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A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps
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A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps

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A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps

A project report on investment strategies of general public and comparative analysis of mutual funds and uli ps

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  • 1. Final Report of Summer Training In Topic Investment Strategies of General Public & Comparative Analysis of Mutual Funds and ULIPsByInstitute for Integrated Learning in ManagementGraduate School of Management16, Knowledge Park-11,Greater Noida - 201306 1
  • 2. Table of ContentsSr. No. Topic Page No.1. Acknowledgement 32. Synopsis 43. Banking in India 54. Challenges faced by Banking Industry 145. Strategic Options to cope with the Challenges 166. List of Banks in India 187. Fact File of Banks in India 248. Company Profile(Worldwide) 259. Company Profile(India) 3210. SWOT Analysis 3811. Problem Statement & Objective 4012. Investment Strategies of General Public 4113. Data Collection and Research 4114. Investment Strategy Questionnaire 4215. Data Profile 4316. Findings of The Research 4717. Comparison of the Services and Products offered by different Banks 5718. Products Offered by Standard Chartered Bank 6219. Mutual Funds 7120. Concept 7121. How Mutual Funds Work 7322. Frequently used Terms with Mutual Funds 7323. Return 7424. Risk 7525. Types of Mutual Funds 7826. Advantages of Mutual Funds 8327. Disadvantages of Mutual Funds 8828. Standard Chartered Mutual Fund 9229. Unit Linked Insurance Plan 9330. Features of ULIP 9531. Latest IRDA Guidelines for ULIPs 9632. Guideline to Select The Right ULIP 9833. Life Insurance Products at Standard Chartered 10134. Comparative Analysis of Mutual Funds and ULIP 104 2
  • 3. Acknowledgment I want to place on record my gratitude to theorganization and its people whose generous help andsupport enabled me to complete this project within thestipulated time period.My special thanks to ……………………………..,Standard Chartered Bank Limited, Wealth Management-Consumer Banking, New Delhi for his active help,guidance and support in making me understand Bankingoperations.I am greatly indebted to all those people who have helpedme in some way or other in the completion of the project. Iam also grateful to the staff members of STANDARDCHARTERED BANK for their support and co-operationduring the course of my summer training.The Faculty of my institute deserves the praise for theirrole in shaping this summer training project.In the end, I take the responsibility for all my shortcomings. Synopsis 3
  • 4. In the last five decades the field of investments hasreceived considerable attention from academicresearchers keen on understanding issues like: • How do people select an Investment option? • How successful are the various strategies followed by investment practioners? • How much Risk do people take up while investing?With the coming up of large number of multinationalcorporations, the competition in the investment sectorhas increased tremendously. Today, an investor hasmany investment products to choose from accordingto his / her needs and preferences.By keeping in mind all these points the analysis ofthe investment pattern is done through sample surveyin this project report. BANKING IN INDIA 4
  • 5. Banking in India originated in the first decade of 18thcentury with The General Bank of India coming intoexistence in 1786. This was followed by Bank ofHindustan. Both these banks are now defunct. The oldestbank in existence in India is the State Bank of India beingestablished as "The Bank of Bengal" in Calcutta in June1806. A couple of decades later, foreign banks like CreditLyonnais started their Calcutta operations in the 1850s. Atthat point of time, Calcutta was the most active tradingport, mainly due to the trade of the British Empire, and dueto which banking activity took roots there and prospered.The first fully Indian owned bank was the Allahabad Bank,which was established in 1865.By the 1900s, the market expanded with the establishmentof banks such as Punjab National Bank, in 1895 in Lahoreand Bank of India in 1906, in Mumbai- both of which werefounded under private ownership. The Reserve Bank ofIndia formally took on the responsibility of regulating theIndian banking sector from 1935. After Indiasindependence in 1947, the Reserve Bank was nationalizedand given broader powers.Structure of the Organized Banking Sector in India 5
  • 6. (Number of banks is in brackets.)Early History:At the end of late-18th century, there were hardly any banks inIndia in the modern sense of the term. At the time of the AmericanCivil War, a void was created as the supply of cotton to Lancashire 6
  • 7. stopped from the Americas. Some banks were opened at that timewhich functioned as entities to finance industry, includingspeculative trades in cotton. With large exposure to speculativeventures, most of the banks opened in India during that periodcould not survive and failed. The depositors lost money and lostinterest in keeping deposits with banks. Subsequently, banking inIndia remained the exclusive domain of Europeans for next severaldecades until the beginning of the 20th century.(The Bank of Bengal, which later became the State Bank of India.)At the beginning of the 20th century, Indian economy was passingthrough a relative period of stability. Around five decades haveelapsed since the Indias First war of Independence, and the social,industrial and other infrastructure have developed. At that timethere were very small banks operated by Indians, and most of themwere owned and operated by particular communities. The bankingin India was controlled and dominated by the presidency banks,namely, the Bank of Bombay, the Bank of Bengal, and the Bank ofMadras - which later on merged to form the Imperial Bank ofIndia, and Imperial Bank of India, upon Indias independence, was 7
  • 8. renamed the State Bank of India. There were also some exchangebanks, as also a number of Indian joint stock banks. All thesebanks operated in different segments of the economy. Thepresidency banks were like the central banks and discharged mostof the functions of central banks. They were established undercharters from the British East India Company. The exchangebanks, mostly owned by the Europeans, concentrated on financingof foreign trade. Indian joint stock banks were generally undercapitalized and lacked the experience and maturity to compete withthe presidency banks, and the exchange banks. There was potentialfor many new banks as the economy was growing. Lord Curzonhad observed then in the context of Indian banking: "In respect ofbanking it seems we are behind the times. We are like some oldfashioned sailing ship, divided by solid wooden bulkheads intoseparate and cumbersome compartments."Under these circumstances, many Indians came forward to set upbanks, and many banks were set up at that time, a number of whichhave survived to the present such as Bank of India and CorporationBank, Indian Bank, Bank of Baroda, and Canara Bank.During the WarsThe period during the First World War (1914-1918) through theend of the Second World War (1939-1945), and two yearsthereafter until the independence of India were challenging for theIndian banking. The years of the First World War were turbulent,and it took toll of many banks which simply collapsed despite theIndian economy gaining indirect boost due to war-related 8
  • 9. economic activities. At least 94 banks in India failed during the years 1913 to 1918 as indicated in the following table: Number of banks Authorised capital Paid-up CapitalYears that failed (Rs. Lakhs) (Rs. Lakhs)1913 12 274 351914 42 710 1091915 11 56 51916 13 231 41917 9 76 251918 7 209 1 Post-Independence The partition of India in 1947 had adversely impacted the economies of Punjab and West Bengal, and banking activities had remained paralyzed for months. Indias independence marked the end of a regime of the Laissez-faire for the Indian banking. The Government of India initiated measures to play an active role in the economic life of the nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy. This resulted into greater involvement of the state in 9
  • 10. different segments of the economy including banking and finance.The major steps to regulate banking included: • In 1948, the Reserve Bank of India, Indias central banking authority, was nationalized, and it became an institution owned by the Government of India. • In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India." • The Banking Regulation Act also provided that no new bank or branch of an existing bank may be opened without a licence from the RBI, and no two banks could have common directors.However, despite these provisions, control and regulations, banksin India except the State Bank of India, continued to be owned andoperated by private persons. This changed with the nationalizationof major banks in India on 19th July, 1969.NationalisationBy the 1960s, the Indian banking industry has become animportant tool to facilitate the development of the Indian economy.At the same time, it has emerged as a large employer, and a debatehas ensued about the possibility to nationalize the bankingindustry. Indira Gandhi, the-then Prime Minister of India expressedthe intention of the GOI in the annual conference of the All IndiaCongress Meeting in a paper entitled "Stray thoughts on BankNationalisation." The paper was received with positiveenthusiasm. Thereafter, her move was swift and sudden, and theGOI issued an ordinance and nationalised the 14 largestcommercial banks with effect from the midnight of July 19, 1969. 10
  • 11. Jayaprakash Narayan, a national leader of India, described the stepas a "masterstroke of political sagacity." Within two weeks of theissue of the ordinance, the Parliament passed the BankingCompanies (Acquition and Transfer of Undertaking) Bill, and itreceived the presidential approval on 9th August, 1969.A second dose of nationalization of 6 more commercial banksfollowed in 1980. The stated reason for the nationalization was togive the government more control of credit delivery. With thesecond dose of nationalization, the GOI controlled around 91% ofthe banking business of India.After this, until the 1990s, the nationalized banks grew at a pace ofaround 4%, closer to the average growth rate of the Indianeconomy.LiberalisationIn the early 1990s the then Narsimha Rao government embarkedon a policy of liberalization and gave licenses to a small number ofprivate banks, which came to be known as New Generation tech-savvy banks, which included banks such as Global Trust Bank (thefirst of such new generation banks to be set up) which lateramalgamated with Oriental Bank of Commerce, UTI Bank(now re-named as Axis Bank), ICICI Bank and HDFC Bank. This move,along with the rapid growth in the economy of India, kick startedthe banking sector in India, which has seen rapid growth withstrong contribution from all the three sectors of banks, namely,government banks, private banks and foreign banks.The next stage for the Indian banking has been setup with theproposed relaxation in the norms for Foreign Direct Investment,where all Foreign Investors in banks may be given voting rightswhich could exceed the present cap of 10%,at present it has goneup to 49% with some restrictions. 11
  • 12. The new policy shook the Banking sector in India completely.Bankers, till this time, were used to the 4-6-4 method (Borrow at4%; Lend at 6%; Go home at 4) of functioning. The new waveushered in a modern outlook and tech-savvy methods of workingfor traditional banks. All this led to the retail boom in India. Peoplenot just demanded more from their banks but also received more.Current SituationCurrently (2008), banking in India is generally fairly mature interms of supply, product range and reach-even though reach inrural India still remains a challenge for the private sector andforeign banks. In terms of quality of assets and capital adequacy,Indian banks are considered to have clean, strong and transparentbalance sheets relative to other banks in comparable economies inits region. The Reserve Bank of India is an autonomous body, withminimal pressure from the government. The stated policy of theBank on the Indian Rupee is to manage volatility but without anyfixed exchange rate-and this has mostly been true.With the growth in the Indian economy expected to be strong forquite some time-especially in its services sector-the demand forbanking services, especially retail banking, mortgages andinvestment services are expected to be strong. One may also expectM&As, takeovers, and asset sales.In March 2006, the Reserve Bank of India allowed WarburgPincus to increase its stake in Kotak Mahindra Bank (a privatesector bank) to 10%. This is the first time an investor has beenallowed to hold more than 5% in a private sector bank since the 12
  • 13. RBI announced norms in 2005 that any stake exceeding 5% in theprivate sector banks would need to be vetted by them.Currently, India has 88 scheduled commercial banks (SCBs) - 28public sector banks (that is with the Government of India holding astake), 29 private banks (these do not have government stake; theymay be publicly listed and traded on stock exchanges) and 31foreign banks. They have a combined network of over 53,000branches and 17,000 ATMs. According to a report by ICRALimited, a rating agency, the public sector banks hold over 75percent of total assets of the banking industry, with the private andforeign banks holding 18.2% and 6.5% respectively.Challenges faced by Indian BankingIndustryThe banking industry in India is undergoing a majortransformation due to changes in economic conditions andcontinuous deregulation. These multiple changes happening oneafter other has a ripple effect on a bank trying to graduate fromcompletely regulated sellers market to completed deregulatedcustomers market. 13
