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    Customer awareness @ sbi mutual fund project report mba marketing Customer awareness @ sbi mutual fund project report mba marketing Document Transcript

    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND TABLE OF CONTENT S.NO PARTICULAR PAGE NO 1. EXECUTIVE SUMMARY 03 2. INTRODUCTION TO BANKING 06 INDUSTRIES 3. HISTORY OF STATE BANK OF INDIA 07 4. SBI LIFE INSURANCE 12 5. INTRODUCTION TO MUTUAL FUND 25 6. ANALYSIS AND FINDINGS 45 7. FINDINGS 58 8. SUGGESTIONS 59 9. CONCLUSION 60 10. REFERENCES 61 11. ANNEXURE 62BABASAB PATIL Page 1
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND EXECUTIVE SUMMARY TITLE OF THE STUDY “OVER ALL STUDY OF SBI LIFE INSURANCE AND CUSTOMER AWARNESS LEVEL ABOUT SBI MUTUAL FUND IN BELGAUM CITY” INTRODUCTION SUMMARY OF THE COMPANYState Bank of IndiaINCLUDEPICTURE "http://upload.wikimedia.org/wikipedia/en/thumb/c/cc/SBI-logo.svg/50px- SBI-logo.svg.png" * MERGEFORMATINETType Public (BSE, NSE: SBI) & (LSE: SBID)Founded Calcutta, 1806 (as Bank of Calcutta) Corporate Center,Headquarters Madame Cama Road, Mumbai 400 021 IndiaKey people Chairman OM PRAKASH BHATT BankingIndustry Insurance Capital Markets and allied industriesProducts Loans, Credit Cards, Savings, Investment vehicles, SBI Life (Insurance) etc.Revenue 38382.42 cror (2006 ,March )Website www.statebankofindia.comBABASAB PATIL Page 2
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND Topic of the study: “Over all study of sbi life insurance and customer awareness about sbi mutual fund in Belgaum city” This project was conducted so as to understand the concept of Mutual Funds and its usage as an investment avenue. The study also aims to find out the awareness of mutual funds and its preference over other investments. The project was undertaken at state bank of India Belgaum” The objectives of the study include:  To over all study about SBI life insurance and mutual fund  To find out market potential for mutual funds.  To find out the factors, which influence to investing in mutual funds.  To find out attributes investors look for while buying mutual funds. My fieldwork involved visiting the people who have invested in mutual funds andwho have not purchased mutual funds and also chartered accountants to know whether theyhave invested in mutual funds or not and also the reasons for their investment / non-investment.Research Methodology: For collecting data, I used Questionnaire and interaction with people. Theprimary data was collected through interaction with the people I visited, and secondary datawas collected from books, magazines, websites etc..Sample Frame: People who have invested in mutual funds and who have not invested in Mutual funds.Sample size : 100 respondentsSample Unit : 1. Bank Employees 2. Udyambag entrepreneurs 3. Government employees 4. Stock Dealers in Belgaum city 5. Businessmen. Sampling Method : Simple random sampling technique. BABASAB PATIL Page 3
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND “Simple random sampling means every element is selected independently ofevery other element and the sample is drawn by a random procedure from asampling frame.”Tools used for the study:  Graphical Representation  SPSS Software  Other related statistical technique like factor analysis etc The difficulty faced during the fieldwork was not getting the appointments of therespondents since they were very busy and some were non-cooperative. Moreover, timelimitation was there. The data analysis is done by using coding sheet, SPSS software,statistical techniques etc. INTRODUCTION TO BANKING INDUSTRIESState Bank of India:BABASAB PATIL Page 4
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND (SBI)) is the largest bank in India. If one measures by the number of branchoffices and employees, SBI is the largest bank in the world. Established in 1806 as bankof Bengal, it is the oldest commercial bank in the Indian Subcontinent. SBI providesvarious domestic, international and NRI products and services, through its vast networkin India and overseas. With an asset base of $126 billion and its reach, it is a regionalbanking behemoth. The government nationalized the bank in 1955, with the Reserve bankof India taking a 60% ownership stake. In recent years the bank has focused on twopriorities, 1), reducing its huge staff through Golden handshake schemes known as theVoluntary Retirement Scheme, which saw many of its best and brightest defect to theprivate sector, and 2), computerizing its operations. State Bank of India (SBI) is Indias largest commercial bank. SBI has a vastdomestic network of over 9000 branches (approximately 14% of all bank branches) andcommands one-fifth of deposits and loans of all scheduled commercial banks in India.The State Bank Group includes a network of eight banking subsidiaries and several non-banking subsidiaries offering merchant banking services, fund management, factoringservices, primary dealership in government secure credit cards and insurance.THE EIGHT BANKING SUBSIDIARIES ARE:1 -State Bank of Bikaner and Jaipur (SBBJ)2 -State Bank of Hyderabad (SBH)3 -State Bank of India (SBI)4 -State Bank of Indore (SBIR)5 -State Bank of Mysore (SBM)6 -State Bank of Patiala (SBP)7 -State Bank of Saurashtra (SBS)8 -State Bank of Travancore (SBT) HISTORY OF STATE BANK OF INDIAEVOLUTION OF SBIBABASAB PATIL Page 5
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDThe origin of SBI goes back to the first decade of the nineteenth century with theestablishment of the bank of Calcutta in Calcutta on 2 June 1806. Three year later thebank received its charter and was redesigned as the bank of Bengal (2 January 1809). Aunique institution, it was the first joint stock bank of British India sponsored by thegovernment of Bengal. The bank of Bombay (15th April 1840) and the bank of madras (IJuly 1843) followed by bank of Bengal. These three banks remained at the apex ofmodern banking in India till their amalgamation as the imperial bank of India on 27January 1921.Primarily Anglo-Indian creation, the three presidency banks came into existence either asa result of the compulsion of imperial finance or by the felt needs of local Europeancommerce and were not imposed from outside in an arbitrary manner to modernizeIndia’s economy. Their evolution was, howeverShaped by ideas culled from similar developments in Europe and England and wasinfluenced by changes occurring in the structure of both the local trading environmentand those in the relation of the Indian economy to the economy of Europe and the globaleconomy frame worksEstablishmentsThe establishment of bank of Bengal marked the advent of limited liability, joint stockbanking in India, so was the associated in banking viz the decision to allow the bank ofBengal to issue notes, which would be accepted goes the payments of public revenueswithin a restricted geographical area, this right of note issue was very valuable not onlyfor the bank of Bengal but also its two siblings, he banks of Bombay and madras, itmeant an accretion to the capital of the bank, a capital on which the proprietors did nothave to pay any interest . The concept of deposit banking was also an innovation becausethe practice of accepting money for safe keeping (in some cases even investment onbehalf of the clients) by the indigenous bankers had not spread as a general habit in mostparts of India, but for long time. And especially up to the time. Each charter provided fora share capital. Four fifth of which were privately subscribed and the rest owned by theBABASAB PATIL Page 6
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDprovincial govt the member of the broad director, which managed the affair each bank,were mostly proprietary directors representing the large European managing agencyhouse of India. The rest were government nominees, invariably civil servant, one ofwhom was elected as the president of the board. INCLUDEPICTURE "http://upload.wikimedia.org/wikipedia/en/8/84/Bank_of_Bengal.jpg" * MERGEFORMATINET Offices of the Bank of BengalPROFILESpreading its arms around the world, the SBI’s International Banking Group deliversthe full range of cross-border finance solutions through its four wings – the Domesticdivision, the Foreign Offices division, the Foreign Department and the InternationalServices division.The Domestic wing provides services like merchant banking, shipping finance andproject export finance. The Foreign Offices wing offers the entire range of internationaltrade and industrial finance products, while the Kolkatta-based Foreign Departmentundertakes treasury and currency operations.The International Services division renders specialized services like correspondentbanking, global link services and country and bank risk exposure monitoring. BeingIndia’s largest and most trusted commercial bank, the SBI offers you a network ofrelationships unmatched in strength and span by any other Indian financial entity.BABASAB PATIL Page 7
