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  1. 1. A Project Report On MUTUAL FUND AND BANCASSURANCE In partial fulfillment of requirements of Master of Business Administration (2007-09) Submitted by RONAK MAKHIJA VRAJESH GANDHI MBA-I Submitted to AES PGIBM Undertaken at STATE BANK OF INDIA
  2. 2. 1 ACKNOWLEDGEMENTS Practical knowledge is equally important along with theoritical knowledge in MBA program. It would not have been possible for us to gain this knowledge had we not been given such an opportunity by our college. Therefore we begin by thanking our ALMA MATTER, AES PGIBM for giving us such a wonderful platform to understand the corporate environment via summer project and join country’s leading bank SBI. Secondly our many thanks to our respective project guide and also our Branch Managers Mr. Ravi Mohan (Sabarmati branch) and Mr. K.M. Rathod.( Ranip branch). Thirdly we would like to express our sincere gratitude to Ms. Falguni Pandya for helping us out with analysis in this project and reading our revisions to make our project achieve a competent level. We would also like to thank all the staff members of our respective branches for helping us to learn different things. We would also like to extend our heartfelt thanks to the staff and faculty of AES PGIBM who helped us out in our project by providing various resources that helped us in the project. Last but not the least we would like to thank Almighty, our family and all the people who have directly or indirectly helped us in successful completion of the project. Vrajesh Gandhi Ronak Makhija
  3. 3. 2 TABLE OF CONTENTS CONTENTS PAGE NO. Acknowledgement ----------- Certificate ----------- Executive Summary 4 Project Outline 5 1. Introduction 6 2. Cross selling 10 3. Mutual Fund 11 4. Origination of Mutual Fund 12 5. Mutual Fund Industry in India 13 6. Benefits and Drawbacks of Mutual Fund 27 7. SBI Mutual Fund 31 8. Bancassurance 38 9. Life Insurance 39 10. Benefits of Life Insurance 41 11. Will Bancassurance click? 43 12. Group Swadhan 45 13. Bancassurance – An Indian Perspective 47
  4. 4. 3 14. Modus Operandi of Bancassurance 48 15. SWOT analysis of Bancassurance 50 16. Bancassurance-- SBI Life 53 17. Vacation 2008 57 18. Loan 58 19. Questionnaire 65 20. Analysis 67 21. Bibliography 78
  5. 5. 4 EXECUTIVE SUMMARY The project takes into account the awareness level about Mutual Fund and Insurance among people of lower and middle class. The analysis of the project has been done taking into consideration the inputs given by SBI customers residing in Sabarmati and Ranip areas of Ahmedabad. The project includes survey regarding awareness level about insurance and mutual fund among people of lower and middle class, their investment choices, their choice for various schemes, their knowledge about concept of bancassurance. It also includes our experience at the vacation 2008 fair, where in addition to Mutual Fund and Insurance we also marketed other products like Home loan, Car Loan and Education loan. Our survey concludes that if proper marketing is done for Mutual Fund and Insurance there is a huge potential for these sectors. People are still accustomed to their earlier tradition of investing into Fixed Deposits, Post Office savings. Not many people were aware of the concept Mutual Fund in the area we surveyed.
  6. 6. 5 Project outline Need Mutual fund and insurance industry have been growing by leaps and bounds these days. However in spite of this there are still people who are not aware of benefits provided by Insurance and mutual fund schemes. Hence it becomes necessary for companies in these sectors to make people aware of products offered by them to help people take benefit of india’s growth story through various schemes offered by insurance and mutual funds. Objective The objective of this study is To study the awareness level of mutual fund and insurance among lower and middle class people To make people in those areas realize importance of mutual fund and insurance. To find out investment choice of people in those areas. LIMITATIONS Limited time for the project. Study was limited to only 2 areas Limited products to offer
  7. 7. 6 INTRODUCTION Not many financial institutions in the world today can claim the antiquity and majesty of the State Bank of India. Founded nearly two centuries ago with the primary intent of imparting stability to the money market, the Bank from its inception mobilized funds for supporting both the public credit of the Company's Governments in the three presidencies of British India and the private credit of the European and Indian merchants. From about the 1860s, when the Indian economy took a significant leap forward under the impulse of quickened world communications and ingenious methods of industrial and agricultural production, the Bank became intimately involved in the financing of practically every trading, manufacturing and mining activity of the sub-continent. Although large European and Indian merchants and manufacturers were undoubtedly the principal beneficiaries, the 'small man' was never ignored as loans as low as Rs.100 were disbursed in agricultural districts against gold ornaments. Added to these the Bank till the creation of the Reserve Bank in 1935 carried out numerous central-banking functions.
  8. 8. 7 Adaptation to a changing world and the needs of the hour has been one of the strengths of the Bank. In the post- Depression era, for instance, when business opportunities became extremely restricted, rules laid down in the book of instructions were relaxed to ensure that good business did not go past. Yet seldom did the Bank contravene its rules or depart from sound banking principles to retain or expand its business. An innovative array of offices, unknown to the world then, was devised in the form of branches, sub- branches, treasury pay-offices, pay offices, sub-pay offices and outstations to exploit the opportunities of an expanding economy. New business strategies were also evolved way back in 1937 to render the 'best banking service' through 'prompt and courteous' attention to customers. A highly efficient and experienced management, functioning in a well-defined organizational structure, did not take long to place the Bank on an exalted pedestal in the areas of business, profitability, internal discipline and above all credibility. An impeccable financial status, consistent maintenance of the lofty traditions of banking and observance of a high standard of integrity in its operations helped the Bank gain a pre-eminent status.
  9. 9. 8 No wonder the admiration for the Bank was universal as key functionaries of the India Office and Government of India, successive finance ministers of independent India, Reserve Bank governors and representatives of the chambers of commerce showered encomiums on it. The CNN IBN, Network 18 recognized this momentous transformation journey, the State Bank of India is undertaking, and has awarded the prestigious Indian of the Year – Business, to its Chairman, Mr. O. P. Bhatt in January 2008.
  10. 10. 9 BANKING SUBSIDAIRIES State Bank of Bikaner and Jaipur (SBBJ) State Bank of Hyderabad (SBH) State Bank of Indore (SBIr) State Bank of Mysore (SBM) State Bank of Patiala (SBP) State Bank of Saurashtra (SBS) State Bank of Travancore (SBT) FOREIGN SUBSIDAIRIES State bank of India International (Mauritius) Ltd. State Bank of India (California). State Bank of India (Canada). INMB Bank Ltd, Lagos NON-BANKING SUBSIDAIRIES SBI Capital Markets Ltd (SBICAP) SBI Funds Management Pvt Ltd (SBI FUNDS) SBI DFHI Ltd (SBI DFHI) SBI Factors and Commercial Services Pvt Ltd (SBI FACTORS) SBI Cards & Payments Services Pvt. Ltd. (SBICPSL JOINT VENTURES SBI Life Insurance Company Ltd (SBI LIFE).
  11. 11. 10 CROSS SELLING The word ‘cross selling’ here, refers to the activities done by the bank apart from its core banking. This facility makes the bank a diversified financial products provider which offers a wide range of insurance policies, ULIPs, mutual funds and SBI card facility. SBI CROSS SELLING The State Bank of India offers a bouquet of the best financial and insurance solutions in addition to its vast array of banking products. The bank has leveraged its pan India network as a Corporate Agent to offer products in life insurance, general insurance, mutual funds and credit cards of the following companies: Life Insurance SBI Life Insurance Co General Insurance New India Assurance Co. Mutual Funds SBI Mutual Funds UTI Mutual Funds Franklin Templeton Mutual Funds Tata Mutual Funds Fidelity Mutual Funds Credit Cards SBI Cards & Payment Services Ltd. SBI premium card SBI gold and more card
  12. 12. 11 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: Mutual Fund Operation Flow Chart
  13. 13. 12 ORIGINATION When three Boston securities executives pooled their money together in 1924 to create the first mutual fund, they had no idea how popular mutual funds would become. The idea of pooling money together for investing purposes started in Europe in the mid-1800s. The first pooled fund in the U.S. was created in 1893 for the faculty and staff of Harvard University. On March 21st, 1924 the first official mutual fund was born. It was called the Massachusetts Investors Trust. After one year, the Massachusetts Investors Trust grew from $50,000 in assets in 1924 to $392,000 in assets (with around 200 shareholders). In contrast, there are over 10,000 mutual funds in the U.S. today totaling around $7 trillion (with approximately 83 million individual investors) according to the Investment Company Institute.