  • 14. Deregulation:This continuous deregulation has made the Banking marketextremely competitive with greater autonomy, operationalflexibility, and decontrolled interest rate and liberalized norms forforeign exchange. The deregulation of the industry coupled withdecontrol in interest rates has led to entry of a number of players inthe banking industry. At the same time reduced corporate credit offtake thanks to sluggish economy has resulted in large number ofcompetitors battling for the same pie.New rules: As a result, the market place has been redefined with new rules of the game. Banks are transforming to universal banking, adding new channels with lucrative pricing and freebees to offer. Natural fall out of this has led to a series of innovative product offerings catering to various customer segments, specifically retail credit. 14
  • 15. Efficiency:This in turn has made it necessary to look for efficiencies in thebusiness. Banks need to access low cost funds and simultaneouslyimprove the efficiency. The banks are facing pricing pressure,squeeze on spread and have to give thrust on retail assetsDiffused Customer loyalty:This will definitely impact Customer preferences, as they arebound to react to the value added offerings. Customers havebecome demanding and the loyalties are diffused. There are ultiplechoices, the wallet share is reduced per bank with demand onflexibility and customization. Given the relatively low switchingcosts; customer retention calls for customized service and hasslefree, flawless service delivery.Misaligned mindset:These changes are creating challenges, as employees are made toadapt to changing conditions. There is resistance to change fromemployees and the Seller market mindset is yet to be changedcoupled with Fear of uncertainty and Control orientation.Acceptance of technology is slowly creeping in but the utilizationis not maximised.Competency Gap: Placing the right skill at the right place will determine success. The competency gap needs to be addressed simultaneously otherwise there will be missed opportunities. The focus of people will be on doing work but not providing solutions, on escalating problems rather than solving them and on disposing customers instead of using the opportunity to cross sell. 15
  • 16. Strategic Options with Banks to cope withthe Challenges Leading players in the industry have embarked on a series of strategic and tactical initiatives to sustain leadership. The major initiatives include:  Investing in state of the art technology as the back bone of to ensure reliable service delivery  Leveraging the branch network and sales structure to mobilize low cost current and savings deposits  Making aggressive forays in the retail advances segment of home and personal loans.  Implementing organization wide initiatives involving people, process and technology to reduce the fixed costs and the cost per transaction.  Focusing on fee based income to compensate for squeezed spread, (e.g. CMS, trade services)  Innovating Products to capture customer ‘mind share’ to begin with and later the wallet share. 16
  • 17.  Improving the asset quality as per Basel II normsPublic sector banksSBI group:State Bank of India, with its seven associate banks commands thelargest banking resources in India. SBI and its associate banks are: • State Bank of India • State Bank of Bikaner & Jaipur • State Bank of Hyderabad • State Bank of Indore • State Bank of Mysore • State Bank of Patiala • State Bank of Saurashtra • State Bank of Travancore 17
  • 18. After the amalgamation of New Bank of India with PunjabNational Bank, currently there are 20 nationalized banks in India: • Allahabad Bank • Andhra Bank • Bank of Baroda • Bank of India • Bank of Maharashtra • Canara Bank • Central Bank of India • Corporation Bank • Dena Bank • Indian Bank • Indian Overseas Bank • Oriental Bank of Commerce • Punjab & Sind Bank • Punjab National Bank • Syndicate Bank • Union Bank of India • United Bank of India • UCO Bank • Vijaya BankPrivate sector banks • Axis Bank (formerly UTI Bank) • Bank of Rajasthan • Bharat Overseas Bank • Catholic Syrian Bank • Centurion Bank of Punjab (Merged with HDFC bank) • City Union Bank • Development Credit Bank • Dhanalakshmi Bank • Federal Bank • Kumfu Blade Bank 18
  • 19. • Ganesh Bank of Kurundwad • HDFC Bank • ICICI Bank • IndusInd Bank • ING Vysya Bank • Jammu & Kashmir Bank • Karnataka Bank Limited • Karur Vysya Bank • Kotak Mahindra Bank • Lakshmi Vilas Bank • Lord Krishna Bank ( now Centurion Bank of Punjab) • Nainital Bank • Nedungadi Bank (now Punjab National Bank) • Ratnakar Bank • Rupee Bank • Saraswat Bank • SBI Commercial and International Bank • South Indian Bank • Tamilnad Mercantile Bank Ltd. • Thane Janata Sahakari Bank • Bassein Catholic Bank • United Western Bank( now IDBI Bank) • YES BankForeign banks • ABN AMRO Bank N.V. • Abu Dhabi Commercial Bank Ltd • American Express Bank • Antwerp Diamond Bank • Arab Bangladesh Bank • Bank International Indonesia • Bank of America 19
  • 20. • Bank of Bahrain & Kuwait • Bank of Ceylon • Bank of Nova Scotia • Bank of Tokyo Mitsubishi UFJ • Barclays Bank • BNP Paribas • Calyon Bank • ChinaTrust Commercial Bank • Cho Hung Bank • Citibank • DBS Bank • Deutsche Bank • HSBC (Hongkong & Shanghai Banking Corporation) • JPMorgan Chase Bank • Krung Thai Bank • Mashreq Bank • Mizuho Corporate Bank • Oman International Bank • Société Générale • Standard Chartered Bank • State Bank of Mauritius • Scotia • Taib BankTotal: 88 Banks.Regional Rural Banks (RRBs) • Adhiyaman Grama Bank • Alaknanda Gramin Bank • Aligarh Gramin Bank • Avadh Gramin Bank • Aryavart Gramin Bank • Balasore Gramya Bank • Ballia Kshetriya Gramin Bank 20
  • 21. • Banaskantha Mehsana Gramin Bank• Bareilly Kshetriya Gramin Bank• Baroda Uttar Pradesh Gramin Bank• Bijapur Grameena Bank• Bilaspur-Raipur Kshetriya Gramin Bank• Bolangir Anchalik Gramya Bank• Bundelkhand Kshetriya Gramin Bank• BundiChittorgarh KshetriyaGraminBank• Cauvery Grameena Bank• Chaitanya Grameena Bank• Chambal Kshetriya Gramin Bank• Champaran Kshetriya Gramin Bank• Chhatrasal Gramin Bank• ChhindwaraSeoniKshetriyaGraminBank• Chitradurga Gramin Bank• Cuttack Gramya Bank• Damoh Panna Sagar Kshetriya Gramin Bank• Devipatan Kshetriya Gramin Bank• Dhenkanal Gramya Bank• Dungarpur Banswara Kshetriya Gramin Bank• Ellaquai Dehati Bank• Farrukhabad Gramin Bank• Gaur Gramin Bank• Gurgaon Gramin Bank• Hadoti Kshetriya Gramin Bank• Himachal Gramin Bank• Hissar-Sirsa Kshetriya Gramin Bank• Indore Ujjain Kshetriya Gramin Bank• Jaipur Nagaur Aanchalik Gramin Bank• Jamnagar Rajkot Gramin Bank• Jamuna Gramin Bank• Jhabua-Dhar Kshetriya Gramin Bank• Kakathiya Grameena Bank• Kalpatharu Grameena Bank• Kamraz Rural Bank 21
  • 22. • Kanpur Kshetriya Gramin Bank• Kapurthala Ferozpur Kshetriya Gramin Bank• Kashi Gomti Samyut Gramin Bank• Kisan Gramin Bank,Budaun• Kolar Gramin Bank• Krishna Grameena Bank• Kshetriya Gramin Bank, Hoshangabad• Kutch Grameen Bank• Malaprabha Grameena Bank• Mandla Balaghat Kshetriya Gramin Bank• Manjira Grameena Bank• Marwar Ganganagar Bikaner Gramin Bank (Previously : Marwar Gramin Bank)• Mewar Aanchalik Gramin Bank• Nagarjuna Grameena Bank• Netravati Grameena Bank• Nimar Kshetriya Gramin Bank• North Malabar Gramin Bank• Panchmahal Vadodara Gramin Bank• Pandyan Grama Bank• Pinakini Grameena Bank• Pragjyotish Gaonlia Bank• Prathama Bank• Raigarh Kshetriya Gramin Bank• Rani Lakshmi Bai Kshetriya Gramin Bank• Ratlam Mandsaur Kshetriya Gramin Bank• Rayalaseema Grameena Bank• Rewa-Sidhi Gramin Bank• Sahyadri Gramin Bank• Samyut Kshetriya Gramin Bank• Sangameshwara Grameena Bank• Shahjahanpur Kshetriya Gramin Bank• Shivpuri Guna Kshetriya Gramin Bank• South Malabar Gramin Bank• Sree Anantha Grameena Bank 22
  • 23. • Sri Saraswati Grameena Bank • Sri Visakha Grameena Bank • Surat Bharuch Gramin Bank • Thar Aanchalik Gramin Bank • Tripura Gramin Bank • Tungabhadra Gramin Bank • Vidur Gramin Bank Other Public Sector Bank • IDBI BANK Fact File of Banks in India:The first bank in India to be given an ISO Certification Canara BankThe first bank in Northern India to get ISO 9002 Punjab and Sind Bankcertification for their selected branchesThe first Indian bank to have been started solely with Punjab National BankIndian capitalThe first among the private sector banks in Kerala to South Indian Bankbecome a scheduled bank in 1946 under the RBI ActIndias oldest, largest and most successful commercial State Bank of Indiabank, offering the widest possible range of domestic,international and NRI products and services, through its 23
  • 24. vast network in India and overseasIndias second largest private sector bank and is now the The Federal Bank Limitedlargest scheduled commercial bank in IndiaBank which started as private shareholders banks, Imperial Bank of Indiamostly Europeans shareholdersThe first Indian bank to open a branch outside India in Bank of India, founded inLondon in 1946 and the first to open a branch in 1906 in Mumbaicontinental Europe at Paris in 1974The oldest Public Sector Bank in India having branchesall over India and serving the customers for the last 132 Allahabad BankyearsThe first Indian commercial bank which was wholly Central Bank of Indiaowned and managed by Indians Bank of India was founded in 1906 in Mumbai. It became the first Indian bank to open a branch outside India in London in 1946 and the first to open a branch in continental Europe at Paris in 1974. Company Profile STANDARD CHARTERED BANK Standard Chartered Bank is a British bank headquartered in London with operations in more than seventy countries. It operates a network of over 1,700 branches and outlets (including subsidiaries, associates and joint ventures) and employs 73,000 people. 24
  • 25. Despite its British base, it has few customers in the UnitedKingdom and 90% of its profits come from Asia, Africa,and the Middle East. Because the banks history is entwinedwith the development of the British Empire its operationslie predominantly in former British colonies, though overthe past two decades it has expanded into countries thathave historically had little British influence. It aims toprovide a safe regulatory bridge between these developingeconomies.It now focuses on consumer, corporate, and institutionalbanking, and on the provision of treasury services—areasin which the Group had particular strength and expertise.Standard Chartered is listed on the London Stock Exchangeand the Hong Kong Stock Exchange and is among the top25 constituent members of the FTSE 100 Index. HistoryThe name Standard Chartered comes from the two original banksfrom which it was founded—The Chartered Bank of India,Australia and China, and The Standard Bank of British SouthAfrica.The Chartered Bank was founded by James Wilson following thegrant of a Royal Charter by Queen Victoria in 1853, while TheStandard Bank was founded in the Cape Province of South Africain 1862 by John Paterson. Both companies were keen to capitaliseon the huge expansion of trade and to earn the handsome profits tobe made from financing the movement of goods from Europe tothe East and to Africa. 25
  • 26. In those early years, both banks prospered. Chartered opened itsfirst branches in Bombay, Calcutta and Shanghai in 1858, followedby Hong Kong and Singapore in 1859. With the opening of theSuez Canal in 1869 and the extension of the telegraph to China in1871, Chartered was well placed to expand and develop itsbusiness.In South Africa, Standard, having established a considerablenumber of branches, was prominent in financing the developmentof the diamond fields of Kimberley from 1867 and later extendedits network further north to the new town of Johannesburg whengold was discovered there in 1885. Half the output of the secondlargest gold field in the world passed through The Standard Bankon its way to London.Both banks – at that time still quite separate companies – survivedthe First World War and the Depression, but were directly affectedby the wider conflict of the Second World War in terms of loss ofbusiness and closure of branches. There were also longer termeffects for both banks as countries in Asia and Africa gained theirindependence in the ‘50s and ‘60s.Each had acquired other small banks along the way and spreadtheir networks further. In 1969, the banks decided to merge, and tocounterbalance their existing network by expanding in Europe andthe United States, while continuing their expansion in theirtraditional markets in Asia and Africa. All appeared to be goingwell, when in 1986 Lloyds Bank of the United Kingdom made ahostile takeover bid for the Group.After having defeated the bid, Standard Chartered entered a periodof change. It made provisions against Third World debt exposureand loans to corporations and entrepreneurs who could not meet 26
  • 27. their commitments. It also began a series of divestments notably inthe United States and South Africa, and entered into a number ofasset sales.From the early 1990s, Standard Chartered has focused ondeveloping its strong franchises in Asia, Africa and the MiddleEast, using its operations in the United Kingdom and NorthAmerica to provide customers with a bridge between thesemarkets. Secondly, it would focus on consumer, corporate andinstitutional banking and on the provision of treasury services -areas in which the Group had particular strength and expertise.Since 2000, Standard Chartered has achieved several milestoneswith a number of strategic alliances and acquisitions.Recent Alliances and Strategic AcquisitionsIn 2000, Standard Chartered acquired Grindlays Bank from ANZBank, increasing its presence in private banking and furtherexpanding its operations in India and Pakistan. Standard Charteredretained Grindlays private banking operations in London andLuxembourg and the subsidiary in Jersey, all of which it integratedinto its own private bank. This now serves high net worthcustomers in Hong Kong, Dubai, and Johannesburg under thename Standard Chartered Grindlays Offshore Financial Services.In India, Standard Chartered integrated most of Grindlaysoperations, making Standard Chartered the largest foreign bank inthe country, despite Standard Chartered having cut some branchesand having reduced the staff from 5500 to 3500 people.On 15th April 2005, the bank acquired Korea First Bank, beatingHSBC in the bid. Since then the bank has rebranded the branchesas SC First Bank.Standard Chartered completed the integration of its Bangkokbranch and Standard Chartered Nakornthon Bank in October, 27