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDThe bank has a network of 66 offices/branches in 29 countries spanning all time zones.The SBI’s international presence is supplemented by a group of Overseas and NRIbranches in India and correspondent links with over 522 leading banks of the world.SBI’s offshore joint ventures and subsidiaries enhance its global stature.The bank has carved a niche for itself in Euroland with branches strategically located inParis, Frankfurt and Antwerp. Indian banks and corporates are able to avail single-window Euro services from SBI Frankfurt.These strengths are reinforced by a dedicated and highly skilled team of professionalsdeployed by the bank in each specific segment.Mission Statement:“To retain the bank position as the premier Indian Financial Service Group, with worldclass standard and significant Global Business committed to excellence in customer,shareholder and employee satisfaction to play a leading role in the expanding anddiversifying financial service sector, while continuing emphasis on its developmentbanking role “Vision statement:  Premier Indian Financial Service Group with Global Perspective, world-class  Standard of efficiency and professionalism and core institutional values.  Retain its position in the country as a pioneer in development banking  Maximize shareholders values through high sustained earning per share  An institution with a culture of mutual care and commitment, a satisfying and exciting work environment and continue learning opportunities.Core values of the bank:  Excellence in customer service  Profit orientation  Belonging and commitment to the bank  Fairness in all dealing and relations  Risk taking and innovationBABASAB PATIL Page 8
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND  Team playing  Learning and renewal  Integrity  Transference and discipline in policies and systemObjectives of SBI “Improvement in profitable through better management of asset portfolio increasedemployee productivity, enhanced support to country’s foreign trade as well as substantialimprovement in the system particularly in the area of training mechanization, customerservice, and internal house keeping etc. “Comfortable capital positionSBI is adequately capitalized with a tier I capital adequacy ratio of 8.04% and a largecapital base of Rs 240.72 billion as at March 31, 2005. The bank has considerablyimproved its net worth coverage for net NPAs to 4.4 times as at March 31, 2005 due tolower slippages reflecting an improving asset quality, witnessed across the entire bankingsector. The capitalization levels of SBI are adequate to address the asset side risks andsupport the business growth in the medium term.Management strategiesIn retail finance, the bank has leveraged its corporate relationships, pursued businessgrowth selectively, and has not competed based on interest rate. The bank has takeninitiatives like on-line tax returns filing and faster transfer of funds to protect its dominantposition in the government business. The bank also has a clear technology strategy thatwill enable it to compete with the new generation private sector banks in customerservice and operational efficiency.Asset quality to remain at average levelsThe bank continues to have a high level of gross NPAs at 5.95% of gross advances as atMarch 31, 2005, compared with 4.9% for all scheduled commercial banks (SCBs) takentogether. The bank is facing challenges to improve the quality of assets originated, as canBABASAB PATIL Page 9
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDbe seen in the consistently higher levels of slippages (additions to NPAs) at 2.71% in2004-05.Business descriptionSBI along with its associate banks offer a wide range of banking products and servicesacross its different client markets. The bank has entered the market of term lending tocorporate and infrastructure financing, traditionally the domain of the financialinstitutions. It has increased its thrust in retail assets in the last two years, and has built astrong market position in housing loans.SBI, through its non-banking subsidiaries, offers a host of financial services, viz.,merchant banking, fund management, factoring, primary dealership, broking, investmentbanking and credit cards. SBI has commenced its life insurance business by setting up asubsidiary, SBI Life Insurance Company Limited, which is a joint venture with CardiffS.A., one of the largest insurance companies in France. SBI currently holds 74% equity inthe joint venture.Industry prospects :To leverage benefits such as access to low cost resources and the facility to provide alarger gamut of services, a number of finance companies such as Kotak MahindraFinance Limited and HDFC Limited have promoted banks. Simultaneously, yet anotheremerging trend is that of foreign banks promoting NBFCs to benefit from regulatoryflexibility available to such entities in areas like absence of statutory liquidity ratio andcash reserve ratio requirements, priority sector requirements, and corporate exposurelimits.SBI LIFE INSURANCE:Our Mission: "To emerge as the leading company offering a comprehensive range of lifeinsurance and pension products at competitive prices, ensuring high standards ofBABASAB PATIL Page 10
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDcustomer satisfaction and world class operating efficiency, and become a model lifeinsurance company in India in the post liberalization period".Our Values:  Trustworthiness  Ambition  Innovation  Dynamism  Excellence SBI Life Insurance is a joint venture between the State bank of India and CardifSA of France. SBI Life Insurance is registered with an authorized capital of Rs 1000crore and a paid up capital of Rs 500 crores. SBI owns 74% of the total capital and Cardifthe remaining 26%. State Bank of India enjoys the largest banking franchise in India.Along with its 7 Associate Banks, SBI Group has the unrivalled strength of over 14,500branches across the country, arguably the largest in the world. Cardif is a wholly ownedsubsidiary of BNP Paribas, which is the Euro Zone’s leading Bank. BNP Paribas is oneof the oldest foreign banks with a presence in India dating back to 1860. Cardif is ranked2nd worldwide in creditor’s insurance offering protection to over 35 millionpolicyholders and net income in excess of Euro 1 billion. Cardif has also been a pioneerin the art of selling insurance products through commercial banks in France and in 35more countries. SBI Life Insurance’s mission is to emerge as the leading company offering acomprehensive range of Life Insurance and pension products at competitive prices,ensuring high standards of customer service and world class operating efficiency. SBILife has a unique multi-distribution model encompassing Bancassurance, Agency andGroup Corporate. SBI Life extensively leverages the SBI Group as a platform for cross-selling insurance products along with its numerous banking product packages such ashousing loans and personal loans. SBI’s access to over 100 million accounts across thecountry provides a vibrant base for insurance penetration across every region andeconomic strata in the country ensuring true financial inclusion.Agency Channel,BABASAB PATIL Page 11
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDcomprising of the most productive force of more than 25,000 Insurance Advisors, offersdoor to door insurance solutions to customers.Why SBI life:Customer Satisfaction - many of our customers who have bought an insurance policywith us have bought a second one Financially sound with over a 100 years of Bankingexperience, when you trusted us with your money, why would you trust somebody elsewith your protection needs.Individual product:Unit Linked Plans: It may be difficult to understand all your needs but as your preferredlife insurance company, SBI Life definitely understands all your financial & insuranceneeds. Unit linked Plans are an attempt to meet all your financial & insurance needsthrough a single non participating product. What’s more you get market linked returnswhich in the long term has always proved to give better returns than traditional savingsproducts. We offer the following plans under this category.  Horizon II  Unit Plus II  Unit Plus Child Plan  Unit Plus Elite PlanPension Plans: Life expectancy is improving rapidly. People live longer. You cannotwork throughout your life. You will have to retire from work. In the post retirementperiod you have lot of time for yourself. You would like to do things you have not donewhile you were working. You need to have a comprehensive plan to meet our postretirement financial needs ensuring complete peace of mind.  Horizon II Pension  Unit Plus II Pension  Life Long PensionPure Protection Plans: There are times when everything seems to be perfect, but who canBABASAB PATIL Page 12
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND predict future and there is always a place to make this world a better place for our loved ones. To ensure that these uncertainties do not shatter the dreams you have for your family, SBI life offers you.  Shield  Swadhan  Keyman Protection cum Savings (Endowment) Plans: SBI Life offers a variety of plans that gives you the benefit of protection and the opportunity to save for various events like purchase of new house, wedding, car etc. we assist your savings.  Sudarshan  Scholar II  Setubandhan Money Back Plans: As an individual your life is fueled by dreams. You experience different special moments in life like wedding, birth of a child, child’s education or purchasing a new home. You have to be financially prepared for these special moments. What you need is easy liquidity at regular intervals with life insurance protection take Care of these special moments. Money Back• Sanjeevan Supreme HORIZON II Introduction: SBI Life’s HORIZON II is a unique, non participating Unit Linked Insurance Plan in Indian Insurance Industry, where you need not to be a financial market expert. This plan offers the flexibility of Unit Linked Plan along with Automatic Asset Allocation which provides relatively higher returns on your money where as increasing BABASAB PATIL Page 13
