought Prone Area Programme’ ‘Marginal Farmers and Agricultural Laborers Scheme’. Keeping the objectives of wage employment, production of valuable assets and food security still, the government focuses on implementing new schemes by seeking drawbacks of old ones. MNREGA is one of the outcomes of same.

Key Features

1. To provide job security to all adult members for at least 100 days in a financial year
2. To create permanent wealth such as roads, ponds, wells.
3. Employment is provided within a range of 5 kms from residence of applicants.
4. Minimum wages will be provided.
5. Applicants will be given unemployment allowances, if work is not provided within 15 days of application.

Highlights

1. By 1st April 2008, this act covered all districts of India.
2. ‘Stellar Example of Rural Development’ is what World Bank termed this act, as per World Development Report 2014.
3. This act is executed by Gram Panchayats.
4. Labor-intensive tasks are preferred.
5. Women empowerment, environment protection, boosting social equality are the areas covered under NREGA act.
6. The act safeguards the effective and efficient management and implementation of its policies.
7. The act also ensures a genuine, transparent regulation of its activities.

MNREGA has been criticized for making agriculture less profitable as landless laborers are lazy and they don’t want to work on farms as they can get money without doing anything through minimum money guarantee at NREGA work sites.

What do you mean by NEFT?

NEFT stands for National Electronic Funds Transfer. It’s an electronic payment system of India facilitated by RBI (Reserve Bank of India), it helps people with one-to-one money transfers. People using this facility can transfer money electronically from any branch of bank to any other individual or organization within the country that has a bank account which has NEFT service enabled.

Not all bank branches of the country are part of NEFT funds transfer network. The branches which are NEFT-enabled, only those can become a part of this network. The consolidated list of bank branches which are a part of NEFT, can be found by clicking here. You can select the appropriate option on this link.

Limits, Charges & Operating Hours of NEFT

Limits

The amounts carry no restrictions. But the cash based transactions are limited up to a maximum amount of INR 50,000/ Per Transaction for cash based payments.

Charges

There are no charges to receive money, however to send money following charges are applicable,

*In some cases it may not attract any charges example salary accounts, specially designed accounts, No frills etc.  

Operating hours

Weekdays (Mon-Fri)- 8 a.m to 7 p.m (twelve settlements)
Weekends (Saturday)- 8 a.m to 1 p.m

Who all can transact through NEFT?

Any individual, association or firm having accounts with banks can transfer money through NEFT. Even people who don’t own an account (walk-in-customers) can deposit money in NEFT enabled banks, adhering to instructions. Such customers are required to supply full information regarding their address, telephone number, supplement accounts and much more.

Only the individuals, firms or associations which hold accounts with any branch of bank can receive payments under NEFT system. So it becomes mandatory for the beneficiary to hold an account with the NEFT enabled bank.

There are no geographical restrictions on the banks. The transactions can be carried out from anywhere to everywhere within the country.

Working of the NEFT system

The operating of this system can be understood in following steps:

Step 1: An individual or the association desiring to transfer funds through NEFT, need to execute/complete the application form consisting details of beneficiary such as name, address, bank branch, account number and the money to be deposited. The form is available at the commencing bank branch. Even ATM offers this facility for some banks.

STEP 2: A message is prepared and sent to the NEFT Service Center (also known as pooling center) by the commencing bank.

STEP 3: That message is dispatched by pooling center to the NEFT Clearing Center, which is managed by National Clearing Cell, Reserve Bank of India, Mumbai.

STEP 4: The funds are sorted by Clearing Center as per the bank branches from commencing banks to destination banks. And after that those messages are delivered by the pooling centers of the destined banks.

STEP 5: The messages are received from the Clearing Center to the destination banks and they approve the request against the beneficiary customers.