  14. 14. 13 MUTUAL FUNDS INDUSTRY IN INDIA The origin of mutual fund industry in India is with the introduction of the concept of mutual fund by UTI in the year 1963. Though the growth was slow, but it accelerated from the year 1987 when non-UTI players entered the industry. In the past decade, Indian mutual fund industry had seen dramatic improvements, both quality wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the Assets under Management (AUM) were Rs. 67bn. The private sector entry to the fund family raised the AUM to Rs. 470 bn in March 1993 and till April 2004; it reached the height of 1,540 bn. Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is less than the deposits of SBI alone. The main reason of its poor growth is that the mutual fund industry in India is new country. Large sections of Indian investors are yet to be intellectuated with the concept. Hence, it is the prime responsibility of all mutual fund companies, to market the product correctly abreast of selling.The mutual fund industry can be broadly put into four phases according to the development of the sector. Each phase is briefly described as under. in the First Phase - 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from
  15. 15. 14 the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. Second Phase - 1987-1993 (Entry of Public Sector Funds) Entry of non-UTI mutual funds. SBI Mutual Fund was the first followed by Can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC in 1989 and GIC in 1990. The end of 1993 marked Rs.47,004 as assets under management. Third Phase - 1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with
  16. 16. 15 total assets of Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds. Fourth Phase - since February 2003 This phase had bitter experience for UTI. It was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with AUM of Rs.29,835 crores (as on January 2003). The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of AUM and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes
  17. 17. 16 PERFORMANCE OF MUTUAL FUND IN INDIA Let us start the discussion of the performance of mutual funds in India from the day the concept of mutual fund took birth in India. The year was 1963. Unit Trust of India invited investors or rather to those who believed in savings, to park their money in UTI Mutual Fund. For 30 years it goaled without a single second player. Though the 1988 year saw some new mutual fund companies, but UTI remained in a monopoly position. The performance of mutual funds in India in the initial phase was not even closer to satisfactory level. People rarely understood, and of course investing was out of question. But yes, some 24 million shareholders was accustomed with guaranteed high returns by the begining of liberalization of the industry in 1992. This good record of UTI became marketing tool for new entrants. The expectations of investors touched the sky in profitability factor. However, people were miles away from the praparedness of risks factor after the liberalization. The Assets Under Management of UTI was Rs. 67bn. by the end of 1987. Let me concentrate about the performance of mutual funds in India through figures. From Rs. 67bn. the Assets Under Management rose to Rs. 470 bn. in March 1993 and the figure had a three times higher performance by April 2004. It rose as high as Rs. 1,540bn. The net asset value (NAV) of mutual funds in India declined when stock prices started falling in the year 1992. Those days, the market regulations did not allow portfolio shifts into alternative investments. There was rather no choice apart from holding the cash or to further continue investing in shares. One more thing to be noted, since
  18. 18. 17 only closed-end funds were floated in the market, the investors disinvested by selling at a loss in the secondary market. The performance of mutual funds in India suffered qualitatively. The 1992 stock market scandal, the losses by disinvestments and of course the lack of transparent rules in the whereabouts rocked confidence among the investors. Partly owing to a relatively weak stock market performance, mutual funds have not yet recovered, with funds trading at an average discount of 1020 percent of their net asset value. The supervisory authority adopted a set of measures to create a transparent and competitive environment in mutual funds. Some of them were like relaxing investment restrictions into the market, introduction of open-ended funds, and paving the gateway for mutual funds to launch pension schemes. The measure was taken to make mutual funds the key instrument for long-term saving. The more the variety offered, the quantitative will be investors. At last to mention, as long as mutual fund companies are performing with lower risks and higher profitability within a short span of time, more and more people will be inclined to invest until and unless they are fully educated with the dos and donts of mutual funds.
  19. 19. 18 MUTUAL FUND COMPANIES IN INDIA The concept of mutual funds in India dates back to the year 1963. The era between 1963 and 1987 marked the existence of only one mutual fund company in India with Rs.67bn assets under management (AUM), by the end of its monopoly era, the Unit Trust of India (UTI). By the end of the 80s decade, few other mutual fund companies in India took their position in mutual fund market. The new entries of mutual fund companies in India were SBI Mutual Fund, Canbank Mutual Fund, Punjab National Bank Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund. The succeeding decade showed a new horizon in indian mutual fund industry. By the end of 1993, the total AUM of the industry was Rs. 470.04 bn. The private sector funds started penetrating the fund families. In the same year the first Mutual Fund Regulations came into existance with re-registering all mutual funds except UTI. The regulations were further given a revised shape in 1996. Kothari Pioneer was the first private sector mutual fund company in India which has now merged with Franklin Templeton. Just after ten years with private sector players penetration, the total assets rose up to Rs. 1218.05 bn. Today there are 33 mutual fund companies in India.
  20. 20. 19 MAJOR MUTUAL FUND COMPANIES IN INDIA ABN AMRO Mutual Fund ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee (India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO Asset Management (India) Ltd. was incorporated on November 4, 2003. Deutsche Bank A G is the custodian of ABN AMRO Mutual Fund. Birla Sun Life Mutual Fund Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life Financial. Sun Life Financial is a golbal organisation evolved in 1871 and is being represented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda apart from India. Birla Sun Life Mutual Fund follows a conservative long-term approach to investment. Recently it crossed AUM of Rs. 10,000 crores. Bank of Baroda Mutual Fund (BOB Mutual Fund) Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 under the sponsorship of Bank of Baroda. BOB Asset Management Company Limited is the AMC of BOB Mutual Fund and was incorporated on November 5, 1992. Deutsche Bank AG is the custodian. HDFC Mutual Fund HDFC Mutual Fund was setup on June 30, 2000 with two sponsor namely Housing Development Finance Corporation Limited and Standard Life Investments Limited.
  21. 21. 20 HSBC Mutual Fund HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital Markets (India) Private Limited as the sponsor. Board of Trustees, HSBC Mutual Fund acts as the Trustee Company of HSBC Mutual Fund. ING Vysya Mutual Fund ING Vysya Mutual Fund was setup on February 11, 1999 with the same named Trustee Company. It is a joint venture of Vysya and ING. The AMC, ING Investment Management (India) Pvt. Ltd. was incorporated on April 6, 1998. Prudential ICICI Mutual Fund The mutual fund of ICICI is a joint venture with Prudential Plc. of America, one of the largest life insurance companies in the US of A. Prudential ICICI Mutual Fund was setup on 13th of October, 1993 with two sponsor, Prudential Plc. and ICICI Ltd. The Trustee Company formed is Prudential ICICI Trust Ltd. and the AMC is Prudential ICICI Asset Management Company Limited incorporated on 22nd of June, 1993. Sahara Mutual Fund Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial Corporation Ltd. as the sponsor. Sahara Asset Management Company Private Limited incorporated on August 31, 1995 works as the AMC of Sahara Mutual Fund. The paid- up capital of the AMC stands at Rs 25.8 crore.