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND death benefits provides higher security to your family. Key features:  Twin benefit of insurance cover and market linked returns  Hassle-free investment management of funds from inception to maturity  Automatic Asset Allocation of funds  Automatic rebalancing of funds at yearly intervals, free of cost  Higher protection, to meet your family financial needs.  Automatic cover continuance.  Liquidity option after 3 years  Facility to top up your investment kitty.  Tax benefit as per section 80C and 10(10D) of income tax act.  15 days free look period from the date on which you receive the policy document. No. of Units Fund(x) = Net Investment in Fund(x) NAV of Fund(x) Benefits:• Hassle Free Investment Management: You simply invest we will manage it for you.• Maturity Benefits: At the end of the term you will get the fund value.• Increasing Death Benefit: For all in forced policies , In case of death after completion of age 7. UNIT PLUS CHILD PLAN BABASAB PATIL Page 14
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDIntroduction:Life begins afresh when you become a parent and when the child takes that first steptowards you, the moment is filled with cheer, enthusiasm never felt before. This momentmarks a new beginning in the child’s life and there’s no looking back after that. The childkeeps growing and so are his dreams, aspirations which always aim to reach horizon andyou want your child achieve his/her dreams. But at the same time as a proud parent youalso want to secure their future against rising cost of education and other necessities. Weat SBI LIFE understand you better and hence have developed UNIT PLUS CHILDPLAN to suit you and your needs best. This Plan is meant for parents in the age group of18-57 having a child between the age group of 0-15 years.Key features:  Market related returns to match increasing cost of education  Peace of Mind by giving you triple benefits.  Loyalty units to celebrate your child reaching 18 years.  New Investment Fund (Equity Optimiser Fund) in addition to existing funds.  Pay Premium for a limited period and reap benefits over a long time.  Flexible plan which adapts to your changing needs as and when you want.UNIT PLUS ELITE:IntroductionYou set the ball rolling and have been the catalyst for transformation of the society andyour decisions have generated maximum benefits both at personal as well as societylevel. Young generation aspires to be you and they get inspiration to emulate you toachieve success. Your leadership does not settle with the normal, it deserves privilegedfacilities. A plan which provides Value for “Your” money Our Preferred Customer.PENSION PRODUCTHORIZON II PENSIONHorizon II Pension is the most simple unit linked pension plan; all you need to do is:BABASAB PATIL Page 15
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND  Choose your retirement date, the plan option and the regular premium amount.  Based on the plan option and the term opted, SBI Life will invest your money in three different funds viz., Equity Pension Fund, Bond Pension Fund and Money Market Pension Fund.  The funds are invested keeping in mind the term opted for and your money is invested in safer funds as your policy approaches maturity.UNIT PLUS II PENSION  Pure Pension  Pension cum Life CoverIN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO ISBORNE BY THE POLICYHOLDERIntroduction:We at SBI Life understand the basic needs for pension plan and give you financialstrength to maintain your life style even after the retirement. Unit Plus II Pension planmakes sure that you have regular income after you retire and also helps you to maintainyour standard of living. This is a unit linked pension plan wherein the policyholderchooses an investment period from 5 to 52 years for a vesting age between 50 to 70 years.You can choose to pay either single premium or pay regular premium for the entirepolicy term. Your contributions are invested into 4 fund options as per your choice.Key Features:Choice to invest & control four different funds as per your risk appetite.Flexibility to choose between two optionsBABASAB PATIL Page 16
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND  Pure Pension  Pension cum Life Cover  No medical required for Pure Pension, automatic acceptance facility.  Flexibility to increase regular contribution.  Top up payments: any amount, anytime.  Customize your plan by adding riders.  15 days free look period.BABASAB PATIL Page 17
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDLIFE LONG PENSION:Introduction:Life expectancy is improving rapidly. People live longer. You cannot work throughoutyour life. You will have to retire from work. In the post retirement period you have lot oftime for yourself. You would like to do things you have not done while you wereworking You need to have a comprehensive plan to meet your post retirement financialneeds ensuring complete peace of mind.Key features:  A maximum of Rs. 1,00,000 p.a. paid as a contribution on a pension plan is fully deductible from the taxable income (within the max. ceiling Rs. 1 lakh )  Minimum Guaranteed returns of 4% p.a. (compounded annually) on your Personal Pension Account (till 31st March 2010) + Vested bonus.  It helps you to accumulate enough savings to meet the old age needs and look for a reliable and enduring pension payment.  It is an extremely flexible plan.Benefits:  Tax benefit  Maturity benefit  Death benefitPure Protection Products:SwadhanBABASAB PATIL Page 18
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDIntroductionHappiness and security for your family is what you want. However life has itsuncertainties and risks. All that you’re interested in is how best to afford a secure futurefor your loved one. Have you ever wished for a low premium insurance policy that notonly provides security to your loved ones but also returns back the premium paid.  Protection at affordable premium  e cover comes to you at no cost  Tax benefit u/s 80 c and (10 D) of it act  5% rebate for female lives  Guaranteed return of basic premium paid on survival at the end of the term, dependingShield:IntroductionYour family is of utmost importance to you. You want your family to have all the goodthings in life and you would do everything you could to fulfill them. Life is full ofuncertainties and risk. To ensure that these uncertainties do not the shatter the dreams youhave for your family.Key features:  It offers you life insurance cover at the lowest cost for a selected term.  It is available in 3 options to suit your requirement.  Level Premium throughout the chosen term with increasing Sum Assured, depending on the option chosen.  Tax benefit u/s 80 C and 10 (10 D) of IT Act  Attractive rebate for Female lives.Schlor IIIntroductionBABASAB PATIL Page 19
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDAs a caring parent you would always want your child to get the very best. Is there a wayto protect your children against life’s risks? Is there a way to make tomorrow safe forthem? Therefore this is the time when careful financial planning can help you fulfill theaspirations that you have for your children’s. We at SBI Life can help you ensure thatyour children’s future is secure and prosperous. Schlor II is designed to protect yourchild’s future educational needs.Key features  We at SBI Life can help you ensure that your children’s future is secure and prosperous. The uncertainties if life.  We at SBI Life can help you ensure that your children’s future is secure and prosperous. Installments.  Attractive rider option  15 days free lock periodMoney back:IntroductionAs an individual your life is fueled by dreams. You experience different special momentsin life like wedding, birth of a child, child’s education or purchasing a new home. Youhave to be financially prepared for these special moments. What you need is easyliquidity at regular intervals with life insurance protection to take care of these specialmoments.Key features  The plan has a number of money back options specially suited to your needs  The cover is available at competitive premium rates.  The cover is available at competitive premium rates.  In addition to normal death cover, the plan also provides you 4 additional covers.  Attractive rider options. Convenient premium payment options: Single andBABASAB PATIL Page 20