For more detailed information on NEFT you can visit www.rbi.org.in 

NSE and BSE

A stock exchange or a stock market acts as a service provider, it is one stop shop for traders to buy or sell financial instruments such as shares, bonds etc. A stock exchange can be approached for both issue and redemption of Publicly listed shares. To be able to trade on a stock exchange you’ll need to have a trading account. SEBI (Securities Exchange Board of India) is the governing body in India that acts as a regulator of capital markets under a resolution of the Indian Government.

Leading Stock Exchanges of India are NSE (National Stock Exchange) and BSE (Bombay Stock Exchange)

WHAT IS BSE?

Bombay Stock Exchange is the expansion of term BSE. It is an ancient stock exchange of Asia, incorporated in 1875 and it is headquartered in Maharashtra (Mumbai), India. Bombay Stock Exchange is the 10th largest stock exchange in market capitalization. Around 5400 companies are listed on BSE as of 2015. Not many know that BSE started under a banyan tree with the total money used back then were INR 7.

Key Features of BSE

CEO/MD – AshishKumar Chauhan

Market Capitalization – USD $1.7 Trillion

Currency Traded – INR

Name of Indexes – BSE Sensex, BSE Mid Cap, BSE Small Cap, BSE 500

Location – Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai

ISO Certified – Yes, first one to get this certification

Timings

09:00 to 09:15 – Pre-open trading session

09:30 to 15:30 – General trading session

17:05 to 17:15 – Position transfer session

17:05 to 17:55 – Closing session

17:07 – Option Exercise session

OBJECTIVES OF BSE

From more than 130 years, BSE is providing an effective and efficient capitalization platform. It provides a transparent electronic screen based market for trading in different securities, instruments, funds and bonds, be it small or medium enterprises. It also serves as host of secondary services for investors like risk management, market facilities, education. These services, processes safeguard the investor’s interest, develop Indian Capital Market along with innovation and competition. It also provides various depository services. Also BSE acts as a regulator, which provides surveillance mechanisms through which all the speculations, irregularities and manipulations can be detected.

WHAT IS NSE?

National Stock Exchange is the expansion of term NSE. It is the top exchange in India by number of trades in equity shares and number three in the world. It is situated in Mumbai and was established in November 1992 as Taxation Company. It was accepted as stock exchange in April 1993 under the Securities Act 1956, with P.V. Narasimha Rao being the Prime Minister of India and Manmohan Singh being the Finance Minister. NSE has around 1600 listings as of 2015. 

Key Features of NSE

CEO/MD – Chitra Ramkrishna

Market Capitalization – USD $1.65 Trillion

Currency Traded – INR

Name of Indexes – CNX Nifty, CNX Nifty Junior, CNX 500

Location – Bandra, Mumbai

Timings

09:00 to 09:08 – Pre-open trading session

09:15 to 15:30 – General trading session

OBJECTIVES OF NSE

The key objective of National Securities Exchange is to provide a transparent trading system for all kinds of securities worldwide. It also protects the interest of investors. It achieved its objectives in quite short span of time. Many new terms have come into being to give a variety of options to investors.

Heard about Public Provident Fund (PPF), but don’t know much about it? For details, have a look at the explanation.

WHAT IS PPF?

Much known as Public Provident fund, PPF a savings instrument introduced by the ministry of finance in India which also helps in tax savings. In 2015 this scheme is more than 45 years old and is still among the top financial instruments used for tax planning. PPF is a success not only because it provides decent returns on investment but the money invested also gives tax benefits. The returns are usually higher than what the Fixed Deposits offer. It is a Long Term Debt Instrument of Indian Government. Post Offices as well as some Banks gain the authority to access PPF accounts. 