  • 28. renaming the new entity Standard Chartered Bank (Thailand).Standard Chartered also formed strategic alliances with FlemingFamily & Partners to expand private wealth management in Asiaand the Middle East, and acquired stakes in ACB Vietnam,Travelex, American Express Bank in Bangladesh and Bohai Bankin China.On 9th August 2006 Standard Chartered announced that it hadacquired an 81% shareholding in the Union Bank of Pakistan in adeal ultimately worth $511 million. This deal represented the firstacquisition by a foreign firm of a Pakistani bank and the mergedbank, Standard Chartered Bank (Pakistan), is now Pakistans sixthlargest bank.On 22 October, 2006 Standard Chartered announced that it hasreceived tenders for more than 51 per cent of the issued sharecapital of Hsinchu International Bank (“Hsinchu”), established in1948 in Hsinchu province in Taiwan. Standard Chartered, whichhad first entered Taiwan in 1985, acquired majority ownership ofthe bank, Taiwan’s seventh largest private sector bank by loansand deposits as at 30 June, 2006. Standard Chartered merged itsexisting three branches with Hsinchus 83, and then delistedHsinchu International Bank, changing the banks name to 渣打國際商業銀行股份有限公司 (Standard Chartered Bank (Taiwan)Limited). Prior to the merger, Hsinchu had suffered extensivelosses on defaulted credit card debt.In 2006, Standard Chartered in Bangladesh announced an alliancewith Dutch Bangla Bank to share their respective ATM operations.On 23 August, 2007 Standard Chartered entered into an agreementto buy a 49 percent of an Indian brokerage firm (UTI Securities)for $36 million in cash from Securities Trading Corporation ofIndia Ltd., with the option to raise its stake to 75 percent in 2008and, if both partners agree, to 100 percent by 2010. UTI Securities 28
  • 29. offers broking, wealth management and investment bankingservices across 60 Indian cities.On 29th February 2008, Standard Chartered PLC announced it hasreceived all the required approvals leading to the completion of itsacquisition of American Express Bank Ltd (AEB) from theAmerican Express Company (AXP). The total cash considerationfor the acquisition is US$ 823 million.The acquisition of AEB provides Standard Chartered with anopportunity to add capability, scale and momentum in thestrategically important Financial Institutions and Private Bankingbusinesses. It will add 19 more markets to the Standard Charteredfootprint, while deepening presence in some core markets andproviding access to several new growth markets.Position todayToday, the bank is a leading player throughout the developingworld.Standard Chartered Bank is one of the three banks issuingbanknotes for Hong Kong (Standard Chartered Bank (Hong Kong)Limited became a note-issuing bank from 2004), the other twobeing the Bank of China (Hong Kong) and The Hongkong andShanghai Banking Corporation.The bank supports marathons in many cities, including London(The City Run), Jersey, Singapore, Dubai, Lahore, Mumbai, HongKong, and Nairobi. 29
  • 30. Standard Chartered Global Presence Standard Chartered Global PresenceThe Americas Africa Asia Middle-East Europe • Argentina • Botswana • Afghanistan • Bahrain • The Falklands • Bahamas • Cameroon • Australia • Jordan (classified as • Brazil • Gambia • Bangladesh • Lebanon "Europe" for • Canada • Ghana • Brunei • Oman Standard • Colombia • Ivory Coast • Cambodia • Qatar Chartered • Mexico • Kenya • China purposes) • Peru • Nigeria • Hong Kong • UAE • Ireland • US • Sierra Leone • India • Jersey • South Africa • Indonesia • Switzerland • Venezuela • Tanzania • Japan 30
  • 31. • Uganda • Laos • Turkey • Zambia • Macus • Malaysia • UK • Zimbabwe • Mauritius • Nepal • Pakistan • Philippines • Singapore • South Korea • Sri Lanka • Taiwan • Thailand • Vietnam Standard Chartered Bank Limited IndiaThe Standard Chartered Group was formed in 1969 through amerger of two banks: The Standard Bank of British South Africafounded in 1863 and the Chartered Bank of India, Australia andChina, founded in 1853. The Chartered Bank opened its firstoverseas branch in India, at Kolkata, on 12 April 1858. In 1969,the decision was made by Chartered and by Standard to undergo afriendly merger. The Grindlays Bank from the ANZ Group and theChase Consumer Banking operations in Hong Kong were acquiredin 2000.Business of the Company: 31
  • 32. Listed on both the London Stock Exchange and the Hong KongStock Exchange, Standard Chartered PLC is consistently ranked inthe top 25 FTSE 100 companies by market capitalization.Personal Banking: Offers personal financial solutions to meet theneeds of more than 14 million customers across Asia, Africa andthe Middle East through a global network of over 1,700 branchesand outlets.SME Banking: The division offers a wide range of products andservices to help small and medium-sized enterprises manage thedemands of a growing business.Wholesale Banking: Headquartered in Singapore and London,provides corporate and institutional clients with innovativesolutions in trade finance, cash management, securities services,foreign exchange and risk management, capital rising, andcorporate finance.Islamic Banking: Standard Chartered Saadiqs dedicated IslamicBanking team provides comprehensive international bankingservices and a wide range of Shariah compliant financial productsthat are based on Islamic values.Private Banking: Provides customized solutions to meet theunique needs and aspirations of high net worth clients.Special features: 32
  • 33. Besides Economic contribution the bank provides services toprotect environment, spread social benefits of economic growthand contributes to better governance.INTEREST RATESWith a wide variety of options to suit different needs, includingShort Term Deposit, Reinvestment Deposit, Simple Fixed Depositand Monthly Income Plan, they can be opened by individuals,proprietors, partnership and limited companies, societies, clubs,associations and HUFs. 33
  • 34. In case you need to withdraw amounts in excess of what is available in your transaction account, we will break your deposit for the exact amount you require. The rest of the deposit continues earning the original high interest. 1. Tenor ranges from 15 days to 5 years (For deposits of Rs. 15Lakhs and above, minimum tenor is 7 days) 2. Options of simple interest and compound interest 3. Auto renewal facility 4. Overdraft facility available against deposit 5. Preferential rates given for large value deposits of Rs.15 Lakhsand above BUSINESS INSIGHTS OF STANDARD CHARTERED Turnover: Net revenue: US$5.37 billion (2004) 34
  • 35. Core Service: Standard Chartered is listed on both the LondonStock Exchange and the Stock Exchange of Hong Kong and is inthe top 25 FTSE-100 companies, by market capitalization.It serves both Consumer and Wholesale Banking customers.Consumer Banking provides credit cards, personal loans,mortgages, deposit taking and wealth management services toindividuals and small to medium sized enterprises. WholesaleBanking provides corporate and institutional clients with servicesin trade finance, cash management, lending, custody, foreignexchange, debt capital markets and corporate finance.Employees: Standard Chartered employs 38,000 people in over9505 locations in 56 countries and territories in the Asia PacificRegion, South Asia, the Middle East, Africa, the United Kingdomand the Americas. It is one of the worlds most international banks,with a management team comprising 70 nationalities.Vision: "Our goal is simple - We want to be The Worlds BestInternational Bank.TRANSFORMATIONThe Bank clearly states its commitment to making a difference inthe communities in which it operates. Evidence of this isdemonstrated on the company’s website through the wide array ofcommunity projects it is engaged in, across the world.As Chris Smith, Head of Corporate Responsibility explains: “Ourwork in the community is a major part of our overall approachto Corporate Responsibility. Understanding how we are able tocontribute to the sustainable economic development of thecommunities we operate in is also fundamental to our business. 35
  • 36. Community investment in emerging marketsThis is the area where Standard Chartered has taken a leadershiprole.“The issue of poverty has a direct economic impact on ourbusiness. If we are able to remove people from poverty theypotentially become a viable customer of the bank,” says, ChrisSmith.The Bank set up the Community Partnership for Africa in2001 with an annual budget for Africa of US$1million whichhas subsequently risen to US$1, 5 million. The Partnership istasked with developing community partnerships, based on donationguidelines of youth, health and education for the economicallydisadvantaged.Just some of the projects that the Bank has engaged in withinthis partnership: • Botswana: House-building initiative (Received acclaim from national organization, Habitat for Humanity) • Kenya: Community “Clean up” activities, involving staff. • Uganda: A community project, which aims to prevent Malaria transmission through donation and awareness campaign on Insecticide Treated Nets (ITNs).SOCIAL RESPONSIBILITIESThe company has historically been very active in its socialresponsibility activities, such as through its programmes to helpblind and partially sighted people, employees suffering from or 36
  • 37. having to deal with the effects of HIV / AIDS in theircommunities and other education-focused programmes. The Bank has been recognized for its efforts through awards andexternal recognition. The company has begun taking a morestrategic approach to its activities through more carefulmeasurement and monitoring of activities. This is ensuring itdelivers more effectively to its business objectives and to thecommunities in which it operates.Business in the Community gained input from the Bank onhow it felt its programmes had impacted on the business andon the communities it served: • Strengthened relationships with local Governments and local authorities • Improved relationships with customers and suppliers, attracting new customers, including a high amount of donor inflow funds channeled through the Bank as a result of the newly established initiatives • Long term sustainable programmes were established that addressed physical needs of local people, including electricity, shelter and water, educational needs including material and equipment and healthcare facilities and equipment • Projects set up that were income generating to enable local communities to help themselves SWOT ANALYSIS:1. Expansion of Standard Chartered:From the early 90s, Standard Chartered has focused on developingits strong franchises in Asia, the Middle East and Africa using its 37
  • 38. operations in the United Kingdom and North America to providecustomers with a bridge between these markets. Secondly, it wouldfocus on consumer, corporate and institutional banking, and on theprovision of treasury services – areas in which the Group hadparticular strength and expertise.In the new millennium they acquired Grindlays Bank from theANZ Group and the Chase Consumer Banking operations in HongKong in 2000.2. Strategic Alliances and Acquisitions:For extending the customer or geographic reach and broadeningthe product range standard chartered had done a no. of strategicalliances & acquisitions. • They completed, rebranded and successfully integrated SC First Bank in Korea, which to date is the biggest acquisition in our history. • They completed full integration between Standard Chartered Bank Thailand and Standard Chartered Nakornthon Bank. • They formed strategic alliances with Fleming Family & Partners to expand private wealth management in Asia and the Middle East • They acquired stakes in ACB Vietnam and Travelex • They acquired the business operations of American Express Bank in Bangladesh • They acquired a stake in Bohai Bank in Tianjin, China, making us the first foreign bank to be allowed a stake in a local bank in China. 38
  • 39. Problem Statement:To understand the behavior pattern of people of differentage groups, incomes and occupations with respect to theinvestment they make thereby.Objective:To make a comparison of different investment productsdiscussed above. This will enable the investors to invest 39
  • 40. in the investment products which are most suited to them. This shall be done with the help of conducting a survey taking a sample size of 44 people. Investment Strategies of General PublicThe tasks in hand for us were to understand: • What Investments do people prefer? • How much risk do they want to take? • The Objective of Investments? • The Satisfaction attained from Investments? • Tenure of Investment?Depending Upon Their:  Income,  Age,  Sex, 40
  • 41.  Occupation. We had to analyze the above mentioned Trends behind people’s Investments depending on the above mentioned Factors so that we can understand which Investments suits which kind of an Investor.Data collection and Research:For this we made a questionnaire and conducted a survey ofpeople. We took a sample of size 44 through random sampling ofdifferent age groups and occupations and by doing the analysis wewill be able to find out the pattern on which customers chooserespective Investments and also to understand their needs better .Investment Strategy Questionnaire(Please Mark the appropriate Option)Name:Age:( )Below 25, ( )25 to 40, ( )40 to 60, ( )Above 60.Income:( )Below 1,50,000 ( )1,50,000 to 4,00,000 ( )4,00,000 to 6,50,000( )Above 6,50,000Occupation:( )Private Sector Employee, ( )Govt. Employee, ( )Businessman/SelfEmployed, ( )Others………….. 41