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND Multiple premium payment.  15 days free lock period from the date on which you receive the policy documentsProtection cum Savings Products:IntroductionSudarshan is an Endowment Policy designed to provide savings and protection to youand your family. You can save regularly for the future. Thus at the end of the plan, youwill receive a substantial amount of savings along with the accumulated bonusesdeclared. At the same time, your family will be protected for death risk for the full sumassured.Key features:  It offers you the option of tailoring your policy according to your requirement and needs, by opting for various extra covers (Riders) that are offered.  This is a unique product that offers you an innovative cover (plan B) which helps you to protect your savings against the financial consequences of inflation with constant premium for the entire duration of the plan.  It gives you protection against unfortunate terminal or dreaded illness even your own retirement - in a most flexible manner.BABASAB PATIL Page 21
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDWhat is a Mutual Fund?A vehicle for investing in stocks and bondsA mutual fund is not an alternative investment option to stocks and bonds, rather it poolsthe money of several investors and invests this in stocks, bonds, money marketinstruments and other types of securitiesBuying a mutual fund is like buying a small slice of a big pizza. The owner of a mutualfund unit gets a proportional share of the fund’s gains, losses, income and expenses.Each mutual fund has a specific stated objectiveThe fund’s objective is laid out in the funds prospectus, which is the legal document thatcontains information about the fund, its history, its officers and its performance.Popular objectives of a Mutual Fund:Fund objective What the fund will invest in Equity (Growth) Only in stock. Debt (Income)Only in fixed income securities. Money market (including Gilt) In short-term money market instruments (including government securities)BABASAB PATIL Page 22
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND Managed by an Asset Management Company (AMC) The company that puts together a mutual fund is called an AMC. An AMC may haveseveral mutual fund schemes with similar or varied investment objectives.The AMC hiresa professional money manager, who buys and sells securities in line with the funds statedobjective. All AMCs Regulated by SEBI, Funds governed by Board of DirectorsThe Securities and Exchange Board of India (SEBI) mutual fund regulations require thatthe fund’s objectives are clearly spelt out in the prospectus.In addition, every mutual fundhas a board of directors that is supposed to represent the shareholders interests, ratherthan the AMC’s.Range of Services  Investment banking  Mutual Funds  Brokerage and distribution of equities  Dematerialization services  Trading in commodities  Life Insurance  Features and Options  Wealth management  Corporate advisory INTRODUCTION TO MUTUAL FUNDMEANINGBABASAB PATIL Page 23
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDA mutual fund is simply a financial intermediary that allows a group of investors to pooltheir money together with a predetermined investment objective. The mutual fund willhave a fund manager who is responsible for investing the pooled money into specificsecurities (usually stocks or bonds). When you invest in a mutual fund, you are buyingshares (or portions) of the mutual fund and become a shareholder of the fund.Mutual funds are one of the best investments ever created because they are very costefficient and very easy to invest in (you dont have to figure out which stocks or bonds tobuy). By pooling money together in a mutual fund, investors can purchase stocks orbonds with much lower trading costs than if they tried to do it on their own. But thebiggest advantage to mutual funds is diversification.One can make money from a mutual fund in three ways:A) Income is earned from dividends declared by mutual fund schemes from time to time.B) If the fund sells securities that have increased in price, the fund has a capital gain. This is reflected in the price of each unit. When investors sell these units at prices higher than their purchase price, they stand to make a gain.C) If fund holdings increase in price but are not sold by the fund manager, the funds unit price increases. You can then sell your mutual fund units for a profit. This is tantamount to a valuation gain.BABASAB PATIL Page 24
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDHISTORY The origin of mutual fund industry in India is with the introduction of the conceptof mutual fund by UTI in the year 1963. Though the growth was slow, but it acceleratedfrom the year 1987 when non-UTI players entered the industry In the past decade, Indian mutual fund industry had seen a dramatic improvement,both qualities wise as well as quantity wise. Before, the monopoly of the market had seenan ending phase; the Assets Under Management (AUM) was Rs. 67bn. The private sectorentry to the fund family rose the AUM to Rs. 470 bn in March 1993 and till April 2004, itreached the height of 1,540 bn. Putting the AUM of the Indian Mutual Funds Industry into comparison, the totalof it is less than the deposits of SBI alone, constitute less than 11% of the total depositsheld by the Indian banking industry. The main reason of its poor growth is that the mutual fund industry in India isnew in the country. Large sections of Indian investors are yet to be intellectuated with theconcept. Hence, it is the prime responsibility of all mutual fund companies, to market theproduct correctly abreast of selling. The mutual fund industry can be broadly put into four phases according to thedevelopment of the sector. Each phase is briefly described as under:First Phase - 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It wasset up by the Reserve Bank of India and functioned under the Regulatory andadministrative control of the Reserve Bank of India. In 1978 UTI was de-linked from theRBI and the Industrial Development Bank of India (IDBI) took over the regulatory andadministrative control in place of RBI. The first scheme launched by UTI was UnitScheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.Second Phase - 1987-1993 (Entry of Public Sector Funds)BABASAB PATIL Page 25
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND Entry of non-UTI mutual funds. SBI Mutual Fund was the first followed byCanbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), IndianBank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct92). LIC in 1989 and GIC in 1990. The end of 1993 marked Rs.47,004 as assets undermanagement.Third Phase - 1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993, a new era started in the Indianmutual fund industry, giving the Indian investors a wider choice of fund families. Also,1993 was the year in which the first Mutual Fund Regulations came into being, underwhich all mutual funds, except UTI were to be registered and governed. The erstwhileKothari Pioneer (now merged with Franklin Templeton) was the first private sectormutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a morecomprehensive and revised Mutual Fund Regulations in 1996. The industry nowfunctions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutualfunds setting up funds in India and also the industry has witnessed several mergers andacquisitions. As at the end of January 2003, there were 33 mutual funds with total assetsof Rs.1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets undermanagement was way ahead of other mutual funds.Fourth Phase - since February 2003 This phase had bitter experience for UTI. It was bifurcated into two separateentities. One is the Specified Undertaking of the Unit Trust of India with AUM ofRs.29,835 crores (as on January 2003). The Specified Undertaking of Unit Trust of India,functioning under an administrator and under the rules framed by Government of Indiaand does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC.It is registered with SEBI and functions under the Mutual Fund Regulations. With theBABASAB PATIL Page 26
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDbifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores ofAUM and with the setting up of a UTI Mutual Fund, conforming to the SEBI MutualFund Regulations, and with recent mergers taking place among different private sectorfunds, the mutual fund industry has entered its current phase of consolidation and growth.As at the end of September, 2004, there were 29 funds, which manage assets ofRs.153108 crores under 421 schemes. THE MUTUAL FUND STRUCTURE SEBI TRUSTEE SPONSOR OPERATIONS AMC FUND MANGER MKT/SALES MKT/ SALES MUTUAL FUND SCHEMES DISTRIBUTORThe structure consists of INVESTORSponsor - Sponsor is the person who acting alone or in combination with another bodycorporate establishes a mutual fund. Sponsor must contribute at least 40% of the networth of the Investment Managed and meet the eligibility criteria prescribed under theSecurities and Exchange Board of India (Mutual Funds) Regulations, 1996.The Sponsoris not responsible or liable for any loss or shortfall resulting from the operation of theSchemes beyond the initial contribution made by it towards setting up of the MutualFund.BABASAB PATIL Page 27
