Category: Personal Finance

What is IEPF? Introduction, Reasons for Transfer, and Process of Claiming Explained

Shares are often bought, but many are never claimed or forgotten about. Money in these situations remains unclaimed for a long time. The Investor Education and Protection Fund (IEPF) was established by the Ministry of Corporate Affairs (MCA) to ensure that these unclaimed shares are transferred to and received by the appropriate individuals.

The purpose of this blog post is to explain why shares are transferred to the IEPF and how they can be claimed.

Introduction

The Investor Education and Protection Fund, or IEPF, was created on January 13, 2016, by the Central Government under Section 125 of the Companies Act 2013 to protect and educate investors. Contributions to the IEPF come from various sources, including unclaimed dividends, matured deposits, and other business assets. These funds are then used to support investors who have lost money due to dishonest business practices.

Why are shares transferred to IEPF?

Many businesses that turn a profit pay dividends to their owners. Shares that have not been claimed by the holder for seven years get transferred to the IEPF. Owing to this inactivity, the company’s legislation requires it to transfer the shares to the IEPF, along with any outstanding interest.

This transfer protects their interests by preventing the investor from losing shares due to inactivity in their account. The shareholder has full right to reclaim their share from the authorities.

Reasons why the holder may not claim dividends

1. It is not possible for you to receive the dividend if you misplace the shares you own or forget the details of your ownership.

2. Legal hires cannot claim assets in the event of a holder’s death if the nominees are unaware of them.

3. You will not be entitled to the dividend the firm declares if your investment records are incomplete.

4. The company will not be able to transfer the dividend to the shareholder if the shareholder’s registered bank account has changed over time and has not been updated with the firm.

Who can claim shares from IEPF?

Any shareholder whose unclaimed dividends and shares have been transferred to IEPF can claim their shares from IEPF. There is a limit of one consolidated claim per corporation per fiscal year. Before filing the claim with IEPF, the claimant must make sure the company has completed the share transmission procedure and issued an entitlement letter.

Amounts credited to IEPF

1. If not claimed by the holder, the unpaid dividend amount is transferred to IEPF.

2. The interest and other income received from investments are transferred to IEPF.

3. The redemption amount received from the preference shares remained unclaimed for more than 7 years.

4. The proceeds received by the IEPF from fractional shares sold as part of bonuses, mergers, and acquisitions.

Utilization of IEPF Amount

The IEPF authority can only utilize the amount lying with them for the below-mentioned purposes.

1. The fund can be utilized towards promoting investor awareness programs.

2. Making refunds regarding matured deposits, debentures, and unclaimed dividends to their holders.

3. The National Company Law Tribunal has sanctioned the reimbursement of legal expenses incurred in suits against debenture holders, members, or depositors.

4. Any other purpose incidental to the purpose mentioned above.

Process to get shares from IEPF

The process to claim the shares from IEPF authorities is as follows:

1. Online Application – First, you must fill out an online application form known as IEPF 5, which is available on the company’s official website, www.iepf.gov.in, under the head claimants. The form will ask you for your information, company details, etc.

2. After completing and submitting the form, you will receive acknowledgement slips and the reference number.

3. Physical Submission—Submit the acknowledgement slips along with essential documents such as the Indemnity Bond, Advance Stamped receipt, original shares, debt certificate, proof of entitlement, and Aadhaar card to the relevant authorities.

4. Send all the documents to the Nodal Officer of the company at their registered office.

5. The nodal officer will then verify your claim and send a verification report to IEPF within 15 days.

6. Your claim will be processed once IEPF receives the verification report.

7. After the company processes the claim, the stock will be transferred to the holder’s Demat account.

Conclusion

The Investor Education and Protection Fund (IEPF) is crucial for advancing financial literacy in India and protecting investors’ interests. In addition to distributing shares and unclaimed dividends to investor education and safety initiatives, the fund fosters a more transparent and accountable environment.

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Frequently Asked Questions (FAQs)

Why are shares transferred to IEPF?
Shares are transferred to IEPF because the shareholder failed to claim the company’s income and shares.
How can I check if I have any unclaimed dividends or shares lying with the IEPF?
You can search for unclaimed sums on the IEPF website by entering your name and PAN card information.
How long does it take to get the shares back from IEPF?
It generally takes 30 to 60 days after completing the verification claim.
What does IEPF stand for?
IEPF stands for “Investor Education and Protection Fund”.
Which form needs to be filled to claim shares from IEPF?
To claim shares from IEPF, you must first fill out the IEPF 5 form. Once completed, print the acknowledgement receipt and send it to the company’s nodal officer.

April 18, 2024

What is Insurance? Features, Terms, Benefits, Types, and Metrics Explained

There are always surprises in life. Some surprises are great, but some are nasty and will hurt your pocket. Imagine yourself driving on a highway when, all of a sudden, there is an accident and your vehicle breaks down. In such a situation, it is natural to be concerned about how to resolve the issue. This is where insurance comes in; if you have coverage for your vehicle, you can get repairs done without having to pay for them.

The blog will guide you through the world of insurance, helping you pick the best coverage for your needs and grasp the fundamentals.

Overview on Insurance

An insurance policy is a financial contract that shields you against unforeseen financial losses between two parties.

The insurance provider charges a premium to cover a person or entity against certain risks, such as mortality, accidents, medical emergencies, etc. This ensures that the insured party can avail of the provider’s insurance benefits in the case of a loss.

For example – Mr. A is driving to work, and en route, he gets into an accident that damages his vehicle. If Mr. A had auto insurance, he would be entitled to a claim for the total amount of compensation from the insurance provider. In order to get this amount, Mr. A would have needed to pay a premium at the start of the policy’s term or length.

Read Also: Prize Indemnity Insurance

Features of Insurance

1. Having an insurance policy allows you to mitigate the risk.

2. You can transfer the financial losses to the provider by paying a small amount as a premium.

3. You can live a calm life and feel at ease knowing that you will be compensated in the event of an accident.

4. There are certain things, like cars, for which you are required to have insurance as it is made mandatory by authorities.

Terms of Insurance

1. Policy – The written agreement between the policyholder and insurer.

2. Insurer – The insurance company that will be covering your risks.

3. Policy Holder – The person who took the policy from the insurance company.

4. Premium – The amount that you are required to pay to the company to keep the policy effective.

5. Policy Term – This will be referred to as the effective period, expressed in terms of the number of years for which the insurance provider will offer coverage.

6. Sum Assured – The highest sum of money that you will receive in the event of unanticipated events.

7. Claim – This is regarded as a formal request for reimbursement/payment for expenses incurred after the event.

How does Insurance work?

The insurance firm takes premiums from several clients, covers them for particular risks, and divides the risk among them.

Let’s use home insurance as an example. In a given area, there are 100 houses with a value of 1 lakh each, of which 2 burn down every year. All of the homeowners obtained insurance from a company and had their homes covered; therefore, the insurance company collected a total of about 10 lakhs in premiums. Should two of the approximately 2 lakhs worth of houses burn down in a given year, the company would pay the homeowners 4 lakh and make a profit of 6 lakhs.

In a similar vein, the policyholder would have the assurance that should their home burn down; they would receive a settlement of two lakh rupees for a premium of just 10,000 INR.

Benefits of Insurance

There are lots of benefits to buying insurance, some of which are mentioned below-

1. Insurance shields you from life’s uncertainties and guards against financial losses brought on by many unforeseen circumstances.

2. Few insurance policies offer both life insurance and investment rewards, giving you the chance to achieve your most important life goals in addition to receiving insurance coverage.

3. Unpredictable events could result in large losses that you would have to pay out of pocket, which could negatively affect your financial situation. But insurance allows you to cushion yourself.

4. You can feel more at ease knowing that your insurance provider will provide support in the form of compensation in the event of a loss.

5. Insurance plans also come with tax benefits, as you can take a deduction for life insurance u/s 80(C) and for health insurance, you can claim a deduction u/s 80(D).

Types of Insurance

In India, insurance is divided into 2 different categories.

1. Life Insurance

2. General Insurance

Life Insurance

This kind of insurance safeguards your loved ones by providing either one-time or periodic payments after the event of your death. This insurance helps your family survive after your passing.

There are several types of life insurance. Some of them are:

1. Term Life Insurance – This insurance ensures that in the event of your death, the designated beneficiary receives an agreed-upon amount from the insurer.

2. Whole Life Insurance – The insurance covers an individual’s life to the age of 100 and is sometimes referred to as a standard life insurance coverage.

3. ULIP Plans – The Unit Linked Insurance Plan, or ULIP, offers both investing and insurance benefits. A portion of your contribution is used to cover your life insurance, while the remaining amount is invested in securities linked to the market.

General Insurance

All other forms of insurance, excluding life insurance, are categorized as general insurance since they shield your finances from losses brought on by events that involve home, car, health, or other property. They also go by the name of non-life insurance policies.

