Monday, November 26, 2001, Chandigarh, India






National Capital Region--Delhi

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A GUIDE TO PERSONAL FINANCE

Students prefer loans for education abroad
T
he stupendously rising education costs are a cause of worry to most of us. And in the present day competitive scenario where professional courses, education abroad are considered as the key to success, good education has no longer remained within affordable limits of an average middle class family.

  • Eligibility

  • Rate of interest

  • Repayment

  • Margin money

  • Security

  • Processing time

HOW I INVEST

Don’t invest in very high-gain sectors
M
r Anurag Aggarwal of PK Industries has been running his family business for the last five years. An MBA with a thorough knowledge of the market. At 32, and with merely five years of managing business, his investments are quite well planned and are almost equally spread over various sectors like equity market, mutual funds, banks, insurance etc.

  • Investment in various sectors
  • Equities
  • Mutual Funds
  • Banks
  • PPF and insurance
  • Where to invest



EARLIER STORIES

 

TAX & YOU

Tax-free income
Q: I availed VRS recently. Kindly clarify whether interest from Bank Deposits and Post Office Monthly Income Scheme are exempt from income-tax or not.

  • Tax-free return

  • Retirement benefits

MARKET UPDATE

Poised for correction
M
arkets witnessed a rally during the week and sensex gained close to two per cent to close the week last Friday at 3252.

  • Satyam Computers

  • Rayban Sun optics

  • Philip (I) Ltd

  • Hughes Software

  • HFCL

  • Coming fortnight

CHECK OUT

Compensate consumers for inordinate delay
T
he Supreme Court, in its landmark judgement in the case of Lucknow Development Authority vs M.K. Gupta, had described state-owned land development authorities in the country as “storehouses of inaction”. Eight years hence things haven’t changed much.


FIIs net buyers in equities
Mumbai, November 25
The foreign institutional investors (FIIs) were net buyers in equities at Rs 278.9 crore ($ 58.1 million) while netting sales of Rs 83.3 crore ($ 17.4 million) in debt for the trading week ended November 23.

Customer fortnight ends
Chandigarh, November 25
Canara Bank, Sector 44-D branch concluded its annual customer care fortnight with a customer meet here yesterday. Present on this occasion were the senior representatives of the bank, Mr D.K. Sahoo, DGM-Chandigarh Circle and others.
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Students prefer loans for education abroad
Shveta Pathak

The stupendously rising education costs are a cause of worry to most of us. And in the present day competitive scenario where professional courses, education abroad are considered as the key to success, good education has no longer remained within affordable limits of an average middle class family. The 2001-02 Union Budget, loans through commercial banks, however, had more relaxed conditions and specified loans for educations where amount has also been increased.

The budget specifies education loans by commercial banks for all types of courses in schools and colleges in India and abroad.

The loans where limit for education within India is as high as Rs 7.5 lakh and outside India is up to Rs 15 lakh.

Though most of the banks have surpassed the targets they had set for sanctioning and disbursal of loans, there still is lack of awareness say the officials. “There are very few people who are coming for education loans within the country. In most cases it is taken for education abroad only”, said a PNB official.

By October end, PNB had disbursed loans to 356 students amounting to at total of Rs 6.40 crore in the zone. In Punjab, the bank sanctioned loans to 269 students. Corporation Bank, under its Corp Vidya Scheme, disbursed loans worth Rs 3.68 crore for 247 accounts (starting from April this year) .

Trends show that students have been availing these loans for engineering and medical courses within the country and for management and IT related courses abroad.

The purpose of these education loans is to cover costs of admission fee, books and stationery, instruments relating to studies, monthly fee, examination fee, insurance premium, boarding and lodging expenses, air fare for joining the course abroad, reimbursement of the fee etc. Almost all types of courses including professional courses are covered under various education loan schemes being offered by the commercial banks.

Eligibility

Punjab National Bank for instance under its Vidya Lakshyapurti education loan scheme, specifies and age limit between 16 years and 40 years. A relaxation of five years in age is given in case one decides to pursue computer or IT related courses. There are banks like State Bank of India, Corporation Bank that do not specify any age limit. Indian nationals who have scored pass marks in last qualifying examination are considered for the loans. A proof of the selection of admission is also required.