Eligibility

• A person needs to be ROI (Resident of India)
• Non Resident Indians (NRI’s) cannot advance money in Public Provident Fund.
• Minors are eligible to open an account by their legal guardian.
• PPF account can not be opened under the name of  HUF (Hindu Undivided Family)

Documents Required

• Pan Card copy
• Form A (Opening Form)
• Passport size photo
• Any residential proof

Investment Amounts

The minimum and maximum limit every year for investing in public provident fund is INR 500 & 1.5 lakhs respectively, deposits may be made in monthly installments (max 12/year) or in one go. Any deposits above the specified amounts will not fetch any interest income. Failure to deposit 500 INR would make you liable for a penalty.

Interest Rates and Other Benefits

RBI declares the Interest Rate every year in March. For 2014-2015 this is 8.70%, which was exactly the same as previous year.

It is advisable to invest money in this account before 5th of each month to gain maximum returns, as the interest is calculated on the least balance from 5th to the last of month. Therefore, it is desirable to deposit additional sum before time to earn additional benefits.

Also the entire sum of 1.5 lakhs can be advanced before 5th April to earn interest on the entire amount for the whole year.

Duration, Loans & Transfers

From the day a PPF account starts, it’s accessible till 15 years. After 15 years, the tenure ends. On the expiry date, the money can be withdrawn.
Also, the account holder can opt for extension of account up to a maximum of 5 years with adherence to certain terms and conditions.

Loans are available to individuals from third financial year itself. All such loans are to be reimbursed within months. disbursed amount can not be more than 25% of balance at the end of 2nd immediately preceding year. If you have paid the first loan successfully and you are between 3rd and the 6th year you may be available for a 2nd loan.

The accounts of individuals can be easily transferred to Post Offices or other Bank Branches free of charge.

Benefits Regarding Tax

Such benefits come under SEC 80(c) of IT ACT. The amount deposited in PPF account, is divided into two parts.

1. PRINCIPAL AMOUNT which is the total sum which you invested
2. INTEREST AMOUNT which is the benefit you will get on the above investment

Tax benefit includes benefits on both the amounts, up to a maximum of INR 1,50,000

ON PRINCIPAL AMOUNT

This amount can be reduced from the actual Income Tax amount of that year. The sum so arrived is liable for tax payment. It can also be reduced from Wealth Tax.

ON INTEREST AMOUNT

The return, in form of interest is tax-free. No tax formality is incurred on the interest amount.

Policies Governing PPF

• Only one account is accessible by an individual. Except in case of minor, if second account of a person is disclosed, the principal amount will be handed over back to him but the interest thereupon will be cancelled.
• A PPF account is not a joint account. A nominee can be selected, who will be benefited after the death of account holder.
• In case, no nominee has been appointed, the benefits will be given to the legal heir’s of the deceased account holder.

PPF Disclaimer

• By default, the PPF account will be deactivated, if no investment is made in the whole year.
• A penalty of 50 INR is to be borne by the account holder for again activating the account along with 500 INR for the inactive year.
• The deceased account cannot be continued by the nominees.
• The identity of legal heirs or nominees is just in case the balance in deceased account exceeds 1.5 lakhs.

PPF Vs Some other Schemes

Tax Savings Fixed Deposit

• PPF and Tax Savings Fixed Deposit both are deductible incomes.
• But the tenure of Tax Savings Fixed Deposit is 5 years, which is less when compared to PPF.
• Even the benefit earned on Tax Savings Fixed Deposit is taxable which is the reverse of PPF.

National Savings certificate

• Both schemes include deposits made in Post Office or Bank Branches.
• NSC is a scheme which involves deposit only once whereas PPF requires deposit every year.
• The tenure of NSC is 5-10 years whereas that of PPF is 15 years.

Secured and Unsecured Loans

You need funds to start a new venture? or Require money for education of your children? or Maybe you’re looking out for a new credit card or loan to buy a new car/house? Whatever the requirement, you will need to choose between Secured or Unsecured debt. Each type has its own positives and negatives. So it’s better to be aware about them by going through our cover story.

WHAT ARE SECURED LOANS?

