Panning investors

There are talks of setting up registered trusts, which will have a PAN and members can invest through that single PAN.

Every now and then the Finance Ministry is gripped with one overbearing fear: people are getting rich faster than the government. In such fits of fear, which are getting irritatingly frequent, it does something that leads to harassment of people and contradicts the government’s self-professed ideologies. The move to make Permanent Account Number (PAN) mandatory for any body investing any amount in mutual fund is one latest symptom of such a reaction. Ironically, victims of this move are the very set of people the government claims it wants to prosper—the aam admi or aam investor or simply small investor.

Word's worthAs MONEY TODAY had reported barely a month ago, sections of mutual fund industry have been making their schemes more accessible to small investors by lowering the minimum investment limit, down to just Rs 50 a month through their systematic investment plans (SIPs). Finally, even the smallest of the small investors could benefit from the wealth creation on stock markets by investing just Rs 50 a month (or Rs 600 a year). “Inclusive investment” in the times of a government that stands for “inclusive growth”. Well, this was not to be, at least not without going through some unnecessary hassles.

A majority of the investors who put Rs 600 a year in a mutual fund scheme—or even the ones who put 10 times that amount annually—are not likely to have total income that brings him under the income tax net. Many of them won’t even have to file a tax return. But they must now get a PAN card, or else mutual funds are out of bounds for them. In a way, these small and fledgling investors have been burdened with the trappings of big, rich investors, even before they could become rich. Mutual fund sellers will testify how slowly, but surely, they were beginning to sell SIPs to small factory workers, security guards and even chauffeurs.

These investors are now running scared of the hassles and implications of applying and keeping a PAN card. On their part, fund houses that have initiated steps to expand to small-town investors, are working overtime to address this issue. There are talks of setting up registered trusts, which will have a PAN and members can invest through that single PAN.

Surely, one can’t argue against the intention of trying to expand the taxpayer’s base by encouraging more and more income earners to file tax returns. But in this case, if the end is right, the means are wrong—or atleast unfair. Tomorrow we might as well have graduation degree certificate necessary for house registration. The laudable purpose? Spread of literacy. Let illiterates not own a house, just like non-PAN card owners not invest in mutual funds.

— Narayan Krishnamurthy

Pay more for being late

One of the implications of rising interest rates that does not get highlighted is deteriorating credit quality. To address this, credit card issuers have started increasing the interest rate on card balance for users who do not pay the minimum amount on the due date twice in a 12-month cycle.

Say you have a credit card that charges 2.5% interest every month. If you do not pay the minimum amount by the deadline twice in a 12-month period, the interest rate will increase to 3%. The new rate will apply from the date of default accrued and will be reviewed only after 12 months. If repayment behaviour does not improve, this interest rate may be further increased. A card issuer cautions that two defaults within four billing cycles can even result in the card being blocked till dues are cleared.

It’s a wake up call for all those who do not pay their credit card bills on time. It does pay to be a smart credit taker; else you might end up paying for uncalled for charges.

— Narayan Krishnamurthy

Valuing your house

Telling figuresHow often have you worried if the property you were planning to buy was actually worth the price quoted or was it just a product of the buoyant real estate market? The National Housing Board is now trying to help you with its pilot residential index developed for five cities—Delhi, Bangalore, Kolkata, Mumbai and Bhopal. The index, to be extended to other cities in phases, will be prepared every six months. The valuation will include weightage given to land cost, housing stock, location, infrastructure and amenities available among 12 parameters. NHB will source details from buyers, sellers, brokers and banks.

-Rakesh Rai

Realty tracker

There is a new way to guage the pulse of real estate, this one more relevant for those interested in stock investing. Bombay Stock Exchange has launched a realty index, which will track price movements of real estate stocks. The launch follows the entry of several new players in the stock market. The base year for the index is set at 2005 and the base index value is 1,000. Just three companies— DLF, Unitech and Indiabulls— account for 80% of the index. But expect things to change soon.