Rate of interest

Most banks charge interest equal to their Primary Term Lending Rate up to Rs 4 lakh and PTLR plus one per cent for loan above Rs 4 lakh. (Conditions differ for different banks).

In case of Corporation Bank, for instance, up to Rs 4 lakh, if the loan is taken for less than one year, interest at 11.5 per cent is charged annually and in case the loan is for more than one year 12.25 per cent annual interest is charged. PNB charges 12 per cent interest. State Bank of India also has the same interest rate.

For more than Rs 4 lakh, Corporation Bank charges 12 .5 per cent for less than one year and 13.5 per cent annually for more than one year. In case of SBI and PNB the rate for amount above Rs 4 lakh is 13 per cent irrespective of the time period for which the loan is availed.

Repayment

In case of PNB, the repayment of the loan starts two years after the completion of studies or one year after getting employment which ever is earlier. In case of SBI it is one year after the course completes or six months after getting the job. While repayment in case of PNB has to be made in 84 equal monthly installments, this period ranges between five years and seven years in case of Corporation Bank. No penalty is charged in case of pre- payment.

Margin money

This also varied from bank to bank. While there is no margin money in case of PNB, in case of Corporation Bank, up to Rs 4 lakh it is nil, but for more than Rs 4 lakh five per cent in case of loan within India and 15 per cent in case of loan for studies abroad is required. Margin would mean that a specified percentage of the loan amount has to be met by the applicant.

Security

If one has to take a loan from PNB, then up to Rs 5 lakh co-obligation of either both parents or guardian and LIC policy equivalent to the amount of the loan is required. For loans of more than Rs 5 lakh co-obligation of the parents or guardians and collateral security of the third party guarantee. Corporation Bank does not ask for security up to Rs 4 lakh, above this amount collateral security of 100 per cent of the loan amount or guarantee of third party whose net worth is equivalent to the loan amount is required.

Processing time

Most banks claim to disburse the loan money within one to two days after the required papers are submitted to them. A checklist is provided to the person seeking loan giving the details of the required documents like proof of age, address, admission expenses, assets and liabilities of co-obligants, details of collateral security, certificate of last qualifying examination etc.

“It has become easier now to avail education loans and the amount is also sufficient to meet the education expenses etc. Moreover, the processing time is also very less, so the students must avail the benefit of these loans, says Mr V. Prabhu, Assistant General Manager, Corporation Bank.
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HOW I INVEST

Don’t invest in very high-gain sectors

Mr Anurag Aggarwal of PK Industries has been running his family business for the last five years. An MBA with a thorough knowledge of the market. At 32, and with merely five years of managing business, his investments are quite well planned and are almost equally spread over various sectors like equity market, mutual funds, banks, insurance etc. He believes that decision to invest in share market should not involve much greed, else one ends up incurring losses only. He spoke to TNS about how he plans his investments.

Investment in various sectors

I save between 30 per cent and 40 per cent of my income. The savings I have spread in almost all the sectors equally — be it Public Provident Fund (PPF), Mutual Funds (MF), equity market or the banks. Spreading your investments in various sectors, I believe, gives you the optimal returns and also minimises the risk. This way tax planning can also be done in a better manner.

Equities

My holdings today include Reliance Petro, Hindustan Lever Limited, VSNL, Reliance Industries, and Satyam Computers etc. Though I have been investing for the last three years only, I observe the market closely especially when a particular sector is expected to grow. My strategy for investing is simple-good fundamentals of the company, sound management and sound financial position are a must.

My business does not give me much time to trade actively so I usually hold the shares for a few months before selling them.

I also make it a point not to invest in very high gain sectors like IT because the risk involved here is also the maximum. A company like Infosys, however, would not be a bad option because it not only has a good management, it is financially strong and the policies well framed. Companies that do not have sound policies are likely to manipulate things to their advantage, which is detrimental to the interest of the investor.