Secured loans are those loans which are backed by some or the other kind of property or assets. The word secured depicts that these type of loan are protected by some collateral. In case if a borrower fails to pay the loan the creditor can legally auction or sell the collateral to recover the original amount disbursed. Assets such as home, automobile, stocks, gold etc. can be used as collateral. The title of the pledged article will be held by the loan provider (creditor) until it is repaid in full along with the interest. A secured loan is generally less costly for the debtors and more peace-of-mind oriented for the creditors.

Examples of Secured Loans

• Home Loans
• Construction Loans
• Gold Loans
• Car Loans
• Boat Loans

PROS AND CONS OF SECURED LOANS

PROS

• Secured loans are available for larger amounts as compared to personal loans.
• Less paper work and easy to qualify if one has suitable collateral against the loan.
• The time period of loan repayment is also higher as compared to other type of loans.
• Such loans offer lower interest rates as they are secured against your property.

CONS

• Failure to repay the loan would result in losing your property.
• Few secured loans have varying interest rates that could make your repayment amount higher.
• Secured loans bear risk factor because they need expensive collateral security.
• You may incur high penalty fees on the repayment of loan.

WHAT ARE UNSECURED LOANS?

Unsecured loans are totally opposite to secured loans, they are disbursed without a collateral in place. Such loans are accessible to anyone & you need not have a suitable asset to be pledged as a collateral. Taking unsecured loan implies that the borrower can repay through his financial resources itself. Unsecured loans are usually more costlier than secured loans due to no security in place and more prone to end up as a total loss to the creditor. If you fail to pay an unsecured loan, the lender can drag you to court and damage your credit worthiness as well.

A borrower is judged by 5 C’s before a secured loan is provided:

1. Character
2. Capacity
3. Collateral
4. Capital
5. Conditions

Examples of Unsecured Loans

• Credit Cards
• Education Loans
• Personal Loans
• Renovation Loans

PROS AND CONS OF UNSECURED LOANS

PROS

• Such loans are quite cheap as compared to Secured ones.
• They give number of options to choose the repayment mode.
• You will not lose any of your assets.
• All you need is a document and signature and you can avail this loan

CONS

• As no property is mortgaged, the lenders charge higher interest rates even for a short-term.
• You can get only a limited sum of money from lenders as they give more money on secured loans because there the financial risk is secured.
• Since the loan amounts are not large, the repayment periods are also short as compared to repayment period of secured loans.
• One may get trapped into the debt cycle due to continuous non-payment of loan amounts

WHICH ONE IS BETTER?

The truth, there is NO right answer to this question. What, When, Which & How to opt for which type of loan, totally depends on your need of taking the loan. Both are a good option if they fit in to your requirements perfectly. Generally secured loans are good from creditor’s point of view as there is a collateral to cover up the losses, whereas an unsecured loan is good from a applicant’s point of view as he/she would have no tangible asset to lose in case of a default.

The key is to think in the right direction before applying for the loan. Auto, education, personal, consumer etc. all these type of loans are designed specifically for the purpose stated in their respective name(s). Be willing to pay more & quicker in case if you don’t wish to collateralize your loan. So the preference solely depends on your requirement.

 Once you are clear about the type of loan you require, you must approach different lenders to see what interest rates they offer. Don’t forget to compare the rate of interests being offered by different banks and NBFCs before you finalize your lender. Try to browse through some websites to check their respective USPs & repayment plans. Cross check and apply for a loan with the lender which suits best, according to your requirements.

THE BIG FOUR

Big Four is the term given to represent the top four audit companies of the world. Ernst and Young, Deloitte, PricewaterhouseCoopers and KPMG together make the Big Four. These companies conduct the audit of many public and private companies throughout the world.

They audit more than 80% of all the public companies in the United States and specialize in other areas such as assurance, actuarial, risk management, corporate legal services, tax, financial planning and consulting.