There are several types of general insurance. Some of them are:

1. Health Insurance – When a person purchases health insurance, the insurance company pays for their medical expenses up to the sum assured, which is determined at the time the policy is taken out.

2. Motor Insurance – This type of insurance offers cash support if your vehicle — a car, bike, etc.— is stolen or damaged.

3. Home Insurance – As the name implies, home insurance protects your home’s infrastructure and possessions from harm and devastation, including natural and man-made calamities.

4. Travel Insurance – If you have travel insurance, you will be protected against any mishaps that happen during your travel, like misplaced bags, cancelled flights, etc.

How to Choose an Insurance Provider?

1. The most important factors to consider when choosing an insurance company are the features and benefits that they are offering.

2. You must obtain estimates from multiple insurance providers and evaluate them; nevertheless, you shouldn’t choose the least expensive option without also considering the value proposition.

3. Customer service is another crucial component to take into account. When filing a claim, you should pay close attention to how quickly and responsively their team responds to your inquiry.

4. Before purchasing any insurance policy, you should research the company’s past claim settlement ratio; the greater the ratio, the more likely the insurer will pay the claim without being denied.

5. Although negative reviews or complaints filed to the insurance business are often disregarded, they may provide insight into which firms are worth considering.

6. When purchasing insurance policies, it is important to consider an insurance company’s size and financial standing. In the event of a larger claim, a company with weaker financial standing may be unable to reimburse the amount due.

Read Also: Concurrent Insurance

Key Comparison Metrics of Insurance Providers

1. Gross Written Premium – It shows the entire amount of the premium that the insurer wrote before commissions and reinsurance costs are subtracted.

2. Claim Settlement Ratio – This displays the percentage of claims that the insurance company has settled relative to the total number of claims that it has received.

3. Policy Renewal Rate – This indicates the percentage of policyholders who choose to renew their insurance with the same insurance company.

4. Average Time to Settle a Claim – The shorter the time taken to process the claim, the more advantageous it is to the insured.

Conclusion

One of the most essential advantages of insurance is that it protects your money after an unforeseen event in exchange for a nominal premium. However, you must take into account several aspects when choosing an insurance provider, including the claim process, customer service, and policy features.

Frequently Asked Questions (FAQs)

What is the purpose of insurance?
The primary goal of insurance is to lessen the burden of monetary loss in exchange for a minimal premium payment.
What are the types of insurance?
There are two primary categories of insurance: general insurance and life insurance.
Which organization manages the workings of the insurance industry?
The Insurance Regulatory and Development Authority of India, or IRDAI, is responsible for overseeing the general operations of the insurance sector.
What is IMF in Insurance?
IMF stands for Insurance Marketing Firm, which is a distribution channel established by IRDAI.
Is there any tax benefit available in insurance?
Yes, insurance plans offer several tax benefits. For example, you can deduct your life insurance payments under Section 80(C) and your health insurance premiums under Section 80(D).

April 16, 2024

What is FIRE in Finance? Full Form, Features, Types, and Formula Explained

Are you tired of your daily grind? Feeling trapped by your income? You are not alone. Millions crave financial freedom and the chance to break free from the traditional 9-5 job. But is early retirement possible?

This blog will dive deep into the world of FIRE and explore the sacrifices needed to achieve financial independence and early retirement.

Overview

FIRE stands for “Financial Independence Retire Early”. According to this theory, saving a bigger percentage of income and making prudent purchases throughout one’s earning years are the best ways for someone to retire early—typically in their 30s or 40s.

A person is typically expected to retire at age 60, but recently, people have a longing to retire early. The idea inspires many to save money to retire early and live a longer life.

Features

The major features of FIRE are as follows –

1. The concept focuses on retirement earlier than traditional retirement age.

2. Individuals should save a significant percentage of their income—more than 50%, on average.

3. It is recommended that savings are invested aggressively in high-yielding asset classes like bonds and stocks.

4. Implementation of the idea requires a minimalistic lifestyle, which means an individual is required to spend less and find cheaper alternatives to their habits.

5. Proper financial planning is required to achieve early retirement.

6. Discipline in saving funds is of paramount importance

Types of ‘FIRE’

The 3 major types of FIRE approaches are explained below-

1. Lean FIRE

Lean FIRE assumes a low spending rate after retirement. This means that you’ll have to sacrifice many of your aspirations and live within your means. If you’re willing to make those sacrifices, then Lean FIRE might be the right option for you because it is the fastest way to achieve your goals.

2. Fat FIRE

If you dream of international travel, lavish vacations, and shopping, Fat FIRE is the way for you. It allows users to save aggressively during their careers to have above-average retirement funds.

3. Barista FIRE

Individuals who follow the FIRE method are not interested in working a 9–5 job in the long term; instead, they engage in part-time work and live a modest lifestyle after retirement. To enjoy the freedom of work and the financial security of retiring early, many attempt to locate a less stressful job or work part-time after retirement.

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How does ‘FIRE’ work?

If you intend to retire early, you must determine how much money you will need to continue living the way you do when you are retired. This will assist you in deciding when you can retire.

For example, a person with an annual income of 7 lakhs who intends to retire at 45 must have a different FIRE plan than someone with an annual income of 12 lakhs who wants to retire at 40.

FIRE strategy requires a unique approach, which typically includes cost-cutting and aggressive investing. One way to save costs is to purchase second-hand goods rather than brand-new ones or to spend on necessities only rather than wants. Individuals must set aside between 50 and 70 percent of their income for savings and use those funds to invest in various higher-yielding asset types, including bonds and stocks.

In addition to these two things, you must review your tax strategies to reduce the amount you pay for tax on your income.

To learn about your required retirement corpus, explore our Retirement Planning Calculator here.

Method of Calculating ‘FIRE’

1. To calculate FIRE, you need to determine your in-hand annual income first.

2. Next, you must determine your FIRE number using the widely accepted 4% thumb rule, which states that to maintain a 4% withdrawal rate, you must amass assets equal to 25 times your yearly expenses. For example – If your annual expenses are 5,00,000 INR, then your FIRE number would be 1,25,00,000, which is 25 times your annual expenses.

3. Then, you must adjust the FIRE number to include the impact of inflation.

4. The next step is to figure out how long it will take you to reach FIRE by factoring in your current savings rate, expenses, and investment return.

5. The next stage would be to decide which asset class to invest in.

6. Your portfolio must be periodically examined to assess investment performance and determine whether your FIRE objective is on track.

Advantages

FIRE offers several advantages to those who use it for their retirement planning, a few of which are mentioned below.

1. It gives someone the ability to feel adaptable and free to pursue the kind of life they desire.

2. An individual can have more time to follow their passions and hobbies when they retire early.

3. Individuals who are financially independent and have a solid financial plan lead stress-free lives free from financial uncertainty.

4. A person can leave a concentrated legacy through FIRE. Early retirement also enables one to spend more time with one’s loved ones.

Disadvantages

1. FIRE is vulnerable to uncertain and erratic returns on your investments; if the actual returns do not align with your retirement plan, you may not be able to secure enough money to retire.

2. It focuses heavily on giving up short-term needs in favor of early retirement and long-term financial security, which can cause mental dissatisfaction among users.

3. The growing cost of healthcare is not considered while accounting for retirement. This exposes the user to vulnerability during periods of a health crisis.

4. Inflation can erode purchasing power and reduce the value of your retirement savings. Hence, it is important to regularly modify the FIRE number in accordance with updated inflation figures.

Conclusion

The FIRE technique is a valuable strategy for early retirement and post-retirement financial independence. If you want to retire in your 40s, you should plan your retirement based on your lifestyle and income. You can apply any of the FIRE types to plan your financial future for yourself and your family. Furthermore, since retirement is a very personal choice, there is no one correct way to plan it; hence, you should do what is practical for you.

Frequently Asked Questions (FAQs)

What does FIRE stand for in financial terms?
FIRE refers to “Financial Independence Retire Early”.
What is the FIRE method?
It’s the process of making significant investments and savings during your formative years so that you can retire early.
How do you calculate your FIRE number?
To calculate your FIRE number, you must calculate your current annual expenses and multiply them by 25. This FIRE formula is derived using the 4% rule as a basis.
How can I plan my retirement by FIRE?
With the FIRE strategy, you can reduce your spending, save more money, and invest in high-yielding asset classes to prepare for retirement.
Is FIRE achievable for everyone?
Most people can achieve it because it just takes discipline, dedication, and smart financial planning. Your ability to achieve FIRE depends on your income level, your spending habits, and your ability to generate higher returns.

Disclaimer: The securities, funds, and strategies mentioned in this blog are purely for informational purposes and are not recommendations.