-Rakesh Rai

Book of jobs

Hirings at the junior levels are likely to increase by 2% while that in the senior levels are likely to stagnate. There will also be a slight increase (1%) in mid-level hirings. There’s been a spike—4%—in firms that are likely to opt for employees who prefer to work flexi-hours. These are some of the findings in the recent Quarterly Employment Outlook Report (July-Sept 2007) by TeamLease Services, a staffing solutions organisation. Infrastructure and financial services are likely to fuel the hiring boom with marketing and finance throwing up more jobs.

Doctor’s prescription

Did you know that Indian households spend 10% of their total consumption expenditure on health today? This is just one of the facts thrown up by the 60th round of National Sample Survey. There is more. Average medical expenditure on hospitalisation is quite high with people shelling out Rs 8,851 a year in the urban areas. Of all hospitalised cases 62% people prefer private hospitals over government ones. Even if no hospitalisation is involved people mostly seek private facilities.

This despite the fact that the latter is three times more expensive than a government hospital. On an average patients spend Rs 3,877 in government hospitals compared to a whopping Rs 11,553 per person in private ones. Obviously the high cost or better treatment shortens people’s stay in a hospital. The average duration of hospitalised treatment in case of private hospitals is only 7.3 days whereas patients tend to linger on in government hospitals for 10.8 days.

The average total expenditure including treatment and other incidental expenses, like travelling, lodging, etc of accompanying family members, was estimated at Rs 9,367. Little wonder then that even modest health expenditure can cause indebtedness. Though most expenses are met by relying on emergency funds or scrimping on the household budget, about 22% of funds are borrowed while 8% comes from selling assets. The study clearly establishes that the health-care scenario needs a drastic makeover to make it accessible to each citizen.

— Namrata Dadwal

Head start

Students often complain that their learning in college does not get them very far in the real world. So financial firms are now trying to rectify matters. They have tied up with academic institutions to teach postgraduate courses designed to give students job-related training. If Reliance World has joined hands with Birla Institute of Technology Management and Philadelphia University for a course in retail management, HDFC Bank has tied up with IILM to start a one-year postgraduate programme in banking and financial services.

ICICI PruLife too has firmly entrenched itself in 10 leading business schools for a postgraduate programme in management and insurance. “The course is a balance of management and insurance subjects supplemented with onthe- job training assignments,” says Judhajit Das, chief-HR, ICICI Prudential Life Insurance. The eligibility criteria is a graduate degree plus work experience. The one deterrent is the high fees: Rs 1.25-1.6 lakh. Then again, there are no free lunches in the world.

— Namrata Dadwal

What’s Hot...

Setting up an online shop on vibrant marketplaces like eBay allows people to overcome any geographic challenges and cater to a national market of two million users from 670 towns in India—a target market that any marketer would die for. The online money-making opportunities— be it through selling, teaching, trading or even by ranting online was looked into in MONEY TODAY ’s cover story dated 17 May 2007

 We did see the opportunity that people from places as far as Surat and Vishakhapatnam, not to forget the metros, were busy cashing in on. And, unlike conventional business, selling online does not involve stockkeeping and huge inventories. This is perhaps one big factor that makes people across agegroups, be it women, elderly or even school children, try their hand at selling on a full- or part-time basis. Then there are many who have extended their bricks and mortar business to online, by adding a distribution channel where none existed. The low entry barriers of minimal set - up costs clubbed with the easy-to-use listing tools make starting an online business on eBay very accessible and scalable, as several first time entrepreneurs are fast discovering.

However, the big question that anyone starting a business would want to have a foolproof answer to is what to start selling? That items such as jewellery, mobile phones, computer peripherals and even clothes have a lot of takers on the online marketplace is more or less known, but the eBay India Pulse will tell you more on the frequency of sale of each of these items. The MONEY TODAY-eBay India Pulse will appear every quarter and track what was the buyer’s flavour the preceding quarter. This we hope will help you get a fair idea on what item sells online and help you confidently join the large army of sellers on the Internet.

Random nuggets of personal finance wisdom

For more details log on to and read our cover story titled Making Money Online.