Initially, there were the Big Eight:

1. Coopers & Lybrand
2. Ernst & Whinney
3. Price Waterhouse
4. Arthur Andersen
5. Arthur Young & Co.
6. Touche Ross
7. Peat Marwick Mitchell
8. Arthur Young & Co.

1989 June – Ernst & Whinney merged with Arthur Young to form Ernst & Young

1989 Aug – Deloitte, Haskins & Sells merged with Touche Ross to form Deloitte & Touche

1998 July – Price Waterhouse merged with Coopers & Lybrand to form PricewaterhouseCoopers

So the world was left with only the Big Five which included Arthur Anderson. After the infamous scandal of Enron, Arthur Anderson went out of business and Big Five became the now famous Big Four.

Deloitte

Head Quarters – 30 Rockefeller Plaza, New York City, New York, USA

Employees – Over 200,000 (2014)

Revenue – Over US$ 34 Billion (2014)

Countries Served – Over 150 (2014)

Found back in 1845 at London, United Kingdom, Deloitte started as the separate companies of William Deloitte, Charles Haskins, Elijah Sells, and George Touche. The three companies eventually merged to become Deloitte & Touche.

Although acquisitions and mergers did help them to an extent but they have mainly remained on the top with the help of strong dedication and commitment towards their clients. In 2011, Deloitte had 1.8% growth and PWC had 1.5% growth, making Deloitte the top firm among the audit companies. In 2011, PWC out-ranked Deloitte and in 2013, Deloitte again took the first place.

Their estimated annual growth for 2012 was 8%, which is the highest out of the big four accounting firms. They have upheld this growth rate over the past four years.

PricewaterhouseCoopers

Head Quarters – London, United Kingdom

Employees – Over 195,000 (2014)

Revenue – US$ 34.0 Billion (2014)

Countries Served – Over 150 (2014)

Founded back in 1849 by Samuel Lowell Price It is the second largest audit firm operating in approximately 157 countries. It re branded itself to PWC in 1998 when Coopers & Lybrand and Price Waterhouse merged together. Their major revenue source as of 2014 is Assurance, Advisory & Tax practice. Its headquarters are in London, UK.

The firm has sustained its growth over the years, acquiring and merging with other company’s such as Booz & Co., leading them to become one of the biggest firms in the world & 5th largest in the US.

PWC has reached this level with acquiring skill from over 750 offices across the world it is growing at the pace of 4% every year.

Ernst and Young (EY)

Head Quarters – London, United Kingdom

Employees – 190,000 (2014)

Revenue – Over US$ 27 Billion (2014)

Countries Served – Over 150 (2014)

Found back in 1849 by Harding & Pullein in England. It reformed to Ernst & Young in 1989 when Ernst & Whinney and Arthur Young & Co. merged together. With more than 700 offices throughout the world EY is rated third among the top 20 accounting firms in the United States.

Top source of income for EY include Assurance, Tax & Advisory.

In 2013 EY reported revenue of $25.8 billion and 5.8% annual growth rate which is the highest growth rate it has seen over the past 5 years. This is up 1.4% YOY 2012.

KPMG

Head Quarters – Amstelveen, Netherlands

Employees – Over 160,000 (2014)

Revenue – Over US$ 24 Billion (2014)

Countries Served – Over 150 (2014)

History of KPMG can be traced back to 1870. In 1979 KMG was formed which was further joined by Peat Marwick and the name was eventually changed to KPMG in the late early 90s. Not a lot of people would know that in 1997 EY & KPMG tried to merge and the announcement was also made however it couldn’t happen due to some reasons.

Major source of income for KPMG is Audit, Advisory & Tax.

KPMG is doing fairly well with its growth and has also earned a lot of accolades over the years such as world’s most attractive employer, (2nd) World’s best outsourcing advisers etc.

Good to know – 5th largest accounting firm is said to be BDO International with over US$ 7Billion revenues (2014) & number 6 is Grant Thornton with over US$ 4 Billion revenues (2014).