  22. 22. 21 State Bank of India Mutual Fund State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch offshor fund, the India Magnum Fund with a corpus of Rs. 225 cr. approximately. Today it is the largest Bank sponsored Mutual Fund in India. They have already launched 35 Schemes out of which 15 have already yielded handsome returns to investors. State Bank of India Mutual Fund has more than Rs. 5,500 Crores as AUM. Now it has an investor base of over 8 Lakhs spread over 18 schemes. Tata Mutual Fund Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsorers for Tata Mutual Fund are Tata Sons Ltd., and Tata Investment Corporation Ltd. The investment manager is Tata Asset Management Limited and its Tata Trustee Company Pvt. Limited. Tata Asset Management Limited's is one of the fastest in the country with more than Rs. 7,703 crores (as on April 30, 2005) of AUM. Kotak Mahindra Mutual Fund Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It is presently having more than 1,99,818 investors in its various schemes. KMAMC started its operations in December 1998. Kotak Mahindra Mutual Fund offers schemes catering to investors with varying risk - return profiles. It was the first company to launch dedicated gilt scheme investing only in government securities. Unit Trust of India Mutual Fund UTI Asset Management Company Private Limited, established in Jan 14, 2003, manages the UTI Mutual Fund with the support of UTI Trustee Company Privete Limited. UTI Asset Management Company presently manages a corpus of over
  23. 23. 22 Rs.20000 Crore. The sponsorers of UTI Mutual Fund are Bank of Baroda (BOB), Punjab National Bank (PNB), State Bank of India (SBI), and Life Insurance Corporation of India (LIC). The schemes of UTI Mutual Fund are Liquid Funds, Income Funds, Asset Management Funds, Index Funds, Equity Funds and Balance Funds. Reliance Mutual Fund Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882. The sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited is the Trustee. It was registered on June 30, 1995 as Reliance Capital Mutual Fund which was changed on March 11, 2004. Reliance Mutual Fund was formed for launching of various schemes under which units are issued to the Public with a view to contribute to the capital market and to provide investors the opportunities to make investments in diversified securities. Standard Chartered Mutual Fund Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by Standard Chartered Bank. The Trustee is Standard Chartered Trustee Company Pvt. Ltd. Standard Chartered Asset Management Company Pvt. Ltd. is the AMC which was incorporated with SEBI on December 20,1999. Franklin Templeton India Mutual Fund The group, Frnaklin Templeton Investments is a California (USA) based company with a global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financial services groups in the world. Investors can buy or sell the Mutual Fund through their financial advisor or through mail or through their website. They have Open end
  24. 24. 23 Diversified Equity schemes, Open end Sector Equity schemes, Open end Hybrid schemes, Open end Tax Saving schemes, Open end Income and Liquid schemes, Closed end Income schemes and Open end Fund of Funds schemes to offer. Morgan Stanley Mutual Fund India Morgan Stanley is a worldwide financial services company and its leading in the market in securities, investmenty management and credit services. Morgan Stanley Investment Management (MISM) was established in the year 1975. It provides customized asset management services and products to governments, corporations, pension funds and non-profit organisations. Its services are also extended to high net worth individuals and retail investors. In India it is known as Morgan Stanley Investment Management Private Limited (MSIM India) and its AMC is Morgan Stanley Mutual Fund (MSMF). This is the first close end diversified equity scheme serving the needs of Indian retail investors focussing on a long-term capital appreciation. Escorts Mutual Fund Escorts Mutual Fund was setup on April 15, 1996 with Excorts Finance Limited as its sponsor. The Trustee Company is Escorts Investment Trust Limited. Its AMC was incorporated on December 1, 1995 with the name Escorts Asset Management Limited. Alliance Capital Mutual Fund Alliance Capital Mutual Fund was setup on December 30, 1994 with Alliance Capital Management Corp. of Delaware (USA) as sponsorer. The Trustee is ACAM Trust Company Pvt. Ltd. and AMC, the Alliance Capital Asset Management India (Pvt) Ltd. with the corporate office in Mumbai.
  25. 25. 24 Benchmark Mutual Fund Benchmark Mutual Fund was setup on June 12, 2001 with Niche Financial Services Pvt. Ltd. as the sponsorer and Benchmark Trustee Company Pvt. Ltd. as the Trustee Company. Incorporated on October 16, 2000 and headquartered in Mumbai, Benchmark Asset Management Company Pvt. Ltd. is the AMC. Canbank Mutual Fund Canbank Mutual Fund was setup on December 19, 1987 with Canara Bank acting as the sponsor. Canbank Investment Management Services Ltd. incorporated on March 2, 1993 is the AMC. The Corporate Office of the AMC is in Mumbai. Chola Mutual Fund Chola Mutual Fund under the sponsorship of Cholamandalam Investment & Finance Company Ltd. was setup on January 3, 1997. Cholamandalam Trustee Co. Ltd. is the Trustee Company. LIC Mutual Fund Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. It contributed Rs. 2 Crores towards the corpus of the Fund. LIC Mutual Fund was constituted as a Trust in accordance with the provisions of the Indian Trust Act, 1882. The Company started its business on 29th April 1994. Company Ltd as the Investment Managers for LIC Mutual Fund. GIC Mutual Fund GIC Mutual Fund, sponsored by General Insurance Corporation of India (GIC), a Government of India undertaking and the four Public Sector General Insurance
  26. 26. 25 Companies, viz. National Insurance Co. Ltd (NIC), The New India Assurance Co. Ltd. (NIA), The Oriental Insurance Co. Ltd (OIC) and United India Insurance Co. Ltd. (UII) and is constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882. TOTAL ASSES UNDER MANAGEMENT
  27. 27. 26 TYPES OF MUTUAL FUND SCHEMES IN INDIA Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing types of schemes in the Industry. TYPES OF MUTUAL FUND SCHEMES • By Structure o Open - Ended Schemes o Close - Ended Schemes o Interval Schemes • By Investment Objective o Growth Schemes o Income Schemes o Balanced Schemes o Money Market Schemes • Other Schemes o Tax Saving Schemes o Special Schemes Index Schemes Sector Specific Schemes
  28. 28. 27 BENEFITS OF INVESTING IN MUTUAL FUNDS Diversification: The best mutual funds design their portfolios so individual investments will react differently to the same economic conditions. For example, economic conditions like a rise in interest rates may cause certain securities in a diversified portfolio to decrease in value. Other securities in the portfolio will respond to the same economic conditions by increasing in value. When a portfolio is balanced in this way, the value of the overall portfolio should gradually increase over time, even if some securities lose value. Professional Management: Most mutual funds pay topflight professionals to manage their investments. These managers decide what securities the fund will buy and sell. Regulatory oversight: Mutual funds are subject to many government regulations that protect investors from fraud. Liquidity: It's easy to get your money out of a mutual fund. Write a check, make a call, and you've got the cash. Convenience: You can usually buy mutual fund shares by mail, phone, or over the Internet. Low cost: Mutual fund expenses are often no more than 1.5 percent of your investment. Expenses for Index Funds are less than that, because index funds are not actively managed. Instead, they automatically buy stock in companies that are listed on a specific index
  29. 29. 28 Transparency: Mutual fund companies regularly show the amount invested in various sectors and also stocks. This helps investors to know where their money is invested. Flexibility: Investors have the choice of switching to other funds in case of open ended funds. Choice of schemes: Many companies in India have floated mutual fund schemes. This gives investor’s lot options to choose from. Tax benefits: Almost all the companies have floated Tax saving schemes. SBI MAGNUM TAX FUND for example, this gives investors a chance to escape tax on their investment DRAWBACKS OF MUTUAL FUND: No Guarantees: No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone who invests through a mutual fund runs the risk of losing money. Fees and commissions: All funds charge administrative fees to cover their day-to- day expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial planners. Even if you don't use a broker or other financial adviser, you will pay a sales commission if you buy shares in a Load Fund.
  30. 30. 29 Management risk: When you invest in a mutual fund, you depend on the fund's manager to make the right decisions regarding the fund's portfolio. If the manager does not perform as well as you had hoped, you might not make as much money on your investment as you expected.