April 16, 2024

UPI Scams Explained – Types, Prevention & Actions

Have you ever received a suspicious call about your UPI account? Or a message claiming an undelivered package requiring an urgent payment? If so, you are not alone. UPI scams are on the rise in India, and it is important to know the tricks scammers use to steal your hard-earned money.

Today’s blog will explore the latest UPI scams and provide essential tips for protecting yourself.

UPI Scams Overview

UPI scams are deceptive tactics that exploit the Unified Payments Interface (UPI) system to steal money from users. These scams can trick you into revealing sensitive information or initiating unauthorized transactions.

Scammers use several methods to manipulate you. They might pose as a trusted source like your bank, a seller, or even a friend. Their ultimate goal is to get your UPI PIN or OTP (one-time password). Once they get this, they can transfer funds from your account without your permission.

Latest Scams

Below are some of the latest tactics used by scammers:

Fake Customer Care Scams

This scam involves impersonation. Scammers pretend to be customer service representatives from your bank or a popular online retailer. They might call you, claiming suspicious activity on your account or undelivered products. The goal is to pressure you to share your UPI PIN or OTP.

QR Code Scams

Malicious QR codes can be placed strategically to trick you. These codes could be on posters, websites, or even physical receipts. Scanning such a code could lead you to a fake UPI payment page or download malware that can steal your credentials.

Fake Investment Schemes

Fraudulent investments offering promising high returns are a common trap. Scammers might reach out through social media or messaging apps. They can be very convincing, so be wary of unsolicited investment advice and always research thoroughly before transferring any funds.

SIM Cloning

While not entirely new, SIM cloning is a growing concern. Scammers can get a duplicate SIM card with your phone number. This could allow them to intercept UPI notifications and verification codes, enabling unauthorised transactions.

Fake Delivery OTP Scam

This is a common tactic used by fraudsters to steal money through UPI. In this scam, you will receive a call from the fraudster impersonating a delivery agent. They would then create a sense of urgency by stating a delivery attempt was unsuccessful due to your absence or an incorrect address. The scammer will then ask for the OTP to reschedule the delivery or verify your information. The OTP that you will receive is actually for a UPI transaction.

Phishing

It is an attempt to steal sensitive information, generally usernames and passwords, credit card details, or any other personal data, by pretending to be a legitimate source. Phishing scams can target you through various channels, including email, text messages, phone calls and even social media. This could be an email that looks like an email from your bank or even a fake website designed to mimic a popular online service.

UPI Scams Economic Data

In 2022-23, 95,000 cases of UPI fraud were reported, up from 84,000 in 2021-22.

55% of digital payment frauds in India are related to UPI transactions, and almost half of cybercrime cases since 2020 have been linked to UPI.

While UPI boasts built-in security features, a few users unfortunately fall victim to social engineering scams.

Year	Count of cases	Fraud-to-Sales Ratio (value terms)
2020-21	77,299	0.0017%
2021-22	84,274	0.0016%
2022-23	95,402	0.0015%

Note – The fraud-to-sales ratio is a metric used to measure the percentage of fraudulent transactions compared to the total volume of transactions in a given period.

Even though the number of UPI fraud cases has increased, the fraud-to-sales ratio remains very low, indicating that most UPI transactions are safe. However, this does not eliminate the importance of being aware of scammers’ social engineering tactics.

UPI Scams Government Actions

The Indian government is aware of the rising problem of UPI scams and is taking steps to combat them. Let us have an overview:

The RBI issues guidelines and regulations for UPI transactions to strengthen security measures and improve fraud detection.
The government has formed an Inter-Ministerial Committee on phone frauds, which brings together various stakeholders like the Ministry of Electronics and Information Technology, the Department of Financial Services, and law enforcement agencies to work collaboratively on preventing online financial frauds, including UPI scams.
RBI and NPCI run public awareness campaigns to educate users about UPI scams. These campaigns include informative videos, posters and social media messages.
The Central Government has also launched the National Cyber Crime Reporting Portal, www.cybercrime.gov.in, to enable victims to report complaints about all cybercrimes, including net and online frauds.

To sum it up, the government is consistently addressing UPI scams, but it is a continuous battle. So, you need to be vigilant and follow safe UPI practices.

Prevention Tactics

Treat your UPI PIN and OTP with the same care you would for your ATM PIN. Never, ever share them with anyone. Banks and legitimate businesses will never ask for this information.
Before approving any UPI transaction, meticulously analyse the recipient’s details. Verify the name and UPI ID; do not rely solely on nicknames or familiar-sounding names.
Scammers often impersonate customer service representatives or sellers. If you receive a call or message requesting urgent UPI payments or claiming suspicious activity on your account, verify the sender’s identity directly with the bank or the company they claim to represent.
Some messages often contain links that lead to fake websites designed to steal your money through UPI credentials. Therefore, do not click on links from unknown senders.
Only download UPI apps from trusted sources like Google Play store or Apple App Store. Avoid downloading apps from untrusted websites or clicking on ads that promote them.
Enable strong passwords or PINs for your phone as well as the UPI app. Consider two-factor authentication for additional security.
Regularly monitor your UPI transaction history, look for any unauthorized transactions and report them to the bank immediately.

Read Also: Explainer on Imitation Investing

Conclusion

In today’s digital world, staying safe from UPI scams requires constant vigilance. Remember, knowledge is power; you can keep yourself safe by educating yourself and following safe practices. Do not hesitate to report suspicious activity to your bank and the authorities. Together, we can create a safer digital payment environment for everyone.

Frequently Asked Questions (FAQs)

What are UPI Scams?
UPI Scams are deceptive tricks that exploit UPI to steal money from users through fake transactions or extracting sensitive information.
What are some common UPI Scams?
Phishing messages, fake money requests, and unauthorized transactions are all common scams.
How can I protect myself from a UPI Scam?
Be cautious of unknown messages, double-check the recipient details, and download apps carefully to protect yourself.
Is using UPI safe?
UPI has built-in security features, but user awareness is important. Following safe practices minimise your risk.
What should I do if I suspect a UPI scam?
Do not respond to the scammer; immediately report the incident to your bank and change your UPI PIN if needed.

April 5, 2024

NEFT vs RTGS vs UPI vs IMPS: A Comparative Study

In today’s digital era, electronic fund transfers have become the norm, revolutionizing how we transact money. Multiple options, such as RTGS, NEFT, UPI, and IMPS, are available. Let us delve into the blog better to understand these options.

NEFT: An Overview

It stands for National Electronic Funds Transfers and is a RBI-governed funds transfer method. NEFT started in November 2005 and is a safe and secure method of transferring small amounts of money.

Features

Fees and Charges: Online NEFT transactions are free of charge and offline transfers cost up to ₹50 in charges.
Processing Time: Processing time is in under 2 hours. In some cases, it may also take up to 12 hours.
Maximum Limit: There is no maximum limit per day for NEFT transactions.

RTGS: An Overview

It stands for Real-time Gross Settlement and is used to transfer higher amounts. RTGS ensures that the funds are transferred securely and without dependence on other transactions, thus minimizing risk.

Features

Fees and Charges: RTGS online transfers do not have any levied charges.
Processing Time: RTGS is the fastest method to transfer higher-value amounts, and the transaction is settled in real-time, under 30 minutes.
Maximum Limit: The Reserve Bank of India (RBI) has not set any maximum transaction limit.

UPI: An Overview

It was launched in 2016 by the National Payments Corporation of India (NPCI) and stands for Unified Payments Interface. The unique feature of UPI is the ease of transferring money, this lets you send money from your bank account to another by simply entering someone’s phone number, UPI ID, or scanning a QR code. This fund transfer facility is available through your mobile 24*7.

Features

Fees & Charges: UPI payments service is free and does not charge any transaction fees.
Processing time: UPI is an instant payment and transfer method.
Maximum Limit: UPI’s maximum transaction limit per day is 1 Lakh.

IMPS: An Overview

It stands for Immediate Payments Service and was first established by NPCI in 2010. An IMPS funds transfer is a better fit for you than UPI as it allows immediate transfer of amounts up to 5 Lakhs.

Features

Fees & Charges: IMPS transfer fees can range from ₹2.5 to ₹25 + GST depending on the amount value and choice of bank.
Processing time: IMPS transfers amount usually within 30 minutes.
Maximum Limit per day: The transaction limit of IMPS is 5 Lakhs.