  • 42. Your Preferred Area of Investment:( )Mutual Funds, ( )ULIP, ( )Shares/Debentures, ( )Real Estate,( )Life Insurance Policies, ( )Bullion, ( )Fixed Deposits, ( )Others………...Risk Level undertook:( )Low, ( )Medium, ( )High.Objective of Investment:( )Growth/Return, ( )Savings, ( )Tax Savings, ( )Child Marriage,( )Others…………Tenure:( )Less than 1 yr, ( )1 yr to 3 yrs, ( )3yrs to 5 yrs, ( )More than 5 yrs.Level of Satisfaction with Investments:( )Low, ( )Medium, ( )High. Data Profile Gender Profile 36.36% Female Male 63.64% 42
  • 43. Income Profile 2.27% 27.27%29.55% 1.5L to 4L 4L to 6.5L Above 6.5L Below 1.5L 40.91% Occupation Profile 4.55% 36.36% Business/Self Employed Government Employee 40.91% Private Sector Employee Retired 18.18% 43
  • 44. Preferred Investment Profile 4.55% 4.55% 11.36% 11.36% Bullion 6.82% Fixed Deposits Kisan Vikas Patra Life Insurance Policies25.00% 9.09% Mutual Funds Real Estate Shares/Debentures ULIP 27.27% Risk Profile 6.82% 45.45% High Low Medium 47.73% 44
  • 45. Objective Profile 11.36% 22.73% Child Marriage Growth/Returns N/A9.09% Safety Savings 50.00% Tax Savings 2.27% 4.55% Tenure Profile 27.27% 45.45% 1 to 3 Yrs 3 to 5 Yrs Less than 1 Yr 9.09% More than 5 Yrs 18.18% 45
  • 46. Satisfaction Level Profile 38.64% High 56.82% Low Medium 4.55% Findings of the Research: 1. Relationship between Age & TenureCount ofAge Tenure More than 5 GrandAge 1 to 3 Yrs 3 to 5 Yrs Less than 1 Yr Yrs Total25 to 40 7 3 2 6 1840 to 60 4 2 3 9Above 60 2 1 2 5Below 25 7 2 2 1 12GrandTotal 20 8 4 12 44 46
  • 47. Drop Page Fields Here Count of Age 20 18 16 14 Tenure 12 More than 5 Yrs 10 Less than 1 Yr 8 3 to 5 Yrs 6 1 to 3 Yrs 4 2 0 25 to 40 40 to 60 Above 60 Below 25 Age 2. Relation between Income & RiskCount of Income RiskIncome High Low Medium Grand Total1.5L to 4L 1 7 4 124L to 6.5L 11 7 18Above 6.5L 2 3 8 13Below 1.5L 1 1Grand Total 3 21 20 44 47
  • 48. Drop Page Fields Here Count of Income 20 18 16 14 Risk 12 Medium 10 Low 8 High 6 4 2 0 1.5L to 4L 4L to 6.5L Above 6.5L Below 1.5L Income3. Relation between Investment &SatisfactionCount of Preferred Investment SatisfactionPreferred Investment High Low Medium Grand TotalBullion 1 1 2Fixed Deposits 3 2 5Kisan Vikas Patra 1 2 3Life Insurance Policies 1 3 4Mutual Funds 6 6 12Real Estate 5 6 11Shares/Debentures 1 4 5ULIP 1 1 2Grand Total 17 2 25 44 48
  • 49. Drop Page Fields Here Count of Pref ered Investment 14 12 10 Satisf action 8 Medium 6 Low High 4 2 Shares/Debentures Kisan Vikas Patra Fixed Deposits Mutual Funds 0 Life Insurance Real Estate ULIP Bullion Policies Pref ered Investment 4. Relation between Age of Investor and Objective of InvestmentCount ofAge Objective Child GrandAge Marriage Growth/Returns N/A Safety Savings Tax Savings Total25 to 40 2 9 2 2 3 1840 to 60 1 6 2 9Above 60 2 2 1 5Below 25 5 2 5 12GrandTotal 5 22 2 1 4 10 44 49
  • 50. Drop Page Fields Here Count of Age 20 18 16 Objective 14 Tax Savings 12 Savings 10 Safety 8 N/A 6 Growth/Returns 4 Child Marriage 2 0 25 to 40 40 to 60 Above 60 Below 25 Age 5. Relation between Investment & TenureCount of PreferedInvestment Tenure More than 5 GrandPrefered Investment 1 to 3 Yrs 3 to 5 Yrs Less than 1 Yr Yrs TotalBullion 2 2Fixed Deposits 3 1 1 5Kisan Vikas Patra 1 1 1 3Life Insurance Policies 1 3 4Mutual Funds 8 3 1 12Real Estate 3 3 5 11Shares/Debentures 2 3 5 50
  • 51. ULIP 2 2 Grand Total 20 8 4 12 44 Drop Page Fields Here Count of Prefered Investment 14 12 Tenure 10 More than 5 Yrs 8 Less than 1 Yr 6 3 to 5 Yrs 4 1 to 3 Yrs 2 0 Mutual Funds ULIP Bullion Fixed Deposits Life Insurance Real Estate Kisan Vikas Patra Shares/Debentures Policies Prefered Investment 6. Relation between Investment and OccupationCount of Occupation Prefered InvestmentOccupation Bullion Fixed Deposits Kisan Vikas Patra Life Insurance PoliciesBusiness/Self Employed 1 1 1 2Government Employee 1 2 1Private Sector Employee 1 2 1Retired 1Grand Total 2 5 3 4Mutual Funds Real Estate Shares/Debentures ULIP Grand Total2 5 3 1 16 4 8 51
  • 52. 10 1 2 1 18 1 212 11 5 2 44 Drop Page Fields Here Count of Occupation 20 Prefered Investment 18 ULIP 16 14 Shares/Debentures 12 Real Estate 10 Mutual Funds 8 Life Insurance Policies 6 Kisan Vikas Patra 4 Fixed Deposits 2 0 Bullion Business/Self Government Private Sector Retired Employed Employee Employee Occupation 7. Relation between Age of Investor & Tenure Count of Age Tenure More than 5 Grand Age 1 to 3 Yrs 3 to 5 Yrs Less than 1 Yr Yrs Total 25 to 40 7 3 2 6 18 40 to 60 4 2 3 9 Above 60 2 1 2 5 Below 25 7 2 2 1 12 52
  • 53. GrandTotal 20 8 4 12 44 Drop Page Fields Here Count of Age 20 18 16 14 Tenure 12 More than 5 Yrs 10 Less than 1 Yr 8 3 to 5 Yrs 6 1 to 3 Yrs 4 2 0 25 to 40 40 to 60 Above 60 Below 25 Age 8. Relation between Age of Investor & Objective of Investment 53
  • 54. Count ofAge Objective Child GrandAge Marriage Growth/Returns N/A Safety Savings Tax Savings Total25 to 40 2 9 2 2 3 1840 to 60 1 6 2 9Above 60 2 2 1 5Below 25 5 2 5 12GrandTotal 5 22 2 1 4 10 44 Drop Page Fields Here Count of Age 20 18 16 Objective 14 Tax Savings 12 Savings 10 Safety 8 N/A 6 Grow th/Returns 4 Child Marriage 2 0 25 to 40 40 to 60 Above 60 Below 25 Age 9. Relation between Investment & Objective of Investment Count of Prefered Objective 54
  • 55. Investment Child Tax GrandPrefered Investment Marriage Growth/Returns N/A Safety Savings Savings TotalBullion 2 2Fixed Deposits 1 1 3 5Kisan Vikas Patra 3 3Life Insurance Policies 1 1 1 1 4Mutual Funds 7 5 12Real Estate 2 8 1 11Shares/Debentures 5 5ULIP 1 1 2Grand Total 5 22 2 1 4 10 44 Drop Page Fields Here Objective Count of Prefered Investment 14 Tax Savings 12 10 Savings 8 6 Safety 4 N/A 2 0 Grow th/Returns ULIP Bullion Real Estate Child Marriage Mutual Funds Fixed Deposits Life Insurance Kisan Vikas Patra Shares/Debentur Policies es Prefered Investment 55
  • 56. Another one of our Assignments was to compare the services and products offered by different Banks from one another.Methodology (Problem Definition, Research / DataCollection)Detailed Features Of Savings A/cAverage Quarterly Balance(AQB)Quarterly StatementMonthly StatementPass BookPersonalised Cheque BookMulticity Cheque BookATM ChargesOwn ATMs within IndiaOther ATMs within IndiaATMs Outside IndiaDebit Card Charges1st Year FeeAnnual Fee Per CardReissuance ChargesATM Card 56
  • 57. Debit Card ChargesBranch Transaction ChargesCash Deposit/WithdrawalDemand DraftOutstation Cheque CollectionMaximum Withdrawal LimitUnique FeatureBANKSICICIRs10,000FreeRs200/yrFree1st is Free,Rs50 Per Additional C/BNAFreeRs20 Per TransactionNARs99Rs99FreeRs200Rs50 Per Transaction at Base Branch,Rs50(Min) If Drawn on ICICI BankFreeRs50,000/day-SelfRs15,000/day-Third Party 57
  • 58. Unlimited ATM TransactionHDFCRs5,000FreeFreeFreeNANAFreeRs20 Per TransactionNARs100NARs100Rs100NARs50 Up to 10,000 at Base BranchFreeRs50,000/day-SelfNo Balance Required On 1,00,000F.D 58
  • 59. KOTAKRs10,000Weekly Report-Rs300/QuarterDaily Report-Rs1500/QuarterFreeFreeNAFree(Including HDFC)Rs20 Per TransactionRs90FreeNARs100Rs100NARs50 (Min) or Rs2.50 Per 1000 after that. Foreign Currency D/D-Rs500FreeRs25,000-SelfKotak 2-Way Sweep BenefitABN-AMRORs10000 59
  • 60. FreeFreeFreeRs50NAFreeRs20 Per TransactionRs120Rs180NANARS200NARs50 If Drawn on ABN-AMRO Branches. Foreign Currency D/D-Rs200Rs50(Min) or 0.25% of The Transaction AmountNAStandard Chartered HSBCRs10,000 Rs25,000 60
  • 61. Free FreeFree FreeFree FreeFree FreeFree NAFree ATM Cash Withdrawal Limit-Rs25,000 Per DayRs20 Per Transaction NARs140 NARs200 Debit Card Purchase Limit-Rs10,000 Per DayRs200 NARs100 NARs200 NARs50 NARs50 NAFree NANA NAProducts Offered by Standard Chartered Bank1. Accountsa) Savings Account: i. aXcess Plus Account: 61
  • 62. Standard Chartered Banks aXcess Plus is a revolutionary savings account that provides you with unstinted aXcess to your money. FeaturesExclusive benefits of an aXcess Plus savings account:  FREE Unlimited Visa ATM transactions* (Cash withdrawal)  FREE Standard Chartered Bank branch access across the country  FREE Doorstep Banking*  FREE Demand Drafts/Pay Orders* (drawn at SCB locations)  FREE Payable at Par Cheque book*Available on maintenance of average quarterly balance of Rs15,000/-Additional FeaturesGet instant cash at over 20,000 ATMs across India and over10,00,000 ATMs across the world through the Visa network. Andget a globally valid Debit Card that lets you shop at over 3,26,000outlets in India and at over 14 million outlets across the world.And that’s not all, with the aXcess Plus account you also get:  International Debit Card  Phone Banking  Online Banking  Extended Banking Hours*Terms and Conditions apply. Certain features are currently notavailable in all branchesThe Standard Chartered aXcessPlus Account comes with aglobally valid debit - cum - ATM card which allows customers to 62
  • 63. aXcess all Standard Chartered Bank ATMs and provides instantcash at all Visa Network ATMs in India and abroad.  aXcessPlus customers get FREE* aXcess to cash withdrawals at over 20,000 Visa ATMs in India up to four free transactions per month.  This is over and above unlimited free aXcess to all Standard Chartered Bank ATMs.  The Debit Card can be used to make purchases at over 3,26,000 merchant outlets in India. ii. Super Value AccountThe unique SuperValue savings account from Standard Charteredis proof that the best things in life come free. With an averagequarterly balance of just Rs. 50,000, you get a host of servicesfrom Standard Chartered absolutely free. iii. Parivaar AccountParivaar is a unique Wealth Management Solution from StandardChartered Bank that offers your family flexibility, convenience andessential tools for wealth accumulation and preservation. iv. No Frills AccountIf you want banking made easy, we give simple solutions. TheStandard Chartered Bank No Frills Account is designed to meetyour basic banking requirements. You need to maintain an averagequarterly balance of just Rs. 250 with this account.What’s more – you can avail of Anywhere Banking, by which youcan access your account from any branch of Standard CharteredBank in India. 63
  • 64. v. aaSaan AccountIntroducing the Standard Chartered Banks aaSaan savingsaccount. It is a no maintenance, hassle free and easy solution to allyour banking needs. vi. 2 in 1 AccountIntroducing a unique account that offers you a double advantage –it lets you earn the high interest rate of a fixed deposit while youenjoy the flexibility of a savings or current account.b) Current a/c i) Business Plus AccountStandard Chartered Bank presents the Business Plus Account. Acurrent account that helps you get more out of your business. ii) Enhanced Business Plus AccountYou run your business efficiently, and effectively. Thats why youneed a current account that does the same. The Enhanced BusinessPlus Account from Standard Chartered is designed to make betterbusiness sense and make your money work most effectively.Its all you have ever wanted from a current account and more.Every business has different needs and complexities. Thats whythe Enhanced Business Plus Account has been developed to suityour business needs.2. Credit Cards: 64
  • 65. It offers a variety of credit cards, each tailored to yourlifestyle needs.Examples:a) Executive Card is designed for the professional on the move. It’sa card that travels like you do.b) Gold Card is for special deals at your favorite restaurants,privileged access to exclusive areas when you’re traveling,worldwide acceptance.3. Debit & Prepaid Cards:It offers Debit cards.Examples:a) ShopSmart Card gives unparalleled aXcess to your money.b) Gold Debit Card includes privileges like high spending limitsand worldwide acceptance.4. Loans & Mortgages:It offers wide range of loans:Examplea) Personal Loan: Best suited for people requiring loan for anyrequirement whatsoever that too at competitive interest rates. Loanamount ranges from 50,000 to 15,00,000. No collaterals orsecurities are required. Any SCB customer can avail of specialrates with less documentation and priority processing.Other Loans are Home loans, Loan against property, Loan againstsecurities etc.5. Insurance & Investment Services 65
  • 66. Standard Chartered offers you a wide range of Life InsuranceProducts from Bajaj Allianz Life Insurance Company, one ofIndias leading Insurance companies.At Standard Chartered, you can avail of the services of trained &certified professional consultants from Bajaj Allianz Insurancecompany, who can guide you in ascertaining your insurance needs,and assist you in making an insurance plan that is just right foryou.Some of the key plans are:a) New SecureFirst:An investment that offers double advantagewith flexibility.b) New Unit Gain Plus:Flexible investments never so easy.We offer the range of innovative general Insurance products inassociation with Royal Sundaram to our customers.Royal Sundaram Alliance Insurance Company Limited is a jointventure between Sundaram Finance and Royal & SunAlliance plc,UK, where the former holds 74% and the latter holds 26% of theequity of the venture. Royal Sundaram currently has over 2.1million customers in its fold. Its products are distributed in over150 cities across India.Some key products are:  Health shield: A comprehensive health insurance package designed to offer complete protection to the insured and his family.  Car shield: A comprehensive motorcar insurance package, designed to cover your car in most adverse situations.  Home shield: Provides complete coverage for damage to your building.  Accident shield: Designed to take care of you and your family in the unfortunate event of a fatal accident. 66