  31. 31. 30 MUTUAL FUND- ORGANISATION There are many entities involved and the diagram below illustrates the organizational set up of a mutual fund: Organisation of a Mutal Fund
  32. 32. 31 SBI MUTUAL FUND SBI Mutual Fund is India’s largest bank sponsored mutual fund and has an enviable track record in judicious investments and consistent wealth creation. The fund traces its lineage to SBI - India’s largest banking enterprise. The institution has grown immensely since its inception and today it is India's largest bank, patronised by over 80% of the top corporate houses of the country. SBI Mutual Fund is a joint venture between the State Bank of India and Société Générale Asset Management, one of the world’s leading fund management companies that manages over US$ 330 Billion worldwide. In eighteen years of operation, the fund has launched thirty-two schemes and successfully redeemed fifteen of them. In the process it has rewarded it’s investors handsomely with consistently high returns. A total of over 20,00,000 investors have reposed their faith in the wealth generation expertise of the Mutual Fund. Schemes of the Mutual fund have consistently outperformed benchmark indices and have emerged as the preferred investment for millions of investors and HNI’s. Today, the fund manages over Rs. 13,000 crores of assets and has a diverse profile of investors actively parking their investments across 28 active schemes. The fund serves this vast family of investors by reaching out to them through network of 82 collection branches, 26 investor service centres, 21 investor service desks and 21 district organisers.
  33. 33. 32 SBI Mutual is the first bank-sponsored fund to launch an offshore fund – Resurgent India Opportunities Fund . Growth through innovation and stable investment policies is the SBI MF credo. VARIOUS SCHEMES OF SBI MF Open Ended SBI Arbitrage Opportunities Fund SBI Magnum Balanced Fund SBI Magnum Blue Chip Fund SBI Magnum Children's Benefit Plan SBI Magnum COMMA Fund SBI Magnum Contra Fund SBI Magnum Emerging Businesses Fund SBI Magnum Equity Fund SBI Magnum FMCG Fund SBI Magnum Gilt Fund Long Term Plan SBI Magnum Gilt Fund Short Term Plan SBI Magnum Global Fund SBI Magnum Income Fund SBI Magnum Income Plus Fund Investment Plan SBI Magnum Income Plus Fund Saving Plan SBI Magnum Index Fund SBI Magnum Insta Cash Fund SBI Magnum Institutional Income Fund
  34. 34. 33 SBI Magnum IT Fund SBI Magnum Midcap Fund SBI Magnum Monthly Income Plan SBI Magnum Monthly Income Plan Floater SBI Magnum Multicap Fund SBI Magnum Multiplier Plus SBI Magnum NRI Investment Fund SBI Magnum NRI Investment Fund Flexi Asset Plan SBI Magnum Pharma Fund SBI Magnum Tax Gain Scheme 1993 SBI Premier Liquid Fund Close Ended SBI ONE India Fund
  36. 36. 35
  37. 37. 36 TERMS USED Net Asset Value (NAV) Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date. Sale Price Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load. Repurchase Price Is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This is also called Bid Price.
  38. 38. 37 Redemption Price Is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Such prices are NAV related. Sales Load Is a charge collected by a scheme when it sells the units. Also called, ‘Front-end’ load. Schemes that do not charge a load are called ‘No Load’ schemes. Repurchase or ‘Back-end’ Load Is a charge collected by a scheme when it buys back the units from the unit holders. TOP 10 MUTUAL FUND COMPANIES IN INDIA 1. Reliance Regular Savings Equity (G) 2. ICICI Pru Infrastructure (G) 3. Kotak Opportunities Fund (G) 4. DSP-ML India T.I.G.E.R -RP (G) 5. Standard Chartered Premier Equity 6. Tata Infrastructure Fund (G) 7. Birla Frontline Equity (G) 8. Sundaram BNP Paribas Select Focus (G) 9. HDFC Growth Fund (G) 10. Principal Global Oppor (G) Source: policydeal.in
  39. 39. 38 BANCASSURANCE Bancassurance is the selling of insurance (assurance) products by a bank. The usage of the word picked up as banks and insurance companies merged and banks sought to provide insurance, especially in markets that have been liberalized recently. It is a controversial idea, and many feel it gives banks too great a control over the financial industry. Privatbancassurance is a wealth management process pioneered by Lombard International Assurance and now used globally. The concept combines private banking and investment management services with the sophisticated use of life assurance as a financial planning structure to achieve fiscal advantages and security for wealthy investors and their families. Bancassurance provides various advantages to banks, insurers and the customers. For the banks, income from bancassurance is the only non interest based income. Interest is market driven and fluctuating and quite narrowing these days. Banks do not get great margins because of the competition This is why more and more banks are getting into bancassurance so as to improve their incomes. Increased competition also makes it difficult for banks to retain their customers. Banassurance comes as a help in this direction also. Providing multiple services at one place to the customers means enhanced customer satisfaction. For example, through bancassurance a customer gets home loans along with insurance at one single place as a combined product. Another important advantage that bancassurance brings about in banks is development of sales culture in their employees.
  40. 40. 39 LIFE INSURANCE You think twice before taking the plunge into buying insurance. Is buying insurance a necessity now? Spending an 'extra' amount as premium at regular intervals where you do not see immediate benefits does not seem a necessity at the moment. May be later. Well you could be wrong. Buying Insurance cannot be compared with any other form of investment. Insurance gives you a life long benefit and the returns will definitely come but only when you need it the most i.e at the right time. Besides buying insurance early in life is one of the wise decisions you could take. Because the premium you would be paying would be comparatively lower. Insurance is not about how much more it can offer you when the stock market is at its peak. It may not be an attractive investment option. But weigh the pros and cons and consider how much more it offers at a small price. Most important of all it provides you with that unique sense of security that no other form of investment provides. It gives you a sense of financial support especially during that time of crisis irrespective of the fluctuations in the stock market. Insurance provides for your career goals right from your childhood years. If the earning member of the family is no more your child's educational needs will not suffer. In fact his higher education too will be provided for. You need not spend sleepless nights thinking about how to save for your child's marriage. Life Insurance will take care of that typical once-in-a-life-time spending on marriages.
  41. 41. 40 An accident or a disability may be devastating but an insurance policy can be of utmost support for the family during such times too. Besides it provides for additional benefits such as bonuses. You need not worry about your retirement years. The rising prices, taxes, and your lifestyle will be taken care of easily. And you can relax and spend your old age in comfort and peace. WHAT DOES LIFE INSURANCE HAVE TO OFFER? Life insurance is many different things to many different people. For some, it is a premium to be paid on time. For others it offers liquidity since cash can be borrowed when needed. For the investment-minded, it denotes a constantly growing capital account and numerous other benefits. Life insurance is nothing but the creation of capital funds on an installment basis. Only here, the results are guaranteed. Life insurance is basically a property that is bought under a contract, accompanied by contractual guarantees that ensure large sums of money at the death of the insured. The contractual guarantee is the promise to pay, backed by one of the oldest and most stably regulated financial industry operating in the Indian sub-continent today.