Comparison Chart

Basis	NEFT	RTGS	UPI	IMPS
Minimum Transfer Limit	No minimum limit	₹2 Lakh	No minimum limit	No minimum limit
Maximum Transfer Limit	No upper limits (max. ₹50,000 per transaction)	No limit	₹1 Lakh	₹5 Lakhs
Time Taken	Up to 12 hours (usually within 2 hours)	Real-time (within 30 Minutes)	Instant	Real-time (within 30 Minutes)
Service Availability	Online + Offline	Online + Offline	Online + Offline	Online + Offline (chargeable)
Security	Safe, backed by RBI	Safe, backed by RBI	Safe, backed by NPCI	Safe, backed by NPCI
Service Fees	No charges on online NEFT transactionsOffline NEFT transactions are charging between ₹2.5 to ₹50	No charges for online transactionsFor offline: ₹2L to 5L transaction: up to ₹25 applicable₹5L & above transaction: ₹25 to ₹50 applicable	Free of cost	₹2.5 to ₹25 (varies from bank to bank)
GST charges	GST charges are applicable	No GST charges for online RTGS transaction₹15 + GST is charged for offline RTGS transaction	No charges	GST charges are levied
Service Availability during Bank Holidays	Available	Available	Available	Available
Suitability	Suitable for loan repayment and credit card payments	Suitable for transactions exceeding ₹2 lakhs.	Suitable for instant transfers upto ₹1 lakh	Suitable for transactions ranging between ₹1 lakhs to ₹2 lakhs
Operated by	RBI	RBI	NPCI	NPCI

Charges

Let’s have a look at which one is cheaper NEFT vs RTGS vs UPI vs IMPS:

Amount	NEFT	RTGS	UPI	IMPS
Below 2 Lakhs	Free	Not Applicable	Free	₹2.5 to ₹15 + GST charges
2 Lakhs to 5 Lakhs	₹25 to ₹30 + GST charges if applicable	Free of cost	Not Applicable	₹2.5 to ₹15 + GST charges
5 Lakhs & above	₹25 to ₹50 + GST charges if applicable	maximum ₹50 + GST charges	Not Applicable	Not applicable

Conclusion

In conclusion, NEFT, RTGS, UPI, and IMPS are distinct electronic fund transfer systems with varying features and benefits. NEFT is suitable for small transactions, RTGS for higher amounts, IMPS for instant transfers up to 5 Lakhs, and UPI for quick transfers up to 1 Lakh without charges. Each method caters to different needs and preferences in online transactions.

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Frequently Asked Questions (FAQs)

What is the minimum amount for an IMPS transfer?
The amount transferable through an IMPS can be as low as Re.1.
What is the limit of IMPS in Indian bank?
Account holders can transfer up to Rs. 2 lakh through IMPS in a day.
Is RTGS mode of payment safe?
RTGS is a highly safe and secure mode of payment which is monitored by the RBI. It is even more secure as it is used majorly for money transfers of higher amounts.
Which is better, NEFT or UPI?
It depends on the user’s preferences and amount of transfer. While UPI transactions are processed instantly, NEFT transactions may take upto 2 hours to process.
Is IMPS a better mode of transfer than NEFT and RTGS?
IMPS allows immediate transfer of funds and this service can be accessed even on bank/public holidays. That is why this service is often considered better than NEFT and RTGS.

March 13, 2024

Green Bonds – Meaning, Process, Pros, Cons & Outlook

Ever wondered how your investments can benefit both your wallet and the environment? That is the power of Green Bonds! These innovative financial instruments are shaking up the investing world, offering investors a chance to earn great returns while supporting sustainable projects that promote environmental well-being.

In our today’s blog, we will discuss green bonds – regular bonds with an eco-friendly twist.

Green Bonds Overview

Green bonds are a type of debt security used to finance projects with environmental benefits. These projects can include renewable energy, energy efficiency, clean water, sustainable agriculture and conservation. The government, corporations, and non-profit organisations issue these bonds. The average maturity is comparatively longer for green bonds, i.e., 17 years.

Did you Know?

The Swedish Environment Protection Agency issued the first-ever environmental bond in 1993.

Green Bonds History

It took decades for green bonds to evolve from a niche concept to a major sustainable finance topic.

The Story

In 2007, the Intergovernmental Panel for Climate Change, a UN agency, focused on providing scientific data about climate change and its economic implications.

A report was released that established the connection between human activities and global warming. This revelation, coupled with the rising frequency of natural disasters, provoked Swedish pension funds to ponder how they could leverage the funds that they managed to resolve the aforementioned problem.

Seeking guidance, they approached their bank, SEB (Skandinaviska Enskilda Banken AB). The bank then recognised the synergy and fostered a unique solution bridging the financial needs with environmental expertise. SEB then facilitated the connection between these financial endeavours and the World Bank and provided its extensive expertise in investing in environmental projects globally.

The solution was obvious in observation. But despite the World Bank’s promising environmental projects and proven issuance record of bonds, a critical question remained: how could investors gain absolute confidence that their contributions directly managed climate issues?

This sparked another collaboration with CICERO, the Centre for International Climate and Environmental Research – an interdisciplinary research centre for climate research in Oslo. CICERO scientists were leading experts on climate issues who could provide a sound and reliable view of whether a project would positively impact the environment.

In 2008, this initiative led to the discovery of the first ‘labelled green bond’ by the World Bank and catalyzed the entire green bond market.

Did you Know?

The global green bond market has surpassed the threshold of INR 134 trillion in cumulative issuance.

Green Bonds in India

To reduce the carbon intensity of the economy, the Union Budget 2022-23 announced the issue of green bonds.

The categories of green bonds include renewable energy, energy efficiency, sustainable management of natural resources, clean transportation, sustainable water, green building etc.

For the same, a framework known as Green Bond Principles was designed by the International Capital Market Association (ICMA).

The four core components as outlined by ICMA green bond principles are as follows

1. Use of Proceeds

The government of India will use the proceeds raised from Sovereign Green Bonds (SGrB) to finance and refinance expenditure either partially or wholly for eligible green projects and it will be made sure that proceeds get allocated to projects within 24 months after the issuance.

2. Project Evaluation and Selection

The Ministry of Finance has constituted a “Green Finance Working Committee” (GFWC) headed by the Chief Economic Advisor and GFWC. They will meet twice a year to support the Ministry of Finance with the selection and evaluation of projects. However, the initial evaluation of the project will be done by the concerned Ministry with the help of experts.

3. Management of Proceeds

The proceeds will be deposited to the Consolidated Fund of India (CFI) and then the funds from CFI will be withdrawn as and when needed for eligible green projects.

A separate account will also be created by the Ministry of Finance (GOI) to monitor the proceeds allocation and avoid any malpractice. Additionally, the Public Debt Management Cell (PDMC) will keep track of proceeds within the existing guidelines

4. Reporting

The Indian Government has pledged to offer investors transparent reporting about the allocation of the proceeds from green bonds and the environmental impact of projects funded.

Read Also: What are Bond Yields?

The Process of Issuance of Green Bonds

The concerned Ministry will conduct an initial evaluation to identify the list of eligible green projects depending on the framework and submit it to GFWC.
Members of the GFWC under the guidance of a climate specialist from Niti Aayog as well as the Representative from the Ministry of Environment, Forest and Climate Change, will evaluate and analyse the complete list of the submitted projects.
Once the Finance Bill is passed, the Ministry of Finance will notify the Reserve Bank of India (RBI) about the amount of eligible green expenditures for which proceeds from green bonds can be used.

India’s First Green Bond

India issued the first tranche of its Sovereign Green Bonds worth INR 8000 crore on January 25, 2023, and the proceeds were used for green projects such as solar power, wind and small hydro projects and other public sector projects that help reduce the economy’s carbon footprint.

This offering was sold in 5-year and 10-year tenors through a uniform price auction on January 25, 2023. A similar offering was scheduled for February 9, 2023.

Also, driven by the shared goal of sustainable development, the World Bank Group and the Indian Government joined forces. The World Bank Sustainable Finance and ESG Advisory Services provided technical assistance and expertise to launch the sovereign green bond program, a key initiative to maximise finance for India’s climate transition and green growth.

Did You Know?

In 2015, Yes Bank, a private sector bank in India, successfully issued India’s first-ever green infrastructure bond, raising INR 1,000 crores.

Green Bonds Future Outlook

India has set an ambitious target of achieving net zero carbon emissions by 2070. Green Bonds are expected to play an essential role in mobilising the massive investments needed for this transition.

The Indian Government plans to issue more sovereign green bonds and encourage more involvement from private companies and municipalities.

Are green bonds good for long-term investing?

Green Bonds can be a good option for both long-term investing and ethical investing, but it depends on your individual goals and preferences.

Pros

Green bonds can offer similar returns as traditional bonds, depending on the creditworthiness of the issuer and the conditions prevailing in the market. These bonds may even outperform conventional bonds in some situations.
These bonds can diversify your portfolio, potentially spreading the risk and enhancing its resilience.
By choosing green bonds, you can contribute to financing environment-friendly projects that best align with your values.

Cons

The green bond market is relatively young in India, so long-term history data might be scarce.
The bonds may have lower trading volumes compared to traditional bonds, which will impact the bond’s liquidity.
The extremely long tenure of these bonds may make them undesirable.