One should also not get tempted by overall market trends — bullish or bearish and rather plan his investments according to his own requirements.

If one thinks that share market can fetch you unimaginable returns, the person is on the wrong track because once you start thinking like that, the greed factor increases and it is a major deterrent in making right investment decisions.

These days, I am looking at cement sector and expect it to grow in the coming days.

I have not lost in the share market till now, but I believe that in this sector no person can make phenomenal gains.

Mutual Funds

I have invested in Templeton and Kothari (bond funds). I do not invest in equity related funds because I am directly involved in the equity market. Before going in for any MF, the portfolio of the company is an important aspect that has to be considered and the fund should also be managed by a professional company.

I believe debt related funds, balanced funds would be good options in the coming days.

Banks

In terms of returns, banks, no doubt are unattractive. But the security and liquidity aspect also cannot be ignored. Moreover, now that there is no penalty in case of Fixed Deposits in pre-mature withdrawals, banks are a reliable sector where one can put his money.

PPF and insurance

For businessmen, who have unlimited liability, PPF is a must. In case everything goes wrong, your PPF account would not be touched. Insurance is also a good investment I believe. Not in terms of returns, but in terms of covering your risk. One must have a medical insurance policy. I have taken money back policy and Jeevan Shree . Insurance is also good for tax saving purposes.

Where to invest

One must keep revising his portfolio and investments should not be concentrated on one sector. Spread your investments over various sectors so that you get reasonably good returns, lower risk and save on tax also. — SP
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TAX & YOU

by R.N. Lakhotia

Tax-free income

Q: I availed VRS recently. Kindly clarify whether interest from Bank Deposits and Post Office Monthly Income Scheme are exempt from income-tax or not.

Please also advise where the amount may be invested with 100 per cent safety and minimum income-tax liability.

— B.S. Bansal, Pinjore

Ans: The interest income from bank fixed deposit as well as post office monthly income plan is exempted to the tune of Rs 9,000 p.a. only. You may invest in Relief Bond issued by the Government which are 100 per cent safe and secured. Besides, no income-tax is payable on the interest income received from Relief Bonds. You may also invest in certain mutual funds, the income of which is also fully exempt from income tax.

Tax-free return

Q: I have retired from Milkfed on 31.5. 2001 and after the receipt of E.P.F accumulation, Gratuity and leave encashment, I intend to invest my hard earned money in a proper and safe place and I also would like to get Tax-free return so that there is no liability. Please give me advice where I should invest with good yielding and the same may be Tax-free.

— Ravinder Kumar, Verka

Ans: To enable you to receive tax-free return on your investments, you may make investment upto Rs 60, 000 in PPF Account, Rs 1 lakh in bank fixed deposit account or monthly Income Plan with Post Office and the balance amount may be invested in Relief Bonds issued by the RBI or Mutual Fund Units. The income from Relief Bond and Mutual Fund is fully exempt from income-tax without any upper limit.

Retirement benefits

Q: I was retired from service on 31.8.98. No TDS was deducted from my retirement dues. In order to cover any probability of I. Tax liability on such dues I deposited a sum of Rs 25,000 as advance IT on 22.12.98. However, taking into account all exemptions on retirement benefits a refund of Rs 18835 was claimed in the IT return for FY ended 31.3.99 filed with the IT Deptt on 22.6.99. Kindly clarify as to from which date the interest on refund amount is payable to me and at what rate?

— S.L. Arora, Jalandhar

Ans: You would be eligible to receive interest from Income-tax Deptt on the refund due to you. The refund will start from 1st April of the relevant Assessment Year and interest @ 0.75 per cent p.m. would be payable upto the date when the refund is granted.
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MARKET UPDATE

by Lalit Batra

Poised for correction

Markets witnessed a rally during the week and sensex gained close to two per cent to close the week last Friday at 3252. The really has been on the back of tech stocks such as Satyam Computers and Infosys, and old economy stocks like Reliance, ITC and Reliance Petroleum

Satyam Computers

The software major, Satyam Computers, sky rocketed by 20 per cent during the past week to close at Rs 212.75. The company’s stock has gone northward on value buying over the recent weeks. It got a further boost recently on the buzz that the company is planning to sell a part of its stake in its US-listed Internet subsidiary Infoway (SIFY) to strategic investors. The stock has also been propelled by a continuous flow of new orders to the company despite the US slowdown. The new orders have eased the concerns of cautious future guidance made by Satyam Computers while announcing its Q2 (ended September 2001) results. On Thursday, Satyam Computers, announced a three-year IT Services alliance with Computer Sciences Corporation, USA.