  42. 42. 41 BENEFITS OF INSURANCE CAN BE LISTED AS FOLLOWS Insurance Buys Time and Money People like to refer to life insurance as time insurance, the reason being that life insurance proceeds are paid to the insured's beneficiaries in case of death. The money proffered by life insurance helps buy time to adjust to the change of circumstances. Insurance provides large amounts of cash that will keep the lifestyle for the survivors the way it was before the insured's death. Insurance Offers Peace of Mind For the person who buys an insurance policy, it offers absolute and complete peace of mind. He or she knows that the decision made by him will provide sound benefits in the future, whether or not the individual may live to see it. The life insurance policy will subsequently prove this in the future if and when funds are needed. This is the guarantee of the insurance contract. Multiple Applications The future is uncertain for each and every one. No one knows how long he or she will live. The investment benefit is paid to the insured's beneficiaries after his death or it can be used during the life as well. Life insurance policy owners can turn to the cash value of the policy in case of a financial emergency when all avenues are either blocked or denied. They know that they can avail of loans based on their insurance policies. Insurance policy owners can use the cash value of their policies to meet their long- term financial needs as well. They may have purposefully invested in insurance to use
  43. 43. 42 the cash in the policy for their children's future marriage expenses or higher education fees. Enduring Elasticity Since life insurance is flexible enough to serve several needs, the insured can keep several long-term goals in mind once he or she invests in the insurance plan. The cash value of the policy can be allocated towards augmenting the monthly income during the retirement years. Leisure years should be turned into pleasure years. Permanent life insurance is designed on the concepts of long-term flexibility. Financial Security The insurance policy offers contractual guarantees to people looking for peace of mind when they buy life insurance. Life insurance offers complete financial security. The purchase of life insurance demonstrates concern for a family's future financial well being.
  44. 44. 43 WILL BANCASURANCE CLICK? Bancassurance, the much talked about channel of insurance distribution through banks that originated in France and which has been a success story in Europe is yet to take off here. A number of insurers have already tied up with banks and some banks have already flagged off bancassurance through soft launches of select risk products. While reams have been written about the numerous benefits of bancassurance considering the wide scale availability of risk products it will enable, rules and regulations regarding the same are yet to fall in place. Fee based income: For banks, bancassurance would mean a major gain. Since interest rates have been falling and profit on off take of credit has been low all banks have been able to do is sustain themselves but not profit much. Enter bancassurance and fee based income through hawking of risk products would be guaranteed. Unique strategies: Before taking the plunge, banks as also insurers need to work hard on chalking out strategies to sell risk products through this channel especially in an emerging market as ours. Through tie-ups some insurers plan to buy shelf space in banks and sell insurance to those who volunteer to purchase them. But unless banks set up a trained task force that will focus on hard-selling risk products, making much headway is difficult especially with a financial product that is not so easily bought over the counter.
  45. 45. 44 Identifying Target audience: Besides, identifying the target audience is yet another important aspect. Banks have a large depositor base of corporate as well as retail clients they can tap. Talking of retail clients the lower end and middle-income group customers constitute a major chunk who have over a period of time built a good rapport with the bank staff and thus hold big potential for bancassurance. Reduced costs: While products such as retirement planning will involve an elaborately worked out plan with the help of a financial advisor, simple products such as an accident cover in other words pure risk products will be sold through this channel enabling savings on solicitation costs of these products. So will insurers pass on a part of the gains on cost saving (saving on agent training etc) to customers? At present insurers are non- committal on this one. Also there are no immediate plans to redesign products to suit the bancassurance channel but banks are gung-ho about cross-selling products. Legal issues: Conversely, the Insurance Regulatory Development Authority (IRDA) has adopted a cautious approach before Bancassurance is flagged off. While on the one hand it is an economical proposition to sell risk products through the numerous bank branches spread across the country the fact that claim settlement disputes take an unusually long time in our country is one of the causes for worry. In such a situation will banks be in a position to fight for the cause of their clients is a major concern.
  46. 46. 45 GROUP SWADHAN SBI Life - Swadhan (Group) is a Non Participating Group Term Insurance Plan with Return of Premium. It is a simple and easy solution which offers dual benefits of life cover protection in the event of death and refund of premium in case of survival up to the end of the cover term. It is the policy on which we have worked during our training session at State Bank of India, Rajkot. BASIC DESCRIPTION Product name: SWADHAN GROUP Eligibility: SBI Customers ( including NRI ) AGE: Between 18 to 50 years old (as on last birthday) Term of cover: 10 years Life cover: Rs. 50,000 Rs. 1,00,000 Rs. 3,00,000 Rs. 5,00,000 (only available for age 18 to 39)
  47. 47. 46 Key Features Eminently affordable premium rates Complete protection during cover term Refund of part/full basic premiums paid, depending on the Term of insurance Cover Choice with regard to Term of Insurance Cover and Sum Assured Flexibility to choose appropriate premium payment modes Simple and convenient joining process Hassle free and efficient claims settlement BENEFITS Key benefits No medical Insurance practically free Tax exemption for premium paid under Sec 80 C Tax free death/maturity Benefits under Sec 10 (10D) Maturity benefits: Total basic premium amount (100%) is refundable at maturity Death benefits: Sum assured payable lump sum Exclusions: Death due to natural causes within the first 45 days from cover start date. Death due to suicide within one year from cover start date.
  48. 48. 47 BANCASSURANCE : AN INDIAN PERSPECTIVE As for the insurance company the advantage that bancassurance provides is evident. The insurance company gets improved geographical reach without additional costs. In India around 67,000 branches are there for PSU banks alone. If all 67,000 branches sell the insurance products one can see the reach. This is one method of penetrating the market. There is also another method called 'Bank Referral'. Here the banks do not issue the policies, they only give the database to the insurance companies. The companies issue the policies and pay the commission to them. That is called referral basis. India's rural market has huge potential that is still untapped by the insurance companies. Setting up their own networks entails such a huge cost, that no company would be interested in doing so. Bancassurance again comes as an answer. It helps the insurance companies to tap the market at a much lower cost. As for the customer the competitive nature of the Indian market ensures that the reduction in costs would result in benefits in terms of lower premium rates being passed on to him. The penetration level of life insurance in the Indian market is abysmally low at 2.3% of GDP with only 8% of the total population currently insured. With almost half of the population likely to be in the 'wage earner' bracket by 2010, there is every reason to be optimistic that bancassurance in India will play a long inning.
  49. 49. 48 MODUS OPERANDI OF BANCASSURANCE There are various models through which bancassurance operates internationally. In the so called integrativemodel, branch bankers themselves directly sell insurance products. In the specialist model, specialised personnel of the bank or the insurance company have specific knowledge and training of insurance to sell these products.Bancassurance could operate through ‘strategic alliance’ models involving asimple ‘marketing’ tie-up or through ‘full integration’ where the bank sells insurance products under its own brand and undertakes all other functions associated with insurance.In India, this scheme, until now, operates largely through strategic alliances or joint ventures. Under RBI regulations, the maximum equity that a bank can hold in JV with an insurance company is 50 per cent, subject to the fact that bank has a net worth of Rs 500 crore, its Capital adequacy ratio is 10 per cent or more and has a reasonable level ofnon performing assets. The Insurance Regulatory and Development Authority also sets guidelines regarding eligibility of corporate agents. Banking personnel who sell insurance products have to satisfy the same training and examination requirements as insurance agents. In India the concept of bancassurance appears to be gaining ground quite rapidly both through commission based arrangements and joint ventures between banks and insurance companies.
  50. 50. 49 WHY INSURERS ARE TURNING TO BANKS? One of the key factors is that banks continue to command the highest trust among Indiansavers and investors and of the total pool of financial savings of households, 3 per cent (the largest share) goes to bank deposits (RBI annual Report 2002). For any providers of new financial products, banks are the fastest and most ‘trusted’ channel to reach households. Besides, the bank branch network of 62000 is virtually impossible to replicate and would be indispensable in penetrating newer markets such as rural markets. Bank assurance also leads to a significant lowering of distribution costs for insurers. Swiss Re estimates for the UK for instance peg average costs through bank assurance atroughly 25 per cent of the cost of selling through a direct sales force. The cost reduction is the corollary of a sharp rise in the numbers of policies sold per employee that follows from enhanced customer access that bancassurance fosters.Why insurers areturning to banks? Bancassurance addresses twin needs of portfolio diversification by retail customers andintegration of marketing.