Remember – Prioritizing ethical choices may affect your returns as compared to a purely profit-driven investment strategy.

Read Also: CAT Bonds: An Easy Explainer

Conclusion

To sum it up, whether green bonds are a good choice depends entirely on your financial goals, risk tolerance and ethical values. Analyse carefully what matters most and do proper research before investing because not all green bonds are perfect.

Frequently Asked Questions (FAQs)

What are green bonds?
Green bonds are a type of fixed-income security issued by the Government, municipalities, and corporations.
Why should I invest in green bonds?
You should invest in green bonds to make a positive impact, diversify your portfolio, and align your values with your investments.
Are green bonds risky?
Green bonds are riskier than traditional ones because of the limited availability of past data and lack of liquidity.
Are green bonds only for ethical investors?
No, anyone can invest in green bonds. But research well to ensure they meet your specific goals.
When was the first tranche of sovereign green bonds launched in India?
The first green bond in India was launched on January 25, 2023

March 13, 2024

NCD vs FD – Meaning, Features & Key Differences

Are you unable to choose between putting your money into Non-Convertible Debentures (NCDs) and Fixed Deposits (FDs)? You’re not alone! Both options are popular among investors looking for safety and consistent returns, but they both come with their own sets of pros and cons. In today’s blog, we’re comparing NCDs with FDs.

Fixed Deposits – An Overview

It’s a well-known conventional investing choice for risk-averse investors. Fixed deposits are financial instruments offered to the general public by banks and non-banking financial organizations (NBFCs) that allow them to deposit money for a predetermined amount of time and receive a guaranteed fixed return. Both cumulative and non-cumulative options are available with the fixed deposit, giving investors the choice of receiving interest payments periodically or all at once when the fixed deposit matures.

Features of Fixed Deposits

1. The length of a fixed deposit may usually be chosen with flexibility; it can be anywhere from seven days to ten years.

2. Many banks provide an automatic renewal option that lets investors reinvest their money without having to go through any extra steps.

3. Fixed deposits often provide flexibility in the amount invested, with most banks allowing a minimum investment of INR 5000.

4. Fixed deposits are extremely low-risk investing options since they provide a guaranteed return.

5. Senior citizens benefit further from fixed deposit investments by earning interest rates higher than standard rates.

Non-Convertible Debentures (NCDs) – An Overview

Debt instruments, known as NCDs, are issued by corporate entities to raise long-term capital from the general public. Investing in debentures entails lending money to corporate entities in exchange for a fixed interest rate for a predetermined length of time. The principal amount of the loan is repaid by the company on the maturity date.

Two forms of debentures exist: convertible debentures, which can be converted into equity shares of the company after a specific length of time, and non-convertible debentures, which cannot be converted into equity shares. NCDs are issued in the primary market initially, but they can also be traded in the secondary market, offering investors greater liquidity.

Features of NCDs

1. NCDs have a fixed interest rate that is set at the time of issue by the issuing firm.

2. An investor will get consistent, recurring income from NCDs.

3. NCDs are issued for a particular period, after which the principal amount is repaid.

4. Purchasing NCDs entitles you to become a creditor of the business, allowing you to make claims against its assets in the event of its insolvency.

5. Due to the high risk associated with investment in corporate houses, these NCDs are rated by the credit rating agencies based on the creditworthiness of the issuing company.

Difference between NCD and Fixed Deposit

We’ll now explain the distinction between a fixed deposit and an NCD.

Interest Rate – Fixed deposit interest rates typically range from 4 to 7% annually, whereas NCD interest rates often range from 8 to 10%.

Issuer – Corporations issue NCDs to generate capital, whereas banks or other financial organizations issue fixed deposits.

Risk – NCDs possess higher risk as private business houses issue them. As some business houses have low credibility, investing in their NCDs can put your money at higher risk. On the other hand, FDs are issued by banks and other financial institutions that the Reserve Bank of India regulates.

Liquidity – Investment in NCDs offers higher liquidity than Fixed Deposits as they can be traded in the secondary market. Still, no such benefit is available in fixed deposits, although a premature withdrawal option comes with a penalty.

Taxation – NCDs held by an investor in demat are exempted from tax deducted at source while keeping the NCD in physical form attracts TDS if the annual payout is more than 5000 INR. Interest earned from a fixed deposit is fully taxable as per your tax slab if it is above 40000 INR (50000 INR in case of a senior citizen) in a financial year.

Credit Rating – The rating of NCDs by credit rating agencies is mandatory, while the fixed deposits issued by the banks are not required to get rated by any agency; however, corporate fixed deposits issued by non-banking financial companies are required to get the rating from any credit rating agency.

Interest Rate Risk – As NCDs are tradable in the secondary market, their price may vary based on interest rates prevailing in the economy, while fixed deposits don’t have any such kind of risk.

Safety – Assets of the company generally back the issuance of NCDs while the fixed deposit issued by the bank is insured against the bank’s insolvency up to 5 lakh INR.

Conclusion

Investment in fixed deposit is suitable for the investor with lower risk-taking ability and is happy with a lesser return on their investment. At the same time, NCDs can be opted for by investors looking to earn some extra return and can take additional risk for that. Overall, the above comparison shows the features of both fixed deposits and NCDs.

On a short note, investors must consider their risk profile, investment goal & objective before deciding between fixed deposits and NCDs.

Frequently Asked Questions (FAQs)

Can I withdraw my investment from a fixed deposit before maturity?
Yes, you can withdraw your investment before maturity, but you need to pay some penalty to the issuing authority.
Can I sell NCDs in the secondary market?
Yes, after NCDs are issued in the primary market, they are listed in the secondary market like any other securities.
What is the shortest and longest duration for which an NCD can be issued?
NCDs cannot be issued for less than 90 days and more than 20 years.
What is the minimum and maximum duration for which a fixed deposit can be issued?
The fixed deposit can be issued for a period ranging from 7 days to 10 years.
Is investment in NCD better than investment in fixed deposits?
NCDs generally carry higher risk as compared to bank fixed deposits but offer higher returns; hence, it is suitable for only those investors who can take risks for higher returns.

March 11, 2024

Financial Scams in India: Types, Resolution, and Awareness

Did you know that during the financial year 2023, the Reserve Bank of India (RBI) registered bank frauds exceeding INR 30,000 Cr in value? Nowadays, financial scams have become more prevalent, making it difficult to distinguish fraudulent activities from genuine ones.

As per the reports of Statista in 2023, the Reserve Bank of India reported 9,103 financial scams across India. In this blog, we will understand how to avoid scams with the aim of increasing awareness.

Prevalence of Financial Scams in India

In 2023, India’s financial sector witnessed a surge in sophisticated scams and frauds that exploit evolving technologies and capitalize on unsuspecting individuals. Here are some facts pertaining to the year of 2023:

The national cyber crime helpline receives around 50,000 Calls every day, totalling over 13.1 lakh complaints in the entire year.
During investment and due process, a total of 2.95 lakh fake SIM cards, 46,000 devices, 2,810 websites, and 595 mobile applications were blocked.
Approx. 35% of the total scams focussed around customer service and KYC.
Approx. 24% of the total scams focussed on sextortion.
Approx. 22% of the total scams were focused on online bookings and QR codes.

While scams are spread out in the entire country, some states witnessed more than others. Data for some of the individual states (& UTs) are as follows:

Uttarakhand – 243 cyber crimes per capita
Gujarat – 226 cyber crimes per capita
Haryana – 381 cyber crimes per capita
Telangana – 261 cyber crimes per capita
Delhi – 755 cyber crimes per capita

It is an undisputed fact that the country is facing an epidemic of scams and frauds. Hence, we must know about the varied types of scams happening around the country.

UPI Scam

The advent of UPI transactions marked an important milestone in the digital era of payments in India. However, fraudsters and scammers are using different social media platforms like WhatsApp to gain access to a number of individuals and defraud them via various means, such as claiming to be bank representatives, NGOs, etc. They feed on fear of the victims and compel them to adhere to the fraudsters’ demands.

In the year 22-23, reported UPI fraud cases exceeded 95,000, a notable increase from the 84,000 cases reported in 2021–2022, as per the Ministry of Finance.
Shockingly, 55% of all digital payment frauds in India are associated with UPI transactions.
According to the reports, it has been witnessed that 50% of these scams have an average ticket size of less than Rs 10,000.
In 2023, UPI fraud, bank fraud, and email scams resulted in a staggering financial loss exceeding INR 200 cr.

QR code scam alert

Nowadays, QR code scams are on the rise in India, with fraudsters employing deceptive tactics to lure victims into scanning fraudulent QR codes, resulting in the direct theft of funds from their bank accounts.

As per police statistics, 41% of the 50,000 reported cybercrime incidents in Bangalore revolved around QR codes.

Part-time job scams

Fraudsters are using social media to target their audiences with promises of easy part-time work and handsome salaries.