  • 67.  Double protect: “Double Protect” is a 2 years Health Insurance plan. The plan offers reimbursement of Hospitalisation expenses in the event of illness or accident Investment ServicesInvestments, unlike works of art, cannot afford the luxury ofexperimenting. Investing is not guesswork. It takes more than justa tip it needs training to plan, instinct to pick and sheer intellect tomake it work for you. That extra mile assures you that your hardearned money is with the right people.Standard Chartered Bank, using over 150 years of expertise,promises to guide you through the world of exciting newinvestment opportunities in India and overseas.From shortest-term deployment of funds to planning yourretirement, we pledge to go the extra mile to ensure that you reachyour chosen financial goals.When you deal with Standard Chartered, you can expect the best.We are, after all, the leading global bank in Asia, Africa and theMiddle East. We look after investments for over 5 millioncustomers across in 57 countries. From world class services to themost sought after talent pool, we provide an unmatched foundationwhich you can trust.Weve invested in professional talent that can provide you with acontinuous, thorough and insightful guidance with your money. Allthis so you can rest easy when you put your money into our hands.We offer a wide range of professional services with a team oftrained, experienced professionals. Our team has a Wide capitalmarkets and investment advisory experience and is dedicated tomaking your investments work for you.  Consolidated portfolio statements of all your mutual fund investments  Online, internet access to PMS portfolios 67
  • 68.  Direct credit/debit facilities for all your investments  Periodic meetings with leading fund managers and industry experts  SCIS Research Edge6. Other Services:NRI BankingUnder this banking SCB offers accounts like NRE, NRO &FCNRaccounts.NRE accounts: Funds remitted from abroad and which are ofrepatriable nature can be credited to NRE accounts. It is best suitedto park overseas savings remitted to India by converting to INR. Inaddition it can open as Savings account, Current account or Fixeddeposit.NRO accounts: Local funds which do not qualify, under theexchange control regulations, for remittance outside India can becredited to NRO accounts. These are best suited to park Indianearnings like rent, Indian salary, dividends etc. It can open asSavings account, Current account or Fixed deposit.PRIORITY BankingDesigned specifically for those who appreciate only the finestthings in life, Priority Banking offers the very highest levels ofpersonalized banking to match unique status.Bank is committed to helping a plan ,build and protect wealth byoffering individual attention as well as international banking andinvestment opportunities to meet current and future needs.Standard Chartered Bank Priority Banking is created specificallyfor a chosen few individuals, who will settle for nothing but the 68
  • 69. best and demand the best and demand the highest standards ofservice in all your banking relationships.SME BankingOne-Stop Financial Solution for Your Growing BusinessWith years of banking experience, Standard Chartered isundoubtedly in a strong position to help growing businesses sailthrough the complexities they may face. As an international bankwith offices in more than 50 countries, we provide the global reachand international recognition that your company deserves.SME Banking offers one of the widest range of banking productsand services in the market today. Managing a growing businessdemands most of your time and energy. Our relationship managersunderstand your business requirement and help you manage yourbusiness better.SCB offers product like FOREX services, Term Loan,International Trade Account, Trade Services & Working Capitaletc.Commercial BankingStandard Chartered has maintained a long local presence, since1858, with particular emphasis on relationship banking. Significantnetworks have been established with vendors and financial-relatedorganisations to enable us to offer our customers a comprehensiverange of flexible financial services, with special focus ontransactional banking products. Supported by state-of-the-artoperations, Standard Chartered is pro-active in improving everypart of our services. Electronic Delivery system has been put inplace to ensure that transactions are handled speedily. We have ourCash Product Specialists and dedicated Customer Service Centres 69
  • 70. to provide our customers with effective solutions. The currency ofIndia is the Rupee (SWIFT code: INR).Standard Chartered fully understands the importance of time,convenience and efficiency to the success of your business. Wemake easy the complex financial world for you and help youmaximise every opportunity.With over 140 years of experience in trade finance and anextensive international branch network, Standard Chartered iscommitted to help you succeed in every competitive environment.To keep pace with your changing needs, we will constantly reviewour comprehensive cash, trade and treasury products and services,ensuring that a full range of flexible and innovative services isalways available for you wherever you trade. Mutual Fund Concept A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund: 70
  • 71. A mutual fund is a professionally managed firm ofcollective investments that collects money from manyinvestors and puts it in stocks, bonds, short-term moneymarket instruments, and/or other securities. The fundmanager, also known as portfolio manager, trades thefunds underlying securities, realizing capital gains orlosses and passing any proceeds to the individual investors.Currently, the worldwide value of all mutual funds totalsmore than $26 trillion. Organization of a Mutual Fund There are many entities involved and the diagram below illustrates the organizational set up of a mutual fund: 71
  • 72. How Mutual Funds WorkEvery mutual fund has a goal - either growing its assets (capitalgains) and/or generating income (dividends) for its investors.Distributions in the form of capital gains (short-term and long-term) and dividends may be passed on (paid) to shareholders asincome or reinvested to purchase more shares. For taxpurposes, keep track of your distributions and cost basis ofpurchased/reinvested shares.Like any business, mutual funds have risks and costs associatedwith returns. As a shareholder, the risks of a fund and theexpenses associated with funds operation directly impact yourreturn.FREQUENTLY USED TERMS 72
  • 73. Net Asset Value (NAV)Net Asset Value is the market value of the assets of the schememinus its liabilities. The per unit NAV is the net asset value ofthe scheme divided by the number of units outstanding on theValuation Date.Sale PriceIs the price you pay when you invest in a scheme. Also calledOffer Price. It may include a sales load.Repurchase PriceIs the price at which a close-ended scheme repurchases its unitsand it may include a back-end load. This is also called BidPrice.Redemption PriceIs the price at which open-ended schemes repurchase their unitsand close-ended schemes redeem their units on maturity. Suchprices are NAV related.Sales LoadIs a charge collected by a scheme when it sells the units. Alsocalled, ‘Front-end’ load. Schemes that do not charge a load arecalled ‘No Load’ schemes.Repurchase or ‘Back-end’ LoadIs a charge collected by a scheme when it buys back the unitsfrom the unit holders.Returns 73
  • 74. As an investor, you want to know the funds return-its track record over a specified period of time. So what exactly is "return?" A mutual funds return is the rate of increase or decrease in its value over a specific period of time usually expressed in the following increments: one, three, five, and ten year, year to date, and since the inception of the fund. Since return is a common measure of performance, you can use it to evaluate and compare mutual funds within the same fund category. Generally expressed as an annualized percentage rate, return is calculated assuming that all distributions from the fund are reinvested. Since average returns can sometimes "hide" short-term highs and lows, you should evaluate returns for a time period of several years-not just one year or less. A fund that has a high return in one year may have experienced losses in other years- these fluctuations may not be apparent in its average return.RiskEvery type of investment, including mutual funds, involves risk.Risk refers to the possibility that you will lose money (bothprincipal and any earnings) or fail to make money on aninvestment. A funds investment objective and its holdings areinfluential factors in determining how risky a fund is. Reading theprospectus will help you to understand the risk associated with thatparticular fund.Generally speaking, risk and potential return are related. This is therisk/return trade-off. Higher risks are usually taken with theexpectation of higher returns at the cost of increased volatility.While a fund with higher risk has the potential for higher return, italso has the greater potential for losses or negative returns. Theschool of thought when investing in mutual funds suggests that the 74
  • 75. longer your investment time horizon is the less affected you shouldbe by short-term volatility. Therefore, the shorter your investmenttime horizon, the more concerned you should be with short-termvolatility and higher risk.Defining Mutual fund riskDifferent mutual fund categories as previously defined haveinherently different risk characteristics and should not be comparedside by side. A bond fund with below-average risk, for example,should not be compared to a stock fund with below average risk.Even though both funds have low risk for their respectivecategories, stock funds overall have a higher risk/return potentialthan bond funds.Of all the asset classes, cash investments (i.e. money markets)offer the greatest price stability but have yielded the lowest long-term returns. Bonds typically experience more short-term priceswings, and in turn have generated higher long-term returns.However, stocks historically have been subject to the greatestshort-term price fluctuations—and have provided the highest long-term returns. Investors looking for a fund which incorporates allasset classes may consider a balanced or hybrid mutual fund.These funds can be very conservative or very aggressive. Assetallocation portfolios are mutual funds that invest in other mutualfunds with different asset classes. At the discretion of themanager(s), securities are bought, sold, and shifted between fundswith different asset classes according to market conditions.Mutual funds face risks based on the investments they hold. Forexample, a bond fund faces interest rate risk and income risk.Bond values are inversely related to interest rates. If interest ratesgo up, bond values will go down and vice versa. Bond income is 75
  • 76. also affected by the change in interest rates. Bond yields aredirectly related to interest rates falling as interest rates fall andrising as interest rise. Income risk is greater for a short-term bondfund than for a long-term bond fund.Similarly, a sector stock fund (which invests in a single industry,such as telecommunications) is at risk that its price will declinedue to developments in its industry. A stock fund that investsacross many industries is more sheltered from this risk defined asindustry risk.Following is a glossary of some risks to consider when investing inmutual funds. • Call Risk. The possibility that falling interest rates will cause a bond issuer to redeem—or call—its high-yielding bond before the bonds maturity date. • Country Risk. The possibility that political events (a war, national elections), financial problems (rising inflation, government default), or natural disasters (an earthquake, a poor harvest) will weaken a countrys economy and cause investments in that country to decline. • Credit Risk. The possibility that a bond issuer will fail to repay interest and principal in a timely manner. Also called default risk. • Currency Risk. The possibility that returns could be reduced for Americans investing in foreign securities because of a rise in the value of the U.S. dollar against foreign currencies. Also called exchange-rate risk. • Income Risk. The possibility that a fixed-income funds dividends will decline as a result of falling overall interest rates. • Industry Risk. The possibility that a group of stocks in a single industry will decline in price due to developments in that industry. 76
  • 77. • Inflation Risk. The possibility that increases in the cost of living will reduce or eliminate a funds real inflation-adjusted returns.• Interest Rate Risk. The possibility that a bond fund will decline in value because of an increase in interest rates.• Manager Risk. The possibility that an actively managed mutual funds investment adviser will fail to execute the funds investment strategy effectively resulting in the failure of stated objectives.• Market Risk. The possibility that stock fund or bond fund prices overall will decline over short or even extended periods. Stock and bond markets tend to move in cycles, with periods when prices rise and other periods when prices fall.• Principal Risk. The possibility that an investment will go down in value, or "lose money," from the original or invested amount. 77
  • 78. Types of mutual funds1. Open-end fundThe term mutual fund is the common name for an open-endinvestment company. Being open-ended means that, at the endof every day, the fund issues new shares to investors and buysback shares from investors wishing to leave the fund.Mutual funds may be legally structured as corporations orbusiness trusts but in either instance are classed as open-endinvestment companies by the SEC.Other funds have a limited number of shares; these are eitherclosed-end funds or unit investment trusts, neither of which amutual fund is. 78