  51. 51. 50 SWOT ANALYSIS OF BANCASSURANCE On order to implement the bancassurance model in our country a lot of steps we have to taken. (A) Top professionals will have to be hired. (B) We have to study the Indians nature regarding insurance. (C) Study about lower middle as well as upper class of society & how much they are eager to adopt insurance. (D) Favorable & easy policies for the people. (E) High capital investment in infrastructure development particularly in Information Technology & Telecommunication is required (F) Creation of research & development cell is very important & adaptive task. (G) We have to study about the SWOP analysis of world in the field of bancassurance & we can take this study as base. Advantages of Banassurance: Bancassurance is a tool, which is beneficial to bank, customer & Insurer at a time. There are certain benefits of bancassurance are given. (1) From the banks point of view: - (A) By selling the insurance product by their own channel the banker can increase their income. (B) Banks have face-to-face contract with their customers. They can directly ask them to take a policy. And the banks need not to go any where for customers. (C) The Bankers have extensive experience in marketing. They can easily attract customers & non-customers because the customer & non-customers also bank on banks. (D) Banks are using different value added services life-E. Banking tele banking, direct mail & so on they can also use all the above-mentioned facility for Bankassurance purpose with customers & non-customers.
  52. 52. 51 (2) From the Insurer Point of view: (A) The Insurance Company can increase their business through the banking distribution channels because the banks have so many customers. (B) By cutting cost Insurers can serve better to customers in terms lower premium rate and better risk coverage through product diversification. (3) From the customers' point of view: Product innovation and distribution activities are directed towards the satisfaction of needs of the customer. Bancassurance model assists customers in terms of reduction price, diversified product quality in time and at their doorstep service by banks. CONCLUSION With the opening up of insurance sector and with so many players entering the Indian Insurance Industry it is required by Insurance Companies to come up with well established infrastructure facilities with good call centre service to attract and provide information to customer regarding different good policies & their premium pay scheme. The life Insurance Industry in India has been progressing at a rapid growth since opening up of the sector. The size of country, a diverse set of people combined with problems of connectivity in rural areas, makes insurance selling in India is a very difficult task. Life Insurance Companies require good distribution strength and tremendous man power to reach out such a huge customer base. Where legislation ahs allowed bancassurance had mostly been a phenomenal success and although slow to gain pace, is now taking of across Asia, especially now that
  53. 53. 52 banks are starting to become more diverse financial institution and the concept of universal banking is being adopted. In the field of bancassurance banks will bring a customer database, leverage their name, recognition & reputation of both local and regional levels. If they are using personal contact with customers and non-customers then only they can success in the field of bancassurance. But the proper implementation of bancassurance is still facing so many hurdles because of poor manpower management, lack of call centers, no personal contact with customers, inadequate incentives to agents and unfullfilment of other essential requirements. Finally we can say that the bancassurance would mostly depend on how well insurers and bankers understanding is with each other and how they are capturing the opportunity and how better service they are providing to their, customers. Let us you all pay more attention towards the policies and enjoy the service provide by banks and Insurance Companies by the mode of Bancassurance.
  54. 54. 53 BANCASSURANCE BOOST FOR SBI LIFE SBI Life Insurance posted a net profit of Rs 34 crore for the financial year ended March 31, 2008, in its third consecutive year of profitable operations. While the private insurer grew premium collections by 92% to Rs 5,622 crore in 2007-08, the new business premium grew 87% to Rs 4,792 crore. SBI Life is also readying itself for an initial public offer sometime later this year, once market conditions turn conducive. "The growth in bancassurance by 108% over the last one year has contributed significantly to the growth of SBI Life Insurance . SBI has done almost Rs 1,600 crore of premium in 2007-08 in bancassurance from about Rs 800 crore the previous year. In fact, the branches selling SBI Life products have started functioning on their own momentum." The life insurer has greater hopes from this channel. "Currently, bancassurance contributes to 38% of the total premium and the target is to increase its share to 50% in the coming years. SBI Life says that its products are currently available at over 10,000 of the 14,000 branches of the State Bank of India and its affiliate banks. The bancassurance model is the company's key distribution channel and contributes about 40 per cent of the total premium collection. SBI Life Insurance, with an authorised capital of Rs500 crore, is a 74 : 26 joint venture between the State Bank of India and Cardif SA of France, a wholly owned subsidiary of BNP Paribas.
  55. 55. 54 LIFE INSURERS HDFC Standard Life Insurance Company Ltd. Max New York Life Insurance Co. Ltd. ICICI Prudential Life Insurance Company Ltd. Kotak Mahindra Life Insurance Co. Ltd. Birla Sun Life Insurance Company Ltd. Tata AIG Life Insurance Company Ltd. SBI Life Insurance Company Limited . ING Vysya Life Insurance Company Private Limited Dabur CGU Life Insurance Company Pvt. Ltd. AMP SANMAR Assurance Company Ltd. Dabur CGU Life Insurance Company Pvt. Ltd. GENERAL INSURERS Royal Sundaram Alliance Insurance Company Limited Reliance General Insurance Company Limited. IFFCO Tokio General Insurance Co. Ltd TATA AIG General Insurance Company Ltd. Bajaj Allianz General Insurance Company Limited ICICI Lombard General Insurance Company Limited. Cholamandalam General Insurance Company Ltd. Export Credit Guarantee Corporation Ltd. HDFC-Chubb General Insurance Co. Ltd. PRODUCTS OFFERED BY SBI LIFE
  56. 56. 55 INDIVIDUAL PRODUCTS SBI Life - Horizon II SBI Life - Unit Plus II SBI Life - Unit Plus Child Plan SBI Life - Unit Plus Elite Plan SBI Life - Horizon II Pension SBI Life - Unit Plus II Pension SBI Life - Lifelong Pensions SBI Life - Immediate Annuity SBI Life - Shield "SBI Life - Shield" used as Keyman SBI Life - Sudarshan SBI Life - Scholar II GROUP PRODUCTS SBI Life - CapAssure Gratuity Scheme SBI Life - CapAssure Superannuation Scheme SBI Life - CapAssure Leave Encashment Scheme SBI Life - Group Immediate Annuity SBI Life - Golden Gratuity SBI Life - Dhanrashi
  57. 57. 56 SBI Life - Group Gratuity cum Life Cover Scheme SBI Life - Group Superannuation Scheme SBI Life - Group Leave Encashment cum Life Cover Scheme SBI Life - Swarna Ganga SBI Life - Sampoorn Suraksha SBI Life - Super Suraksha SBI Life - Super Suraksha in Lieu of EDLI SBI Life - Credit Guard "SBI Life - Shield" used as Keyman SBI Life - Swadhan (Group) SBI Life - Dhanaraksha Plus SP SBI Life - Dhanaraksha Plus LPPT SBI Life - Dhanaraksha Plus RP SBI Life - Nidhi Raksha RP VACATION 2008
  58. 58. 57 Vacation 2008 is a mega fair organized by GANDHI CORPORATION, Ahmedabad based event management company. We had a great opportunity to witness lacs of people gathering at one place as SBI had booked a huge stall and marketed its wide range range of products. It lasted for 11 days starting from 23rd May to 2nd June 2008. Representatives from 15 different branches participated in this exhibition. Over here we counsel inquires of home loan, car loan and education loan and handled queries related to the same. Its was a unique experience for us in the sense that this kind of gathering is not possible by SBI alone. Thus we learnt how to tackle mass customers and satisfy them by fulfilling their needs. We were fully supported by the representatives of other branches wherever we required. We also handled the customers inquiring for mutual fund and insurance. Thus we also got a chance to do the survey on mutual fund and insurance over here. One important thing that we noticed at this fair was that there is still a huge potential market of personal banking products in ahmedabad. But at the same time it is equally important to market our products in this competitive era. LOANS
  59. 59. 58 SBI home Loans "THE MOST PREFERRED HOME LOAN PROVIDER" voted in AWAAZ Consumer Awards along with the MOST PREFERRED BANK AWARD in a survey conducted by TV 18 in association with AC Nielsen-ORG Marg in 21 cities across India. SBI HOME LOANS now offer Interest Rates concessions on GREEN HOMES in accordance with SBI's commitment to Environment protection. Unique features: * Provision for on the spot "In principle" approval. * Loan sanctioned within 6 days of submission of required documents. * Option to avail Home Loan as a Term Loan or as an Overdraft facility to save on interest and maximize gains. * Option to club income of spouse and children to compute eligible loan amount. * Provision to club depreciation, expected rent accruals from property proposed to compute eligible loan amount. * Provision to finance cost of furnishing and consumer durables as part of project cost. * Repayment permitted up to 70 years of age * Free personal accident insurance cover up to Rs.40 Lac. * Optional Group Insurance from SBI Life at concessional premium (Upfront premium financed as part of project cost) * Interest calculated on daily reducing balance basis, and starts from the date of disbursement. * ‘Plus’ schemes which offer attractive packages with concessional interest rates to Govt. Employees, Teachers, Employees in Public Sector Oil Companies.