As per a report in 2023, Delhi police addressed 467 complaints about internet fraudsters advertising part-time work—an alarming increase from the 32 complaints reported in 2020.

Courier Scam

These kinds of scammers are targeting young audiences and claiming that courier parcels, allegedly containing drugs or other illegal items, are being sent in their names to foreign countries.

Bengaluru police addressed around 163 such courier reports in 2023, and the cumulative financial loss from these scams was more than Rs 5 cr.

Malware warning frauds

Fraudsters are increasing in delusive tactics, like fake customer support, cashback links, or emails, to convince unsuspecting consumers to install malware, screen mirroring, or remote access apps.

Tech support scams are becoming a worrying factor where 7 out of 10 consumers fall victim to such schemes.

Financial Scams Awareness

Protecting yourself from financial scams and fraud in India requires awareness and caution. Frauds and scams exist in different forms: phishing, emails, and phone calls. Some steps to protect yourself are stated below.

Educate yourself

Knowledge is a great way to defend yourself from scams and frauds. Stay informed and updated about scams and fraud. Government bodies provide information about current scams and how to avoid them.

Verify PIN

Do not share your PIN or any other personal information with anyone. Reputed organizations will not ask for your PIN.

Two-step -verification

It is essential to enable the two-step verification factor. This will help you to give an extra layer of security.

Use strong passwords

Create strong and unique passwords for your files, including social media sites, banking files, etc. Always use a combination of letters, numbers, and special characters, and avoid using the same passwords for multiple portals.

Beware of fraud phone calls

Avoid picking up calls from suspecting numbers and do not provide any confidential details on such calls, even if they claim to be representatives of corporations.

Ask help

If you become the victim of a scam, then consult with the police and legal professionals to seek resolution as quickly as possible.

Financial Scams Resolution

In a recent interview, the Director General of Police (DGP) of Uttarakhand, Ashok Kumar, spoke on cyber crimes in India. He explained a few preventive steps to minimize cyber crimes, fraud, and scams. The pointers are stated below:

Notify your bank’s customer service immediately, report your incident to them, and ask for help to cease your bank details.
File a complaint with NCRP (National Cyber Crime Reporting Portal).
Contact your local police station and also file an FIR.
Keep a close eye on your account’s transactions.

Conclusion

In conclusion, it is crucial to stay informed and cautious to avoid falling victim to scams and fraud in India. By educating themselves, verifying identities, enabling two-step verification, using strong passwords, being wary of fraudulent phone calls, staying updated, and seeking help when needed, individuals can protect themselves from financial scams and fraud.

Frequently Asked Questions (FAQs)

What is Fraud?
It is defined as the false representation of facts or providing false statements to another party for the specific purpose of gaining something that may not have been supplied without the deception.
What are two basic types of Fraud?
The courts classify fraud under two major types: criminal and civil.
What is an example of a fraud scheme?
Common frauds include Ponzi schemes, phoney job offers, false billings, bogus investment opportunities, etc.
Why is it important to understand fraud?
Fraudsters have evolved their methodology in recent times. Therefore, we need to stay aware of their movements so that we can protect ourselves from getting defrauded.

March 7, 2024

Portfolio Management Services – Features, Charges & Risks

Portfolio Management Services is a solution that offers you professional expertise to help you manage your portfolio and grow it. It involves buying stocks and securities in your demat account and directly managing it so that you can have better returns.

While this is a great opportunity, it is important to note that there are certain terms and aspects associated with it. The details of the same are discussed in the guide here.

What Does PMS Mean?

PMS full form is Portfolio Management Services. It is a SEBI-regulated investment service where a registered portfolio manager builds and manages a segregated portfolio of securities on behalf of an individual investor.

This portfolio is tailored to that investor’s specific goals, risk appetite, and time horizon. There is no pooling involved. You own the actual securities directly, in your own demat account.

The minimum investment for PMS in India, as mandated by SEBI, is ₹50 lakh, which is why it’s positioned mainly for high-net-worth individuals, NRIs, HUFs, and similar eligible entities rather than retail investors.

A Quick Note: PMS in Company or Corporate Terms

If you landed here searching for PMS full form in company or PMS full form in corporate settings, know that PMS carries a completely different meaning in HR and business management.

When you consider it in a company from the HR perspective, it is the Performance Management System. This is the process companies use to set employee goals, track performance, and conduct appraisals. That’s unrelated to the investment product covered in this article. Everything from this point forward refers specifically to Portfolio Management Services in the financial and investment sense.

What are the Core Objectives of Portfolio Management

Every PMS strategy, regardless of the manager or approach, is generally built around a consistent set of goals.

Capital Appreciation: Growing the overall value of the portfolio over time. This is primarily through growth-oriented assets like equities.
Risk Optimisation Through Diversification: Balancing returns and risk as per the client’s needs. This is done by spreading investments across asset classes, sectors, and individual securities.
Downside Protection During Volatile Phases: Actively managing exposure to limit drawdowns when markets turn volatile. The idea is to ensure better performance and avoid the assets that are not aligned with the goal.
Liquidity for Opportunities and Emergencies: Keeping enough flexibility in the portfolio to act on new opportunities. Supporting and helping to handle unexpected cash needs without disrupting the broader strategy.
Goal-Based Allocation: Tailoring the asset mix specifically to the investor’s stated financial goals, rather than applying a generic allocation model to every client.

How Does Portfolio Management Services Work?

The PMS process moves through a defined sequence once you sign on with a portfolio manager.

Client Profiling: The portfolio manager evaluates your financial situation. This is followed by setting the investment goals, liquidity needs, risk tolerance, and time horizon. All this done before designing anything.
Strategy Formulation: A custom investment strategy gets built around your profile, covering asset allocation, stock selection approach, and a risk management framework specific to your goals.
Account Setup and Funding: A demat account, trading account, and dedicated bank account get opened in your name, and your funds or existing securities are transferred in.
Portfolio Construction and Management: The manager executes trades, actively monitors the market, and rebalances the portfolio in line with the agreed strategy on an ongoing basis.
Reporting and Review: You receive regular performance reports, disclosures, and digital access to view your holdings and transaction history at any time.

Types of Portfolio Management Services

PMS in India comes in three distinct structures, each giving you a different level of control.

1. Discretionary PMS

The portfolio manager has full authority to make investment decisions on your behalf. This is without needing prior approval for each trade. This suits investors who want a genuinely hands-off experience.

2. Non-Discretionary PMS

The manager recommends trades, but nothing executes until you approve it. This works for investors who want expert input while still retaining final say over every decision.

3. Advisory PMS

The manager provides guidance only. You handle both the decision-making and the actual trade execution yourself. This gives the most control, suited to experienced investors with the time to manage things directly.

PMS vs Mutual Funds

Many people confuse PMS with mutual funds, but they are different. Read this to know how they stand apart.

Factor	PMS	Mutual Funds
Minimum investment	₹50 lakh	As low as ₹100 via SIP
Ownership	Direct ownership of securities	Pooled units, no direct ownership
Customisation	Fully tailored to the investor	Standardised for all unit holders
Transparency	Real-time visibility into every holding	Portfolio disclosed periodically
Taxation	Taxed directly in investor’s hands per trade	Taxed at redemption of units
Regulation	SEBI (Portfolio Managers) Regulations, 2020	SEBI Mutual Fund Regulations

Benefits of Investing in PMS

Investing in PMS is a great choice and can offer you a range of benefits, like:

Professional, Research-Driven Management: The portfolio is managed by an expert and is designed based on the needs of the investors. This supports long-term growth and will ensure that you invest after following risk and return analysis.
Genuine Customisation: Every PMS portfolio is built around your specific goals, risk tolerance, and liquidity needs, and can evolve as your circumstances or the market changes.
Direct Ownership and Transparency: Securities sit in your own demat account, giving you real-time visibility into exactly what you hold, unlike a pooled fund where you own units rather than the underlying stocks.
Tax-Aware Portfolio Construction: Portfolio managers factor in tax efficiency when structuring trades This is aimed to optimise your post-tax returns within regulatory limits.
Time Saved for Investors Who Can’t Manage Actively: If you don’t have the time or expertise to track markets closely, PMS hands that responsibility to a professional while keeping you informed through regular reporting.

Fees and Charges Associated with PMS

PMS costs come from a few distinct sources, not one flat number.

Management fee, either fixed, performance-linked, or a hybrid of both, agreed between you and the portfolio manager.
Brokerage, custodian, and demat charges, added on top of the management fee as operational costs.
No upfront fees allowed, since SEBI regulations specifically prohibit charging fees before the investment is made.
Exit load, where applicable, generally capped at 3% in the first year, 2% in the second, 1% in the third, and nil after that, to discourage short-term withdrawals.
Operating expenses excluding brokerage, capped at 0.50% per annum of average daily assets under management.

