Investment limit in Infra bonds to be increased?

The government is considering more than doubling the investment limit in infrastructure bonds eligible for tax rebates as part of a strategy to provide a funding boost to a vital sector while having a beneficial effect across the economy.

The finance ministry’s department of economic affairs, as part of its suggestions for the 2012-13 budget, had proposed raising the investment limit in these bonds to Rs 50,000 from Rs 20,000 now. The revenue department is expected to take a final decision after weighing expected economic gains against short-term revenue losses.

The tax-free bonds are a good option not just for investors, but also for issuers to raise funds.

After a gap of five years, the 2010-11 budget reintroduced tax breaks on infrastructure bonds, allowing investments of up to Rs 20,000 in these instruments to be deducted from taxable income and effectively helping individuals save Rs 6,180 in taxes.

Initially announced for one year, this concession was extended for another year last year. Now the economic affairs department wants to continue the tax rebate into the next fiscal with a higher limit and a larger number of eligible issuers.

In 2010-11, IDFC, REC, IIFCL and a few other companies together raised more than Rs 3,000 crore. In the current year, these infrastructure companies have already sought permission to raise about Rs 13,500 crore.

LIC is number ONE in claim settlements

Life Insurance Corporation remained well ahead of private rivals in living up to the purpose of insurance by settling 97.03% of claims in 2010-11, helping the state-run giant retain its market dominance even a decade after its monopoly ended.

Settlement of claims at LIC rose from 96.54% in 2009-10, IRDA said in its annual report. For the private sector, where the premia on policies are lower than for LIC, the claims-to-settlement ratio was 86.04%, up from 84.87% in 2009-10.

Higher the ratio of settlement to claims, the more customer-friendly a company is.

LIC, which controls nearly three-fourths of the market, scored on another front: its repudiation of claims declined to just 1% in FY11, from 1.21% a year earlier. The remaining claims are under dispute.

Settlement of claims is the key factor that decides customer satisfaction and a company’s profitability. While genuine claims are usually settled by both private insurers and LIC, private players see more disputes.

Insurance is not what you sell, but deliver," said AK Dasgupta, MD, LIC. "People trust LIC because of our strong claims settlement record. They know we have the ability because of our balance sheet and intention. People need insurance for two reasons – uncertainty and good return."

Pvt Life insurers policy issuance dips 35% since April

According to the data collected by the Insurance Regulatory Development Authority (Irda), during 2011-12, life insurance industry sold close to 19.6 million policies, 15.31 per cent lower, compared to 23.14 million policies sold in the same period last year. In the same period, number of policies issued by the private players came down to 4.15 million from 6.34 million.

Pension plans, which consisted of about 30 per cent of the sales, specially for the private players till the new regulations came into force in September 2010, now account for only 1.7 per cent of sales.

With the commissions on unit-linked plans (Ulips) coming down, many agents have left the industry, which has impacted the sales of private life insurance companies.

During April-October, while LIC collected Rs 41,259 crore by writing new policies, the private insurers collected Rs 14,479 crore.

Considering the choppy equity market and the high inflation scenario, Ulip sales are unlikely to pick up this financial year and experts fear growth of the life insurance industry is likely to remain subdued over the next six to 12 months.

IDFC Infra Bonds

Overview

What are infrastructure bonds?

To channelize long term retail flows into the Infrastructure sector, the Government of India had introduced Section 80CCF under the Income Tax Act, 1961 (‘the Act’). This section provides for an income tax deduction for an individual investor who subscribes in the Long-Term Infrastructure Bonds (‘Bonds’), issued by certain financial institutions.

Presently, individual investors have various options to invest upto 1 lakh into various instruments such as PPF, Insurance, ELSS etc as allowed under sections 80C, 80CCC and 80CCD of the Act.

An investment in infrastructure bonds under Section 80CCF is an additional window to save tax upto 20,000, over and above the 1 lakh limit already available.

Long term Infrastructure Bonds by IDFC

IDFC has come up with its first tranche of Long Term Infrastructure Bonds for financial year 2011 – 12. These Bonds would be for a period of ten year with an option to the investor to buyback the same after five years. These bonds have got the highest credit rating of (ICRA) AAA by ICRA and Fitch AAA (ind) by Fitch.

Issue opens: November 21, 2011
Issue closes: December 16, 2011

Bankers are ‘BHAYANKAR’ Mis-Sellers

1. The top level management of Banks etc. takes huge targets from Insurance Companies, Mutual Funds etc. Then employees of the organization are put under severe pressure to meet the targets.

2. Since, the employee carry a SO CALLED BRAND name, they just make Investors fool by making any false commitment.

3. Since the employees get the remuneration and incentives from the Management and any good performance would mean their increment or bonuses, they hardly care for investor.

4. The attitude for the Banker is too short term and hence they don’t feel scared cheating the investors.

Please find the few of the Sales Pitch used by banker to make you fool.

Insurance Mis-selling Tactics

- Selling a Regular Insurance Plan as One time Investment Plan so that he get maximum incentive.

-  Selling an Insurance Policy as an Fixed Deposit and misleading investors by saying that it is a Guaranteed Return Product.

-  Selling ULIP before you actually avail any other service like Home Loan, Mortgage Loan etc.

Mutual Fund Mis-selling Tactics

- Churning the Portfolio would give you better return.

- Asking Investors to invest in new funds as New Fund is recommended by their so called Research Team.

- We get reports from our Management about the Future movement of Market and hence we can maximize your return.

-  Offering Loan so that you can invest in Mutual Funds. Double benefits for Bank.

Banking Product Mis-selling Tactics

-  Offering Credit card as you are a "Preferred Customer".

- Opening Savings Bank account by saying Zero Balance Account. But they don’t disclose that after a period of time, huge charges are levied as Minimum balance is not maintained.

- Selling GOLD Coins which are very expensive in comparison of Market Rate.

- Giving personal loan saying that interest rate is at 9-10% but it turns out to be 18-20%

These are just few tactics which we could list down though the list in endless & everyday it increases. We advise you to deal with such an advisor who can carry long term vision with you and would be happy when you grow rather than being happy when an organization grows.

It’s true that banks alone enjoy the trust of investors and some of them have been abusing that trust.

Be-Aware & Beware

Common KYC for all investment products

Financial sector regulators are working towards a common KYC norm for investors across financial instruments – mutual funds, stocks, bonds, bank deposits, insurance and pension plans. While SEBI has already decided to move to a common standard for all products regulated by it, there has been discussion with other regulators on the subject.

Also Read :  Compliance with Mandatory KYC Requirement

In due course, KYC done by one of the financial sector players may become the enabling tool for all products.

A transition to a common KYC will make the lives of investors and financial advisors easier as it would reduce the documentation substantially. The investors and advisors would be able to do away with the hassle of submitting various documents.

At present, it is only in case of mutual funds that one KYC clearance entitles investors to put money in multiple schemes.