Rayban Sun optics

The scrip of Rayban Sun optics moved up by 25 per cent from last weeks closing of Rs 44.8 to close the week at Rs 56. The rise in the scrip is attributed to the market pinning hopes on an open offer by the parent company Luxottia s.p.a. If market rumours are to be believed they put the buyback price close to Rs 100 per share.

Philip (I) Ltd

The news of Philip (I)’s Dutch parent hiking its stake in the company at Rs 105 per share pulled up the stock past the Rs 100 level to Rs 101.06. The company announced on Thursday that the Netherlands-based Royal Philips Electronics is making in second open offer to the minority shareholders of Philips India Ltd of Rs 105 per share.

Hughes Software

Hughes Software Systems closed last week at Rs 273.5, down from its high of Rs 317.5 touched in the course of last week. The fall in its price from the high of intra week levels seems to be on account of the reports that the Securities and Exchange Board of India (SEBI) has decided to exempt the US-based Hughes Electronic Corporation from making an open offer to the shareholders of Hughes Software Services (HSS), after the change in global ownership of the company. According to market sources, speculators and investors built up positions in HSS on the hopes of an open offer in the range of Rs 350 to Rs 400 by the new parent company, but reports of SEBI exempting the open offer from Echostar have put a lid on such speculation.

HFCL

The scrip, from a low of Rs 30.90 on October 5, 2001, has soared by whopping 215.2 per cent in just one-and-a-half months to its current price of Rs 97.40. On the BSE, 1.01 crore HFCL shares changed hands on Friday. This was the highest volume recorded in the scrip in last nine months. This rise in the scrip can be attributed to speculative interest and retail investors are advised to stay away from buying into the scrip. Also every rise should be used as a profit booking opportunity.

Coming fortnight

The sensex has made strong come back after touching a low of 2595 on the September 21, 2001. The gains have been made on strong recovery in both old economy and new economy stocks. Though the underlying sentiment has been optimistic, we believe it is time to book profit as the market is poised for a correction. Several stocks have been steaming ahead despite being in the overbought territory. The exceptions are index heavy based and have propped the sensex from time to time. But this cannot be sustained. It has now become difficult to say when the market will tank, as the rally has extended longer than usual.
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CHECK OUT

by Pushpa Girimaji

Compensate consumers for inordinate delay

The Supreme Court, in its landmark judgement in the case of Lucknow Development Authority vs M.K. Gupta, had described state-owned land development authorities in the country as “storehouses of inaction”. Eight years hence things haven’t changed much. Even today, most consumer complaints against these authorities pertain to inordinate delay in handing over possession of a plot or a flat and their refusal to compensate the consumer for the loss and suffering caused.

In fact if you look at the terms and conditions governing the sale of plots and flats drawn up by these bodies, you will notice that the allottees are almost always required to pay a steep interest on late payments. But no such penalty clauses are imposed on the authorities for any delay in handing over possession.

Recently, the National Consumer Disputes Redressal Commission bunched together five different revision petitions filed by land development authorities to decide an important aspect of this issue — the rate of interest that needs to be paid by these authorities to the consumers for undue delay in handing over possession. In all these cases, the consumer courts at the district level had awarded consumers 18-15 per cent interest on the amount paid by them and the State Commissions had upheld them. The land development authorities — Haryana Urban Development Authority (HUDA), Ghaziabad Development Authority (GDA) and Himachal Pradesh Nagar Vikas Pradhikaran (HPNVP) — had challenged these decisions before the apex consumer court.