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDTrust - The Mutual Fund is constituted as a trust in accordance with the provisions of theIndian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the IndianRegistration Act, 1908.Trustee - Trustee is usually a company (corporate body) or a Board of Trustees (body ofindividuals). The main responsibility of the Trustee is to safeguard the interest of the unitholders and inter alia ensure that the AMC functions in the interest of investors and inaccordance with the Securities and Exchange Board of India (Mutual Funds) Regulations,1996, the provisions of the Trust Deed and the Offer Documents of the respectiveSchemes. At least 2/3rd directors of the Trustee are independent directors who are notassociated with the Sponsor in any manner.Asset Management Company (AMC) - The AMC is appointed by the Trustee as theInvestment Manager of the Mutual Fund. The AMC is required to be approved by theSecurities and Exchange Board of India (SEBI) to act as an asset management companyof the Mutual Fund. At least 50% of the directors of the AMC are independent directorswho are not associated with the Sponsor in any manner. The AMC must have a net worthof at least 10 crore at all times.Registrar and Transfer Agent - The AMC if so authorized by the Trust Deed appointsthe Registrar and Transfer Agent to the Mutual Fund. The Registrar processes theapplication form, redemption requests and dispatches account statements to the unitholders. The Registrar and Transfer agent also handles communications with investorsand updates investor records.BABASAB PATIL Page 28
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDRole of Mutual funds in Financial Market Indian financial institution have played a dominant role in asset formation andintermediation and contributed substantially in macroeconomic development. In thisprocess of development Indian Mutual Funds have emerged as a strong financialintermediaries and are playing a very important role in bringing stability to the financialsystem and efficiency to resource allocation. Mutual Fund plays a crucial role in an economy by mobilizing savings and investingthem in the capital market, thus establishing a link between savings and the capitalmarket. The activities of mutual fund have both short and long term impact on thesavings and capital market, and the national economy. Mutual fund, thus, assist theprocess financial intermediation. They mobilize funds in the saving market and act ascomplimentary to banking, at the same time they also compete with banks and otherfinancial institutions. In the process stock market activities are also significantinfluenced by mutual funds. There is thus hardly any segment of the financial market, which is not influenced bythe existence and operations of mutual funds. However, the scope and efficiency ofmutual funds are influenced by overall economic fundamentals: the inter-relationbetween the financial and real sector, the nature of development of the savings andcapital markets, market structure, institutional arrangements and overall policy regime.ADVANTAGES OF INVESTING IN MUTUAL FUNDSBABASAB PATIL Page 29
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDA. Professional Management - The primary advantage of funds is the professional management of your money. Investors purchase funds because they do not have the time or the expertise to manage their own portfolio. A mutual fund is a relatively inexpensive way for a small investor to get a full-time manager to make and monitor investments.B. Diversification - By owning shares in a mutual fund instead of owning individual stocks or bonds, the risk is spread out. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others. In other words, the more stocks and bonds you own, the less any one of them can hurt you. Large mutual funds typically own hundreds of different stocks in many different industries. It wouldnt be possible for an investor to build this kind of a portfolio with a small amount of money.C. Economies of Scale - Because a mutual fund buys and sells large amounts of securities at a time, its transaction costs are lower than you as an individual would pay.D. Liquidity - Open-ended mutual funds are priced daily and are always willing to buy back units from investors. This means that investors can sell their holdings in mutual fund investments anytime without worrying about finding a buyer at the right price. In the case of other investment avenues such as stocks and bonds, buyers are not necessarily available and therefore these investment avenues are less liquid compared to open-ended schemes of mutual funds.E. Regulations - All Mutual Funds are registered with SEBI and they function under strict guidelines designed to protect the interests of the Investor.F. Tax benefits  Equity Funds: Currently, dividends are tax-free in the hands of the investor. There is no distribution tax payable by the Mutual Fund on dividends distributed. There is no tax deduction at source on dividends as well. Investments for over 12 months qualify for long term capital gains. Moreover for resident investors there is no TDS on redemption of the units. The recently introduced Securities Transaction Tax is applicable to equity fund investments.BABASAB PATIL Page 30
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND  Debt Funds: Currently, dividends are tax-free in the hands of the investor. However, there is distribution tax together with surcharge and education cess, as may be applicable, payable by the Mutual Fund on dividends distributed. There is no tax deduction at source on dividends as well. Investments for over 12 months qualify for long term capital gains. For resident investors there is no TDS on redemption of the units.LIMITATIONS OF MUTUAL FUNDS As Mutual Fund provides numerous advantages for investment it has also fewlimitations that are listed below:A) Costs Despite Negative Returns- Investors must pay sales charges, annual fees, and other expenses regardless of how the fund performs. And, depending on the timing of their investment, investors may also have to pay taxes on any capital gains distribution they receive – even if the funds went on to perform poorly after they bought shares.B) Lack of Control- Investors typically can’t ascertain the exact make up of a fund’s portfolio at any given time, nor can they directly influence which securities the fund manager buys and sells or the timing of those trades.C) Price Uncertainty- With an individual stock, you can obtain real time pricing information with relative ease by checking financial websites or by calling your broker. You can also monitor how a stocks price changes from hour to hour or even seconds to seconds. By contrast, with a Mutual Fund, the price at which you purchase or redeem shares will typically depend on the funds NAV. In general; Mutual Funds must calculate their NAV at least once every business day, typically after the major U.S. exchange close. GLOBAL SCENARIOBABASAB PATIL Page 31
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDSome basic facts-  The money market mutual fund segment has a total corpus of $ 1.48 trillion in the U.S. against a corpus of $ 100 million in India.  Out of the top 10 mutual funds worldwide, eight are bank- sponsored. Only Fidelity and Capital are non-bank mutual funds in this group.  In the U.S. the total number of schemes is higher than that of the listed companies while in India we have just 277 schemes  Internationally, mutual funds are allowed to go short. In India fund managers do not have such leeway.  On- line trading is a great idea to reduce management expenses from the current 2 % of total assets to about 0.75 % of the total assets.Changes Taken Place  Lower Costs: As per SEBI regulations, bond funds can charge a maximum of 2.25% and equity funds can charge 2.5% as administrative fees. Therefore if the administrative costs are low, the benefits are passed down and hence Mutual Funds are able to attract mire investors and increase their asset base.  Better Advice: Mutual funds could provide better advice to their investors through the Net rather than through the traditional investment routes. Direct dealing with the fund could help the investor with their financial planning.  New investors would prefer online: Mutual funds can target investors who are young individuals and who are Net savvy, since servicing them would be easier on the Net.BABASAB PATIL Page 32
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND FUTURE SCENARIOThe asset base will continue to grow at an annual rate of about 30 to 35 % over the nextfew years as investor’s shift their assets from banks and other traditional avenues. Someof the older public and private sector players will either close shop or be taken over.Out of ten public sector players five will sell out, close down or merge with strongerplayers in three to four years. In the private sector this trend has already started with twomergers and one takeover. Here too some of them will down their shutters in the nearfuture to come.But this does not mean there is no room for other players. The market will witness aflurry of new players entering the arena. There will be a large number of offers fromvarious asset management companies in the time to come. Some big names like Fidelity,Principal, Old Mutual etc. are looking at Indian market seriously. One important reasonfor it is that most major players already have presence here and hence these big nameswould hardly like to get left behind.The mutual fund industry is awaiting the introduction of derivatives in India as this wouldenable it to hedge its risk and this in turn would be reflected in its Net Asset Value(NAV).SEBI is working out the norms for enabling the existing mutual fund schemes to trade inderivatives. Importantly, many market players have called on the Regulator to initiate theprocess immediately, so that the mutual funds can implement the changes that arerequired to trade in Derivatives.BABASAB PATIL Page 33