How PMS Investments Are Taxed

Since securities sit directly in your account rather than in a pooled structure, tax treatment works differently from a mutual fund.

Gains are taxed directly in your hands, not at the fund level, since you personally hold each security.
Long-term capital gains on listed equity are taxed at 12.5% above the applicable exemption threshold, subject to surcharge and cess.
Short-term capital gains are taxed at 20%, also subject to surcharge and cess.
Every trade the manager makes can trigger a taxable event in your name, unlike a mutual fund where only your own redemption creates one.

SEBI Regulations Governing PMS

PMS providers operate under the SEBI (Portfolio Managers) Regulations, 2020, along with periodic master circulars. Key requirements include:

Mandatory SEBI registration for every PMS provider before they can accept client funds.
The ₹50 lakh minimum investment threshold, non-negotiable across all providers.
An independent custodian holding client assets separately from the portfolio manager.
A strict prohibition on guaranteeing returns, regardless of what a manager’s track record looks like.
Mandatory disclosure documents and quarterly reports covering fees, performance, and risk, shared directly with every client.

Read Also: Types of Mutual Funds in India

Who Should Consider PMS?

PMS is a fit for a specific type of investor, not everyone with spare capital to invest.

Investors who can meet the ₹50 lakh minimum, since this is a hard SEBI-mandated threshold, not a suggestion.
HNIs, NRIs, and HUFs who are looking for professional management services.
Investors who want direct ownership of the actual securities in their own demat account, not units in a pooled scheme.
Those with a specific investment theme in mind that standard mutual funds don’t offer.
Investors who lack the time or expertise to actively manage their portfolio.
Investors are comfortable with higher costs and lower liquidity, and are looking for better returns.

Final Thoughts

Portfolio Management Services offer a level of customisation and direct ownership that pooled investment products can’t match, but that comes paired with a high entry threshold, meaningful fees, and less liquidity than you’d get from a mutual fund. It’s built for investors who have the capital, the risk appetite, and a specific enough set of goals to justify a dedicated, professionally managed portfolio. Before committing, check all the details you need like fees and charges.

S.NO.	Check Out These Interesting Posts You Might Enjoy!
1	Types of Demat Accounts in India
2	Features and Benefits of Demat Account
3	Can I Have Multiple Demat Accounts in India?
4	How to Open a Demat Account Online?
5	Small-Cap ETFs to Invest in India

Frequently Asked Questions (FAQs)

What is the full form of PMS in the investment context?
PMS stands for Portfolio Management Services. It is a SEBI-regulated service where a professional portfolio manager builds and manages a customised, directly-owned securities portfolio for an eligible investor.
What is the minimum investment required for PMS in India?
SEBI mandates a minimum investment of ₹50 lakh for PMS, which is why it’s aimed primarily at high-net-worth individuals, NRIs, and similar eligible entities rather than retail investors.
How is PMS different from a mutual fund?
PMS gives you direct ownership of individual securities in your own demat account with a fully customised strategy, while mutual funds pool your money with other investors into shared units following a standardised strategy.
What does PMS mean in a corporate or HR context?
In company or HR settings, PMS usually refers to a Performance Management System, used for employee goal-setting and appraisals, which is entirely unrelated to Portfolio Management Services in investing.
Are PMS returns guaranteed?
No. SEBI regulations specifically prohibit portfolio managers from guaranteeing returns. PMS aims to optimise risk-adjusted performance over a full market cycle, not deliver assured outcomes.

March 7, 2024

NISM Certifications: An Easy Explainer

Are you planning to build your career in financial markets? Well, if that is the case that you need to be certified. This is not just to make sure that you know the markets, but also to ensure that people can trust you.

This is where you need to know the NISM certificate benefits. Designed to help you start your career in the field of finance, these are perfect. But the question is what is NISM certification, and who should actually complete these?

In this blog, we will break everything down in a simple way. You will learn the NISM full form to the major NISM certification benefits that can help you with your career. So, let us get started without further delay.

What Is NISM?

The National Institute of Securities Markets is known as NISM. It is an educational institution. It was established by SEBI. The main aim of the NISM is:

To ensure right practices in the financial markets.
Guide people on the processes and help them gain expertise.
Offering certification to practice in the market.
Build trust and transparency.
Manage working and ensure no inefficiencies are there.

NISM conducts certification exams. These are the exams that are mainly used to teach and allow people to trade or help others trade in various assets. These include stock markets, mutual funds, and investment advisory services.

A NISM certificate course confirms that a professional meets SEBI’s regulatory standards. This brings us to the main NISM certification benefits, which are:

Better credibility
Role eligibility
Stronger career building

Eligibility for NISM Certification

NISM certification is designed to be accessible and practical for anyone interested in the Indian securities market. There are no complex entry barriers, which makes it suitable for both beginners and working professionals.

There is no minimum educational qualification required for most NISM exams.
There is no age limit, so students, fresh graduates, and experienced professionals can apply.
Market professionals, distributors, advisers, and even individuals with a general interest in finance are eligible.
The only requirement is a basic understanding of financial markets relevant to the chosen exam.

This open eligibility structure allows NISM certifications to support learning, compliance, and career growth at different stages.

NISM Certification Benefits

NISM certification offers practical value for anyone looking to build or grow a career in the securities market. It is not just about clearing an exam, but about meeting regulatory expectations and gaining professional credibility.

1. Regulatory Eligibility for Market Roles

Many positions in mutual funds, stockbroking, investment advisory, and portfolio management require a valid NISM certificate. Clearing the exam ensures you meet SEBI’s eligibility norms and can legally perform specific market functions.

2. Strong Foundation in Financial Markets

NISM exams focus on core concepts. These include topics such as market structure, products, compliance, and ethics. This helps you understand how the securities market works in practice. The focus is not on the theory alone, but also on how the market actually works.

3. Improved Career Opportunities

Holding a NISM certificate increases your chances of getting hired by AMCs, brokerage firms, banks, and advisory companies. Employers prefer certified professionals who already meet regulatory standards.

4. Professional Credibility and Trust

A NISM certification signals seriousness and discipline. It shows that you know about the market. It helps you to build credibility and ensure that people trust you. This is also an assurance for professional conduct.

5. Flexibility for Career Growth

NISM certifications are role-based and renewable. This allows you to upgrade your qualifications as your career progresses or as you move into more advanced roles.

These NISM certification benefits make the certification relevant at every stage of a financial services career.

NISM Courses List 2026

NISM offers a wide range of certification exams in 2026. Each of these courses is aimed towards financial markets. Some of the courses focus on the stock market, while others might focus on mutual funds. It is based on your personal aim that you select the course for yourself.

The NISM Certificate Exam list is as below:

S. No	NISM Certification Examination	Mandating Authority	Duration (mins)	Max Marks	Pass Mark (%)	Negative Marks (%)	Certificate Validity (Years)	Fees (₹)
1	NISM-Series-I: Currency Derivatives	SEBI	120	100	60	25	3	1,500
2	NISM-Series-II-A: Registrars to an Issue and Share Transfer Agents – Corporate	SEBI	120	100	50	NA	3	1,500
3	NISM-Series-II-B: Registrars to an Issue and Share Transfer Agents – Mutual Fund	SEBI	120	100	50	NA	3	1,500
4	NISM-Series-III-A: Securities Intermediaries Compliance (Non-Fund)	SEBI	120	100	60	25	3	1,500
5	NISM-Series-III-C: Securities Intermediaries Compliance (Fund)	SEBI	120	100	60	25	3	1,500
6	NISM-Series-IV: Interest Rate Derivatives	SEBI	120	100	60	25	3	1,500
7	NISM-Series-V-A: Mutual Fund Distributors (English)	SEBI	120	100	50	NA	3	1,500
8	NISM-Series-V-A: Mutual Fund Distributors (Hindi)	SEBI	120	100	50	NA	3	1,500
9	NISM-Series-V-B: Mutual Fund Foundation	SEBI	120	50	50	NA	3	1,500
10	NISM-Series-VI: Depository Operations	SEBI	120	100	60	25	3	1,500
11	NISM-Series-VII: Securities Operations and Risk Management	SEBI	120	100	50	25	3	1,500
12	NISM-Series-VIII: Equity Derivatives	SEBI	120	100	60	25	3	1,500
13	NISM-Series-IX: Merchant Banking	SEBI	120	100	60	25	3	1,500
14	NISM-Series-X-A: Investment Adviser (Level 1)	SEBI	180	150	60	25	3	3,000
15	NISM-Series-X-B: Investment Adviser (Level 2)	SEBI	180	150	60	25	3	3,000
16	NISM-Series-X-C: Investment Adviser Certification (Renewal)	SEBI	60	50	50	NA	3	2,500
17	NISM-Series-XIII: Common Derivatives	SEBI	180	150	60	25	3	3,000
18	NISM-Series-XV: Research Analyst	SEBI	120	100	60	25	3	1,500
19	NISM-Series-XV-B: Research Analyst Certification (Renewal)	SEBI	60	50	50	NA	3	2,500
20	NISM-Series-XVI: Commodity Derivatives	SEBI	120	100	60	25	3	1,500
21	NISM-Series-XIX-C: Alternative Investment Fund Managers	SEBI	180	150	60	25	3	3,000
22	NISM-Series-XIX-D: Category I and II AIF Managers	SEBI	120	100	60	25	3	1,500
23	NISM-Series-XIX-E: Category III AIF Managers	SEBI	120	100	60	25	3	1,500
24	NISM-Series-XXI-A: Portfolio Management Services Distributors	SEBI	120	100	60	10	3	1,500
25	NISM-Series-XXI-B: Portfolio Managers	SEBI	180	150	60	25	3	3,000
26	NISM-Series-XVII: Retirement Adviser	PFRDA	120	100	60	25	3	1,500
27	NISM-Series-XII: Securities Markets Foundation	Non-Mandatory	120	100	60	NA	3	1,770
28	NISM-Series-XIX-A: AIF Distributors (Category I and II)	Non-Mandatory	120	100	60	10	3	1,770
29	NISM-Series-XIX-B: AIF Distributors (Category III)	Non-Mandatory	120	100	60	10	3	1,770
30	NISM-Series-XXIII: Social Impact Assessors	Non-Mandatory	120	100	60	25	3	1,770
31	NISM-Series-XXIV: AML and CFT Provisions in Securities Markets	Non-Mandatory	60	50	50	NA	3	885