Eventually, the apex consumer court’s verdict favoured 18 per cent interest, calculated after two years from the date of depositing the amount. Declaring this as equitable, the Commission pointed out that when a consumer is allotted a plot or a house by these authorities, he invests all his life’s savings towards payment of installments. And he is put in an unenviable position when the urban authority does not hand over possession within the promised period. On one hand, he is constantly plagued by uncertainty over whether he will eventually get possession at all and on the other, he cannot even buy elsewhere as all his money is locked up with the authority. If he has applied for a plot, a long delay in handing over possession would mean that he will have to bear the escalation in the cost of construction. If he has applied for a flat or a house, a delay invariably leads to the authority demanding escalation charges. In addition, while he waits, the consumer continues to spend on a rented accommodation. Given these factors, 18 per cent interest would be just and reasonable, the Commission said.

In the case, Mr Balbir Singh was allotted a plot by GDA 1989. Five years later he was given the plot number, but a year later given an alternate site, which he did not like. Subsequently, he was given another plot and its possession given in 1996, only after he moved the District Forum. The Forum awarded 18 per cent interest on the amount deposited by him from 1994 to 1996, which was upheld by the State Commission. In the another case, Mr Pawan Kumar Verma got possession of the plot for which he had paid the full amount in 1992, only in 1997, after moving the District Forum. The Forum directed GDA to pay 15 per cent interest from 1993 to 1997.

What comes out loud and clear in all these cases is the attitude of the authorities, who prefer to waste public money on endless litigation than accept their mistake and compensate the consumer.
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FIIs net buyers in equities

Mumbai, November 25
The foreign institutional investors (FIIs) were net buyers in equities at Rs 278.9 crore ($ 58.1 million) while netting sales of Rs 83.3 crore ($ 17.4 million) in debt for the trading week ended November 23.

Mutual funds, However, were very active in the debt market and were net buyers worth Rs 480.95 crore. On equities, they remained net sellers at Rs 149.73 crore in the reporting week, according to data available with SEBI.

MFs bought debt instruments of Rs 176.96 crore and sold to the extent of Rs 33.53 crore on November 19, thus registering their highest sales of Rs 143.43 crore of the week followed by Rs 138.08 crore on next day.

In contrast to MFs, the foreign funds abstained from any purchasing activity in debt instruments on all the days. They recorded their highest sales of Rs 30.1 crore ($ 6.3 mn) for the week on November 20. PTI
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Customer fortnight ends

Chandigarh, November 25
Canara Bank, Sector 44-D branch concluded its annual customer care fortnight with a customer meet here yesterday. Present on this occasion were the senior representatives of the bank, Mr D.K. Sahoo, DGM-Chandigarh Circle and others. Mr M. Ramalingam, Senior Manager of the branch and staff listened to the grievances and suggestions from the customers. Mr Sahoo said he will redress the grievances, of the customers, if any, immediately which are permissible under the bank rules. He said the bank holds its leadership position as it has been declared No.1 among the nationalised banks on the basis of financial reports of the year 2000-2001. The bank will start two ATMs in Chandigarh by the end of this year and this figure will rise to 10 ATMs by the end of next year. TNS
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BIZ BRIEFS

Inflation rises
New Delhi, November 25
Commodities’ prices began to rise as inflation measured by Wholesale Price Index inched up marginally by 0.07 per cent to 2.47 per cent for the week ended November 10 as compared to 7.48 per cent a year ago. PTI

SBP fortnight
Chandigarh, November 25
All the branches of the State Bank of Patiala across the country observed “customer interaction fortnight” which concluded yesterday, according to Mr J.R. Devgun, General Manager (Operations) of the bank. The fortnight was observed in consonance with Ministry of Finance, Government of India. TNS

Cosmo Films
New Delhi, November 25
Close on the heels of acquiring Gujarat Propack, leading packaging company Cosmo Films Ltd is planning to invest about Ts 45 crore to expand its capacity. PTI

NIIT awards
New Delhi, November 25
NIIT has launched its 20th Anniversary awards to reward computer career seekers. Now students can earn these awards for its Futurz and CATS programme based on entrance test and interview. A large number of students will be given heavy fee waiver. UNI
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