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND TYPES OF SCHEMESA. Investment Objective:Schemes can be classified by way of their stated investment objective such as GrowthFund, Balanced Fund, and Income Fund etc.1. Equity Oriented Schemes The investments of these schemes will predominantly be in the stock markets and endeavor will be to provide investors the opportunity to benefit from the higher returns which stock markets can provide. However they are also exposed to the volatility and attendant risks of stock markets and hence should be chosen only by such investors who have high risk taking capacities and are willing to think long term. Equity Funds include diversified Equity Funds, Sectoral Funds and Index Funds. Diversified Equity Funds invest in various stocks across different sectors while sectoral funds which are specialized Equity Funds restrict their investments only to shares of a particular sector and hence, are riskier than Diversified Equity Funds. Index Funds invest passively only in the stocks of a particular index and the performance of such funds move with the movements of the index.BABASAB PATIL Page 34
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND  Magnum COMMA Fund  Magnum Equity Fund  Magnum Global Fund  Magnum Index Fund  Magnum MidCap Fund  Magnum Multicap Fund  Magnum Multiplier Plus 1993  Magnum Sector Funds Umbrella o MSFU - FMCG Fund o MSFU - Emerging Businesses Fund o MSFU - IT Fund o MSFU - Pharma Fund o MSFU - Contra Fund  SBI Arbitrage Opportunities Fund  SBI Blue chip Fund  SBI Infrastructure Fund - Series I  SBI Magnum Taxgain Scheme 1993  SBI ONE India Fund  SBI TAX ADVANTAGE FUND - SERIES IBABASAB PATIL Page 35
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND2. Debt Based Schemes Debt Funds invest only in debt instruments such as Corporate Bonds, Government Securities and Money Market instruments either completely avoiding any investments in the stock markets as in Income funds or gilt Funds or having a small exposure to equities as in Monthly Income Plans or Childrens Plan. Hence they are safer than equity funds. At the same time the expected returns from debt funds would be lower. Such investments are advisable for the risk.  Magnum Children`s Benefit Plan  Magnum Gilt Fund o Magnum Gilt Fund (Long Term) o Magnum Gilt Fund (Short Term)  Magnum Income Fund  Magnum Income Plus Fund o Magnum Income Plus Fund (Saving Plan) o Magnum Income Plus Fund (Investment Plan)  Magnum Insta Cash Fund  Magnum InstaCash Fund -Liquid Floater Plan  Magnum Institutional Income Fund  Magnum Monthly Income Plan  Magnum Monthly Income Plan Floater  Magnum NRI Investment FundBABASAB PATIL Page 36
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND  SBI Capital Protection Oriented Fund - Series I  SBI Debt Fund Series o SDFS 15 Months Fund o SDFS 90 Days Fund o SDFS 13 Months Fund o SDFS 18 Months Fund o SDFS 24 Months Fund o SDFS 60 Days Fund o SDFS 180 Days Fund  SBI Premier Liquid Fund  SBI Short Horizon Fund o SBI Short Horizon Fund - Liquid Plus Fund o SBI Short Horizon Fund - Short Term Fund3. Hybrid Schemes (Balanced scheme) Magnum Balanced Fund invest in a mix of equity and debt investments. Hence they are less risky than equity funds, but at the same time provide commensurately lower returns. They provide a good investment opportunity to investors who do not wish to be completely exposed to equity markets, but is looking for higher returns than those provided by debt funds.  Magnum Balanced Fund  Magnum NRI Investment Fund - FlexiAsset PlBABASAB PATIL Page 37
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDB. STRUCTURE Schemes can be classified as Closed-ended or Open-ended depending uponwhether they give the investor the option to redeem at any time (open-ended) or whetherthe investor has to wait till maturity of the scheme. 1. Open ended Schemes - The units offered by these schemes are available for sale and repurchase on any business day at NAV based prices. Hence, the unit capital of the schemes keeps changing each day. Such schemes thus offer very high liquidity to investors and are becoming increasingly popular in India. Please note that an open-ended fund is NOT obliged to keep selling/issuing new units at all times, and may stop issuing further subscription to new investors. On the other hand, an open-ended fund rarely denies to its investor the facility to redeem existing units. 2. Closed ended Schemes - The unit capital of a close-ended product is fixed as it makes a one-time sale of fixed number of units. These schemes are launched with an initial public offer (IPO) with a stated maturity period after which the units are fully redeemed at NAV linked prices. In the interim, investors can buy or sell units on the stock exchanges where they are listed. Unlike open-ended schemes, the unit capital in closed-ended schemes usually remains unchanged. After an initial closed period, the scheme may offer direct repurchase facility to the investors. Closed-ended schemes are usually more illiquid as compared to open- ended schemes and hence trade at a discount to the NAV. This discount tends towards the NAV closer to the maturity date of the scheme. 3. Interval Schemes - These schemes combine the features of open-ended and closed-ended schemes. They may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV based prices.Rules prescribed to govern Mutual Funds: 1. All Mutual Funds expect the statutory ones, will have to seek the approval of the SEBI and the scheme floated by them shall have to be registered with the SEBI.BABASAB PATIL Page 38
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND 2. Mutual Funds shall be established in the form of trust under Indian Trust Act to be operated by separate asset management companies (AMCs) will be authorized by SEBI and should have minimum net worth of 5 crores. 3. SEBI will have the power to withdraw authorization to any AMC if it finds the interest of investors, Mutual Funds or the capital market are not been served. 4. The AMC and the Trustee of a Mutual Fund should be two separate legal entities and an AMC or its affiliate cannot act as a manager or any other fund. 5. No person should be director of more than one AMC, nor hold the position of the trustee of director in trust company of funds operated by the same AMC. 6. Mutual Funds must distribute 90% of their profits in any given year. 7. No Mutual Funds under all its schemes shall hold more than 10% of its fund in the shares or debentures or other instruments of a single company. 8. No Mutual Funds under all its schemes take together shall invest more than 10% of its fund in the shares or debentures or other instruments of a single company. 9. No Mutual Funds under all its schemes taken together shall invest more than 15% of its fund in the shares and debentures of any specific industry, expecting those schemes which have been floated specifically for investment in one or more specified industries and a declaration has been made in the offer letter. 10. No individual scheme of Mutual Funds shall invest more than 5% of its corpus in any one company’s share. 11. Mutual Funds can invest only in transferable securities either in the money market or in the capital market. 12. Privately placed debentures, securities debt and other unquoted debt instrument holding shall not exceed 10% in case of growth fund and 40% in case of income funds. 13. Mutual Funds will be required to take delivery of scrip purchase and give delivery in case of income funds. 14. Mutual Funds shall be authorized for business by SEBI and registered companies with sound track records and good reputation could sponsor this. 15. The entire subscription shall have to be refunded to the investor if (a) The minimum amount of Rs.20 Crores or 60% of the targeted amount which ever isBABASAB PATIL Page 39