Subjects Covered in NISM Certification

Before looking at roles or career paths, it helps to know what you actually study in a NISM exam. A NISM certificate course is built around real market knowledge. The focus is on how things work in practice, not academic theory.

1. Basics of Financial Markets

This subject explains how Indian financial markets function in real life. You learn about equities, debt instruments, derivatives, and the role of stock exchanges. This helps you to understand the market well.

2. Mutual Funds and Investment Products

Many NISM exams spend a lot of time on mutual funds and investment products. You learn how different products are structured. This allows you to guide the investors and make sure that you help them in reaching their goals.

3. Regulations and SEBI Guidelines

Regulation is a core part of every NISM exam. You study SEBI rules, compliance requirements, and the responsibilities expected from market professionals. This subject explains the regulatory purpose behind what is NISM certification.

4. Risk, Return, and Investor Protection

This subject connects risk with returns in a practical way. It also covers investor rights, grievance redressal, and fair practices that professionals must follow while dealing with clients.

5. Market Operations and Processes

You will learn about the market and how the transactions work. This information is key to ensuring that all the trades are happening in the right manner. Also, this acts as a point of guidance for you to help your clients with better trades.

6. Ethics and Professional Conduct

NISM places strong emphasis on ethics. This subject focuses on responsible behaviour. This is where you would know what to tell and how. This is important to avoid sharing wrong information and mis-selling.

Where to Find NISM Study Material and Information

Now, if you are planning to get the NISM certificate, then you must know where to get the material. You must know the sources to find the information. Some of the sources which you can use to find the information on the NISM courses are:

1. Official NISM Website

The first and most reliable source is the official NISM portal. When you register here to complete a course, you will be able to access the materials as well. This will allow you to not just learn but gain better and factual insights.

2. Workbook Provided During Registration

For most exams, NISM provides a downloadable workbook after successful registration. This is the primary study material and is usually enough if you read it properly and revise it more than once.

3. Practice Questions on NISM Portal

NISM also offers sample questions and mock-style practice tests on its website. You can use these to ensure that you practise well and know the previous formats.

4. SEBI Circulars and Guidelines

Some exams, especially compliance and advisory ones, require understanding SEBI regulations. If you go through the rulebooks, you will gain the insights needed.

5. Simple Revision Notes and Self-Made Summaries

Many candidates rely on their own short notes while revising. This works well because this helps you to revise and learn in a systematic manner.

In most cases, official NISM material plus regular practice is enough. You do not need coaching unless you are completely new to financial markets or short on preparation time.

Career Options After NISM Certification

Once you clear a NISM exam, you do not automatically land a job. What it really gives you is eligibility. It allows you to work in roles where certification is mandatory and trust matters.

1. Mutual Fund Distribution

This is one of the most common paths after NISM certification. You help investors understand mutual funds and guide them based on their goals. It suits people who enjoy planning and building long-term relationships with the clients.

2. Investment Advisory Support

Some roles involve supporting investment advisers rather than directly advising clients. This includes basic positions but they are quite important. You will analyze the portfolios and companies which will make the difference.

3. Research and Analysis Roles

If you like studying companies and markets, research roles are a natural fit. The work involves analysing data, tracking trends, and supporting investment decisions. It is more desk-based and less client-facing.

4. Trading and Market Operations

These roles focus on how trades are placed, settled, and recorded. It includes derivatives, depository operations, and risk checks. This suits people who prefer structured work and defined processes.

5. Compliance and Back-Office Roles

Every financial firm needs people to handle compliance and reporting. NISM certification is often required here. The work is detail-oriented and suits those who prefer accuracy over sales.

6. Wealth and Portfolio Support

With experience, some professionals move into wealth-related roles. This includes tracking investments and helping the HNIs with their portfolios. This is quite an important and growing role.

Conclusion

NISM certification is not about chasing a certificate. It is about understanding how Indian financial markets actually work and becoming eligible for regulated roles. Whether you want to work with clients, support advisory teams, handle research, or manage compliance, NISM gives you a valid entry point. What you build after that depends on your effort, learning, and experience. Implement your NISM skills in real markets with Pocketful—easy to use, smart, and low brokerage.

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Frequently Asked Questions (FAQs)

What is NISM certification used for?
NISM certification is used to become eligible for SEBI-regulated roles in financial markets such as mutual funds, advisory, research, trading, and compliance.
Is NISM certification mandatory for jobs in finance?
It is mandatory for many roles like mutual fund distributors, investment advisers, and research analysts. For other roles, it improves credibility and job readiness.
Can beginners appear for NISM exams?
Yes. There is no minimum educational qualification or age limit for most NISM exams. Beginners can start with foundation-level certifications.
How long is a NISM certificate valid?
Most NISM certificates are valid for 3 years. After that, you would need to gain a new certification either by training or exam.
Does NISM certification guarantee a job?
No. NISM certification does not guarantee a job. It helps you to gain knowledge and skills. But getting a job is not confirmed.

February 20, 2024

Category: Personal Finance

Introduction

Why are shares transferred to IEPF?

Reasons why the holder may not claim dividends

Who can claim shares from IEPF?

Amounts credited to IEPF

Utilization of IEPF Amount

Process to get shares from IEPF

Conclusion

Frequently Asked Questions (FAQs)

Why are shares transferred to IEPF?

How can I check if I have any unclaimed dividends or shares lying with the IEPF?

How long does it take to get the shares back from IEPF?

What does IEPF stand for?

Which form needs to be filled to claim shares from IEPF?

Overview on Insurance

Features of Insurance

Terms of Insurance

How does Insurance work?

Benefits of Insurance

Types of Insurance

Life Insurance

General Insurance

How to Choose an Insurance Provider?

Key Comparison Metrics of Insurance Providers

Conclusion

Frequently Asked Questions (FAQs)

What is the purpose of insurance?

What are the types of insurance?

Which organization manages the workings of the insurance industry?

What is IMF in Insurance?

Is there any tax benefit available in insurance?

Overview

Features

Types of ‘FIRE’

How does ‘FIRE’ work?

Method of Calculating ‘FIRE’

Advantages

Disadvantages

Conclusion

Frequently Asked Questions (FAQs)

What does FIRE stand for in financial terms?

What is the FIRE method?

How do you calculate your FIRE number?

How can I plan my retirement by FIRE?

Is FIRE achievable for everyone?

UPI Scams Overview

Latest Scams

Fake Customer Care Scams

QR Code Scams

Fake Investment Schemes

SIM Cloning

Fake Delivery OTP Scam

Phishing

UPI Scams Economic Data

UPI Scams Government Actions

Prevention Tactics

Conclusion

Frequently Asked Questions (FAQs)

What are UPI Scams?

What are some common UPI Scams?

How can I protect myself from a UPI Scam?

Is using UPI safe?

What should I do if I suspect a UPI scam?

NEFT: An Overview

Features

RTGS: An Overview

Features

UPI: An Overview

Features

IMPS: An Overview

Features

Comparison Chart

Charges

Conclusion

Frequently Asked Questions (FAQs)

What is the minimum amount for an IMPS transfer?

What is the limit of IMPS in Indian bank?

Is RTGS mode of payment safe?

Which is better, NEFT or UPI?