  60. 60. 59 * Special scheme to grant loans to finance Earnest Money Deposits to be paid to Urban Development Authority/ Housing Board, etc. in respect of allotment of sites/ house/ flat. * Option to avail loan at the place of employment or at the place of construction Loan Amount 40 to 60 times of NMI, depending on repayment capacity as % of NMI as under - Net Annual Income EMI/NMI Ratio Up to Rs.2 lacs 40% Above Rs.2 lac to Rs. 5 lacs 50% Above Rs. 5 lacs 55% Interest Processing Fee 0.25% of Loan amount with a cap of Rs.5, 000/-(including Service Tax) Pre-closure Penalty No penalty if the loan is preclosed from own savings/windfall gains for which documentary evidence is produced by the customer. In case, such proof is not produced by the borrower, penalty @ 2% on the amount prepaid in excess of normal EMI dues shall be levied if the loan is preclosed within 3 years from the date of commencement of repayment. Security • Equitable mortgage of the property
  61. 61. 60 • Other tangible security of adequate value like NSCs, Life Insurance policies etc., if the property cannot be mortgaged Maximum Repayment Period • For applicants up to 45 years of age: 20 years • For applicants over 45 years of age: 15 years Moratorium Up to 18 months from the date of disbursement of first installment or 2 months after final disbursement in respect of loans for construction of new house/ flat (moratorium period will be included in the maximum repayment period) Disbursement • In lump sum direct in favour of the builder/ seller in respect of outright purchase • In stages depending upon the actual progress of work in respect of construction of house/ flat etc. CAR LOAN
  62. 62. 61 Low interest rates, easy repayment options, total transparency are the main features of SBI’s car loan. Finance to include vehicle registration charges, insurance, one-time road tax and accessories (subject to conditions). Customer can apply for an SBI Car Loan to purchase: • A new car, jeep, Multi Utility Vehicle (MUV) or SUV (any make or model) • A used car / jeep / MUV /SUV (not more than 5 years old). (any make or model) Enjoy the SBI Advantage: Excellent service and lower costs. SBI Car Loans for new and old vehicles offer you: • Lowest interest rates • Longer repayment period of up to 84 months. • No hidden costs or administrative charges. • Finance for one-time road tax, registration fee, insurance premium and accessories • No advance EMIs. (Some Banks/companies ask to pay one or more EMIs at the time of disbursement of loan, thereby effectively reducing loan amount.) • Complete transparency: SBI levy interest on daily reducing balance method. When customer pays one instalment, the interest is automatically calculated on the reduced balance thereafter. When customer pays interest on an annual reducing balance, as charged by many other companies/banks, the interest amount for the coming year is determined on the amount outstanding at the beginning of the year. Customers continue to pay interest even on the amounts you repay during the year. .
  63. 63. 62 Type of Loan 1. Term Loan 2. Overdraft - a) For New vehicles only b) Minimum loan amount: Rs. 3 lacs. If customer is not an account holder with SBI he would also need to furnish documents that establish his identity and give proof of residence. Margin New / Used vehicles: 15% of the on the road price. Repayment Repayment period For Salaried: Maximum of 84 months For Self-employed & Professionals: Maximum 60 months Repayment period for used vehicles: Up to 84 months from the date of original purchase of the vehicle (subject to maximum tenure as above). Prepayment Penalty Prepayment fee of 2% of the amount of the loan prepaid will be levied subject to certain conditions. Processing Fee 0.50% of Loan amount and to be paid upfront. Minimum: Rs. 500/- Maximum Rs. 10,000 EDUCATION LOAN
  64. 64. 63 A term loan granted to Indian Nationals for pursuing higher education in India or abroad where admission has been secured. Eligible Courses All courses having employment prospects are eligible. • Graduation courses/ Post graduation courses/ Professional courses • Other courses approved by UGC/Government/AICTE etc. Expenses considered for loan • Fees payable to college/school/hostel • Examination/Library/Laboratory fees • Purchase of Books/Equipment/Instruments/Uniforms • Caution Deposit/Building Fund/Refundable Deposit (maximum 10% tuition fees for the entire course) • Travel Expenses/Passage money for studies abroad • Purchase of computers considered necessary for completion of course • Cost of a Two-wheeler up to Rs. 50,000/- Any other expenses required to complete the course like study tours, project work etc. Amount of Loan • For studies in India, maximum Rs. 10 lacs • Studies abroad, maximum Rs. 20 lacs Interest Rates (With effect from 1st June 2008) For loans up to Rs.4 lacs - 12.25 % p.a. floating For loans above Rs. 4 lacs and up to Rs.7.50 lacs - 13.50 % floating For loans above Rs.7.50 lacs - 12.75% p.a. floating Processing Fees
  65. 65. 64 • No processing fee/ upfront charges • Deposit of Rs. 5000/- for education loan for studies abroad which will be adjusted in the margin money Repayment Tenure Repayment will commence one year after completion of course or 6 months after securing a job, whichever is earlier. Place of Study Loan Amount Repayment Period in Years Studies in India Rs. 10.0 lacs 5-7 Studies Abroad Rs. 20.0 lacs 5-7 Security Amount For loans up to Rs. 10.00 lacs for Studies in India and up to Rs. 20.00 lacs for studies abroad Up to Rs. 4 lacs No Security 4 lacs to Rs. 7.50 lacs Collateral security in the form of suitable third party guarantee. The bank may, at its discretion, in exceptional cases, waive third party guarantee if satisfied with the net-worth/means of parent/s who would be executing the documents as "joint borrower". Above Rs. 7.50 lacs. Tangible collateral security of suitable value, along with the assignment of future income of the student for payment of installments. All loans should be secured by parent(s)/guardian of the student borrower. In case of married person, co-obligator can be spouse or the parent(s)/ parents-in-law. QUESTIONNAIRE
  66. 66. 65 Name :- Age :- PART I- MUTUAL FUND 1) Where do u invest? ( ) Mutual Fund ( ) Insurance ( ) Fixed deposit ( ) others 2) Do you know what is Mutual Fund? ( ) yes ( ) no 3) How many mutual Fund companies are you aware of ? ( ) Reliance ( ) SBI ( ) UTI ( ) Kotak Mahindra ( ) ICICI ( ) Sundaram ( ) HSBC ( ) HDFC ( ) Others 4) Have you ever invested in Mutual Fund? ( ) yes ( ) no 5) Do you find it safe to invest in mf than in equity? ( ) yes ( ) no 6) What is the average return you expect from your investment in Mf? ( ) 0- 20% ( ) 20-40% ( ) 40-60% ( ) >60% 7) Are you aware about the Tax saver schemes in Mutual Fund? ( ) Yes ( ) No PART II- INSURANCE 1) Have you insured yourself?