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND higher is not raised for closed-end scheme or (b) The minimum amount of Rs.50 Crores or 60% of the targeted amount, whichever is higher is not raised for an open-ended scheme. 16. Mutual Funds shall provide continuous liquidity and closed-end scheme shall be listed on exchange. For open ended schemes, Mutual Funds shall sell or purchase units at predetermined price based on net asset value, which shall be published at least ones a week . NAV OF A MUTUAL FUNDTrack your investments:One easy way to keep track of your fund is to keep track of the intelligent investorrankings of mutual funds, which are complied on a quarterly basis. These rankings allowyou to take note of your funds performance and risk profile and compare it across varioustime periods as well as across its peer set,Net Asset Value (NAV)The net asset value of the fund is the cumulative market value of the assets fund net of itsliabilities. In other words, if the fund is dissolved or liquidated, by selling off all theassets in the fund, this is the amount that the shareholders would collectively own. Thisgives rise to the concept of net asset value per unit, which is the value, represented by theownership of one unit in the fund. It is calculated simply by dividing the net asset valueof the fund by the number of units.Calculation of NAVThe most important part of the calculation is the valuation of the assets owned by thefund. Once it is calculated, the NAV is simply the net value of assets divided by thenumber of units outstanding. The detailed methodology for the calculation of the assetvalue is given below:Asset value is equal to:Sum of market value of shares/debentures  Liquid assets/cash held, if any  Dividends/interest accruedBABASAB PATIL Page 40
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND  Amount due on unpaid assets  Expenses accrued but not paidDetails on the above itemsFor liquid shares/debentures, valuation is done on the basis of the last or closing marketprice on the principal exchange where the security is tradedFor illiquid and unlisted and/or thinly traded shares/debentures, the value has to beestimated. For shares, this could be the book value per share or an estimated market priceif suitable benchmarks are available. For debentures and bonds, value is estimated on thebasis of yields of comparable liquid securities after adjusting for illiquidity. The value offixed interest bearing securities moves in a direction opposite to interest rate changesValuation of debentures and bonds is a big problem since most of them are unlisted andthinly traded. This gives considerable leeway to the AMCs on valuation and some of theAMCs are believed to take advantage of this and adopt flexible valuation policiesdepending on the situation.Interest is payable on debentures/bonds on a periodic basis say every 6 months. But, withevery passing day, interest is said to be accrued, at the daily interest rate, which iscalculated by dividing the periodic interest payment with the number of days in eachperiod. Thus, accrued interest on a particular day is equal to the daily interest ratemultiplied by the number of days since the last interest payment date. Usually, dividendsare proposed at the time of the Annual General meeting and become due on the recorddate.How is the percentage change in NAV calculated?Percentage change in NAV is an absolute measure of return, which finds the NAVappreciation between two points, as a percentage. For example, if the NAV of the fund isRs.23.45 at the beginning of a year, and Rs. 27.65 at the end of the year, then thepercentage change in NAV is= ( 27.65-23.45 ) / 23.45*100= 17.91%The general formula is (Absolute change in NAV / NAV at the beginning)* 100BABASAB PATIL Page 41
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDWhat is the rate of return to an investor in mutual funds?An investor in mutual fund earns returns from 2 sources:  Income from Dividend paid by the mutual fund.  Capital gains arising out of selling the units at a price higher than the acquisition price.What is Growth Option?Investors who do not require periodic income distributions can choose the growth option,where incomes earned are retained in the investment portfolio, and allowed to grow,rather than being distributed to the investors.What is Dividend Option?Investors, who choose a dividend option on their investment, will receive dividends fromthe mutual fund, as and when such dividends are declared. Dividend are paid in the formof warrants, or directly credited to the investor bank accounts.There are further choices in the distribution of dividends, in the normal dividend plan,periodicity of dividend is left to Fund Manager, who may pay annually or an interimdividend. There are other choices where in the investor can choose their dividend payoutfrequencies that can monthly, weekly, daily.What is re-investment option? Mutual Funds also provide another option to investors in the form of re-investment.Investors reinvest the dividends that are declared by the mutual fund, back into the funditself, at NAV that is prevalent at the time of re-investment. In this option, the number ofunits held by the investor will change with every re-investment. The value of the unitswill be similar to that under the dividend option.What are 1) Equity funds 2) Debt funds 3) Sector funds?BABASAB PATIL Page 42
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDEquity Funds: These are those that invest pre-dominantly in equity shares of thecompanies.Debt Funds: These are those that pre-dominantly invest in debt securities such as bonds,commercial papers, certificates of deposits and treasury bills.Sector Funds: Sector funds choose to invest in one or more chosen sectors of the equitymarkets. These sectors could vary depending on the investors preference than the returnrisk attributes of the sector.What is the maximum load the fund can charge?A mutual fund is required to dispatch to the unitholders the dividend warrants within 30days of the declaration of the dividend and the redemption or repurchase proceeds within10 working days from the date of redemption or repurchase request made by theunitholder.In case of failures to dispatch the redemption/repurchase proceeds within the stipulatedtime period, Asset management Company is liable to pay interest as specified from timeto time 915% at present).BABASAB PATIL Page 43
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND ANALYSIS AND FINDINGS Analysis of QuestionnaireRESPONDENTS AGE age Cumulative Frequency Percent Valid Percent Percent Valid 18-30 32 32.0 32.0 32.0 30-40 26 26.0 26.0 58.0 40-50 21 21.0 21.0 79.0 50&above 21 21.0 21.0 100.0 Total 100 100.0 100.0BABASAB PATIL Page 44
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND age 50&above 21.0% 18-30 32.0% 40-50 21.0% 30-40 26.0%Interpretation: Out of 100 respondents 32% are 18 to 30 age, 26% are 30 to 40, 21% are 40 to 50 andremaining 21% are of above 50. So Mutual funds should more concentrate on younggeneration because they have less risk on family and they will investment more becauseof career development and retirement benefits.BABASAB PATIL Page 45
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDOCCUPATION OF THE RESPONDENTS what is your occupation Cumulative Frequency Percent Valid Percent Percent Valid serviceman 19 19.0 19.0 19.0 businessman 39 39.0 39.0 58.0 professional 19 19.0 19.0 77.0 other 23 23.0 23.0 100.0 Total 100 100.0 100.0 what is your occupation serviceman other 19.0% 23.0% professional 19.0% businessman 39.0%Interpretation: The responses which I had got 19% were serviceman, 39% were businessman,19% were professional and the remaining 23% were other people.BABASAB PATIL Page 46
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDMONTHLY INCOME: what is your monthly income in rupess Cumulative Frequency Percent Valid Percent Percent Valid below 5000 8 8.0 8.0 8.0 5000-10000 18 18.0 18.0 26.0 10000-15000 17 17.0 17.0 43.0 15000-20000 27 27.0 27.0 70.0 20000-25000 15 15.0 15.0 85.0 above 25000 15 15.0 15.0 100.0 Total 100 100.0 100.0 what is your monthly income in rupess below 5000 above 25000 8.0% 15.0% 5000-10000 18.0% 20000-25000 15.0% 10000-15000 17.0% 15000-20000 27.0%Interpretation: Out of 100 samples 8% are of below Rs.5,000, 18% are of above 5,000 and belowRs.10,000, 17% are of above Rs.10,000 and below Rs.15,000,27% are of above 15,000and below Rs 20,000, 15% are of above 20,000 and below 25,000 the remaining 15% areof above Rs.25,000 monthly income.BABASAB PATIL Page 47
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDAWARENESS are you aware about of sbi mutual fund Cumulative Frequency Percent Valid Percent Percent Valid yes 66 66.0 66.0 66.0 no 34 34.0 34.0 100.0 Total 100 100.0 100.0 are you aware about of sbi mutual fund no 34.0% yes 66.0%Interpretation: Out of 100 samples 66% are aware of SBI mutual funds i.e. 66 surveyed peopleknow about SBI mutual funds and 34% are unaware of the SBI mutual funds. As there isa lack of awareness in this semi urban city Belgaum, the attempts should be made tocreate the general awareness through popular modes of communication that would reachthe potential customers, like Local T.V Channels, Local Newspapers, Theatres,Hoardings and Banners in the public crowded areas.MUTUAL FUND:BABASAB PATIL Page 48
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND do you want to invest your money in the following mutual fund Cumulative Frequency Percent Valid Percent Percent Valid debt fund 35 35.0 35.0 35.0 equity fund 40 40.0 40.0 75.0 no 25 25.0 25.0 100.0 Total 100 100.0 100.0do you want to invest your money in the following mutual fund no 25.0% debt fund 35.0% equity fund 40.0% Interpretation: Out of 100 samples 40% respondents have invested their money in equity mutual funds and the remaining 35%have invested in debt mutual funds and remaining 25% respondents are not interested. INVESTED IN MUTUAL FUND: BABASAB PATIL Page 49