  • 79. 2. Close-Ended FundsRedemption can take place only after the period of the schemeis over. However, close-ended funds are listed on the stockexchanges and investors can buy/ sell units in the secondarymarket (there is no load).3. Exchange-traded fundsA relatively recent innovation, the exchange-traded fund orETF, is often structured as an open-end investment company.ETFs combine characteristics of both mutual funds and closed-end funds. ETFs are traded throughout the day on a stockexchange, just like closed-end funds, but at prices generallyapproximating the ETFs net asset value. Most ETFs are indexfunds and track stock market indexes. Shares are issued orredeemed by institutional investors in large blocks (typically of50,000). Most investors purchase and sell shares throughbrokers in market transactions. Because the institutionalinvestors normally purchase and redeem in in kind transactions,ETFs are more efficient than traditional mutual funds (which arecontinuously issuing and redeeming securities and, to effectsuch transactions, continually buying and selling securities andmaintaining liquidity positions) and therefore tend to have lowerexpenses.Exchange-traded funds are also valuable for foreign investorswho are often able to buy and sell securities traded on a stockmarket, but who, for regulatory reasons, are limited in theirability to participate in traditional U.S. mutual funds. 79
  • 80. 4. Equity fundsEquity funds, which consist mainly of stock investments, are themost common type of mutual fund. Equity funds hold 50percent of all amounts invested in mutual funds in the UnitedStates. Often equity funds focus investments on particularstrategies and certain types of issuers.5. Bond fundsBond funds account for 18% of mutual fund assets. Types ofbond funds include term funds, which have a fixed set of time(short-, medium-, or long-term) before they mature. Municipalbond funds generally have lower returns, but have taxadvantages and lower risk. High-yield bond funds invest incorporate bonds, including high-yield or junk bonds. With thepotential for high yield, these bonds also come with greater risk.6. Money market fundsMoney market funds hold 26% of mutual fund assets in theUnited States. Money market funds entail the least risk, as wellas lower rates of return. Unlike certificates of deposit (CDs),money market shares are liquid and redeemable at any time. Theinterest rate quoted by money market funds is known as the 7Day SEC Yield. 80
  • 81. 7. Funds of fundsFunds of funds (FoF) are mutual funds which invest in otherunderlying mutual funds (i.e., they are funds comprised of otherfunds). The funds at the underlying level are typically fundswhich an investor can invest in individually. A fund of fundswill typically charge a management fee which is smaller thanthat of a normal fund because it is considered a fee charged forasset allocation services. The fees charged at the underlyingfund level do not pass through the statement of operations, butare usually disclosed in the funds annual report, prospectus, orstatement of additional information. The fund should beevaluated on the combination of the fund-level expenses andunderlying fund expenses, as these both reduce the return to theinvestor.Most FoFs invest in affiliated funds (i.e., mutual funds managedby the same advisor), although some invest in funds managedby other (unaffiliated) advisors. The cost associated withinvesting in an unaffiliated underlying fund is most often higherthan investing in an affiliated underlying because of theinvestment management research involved in investing in fundadvised by a different advisor. Recently, FoFs have beenclassified into those that are actively managed (in which theinvestment advisor reallocates frequently among the underlyingfunds in order to adjust to changing market conditions) andthose that are passively managed (the investment advisorallocates assets on the basis of on an allocation model which isrebalanced on a regular basis).The design of FoFs is structured in such a way as to provide aready mix of mutual funds for investors who are unable to orunwilling to determine their own asset allocation model. Fundcompanies such as TIAA-CREF, American CenturyInvestments, Vanguard, and Fidelity have also entered thismarket to provide investors with these options and take the"guess work" out of selecting funds. The allocation mixes 81
  • 82. usually vary by the time the investor would like to retire: 2020,2030, 2050, etc. The more distant the target retirement date, themore aggressive the asset mix.8. Hedge fundsHedge funds in the United States are pooled investment fundswith loose SEC regulation and should not be confused withmutual funds. Some hedge fund managers are required toregister with SEC as investment advisers under the InvestmentAdvisers Act. The Act does not require an adviser to follow oravoid any particular investment strategies, nor does it require orprohibit specific investments. Hedge funds typically charge amanagement fee of 1% or more, plus a “performance fee” of20% of the hedge fund’s profit. There may be a "lock-up"period, during which an investor cannot cash in shares. Avariation of the hedge strategy is the 130-30 fund for individualinvestors. 82
  • 83. Advantages of Mutual Funds1. Professional Management:The primary advantage of funds (at least theoretically) is theprofessional management of your money. Investors purchase fundsbecause they do not have the time or the expertise to manage theirown portfolio. A mutual fund is a relatively inexpensive way for asmall investor to get a full-time manager to make and monitorinvestments.Mutual funds are managed and supervised by investmentprofessionals. As per the stated objectives set forth in theprospectus, along with prevailing market conditions and otherfactors, the mutual fund manager will decide when to buy or sellsecurities. This eliminates the investor of the difficult task oftrying to time the market. Furthermore, mutual funds caneliminate the cost an investor would incur when proper duediligence is given to researching securities. This cost of managingnumerous securities is dispersed among all the investors accordingto the amount of shares they own with a fraction of each dollarinvested used to cover the expenses of the fund. What does thismean? Fund managers have more money to research moresecurities more in depth than the average investor.When you buy a mutual fund, you are also choosing a professionalmoney manager. This manager will use the money that you investto buy and sell stocks that he or she has carefully researched.Therefore, rather than having to thoroughly research everyinvestment before you decide to buy or sell, you have a mutualfunds money manager to handle it for you. 83
  • 84. 2. DiversificationBy owning shares in a mutual fund instead of owning individualstocks or bonds, your risk is spread out. The idea behinddiversification is to invest in a large number of assets so that a lossin any particular investment is minimized by gains in others. Inother words, the more stocks and bonds you own, the less any oneof them can hurt you (think about Enron). Large mutual fundstypically own hundreds of different stocks in many differentindustries. It wouldnt be possible for an investor to build this kindof a portfolio with a small amount of money.Using mutual funds can help an investor diversify their portfoliowith a minimum investment. When investing in a single fund, aninvestor is actually investing in numerous securities. Spreadingyour investment across a range of securities can help to reducerisk. A stock mutual fund, for example, invests in many stocks -hundreds or even thousands. This minimizes the risk attributed toa concentrated position. If a few securities in the mutual fund losevalue or become worthless, the loss maybe offset by othersecurities that appreciate in value. Further diversification can beachieved by investing in multiple funds which invest in differentsectors or categories. This helps to reduce the risk associated witha specific industry or category. Diversification may help to reducerisk but will never completely eliminate it. It is possible to lose allor part of your investment.3. Convenience:With most mutual funds, buying and selling shares, changingdistribution options, and obtaining information can beaccomplished conveniently by telephone, by mail, or online. 84
  • 85. Although a funds shareholder is relieved of the day-to-day tasksinvolved in researching, buying, and selling securities, an investorwill still need to evaluate a mutual fund based on investment goalsand risk tolerance before making a purchase decision. Investorsshould always read the prospectus carefully before investing in anymutual fund.4. LiquidityJust like an individual stock, a mutual fund allows you to requestthat your shares be converted into cash at any time.Another advantage of mutual funds is the ability to get in and outwith relative ease. In general, you are able to sell your mutualfunds in a short period of time without there being much differencebetween the sale price and the most current market value.However, it is important to watch out for any fees associated withselling, including back-end load fees. Also, unlike stocksand exchange-traded funds (ETFs), which trade any time duringmarket hours, mutual funds mutual funds transact only once perday after the funds net asset value (NAV) is calculated.Mutual fund shares are liquid and orders to buy or sell are placedduring market hours. However, orders are not executed until theclose of business when the NAV (Net Average Value) of the fundcan be determined. Fees or commissions may or may not beapplicable. Fees and commissions are determined by the specificfund and the institution that executes the order.5. Economies of Scale: 85
  • 86. The easiest way to understand economies of scale is by thinkingabout volume discounts; in many stores the more of one productyou buy, the cheaper that product becomes. For example, whenyou buy a dozen donuts, the price per donut is usually cheaper thanbuying a single one. This occurs also in the purchase and sale ofsecurities. If you buy only one security at a time, the transactionfees will be relatively large.Mutual funds are able to take advantage of their buying and sellingsize and thereby reduce transaction costs for investors. When youbuy a mutual fund, you are able to diversify without the numerouscommission charges. Imagine if you had to buy the 10-20 stocksneeded for diversification. The commission charges alone wouldeat up a good chunk of your savings. Add to this the fact that youwould have to pay more transaction fees every time you wanted tomodify your portfolio - as you can see the costs begin to add up.With mutual funds, you can make transactions on a much largerscale for less money.6. Divisibility:Many investors dont have the exact sums of money to buy roundlots of securities. One to two hundred dollars is usually not enoughto buy a round lot of a stock, especially after deductingcommissions. Investors can purchase mutual funds in smallerdenominations, ranging from $100 to $1,000 minimums. Smallerdenominations of mutual funds provide mutual fund investors theability to make periodic investments through monthly purchaseplans while taking advantage of dollar-cost averaging. So, ratherthan having to wait until you have enough money to buy higher-cost investments, you can get in right away with mutual funds.This provides an additional advantage - liquidity. 86
  • 87. 7. Minimum Initial Investment:Most funds have a minimum initial purchase of Rs 10,000 butsome are as low as Rs 5,000.8. Simplicity:Buying a mutual fund is easy! Pretty well any bank has its ownline of mutual funds, and the minimum investment is small. Mostcompanies also have automatic purchase plans whereby as little as$100 can be invested on a monthly basis.Other Advantages are:9. Tax Benefits.10. Transparency.11. Flexibility.12. Wide Choice of Schemes. Disadvantages of Mutual Funds 87
  • 88. 1. Fluctuating Returns:Mutual funds are like many other investments without aguaranteed return: there is always the possibility that the value ofyour mutual fund will depreciate. Unlike fixed-income products,such as bonds and Treasury bills, mutual funds experience pricefluctuations along with the stocks that make up the fund. Whendeciding on a particular fund to buy, you need to research the risksinvolved - just because a professional manager is looking after thefund, that doesnt mean the performance will be stellar.Another important thing to know is that mutual funds are notguaranteed by the U.S. government, so in the case of dissolution,you wont get anything back. This is especially important forinvestors in money market funds.2. Diversification:Although diversification is one of the keys to successful investing,many mutual fund investors tend to overdiversify. The idea ofdiversification is to reduce the risks associated with holding asingle security; overdiversification (also known as diworsification)occurs when investors acquire many funds that are highly relatedand, as a result, dont get the risk reducing benefits ofdiversification.At the other extreme, just because you own mutual funds doesntmean you are automatically diversified. For example, a fund that 88