  67. 67. 66 ( ) YES ( ) NO 2) What kind of Insurance plans are you aware of? ( ) Endowment plan ( ) Pension Plan ( ) Unit linked plans ( ) Pure Protection ( ) Protection cum saving ( ) Money back ( ) ( ) Others 3) Through which medium do you purchase insurance policies ? ( ) Banks ( ) agents 4) For what purpose you buy insurance policies? ( ) Investment ( ) safety ( ) tax savings ( ) all three 5) which insurance companies are you aware of? ( ) SBI LIFE ( ) LIC ( ) HDFC STD LIFE ( ) BHARTI AXA ( ) MAX NEWYORK ( ) KOTAK LIFE ( ) ICICI LIFE ( ) BAJAJ ALLIANZ ( ) OTHERS 6) Do you find it safe to invest in ULIPs? ( ) yes ( ) no 7) Are you aware about the SWADHAN policy of SBI? ( ) Yes ( ) no ANALYSIS PART-I 1) WHERE DO YOU INVEST?
  68. 68. 67 45 22 60 52 MUTUAL FUND INSURANCE FIXED DEPOSIT OTHERS The above results shows that still Fixed deposit holds top priority for people specially in low income group as far as investment choice is concerned. Others here include post office savings, realty etc. Mutual fund however in not as popular as it should be given SBI’s wide reach and performance. 2) DO YOU KNOW WHAT IS MUTUAL FUND? 58 42 YES NO As shown in the above question mutual fund is not famous. The above result questions shows that only 58 people were aware of what mutual fund actually is. Thus this shows either the lack of marketing efforts by SBI or reluctance of people to move away from traditional source of investment i.e. fixed deposit.
  69. 69. 68 3) HOW MANY MUTUAL FUND COMPANIES ARE YOU AWARE OF? 53 45 5842 35 37 11 18 6 RELIANCE SBI UTI KOTAK MAHINDRA ICICI SUNDRAM HSBC HDFC OTHERS The above graph shows that UTI is the most popular mutual fund company followed by Reliance. SBI too is popular but still 13 people who knew what mutual fund is were not aware that their own bank was offering Mutual Fund. This shows lack of marketing effort on part of SBI. 4) HAVE YOU EVER INVESTED IN MUTUAL FUND?
  70. 70. 69 35 23 YES NO The above findings show that of the 58 people who know about mutual fund only 35 had Invested in it. This shows that even though mutual fund is popular among people not many were prepared to invest in it. 5) DO YOU FIND IT SAFE TO INVEST IN MF THAN IN EQUITY? 53 5 YES NO From the above graph one can infer that 53 of 58 people who knew about mutual fund found it safer that investing directly in equity market. The reason given by them include safety from market volatility, tax benefit among others. While 5 still preferred investing in equity over mutual fund. 6) WHAT PERCENTAGE OF RETURN YOU EXPECT FROM YOUR
  71. 71. 70 INVESTMENT IN MUTUAL FUND? 8 15 9 3 0-20% 20-40% 40-60% >60% The above result shows that most people had moderate expectations from their investment in mutual fund. Only 12 were bullish on their trusted mutual fund scheme. In spite of so much growth in Indian capital market not many people expected that their capital would appreciate more than 50%. 7) ARE YOU AWARE ABOUT THE TAX SAVER SCHEME IN MUTUAL FUND? 48 10 YES NO
  72. 72. 71 The above findings show that 10 people of 58 were ignorant about the tax saver scheme offered by various mutual fund companies including their bank i.e. SBI, whose magnum tax gain has topped chart consistently. While 48 were well aware of tax saver scheme. PART II 1) HAVE YOU INSURED YOURSELF? 72 28 yes no Out of the 100 customers who have been taken into consideration 72 of them had insured themselves with 1 or more insurance companies or had 1 of more life insurance policies in their name. Rest 28 had not yet insured themselves with any of the life insurance companies, major reason being illiteracy, unawareness, or financial reasons to pay the premium. This class of people were not even able to write their names in their mother tongue.
  73. 73. 72 2) WHAT KIND OF INSURANCE PLANS ARE YOU AWARE OF? 48 42 24 3665 74 endowment pension unit linked pure protection protection cum saving money back In this particular survey we have considered all the plans that a particular customer is aware of. The result of same is as per our expectations.48 people were aware of what is endowment plan, 42 people were aware of what is pension plan offered by the life insurance companies.24 people were aware of what is unit linked insurance plans and 36 people were knowing what is pure protection plan. 65 people were having knowledge of what is protection cum saving plan and 74 people were aware about the money back plan of the life insurance companies. 3) THROUGH WHICH MEDIUM DO YOU PURCHASE INSURANCE POLICIES? 32 68 banks agents
  74. 74. 73 Bancassurance is yet not that popular in India and so we ended up with 68 people who agreed that they purchase insurance through agents and 32 people purchased it through banks. One of the major reasons of buying the insurance policies through agents was the rolling back of commission by the agents to their customers. And the sales that came through banks were because of the smartness of the banks’ employee and their customer relationship skills. 4) FOR WHAT PURPOSE YOU BUY INSURANCE POLICIES? 40 87 42 35 investment safety tax savings all three On being asked that why they have been buying policies from insurance companies the result were as follows.40 people told that they are opting insurance companies as a good investment option. 87 people told that they need the safety for their family and so they buy insurance.42 people took insurance for tax benefit and 35 people wanted all the three options and so they were buying it.
  75. 75. 74 5) WHICH ARE THESE LIFE INSURANCE COMPANIES ARE AWARE OF? 63 100 451530 38 54 22 8 sbi life lic hdfc std life bharti axa max new york life kotak life icici life bajaj allianz others This question of our survey actually tested their general knowledge.63 people were aware of SBI life, all the 100 knew about LIC, 45 knew HDFC STANDARD life, 15 for BHARTI AXA life, 30 for MAX NEW YORK life, 38 for KOTAK life, 54 for ICICI PRUDENTIAL life, 22 for BAJAJ ALLIAZ life, and 8 fell in others category.
  76. 76. 75 6) DO YOU FIND IT SAFE TO INVEST IN ULIPS? 36 64 yes no Out of the total 100 people 64 people said that they find it safe to invest in the ULIPs of life insurance companies. One reason why people found it prudent to invest in ULIPS was that they got benefit of both insurance and capital market. The rest 36 did not find it safe as they did not had even the basic knowledge of how exactly the ULIPs work. 7) ARE YOU AWARE ABOUT THE SWADHAN POLICY OF SBI LIFE? 18 82 yes no
  77. 77. 76 This particular policy SWADHAN of SBI life was specially designed for the SBI banks customers only. To our surprise 82 people were unaware of it and the major reason for this being the lack of marketing by SBI as a whole. Just 18 people knew about SWADHAN policy FINDINGS From the above findings we can summarize the following points People are still accustomed to their earlier tradition of investing in to Fixed Deposits, Post Office savings. There still a huge market left untapped by mutual fund and insurance companies. Not many people are aware about the bancassurance concept. Unit linked insurance plans which are blend of insurance and mutual funds are yet to find place among people of middle and lower class. This shows that people are not risk averse. SBI which is the leading bank of the country has not still placed itself parallel to LIC in insurance business. Swadhan policy which is designed for customers of SBI only is not very popular among its customers, because of lack of marketing efforts by SBI.
  78. 78. 77 LIMITATIONS The main limitation we faced was, we had only two branches to survey. Time constraint was another limitation. We had only two products two survey, one each of mutual fund and insurance. Literacy wise the branches we surveyed were very low.
  79. 79. 78 BIBLIOGRAPHY http://finance.indiamart.com/india_business_information/mutual_funds_te rms.html (finance@indiamart) About.com www.google.com www.insuremagic.com/Content/Articles/Life/bancassurance.asp www.indianmba.com/Occasional_Papers/OP134/op134.html http://www.sbilife.co.in/sbilife/application www.123eng.com/forum/viewtopic.php?t=50507 www.allbankingsolutions.com/bancassurance.htm
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