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND have you invested money in mutual fund Cumulative Frequency Percent Valid Percent Percent Valid yes 65 65.0 65.0 65.0 no 35 35.0 35.0 100.0 Total 100 100.0 100.0 have you invested money in mutual fund no 35.0% yes 65.0%Interpretation: Out of 100 samples 65% respondents have invested their money in mutual funds andthe remaining 35% have not invested in mutual funds. So that the potential marketavailable for targeting is around 35%.BABASAB PATIL Page 50
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDINVESTMENT COMPANIES: in which company you have invested your money Cumulative Frequency Percent Valid Percent Percent Valid uti 36 36.0 36.0 36.0 sbi 33 33.0 33.0 69.0 reliance money 20 20.0 20.0 89.0 others 11 11.0 11.0 100.0 Total 100 100.0 100.0 in which company you have invested your money others 11.0% uti reliance money 36.0% 20.0% sbi 33.0%Interpretation: Out of 100 samples 36% respondents have invested their money in UTI mutual funds,33% respondents have invested their money in SBI mutual fund, 20% respondents haveinvested their money in reliance money and the remaining 11% respondents haveinvested their money in other mutual fund.BABASAB PATIL Page 51
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND PLANS: which plan you have taken Cumulative Frequency Percent Valid Percent Percent Valid debt fund 35 35.0 35.0 35.0 equity fund 40 40.0 40.0 75.0 if any other specify others 25 25.0 25.0 100.0 Total 100 100.0 100.0 which plan you have taken if any other specify 25.0% debt fund 35.0% equity fund 40.0%Interpretation: Out of 100 samples 40% respondents have invested their money in equity scheme mutual funds, 35% respondents have invested their money in debt scheme mutual fund and the remaining 25% respondents have invested their money in other scheme BABASAB PATIL Page 52
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDINVESTED IN MUTUAL FUND: which amount you are contributing to a mutual fund Cumulative Frequency Percent Valid Percent Percent Valid up to 10000 31 31.0 31.0 31.0 10000-25000 41 41.0 41.0 72.0 25000-50000 22 22.0 22.0 94.0 50000-100000 6 6.0 6.0 100.0 Total 100 100.0 100.0 which amount you are contributing to a mutual fund 50000-100000 6.0% up to 10000 25000-50000 31.0% 22.0% 10000-25000 41.0%Interpretation: Out of 100 respondents 31% of them have invested up to Rs.10,000, 41% of them haveinvested above Rs 10,000 and below Rs 25,000, 22% of them have invested above Rs25,000 and below Rs 50,000, and remaining 6% of them have invested above Rs.50,000and below Rs 1,00,000. Mutual fund companies should give advertisement on T.V andother local medium to attract the customers.BABASAB PATIL Page 53
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUNDINFLUENCED TO BUY MUTUAL FUND: what influenced your financial planning Cumulative Frequency Percent Valid Percent Percent Valid discussion with 21 21.0 21.0 21.0 family member stock holder/agent 45 45.0 45.0 66.0 website 34 34.0 34.0 100.0 Total 100 100.0 100.0 what influenced your financial planning w ebsite 34.0% discussion w ith fami 21.0% stock holder/agent 45.0%Interpretation: According to respondents the influencing factor to buy mutual funds was 21% of themwere influenced by Family member,45% were influenced by stock holder/agent,34% ofthem influenced by website. People who have invested in mutual funds they haveinfluenced from family member, stock holder/agent, website.BABASAB PATIL Page 54
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND INFLUENCED TO WHILE TAKING DECISION TO INVEST IN MUTUAL FUND: which factor you considered while taking decision to invest in mutual fund Cumulative Frequency Percent Valid Percent Percent Valid returns 36 36.0 36.0 36.0 saving 20 20.0 20.0 56.0 liquidity 16 16.0 16.0 72.0 if any other specify 28 28.0 28.0 100.0 Total 100 100.0 100.0which factor you considered while taking decision to invest in mutual fu if any other specify 28.0% returns 36.0% liquidity 16.0% saving 20.0% Interpretation: The various attributes the investors look for while buying the mutual funds are 36% of them gives preference of Rate of Return, 20% of them gives preference of saving, 16% of them gives preference of liquidity, 28% of them gives preference of other (tax benefit) People will consider rate of return as a very high attribute while investing in mutual funds compared to other attributes like saving, liquidity, and other. BABASAB PATIL Page 55
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND FUTURE INVESTED IN SBI MUTUAL FUND: in future are you interested investing money in SBI mutual fund Cumulative Frequency Percent Valid Percent Percent Valid yes 64 64.0 64.0 64.0 no 36 36.0 36.0 100.0 Total 100 100.0 100.0in future are you interested investing money in SBI mutual fund no 36.0% yes 64.0% Interpretation: Out of 100 samples 64% respondents will invested their money in SBI mutual fund, and remaining 36% respondents will not invested their money in SBI mutual fund. BABASAB PATIL Page 56
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND if no why Cumulative Frequency Percent Valid Percent Percent Valid risk 28 28.0 28.0 28.0 not much knowledge 18 18.0 18.0 46.0 about the mutual fund bad experience 10 10.0 10.0 56.0 returns is not fixed 23 23.0 23.0 79.0 all of the above 21 21.0 21.0 100.0 Total 100 100.0 100.0 if no why all of the above 21.0% risk 28.0% returns is not fixed 23.0% not much know ledge a 18.0% bad experience 10.0%Interpretation: The reason for not opting for mutual funds for those 28% respondents they feel mutualfund involves high risk, 18% respondents not much knowledge about mutual fund, 10%respondents had bad experience with mutual funds because they have lost their money inpast, 23% respondents they feel mutual fund return is not fixed, 21% respondents all ofthe above reason.BABASAB PATIL Page 57
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND FINDINGSThus on the basis of the study conducted we can see that Mutual Fund is one of the bestoptions for investment as it has many advantages of diversification, professionalmanagement, economies of scale, liquidity etc. From the survey conducted it was foundthat –  Mutual fund should mainly concentrate on young generation.  Around 66% aware about SBI mutual fund.  Investors invest in Mutual Funds as a high return and (saving) security in their old age or as retirement security. While others invest to gain access to stock market through professional management and for higher education.  Around 30% of the investors know about the tax benefits of investing in Mutual Funds.BABASAB PATIL Page 58
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND SUGGESTIONS • Awareness of mutual funds: Investors are not very much aware of the investment opportunities, therefore they have to be educated about this form of investment. In order to educate the Government as well as the Non-government employees, seminars and workshops could be conducted in these organizations and try to clear their doubts and misconceptions about Mutual funds. • Proper benchmark is required to measure the performance of the mutual funds. • Mutual fund is a classical example of unsought goods. The nature of that the consumer does not know about or does not normally think of buying. The attempts should be made to create awareness through popular modes of communication that would reach the potential customers, like Local T.V Channels, Local Newspapers, Theatres, Hoardings and Banners in the public crowded areas etc.BABASAB PATIL Page 59
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND CONCLUSIONFrom the above study it is seen that there is an attractive market for mutual funds inBelgaum provided awareness should be created of the different schemes and peopleshould be educated with all the information of mutual funds.BABASAB PATIL Page 60
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND References  Company website  Magazines  www.moneycontrol.com  www.mutualfundsindia.com  www.amfi.comBABASAB PATIL Page 61
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND Annexure QUESTIONARRIE1. Age a] 18-30 ` b] 30-40 c] 40-50 d] 50 & above2. What is your occupation? Serviceman Businessman Professional Other3. What is your monthly income in Rupess? Below 5,000 5,000-10,000 10,000-15,000 15,000-20,000 20,000-25,000 above 25,0004. Are you aware about SBI Mutual fund? Yes No5. Do you want to invest your money in the following Mutual fund? Debt fund Equity fund No6. Have you invested money in Mutual fund? Yes No th (If no go to 12 question)7. In which company have you have invested your money? UTI SBI Reliance money Other8. Which plan you have taken? Debt fund Equity fund If any other specify other ……………BABASAB PATIL Page 62
    • CUSTOMER AWARENESS ABOUT SBI MUTUAL FUND9. Which amount you are contributing to a Mutual fund? Up to 10,000 10,000-25,000 25,000-50,000 50,000-1, 00,00010. What influenced your financial Planning? Discussion with family Member Stock holder/ Agent Web site11. Which factor you considered while taking decision to invest Mutual Fund? Returns Saving Liquidity If any other specify…………….12In futures are you invested money in SBI Mutual fund? Yes No13. If no why? 1. Risk 2. Not much knowledge about the Mutual fund 3. Bad experience 4. Returns is not fixed 5. All of the above Signature of the person Thank You for Your Kind CooperationBABASAB PATIL Page 63