  • 89. invests only in a particular industry or region is still relativelyrisky.3. Cash, Cash and More Cash:As you know already, mutual funds pool money from thousands ofinvestors, so everyday investors are putting money into the fund aswell as withdrawing investments. To maintain liquidity and thecapacity to accommodate withdrawals, funds typically have tokeep a large portion of their portfolios as cash. Having ample cashis great for liquidity, but money sitting around as cash is notworking for you and thus is not very advantageous.4. Costs:Mutual funds dont exist solely to make your life easier--all fundsare in it for a profit. The mutual fund industry is masterful atburying costs under layers of jargon. These costs are socomplicated that in this tutorial we have devoted an entire sectionto the subject.Mutual funds provide investors with professional management, butit comes at a cost. Funds will typically have a range of differentfees that reduce the overall payout. In mutual funds, the fees areclassified into two categories: shareholder fees and annualoperating fees.The shareholder fees, in the forms of loads and redemption fees,are paid directly by shareholders purchasing or selling the funds.The annual fund operating fees are charged as an annual 89
  • 90. percentage - usually ranging from 1-3%. These fees are assessed tomutual fund investors regardless of the performance of the fund.As you can imagine, in years when the fund doesnt make money,these fees only magnify losses.5. Misleading Advertisements:The misleading advertisements of different funds can guideinvestors down the wrong path. Some funds may be incorrectlylabeled as growth funds, while others are classified as small cap orincome funds. The Securities and Exchange Commission (SEC)requires that funds have at least 80% of assets in the particular typeof investment implied in their names. How the remaining assets areinvested is up to the fund manager.However, the different categories that qualify for the required 80%of the assets may be vague and wide-ranging. A fund can thereforemanipulate prospective investors by using names that are attractiveand misleading. Instead of labeling itself a small cap, a fund maybe sold as a "growth fund". Or, the "Congo High-Tech Fund" couldbe sold with the title "International High-Tech Fund".Dilution - Its possible to have too much diversification (this isexplained in our article entitled "Are You Over-Diversified?").Because funds have small holdings in so many differentcompanies, high returns from a few investments often dont makemuch difference on the overall return. Dilution is also the result ofa successful fund getting too big. When money pours into fundsthat have had strong success, the manager often has trouble findinga good investment for all the new money.6. Evaluating Funds: 90
  • 91. Another disadvantage of mutual funds is the difficulty they posefor investors interested in researching and evaluating the differentfunds. Unlike stocks, mutual funds do not offer investors theopportunity to compare the P/E ratio, sales growth, earnings pershare, etc. A mutual funds net asset value gives investors the totalvalue of the funds portfolio less liabilities, but how do you know ifone fund is better than another?Furthermore, advertisements, rankings and ratings issued by fundcompanies only describe past performance. Always note thatmutual fund descriptions/advertisements always include the tagline"past results are not indicative of future returns". Be sure not topick funds only because they have performed well in the past -yesterdays big winners may be todays big losers. 91
  • 92. Standard Chartered Mutual FundStandard Chartered Mutual Fund is well-established fundhouse and is sponsored by the Standard Chartered GroupStandard Chartered Mutual Fund launched its first schemeGrindlays Super Saver Income Fund in the year July 2000. Sincethen it focused on debt for 5 years and launched several innovativeproducts that went to become bourgeoning categories in the Indianmutual fund industry. Some of these were The Dynamic BondFund, The Short term Fund and the Medium Term Fund. In June2005 standard chartered launched its first equity fund. StandardChartered Classic Equity Fund is a truly diversified fund thatwould not be limited by diktats of investing in either a particularsection of the market or a particular style of investing. It alsopioneered several service initiatives that helped increasetransactional ease. It was the first mutual fund to initiate • Across the counter redemptions for all classes of investors in liquid funds, • Next day redemptions for non-liquid funds and lately • One Call Free number 1600226622 accessible across 153 citiesPhone transact service wherein investors can redeem withouthaving any Personal Identification Numbers.Standard Chartered Mutual Fund today has offices in 19 cities andcurrently manages assets in excess of Rs 8000 crores. 92
  • 93. Unit Linked Insurance PlanUnit Linked Insurance Plan (ULIP) provides for life insurancewhere the policy value at any time varies according to the valueof the underlying assets at the time. ULIP is life insurancesolution that provides for the benefits of protection andflexibility in investment. The investment is denoted as units andis represented by the value that it has attained called as NetAsset Value (NAV).ULIP is life insurance solution that provides for the benefits ofprotection and flexibility in investment. The investment isdenoted as units and is represented by the value that it hasattained called as Net Asset Value (NAV). As times progressedthe plans were also successfully mapped along with lifeinsurance need to do retirement planning. In todays times, ULIPprovides solutions for insurance planning, financial needs,financial planning for childrens future and retirement planning.For the generation of insurance seekers who thrived oninsurance policies with assured returns issued by a single publicsector enterprise, unit-linked insurance plans are a revelation.Traditionally insurance products have been associated withattractive returns coupled with tax benefits. The returns part wasoften so compelling that insurance products competed withinvestment products for a place in the investors portfolio.Perhaps insurance policies then were symbolic of the timeswhen high interest rates and the absence of a rational risk-returntrade-off were the norms.The subsequent softening of interest rates introduced a degree amuch-needed rationality to insurance products like endowmentplans; attractive returns at low risk became a thing of the past.The same period also coincided with an upturn in equity 93
  • 94. markets and the emergence of a new breed of market-linkedinsurance products like ULIPs.While in conventional insurance products the insurancecomponent takes precedence over the savings component, theopposite holds true for ULIPs.More importantly ULIPs (powered by the presence of a largenumber of variants) offer investors the opportunity to select aproduct which matches their risk profile; for example anindividual with a high risk appetite can shun traditionalendowment plans (which invest about 85% of their funds in thedebt instruments) in favour of a ULIP which invests its entirecorpus in equities.In traditional insurance products, the sum assured is the cornerstone; in ULIPs premium payments is the key component.ULIPs are remarkably alike to mutual funds in terms of theirstructure and functioning; premium payments made areconverted into units and a net asset value (NAV) is declared forthe same.Investors have the choice of enhancing their insurance cover,modifying premium payments and even opting for a distinctasset allocation than the one they originally opted for.Also if an unforeseen eventuality were to occur, in case oftraditional products, the sum assured is paid along withaccumulated bonuses; conversely in ULIPs, the insured is paideither the sum assured or corpus amount whichever is higher.Insurance seekers have never been exposed to this kind offlexibility in traditional insurance products and it would be fairto say that ULIPs represent the new face of insurance.While few would dispute the value-add that ULIPs can provideto ones insurance portfolio and financial planning; the same isnot without its flipside.For the uninitiated, understanding the functioning of ULIPs canbe quite a handful! The presence of what seem to be relativelyhigher expenses, rigidly defined insurance and investmentcomponents and the impact of markets on the corpus clearly 94
  • 95. make ULIPs a complex proposition. Traditionally the insuranceseekers role was a passive one restricted to making premiumpayments; ULIPs require greater participation from both theinsured and the insurance advisor.As is the case with most evolved investment avenues, makinginformed decisions is the key if investors in ULIPs wish to trulygain from their investments. The various aspects of ULIPs dealtwith in this publication will certainly further the ULIP investorscause.Features of ULIP:ULIP distinguishes itself through the multiple benefits that itprovides to the consumer. The plan is a one-stop solutionproviding: Life Protection Investment and savings Flexibility Adjustable Life cover Investment options Transparency Options to take additional cover against death due to accident Disability Critical Illness Surgeries Liquidity Tax Planning 95
  • 96. The Latest IRDA Guidelines dictate theFollowing Requirements for ULIPs:1. Term/Tenure The ULIP client must have the option to choose a term/tenure. If no term is defined, then the term will be defined as 70 minus the age of the client. For example if the client is opting for ULIP at the age of 30 then the policy term would be 40 years. The ULIP must have a minimum tenure of 5 years.2. Sum AssuredOn the same lines, now there is a sum assured that clients canassociate with. The minimum sum assured is calculated as:(Term/2 * Annual Premium) or (5 * Annual Premium)whichever is higher.There is no clarity with regards to the maximum sum assured.The sum assured is treated as sacred under the new guidelines; itcannot be reduced at any point during the term of the policyexcept under certain conditions - like a partial withdrawalwithin two years of death or all partial withdrawals after 60years of age. This way the client is at ease with regards to thesum assured at his disposal.3. Premium paymentsIf less than first 3 years premiums are paid, the life cover willlapse and policy will be terminated by paying the surrendervalue. However, if at least first 3 years premiums have beenpaid, then the life cover would have to continue at the option ofthe client. 96
  • 97. 4. Surrender valueThe surrender value would be payable only after completion of3 policy years.5. Top-upsInsurance companies can accept top-ups only if the client haspaid regular premiums till date. If the top-up amount exceeds25% of total basic regular premiums paid till date, then theclient has to be given a certain percentage of sum assured on theexcess amount. Top-ups have a lock-in of 3 years (unless thetop-up is made in the last 3 years of the policy).6.Partial withdrawalsThe client can make partial withdrawals only after 3 policyyears.7. SettlementThe client has the option to claim the amount accumulated in hisaccount after maturity of the term of the policy upto a maximumof 5 years. For instance, if the ULIP matures on January 1,2007, the client has the option to claim the ULIP monies till aslate as December 31, 2012. However, life cover will not beavailable during the extended period.8. LoansNo loans will be granted under the new ULIP.9. ChargesThe insurance company must state the ULIP charges explicitly.They must also give the method of deduction of charges.10. Benefit IllustrationsThe client must necessarily sign on the sales benefitillustrations. These illustrations are shown to the client by theagent to give him an idea about the returns on his policy. Agents 97
  • 98. are bound by guidelines to show illustrations based on anoptimistic estimate of 10% and a conservative estimate of 6%.Now clients will have to sign on these illustrations, becauseagents were violating these guidelines and projecting higherreturns.How to Select the Right ULIP:For a product capable of adding significant value to investorsportfolios, ULIPs have far too many critics. We at Personalfnhave interacted with a number of investors who were verydisillusioned with their ULIPs investments; often thedisappointment stemmed from poor and inappropriate selection.We present a 5-step investment strategy that will guide investorsin the selection process and enable them to choose the rightULIP.1. Understand the Concept of ULIPs:Do as much homework as possible before investing in an ULIP.This way you will be fully aware of what you are getting intoand make an informed decision.More importantly, it will ensure that you are not faced with anyunpleasant surprises at a later stage. Our experience suggeststhat investors on most occasions fail to realise what they aregetting into and unscrupulous agents should get a lot of creditfor the same.Gather information on ULIPs, the various options available andunderstand their working. Read ULIP-related informationavailable on financial Web sites, newspapers and sales literaturecirculated by insurance companies. 98
  • 99. 2. Focus on your Need and Risk Profile:Identify a plan that is best suited for you (in terms of allocationof money between equity and debt instruments). Your riskappetite should be the deciding criterion in choosing the plan.As a result if you have a high risk appetite, then an aggressiveinvestment option with a higher equity component is likely to bemore suited. Similarly your existing investment portfolio andthe equity-debt allocation therein also need to be given dueimportance before selecting a plan.Opting for a plan that is lop-sided in favour of equities, onlywith the objective of clocking attractive returns can and doesspell disaster in most cases.3. Compare ULIP products from variousInsurance Companies:Compare products offered by various insurance companies onparameters like expenses, premium payments and performanceamong others. For example, information on premium paymentswill help you get a better picture of the minimum outlay sinceULIPs work on premium payments as opposed to sum assuredin the case of conventional insurance products.Compare the ULIPs performance i.e. find out how the debt,equity and balanced schemes are performing; also study theportfolios of various plans. Expenses are a significant factor inULIPs, hence an assessment on this parameter is warranted aswell.Enquire about the top-up facility offered by ULIPs i.e.additional lump sum investments which can be made to enhancethe policys savings portion. This option enables policyholders 99
  • 100. to increase the premium amounts, thereby providing presentingan opportunity to gainfully invest any surplus funds available.Find out about the number of times you can make free switches(i.e. change the asset allocation of your ULIP account) from oneinvestment plan to another. Some insurance companies offermultiple free switches every year while others do so only afterthe completion of a stipulated period.4. Go for an Experienced Insurance Advisor:Select an advisor who is not only conversant with thefunctioning of debt and equity markets, but also independentand unbiased. Ask for references of clients he has servicedearlier and cross-check his service standards.When your agent recommends a ULIP from a given company,put forth some product-related questions to test him and also askhim why the products from other insurers should not beconsidered.Insurance advice at all times must be unbiased and independent;also your agent must be willing to inform you about the prosand cons of buying a particular plan. His job should not berestricted to doing paper work like filling forms and deliveringreceipts; instead he should keep track of your plan and offer youadvice on a regular basis.5. Does your ULIP offer a minimum guarantee?In a market-linked product, protecting the investmentsdownside can be a huge advantage. Find out if the ULIP you areconsidering offers a minimum guarantee and what costs have tobe borne for the same. 100
  • 101. Life Insurance Products at Standard CharteredStandard Chartered offers you a wide range of Life InsuranceProducts from Bajaj Allianz Life Insurance Company, one ofIndias leading Insurance companies.Some of the key Life Insurance plans* available at StandardChartered Bank: • New Secure First: An investment plan which offers double advantage with flexibility o This flexible Unit linked life insurance plan provides you protection and participation in market-linked returns. o Double benefit of Sum Assured + Fund Value in case of demise o Choice of 5 investment options, 3 free switches and premium redirection option • New Unit Gain Plus: Flexible investments were never so easy. o Guaranteed life cover. Choice of 5 investment funds. 3 free switches allowed every year. o Partial and Full withdrawals after 3 yrs. o Unmatched flexibility to meet your changing lifestyle and insurance requirements. 101
  • 102. • Bajaj Allianz Care First: A medical insurance plan that allows you to renew till the age of 65 years. Premium guaranteed for the length of the each policy term of 3 years o Generous hospital cover up to 7 Lacs. o Cashless Treatment available across over 2000 leading hospitals in over 200 towns across India. o Specific Day Care treatments requiring less than 24 hrs. Hospitalization is also covered under this plan.• Protector: A Mortgage Reducing Term Insurance Plan. Make you’re your family home remains with your family for life. o The loan protector plan from Bajaj Allianz Life Insurance is mortgage reducing term assurance plan, which at low premiums helps you to secure your family against home loan. o It is an economical way to protect the family from the burden of repayment of the loan. o Convenient premium payment options - Regular Premium Payment & Single Premium Payment. o Joint Life availability - the option to cover the co- applicant of the loan under this plan.• New Unit Gain Easy Pension Plus: Unique unit-linked pension plan without life cover o Available in Single Premium and regular Premium payment mode. o Option to take a tax-free lump sum up to 33% of Sum Assured. o Open Market option: Purchase immediate annuity from Bajaj Allianz Life Insurance or any other life insurer. 102
  • 103. o Choice of 5 investment funds. o 3 free switches allowed every year.• Child Gain: Insure today and secure your child’s education and ambitions. This policy is available in 4 Options o Child Gain 21 and Child Gain 21 Plus  Childs education Plan upto Graduation  105% Guaranteed Payouts + Bonuses o Child Gain 24 and Child Gain 24 Plus  Childs education Plan upto Post Graduation  115% Guaranteed Payouts + Bonuses o Family Income Benefit: In case of death or accidental total permanent disability of insured, all future premiums are waived and 1% of the sum assured is paid monthly o Start of Life Benefit: Enables a smooth start to your child’s professional life, incase of an unfortunate death or disability of the insured parent during the policy term.• Invest Gain: Invest Gain is a specially designed plan that offers a unique combination of benefits that help you develop a sound financial portfolio for your family. o 4 Times Life Cover at a little extra cost. o Limited premium payment option available. o Available with a host of additional benefits including: Family Income and Waiver of Premium Benefit 103
  • 104. • Term Care: Term Assurance plan with return of premium o An economic way of providing life cover, this plan also ensures the return of all premiums at the time of maturity. o Dual benefit - Life cover + Return of premiums paid on survival at the end of the term. o Single premium payment option available. o The only pure term plan in the market to provide Hospital Cash Benefit. Comparative Analysis of Mutual Funds and ULIPUnit Linked Insurance Policies (ULIPs) as an investmentavenue are closest to mutual funds in terms of their structureand functioning. As is the case with mutual funds, investors inULIPs is allotted units by the insurance company and a net assetvalue (NAV) is declared for the same on a daily basis.Similarly ULIP investors have the option of investing acrossvarious schemes similar to the ones found in the mutual fundsdomain, i.e. diversified equity funds, balanced funds and debtfunds to name a few. Generally speaking, ULIPs can be termedas mutual fund schemes with an insurance component.However it should not be construed that barring the insuranceelement there is nothing differentiating mutual funds fromULIPs. 104
  • 105. Comparison between the two:1. Mode of investment/ investment amountsMutual fund investors have the option of either making lumpsum investments or investing using the systematic investmentplan (SIP) route which entails commitments over longer timehorizons. The minimum investment amounts are laid out by thefund house.ULIP investors also have the choice of investing in a lump sum(single premium) or using the conventional route, i.e. makingpremium payments on an annual, half-yearly, quarterly ormonthly basis. In ULIPs, determining the premium paid is oftenthe starting point for the investment activity.This is in stark contrast to conventional insurance plans wherethe sum assured is the starting point and premiums to be paidare determined thereafter.ULIP investors also have the flexibility to alter the premiumamounts during the policys tenure. For example an individualwith access to surplus funds can enhance the contributionthereby ensuring that his surplus funds are gainfully invested;conversely an individual faced with a liquidity crunch has theoption of paying a lower amount (the difference being adjustedin the accumulated value of his ULIP). The freedom to modifypremium payments at ones convenience clearly gives ULIPinvestors an edge over their mutual fund counterparts.2. ExpensesIn mutual fund investments, expenses charged for variousactivities like fund management, sales and marketing,administration among others are subject to pre-determined 105
  • 106. upper limits as prescribed by the Securities and Exchange Boardof India.For example equity-oriented funds can charge their investors amaximum of 2.5% per annum on a recurring basis for all theirexpenses; any expense above the prescribed limit is borne bythe fund house and not the investors.Similarly funds also charge their investors entry and exit loads(in most cases, either is applicable). Entry loads are charged atthe timing of making an investment while the exit load ischarged at the time of sale.Insurance companies have a free hand in levying expenses ontheir ULIP products with no upper limits being prescribed bythe regulator, i.e. the Insurance Regulatory and DevelopmentAuthority. This explains the complex and at times unwieldyexpense structures on ULIP offerings. The only restraint placedis that insurers are required to notify the regulator of all theexpenses that will be charged on their ULIP offerings.Expenses can have far-reaching consequences on investors sincehigher expenses translate into lower amounts being invested anda smaller corpus being accumulated. ULIP-related expenseshave been dealt with in detail in the article "UnderstandingULIP expenses".3. Portfolio disclosureMutual fund houses are required to statutorily declare theirportfolios on a quarterly basis, albeit most fund houses do so ona monthly basis. Investors get the opportunity to see where theirmonies are being invested and how they have been managed bystudying the portfolio.There is lack of consensus on whether ULIPs are required todisclose their portfolios. During our interactions with leadinginsurers we came across divergent views on this issue. 106
  • 107. While one school of thought believes that disclosing portfolios on a quarterly basis is mandatory, the other believes that there is no legal obligation to do so and that insurers are required to disclose their portfolios only on demand. Some insurance companies do declare their portfolios on a monthly/quarterly basis. However the lack of transparency in ULIP investments could be a cause for concern considering that the amount invested in insurance policies is essentially meant to provide for contingencies and for long-term needs like retirement; regular portfolio disclosures on the other hand can enable investors to make timely investment decisions. ULIPs vs Mutual Funds ULIPs Mutual Funds Determined by the Minimum investment amounts areInvestment amounts investor and can be determined by the fund house modified as well No upper limits, Upper limits for expenses chargeable expenses determinedExpenses to investors have been set by the by the insurance regulator companyPortfolio disclosure Not mandatory* Quarterly disclosures are mandatory Generally permitted forModifying asset Entry/exit loads have to be borne by free or at a nominalallocation the investor cost Section 80C benefits Section 80C benefits are available onlyTax benefits are available on all on investments in tax-saving funds ULIP investments * There is lack of consensus on whether ULIPs are required to disclose their portfolios. While some insurers claim that 107
  • 108. disclosing portfolios on a quarterly basis is mandatory, othersstate that there is no legal obligation to do so.4. Flexibility in altering the asset allocationAs was stated earlier, offerings in both the mutual fundssegment and ULIPs segment are largely comparable. Forexample plans that invest their entire corpus in equities(diversified equity funds), a 60:40 allotment in equity and debtinstruments (balanced funds) and those investing only in debtinstruments (debt funds) can be found in both ULIPs and mutualfunds.If a mutual fund investor in a diversified equity fund wishes toshift his corpus into a debt from the same fund house, he couldhave to bear an exit load and/or entry load.On the other hand most insurance companies permit their ULIPinventors to shift investments across various plans/asset classeseither at a nominal or no cost (usually, a couple of switches areallowed free of charge every year and a cost has to be borne foradditional switches).Effectively the ULIP investor is given the option to investacross asset classes as per his convenience in a cost-effectivemanner.This can prove to be very useful for investors, for example in abull market when the ULIP investors equity component hasappreciated, he can book profits by simply transferring therequisite amount to a debt-oriented plan.5. Tax benefitsULIP investments qualify for deductions under Section 80C ofthe Income Tax Act. This holds good, irrespective of the natureof the plan chosen by the investor. On the other hand in the 108
  • 109. mutual funds domain, only investments in tax-saving funds(also referred to as equity-linked savings schemes) are eligiblefor Section 80C benefits.Maturity proceeds from ULIPs are tax free. In case of equity-oriented funds (for example diversified equity funds, balancedfunds), if the investments are held for a period over 12 months,the gains are tax free; conversely investments sold within a 12-month period attract short-term capital gains tax @ 10%.Similarly, debt-oriented funds attract a long-term capital gainstax @ 10%, while a short-term capital gain is taxed at theinvestors marginal tax rate.Despite the seemingly similar structures evidently both mutualfunds and ULIPs have their unique set of advantages to offer.As always, it is vital for investors to be aware of the nuances inboth offerings and make informed decisions.6. LiquidityULIPs score low on liquidity. According to guidelines of theInsurance Regulatory and Development Authority (IRDA),ULIPs have a minimum term of five years and a minimum lockin of three years. You can make partial withdrawals after threeyears. The surrender value of a ULIP is low in the initial years,since the insurer deducts a large part of your premium asmarketing and distribution costs. ULIPs are essentially long-term products that make sense only if your time horizon is 10 to20 years.Mutual fund investments, on the other hand, can be redeemed atany time, barring ELSS (equity-linked savings schemes). Exitloads, if applicable, are generally for six months to a year inequity funds. So mutual funds score substantially higher onliquidity. 109

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