One mind blowing interview

Interviewer : Tell me about yourself.
Candidate: I ...am Rameshwar Kulkarni. I did my Tele Communication engineering from BabanRao Dhole-Patil Inst it ute of Technology.

Interviewer : BabanRao Dhole-Patil Inst it ute of Technology? I had never heard of this college before!
Candidate : Great! Even I had not heard of it before getting an admission into it ..
What happened is – due to cricket world cup I scored badly! in 12th.I was getting a paid seat in a good college. But my father said (I prefer to call him ‘baap’) – “I can not invest so much of money”.(The baap actually said – “I will never waste so much of money on you”). So I had to join this college. Frankly speaking this name – BabanRao Dhole-Patil, can at the most be related to a Shetakari Mahavidyalaya

Interviewer: ok, ok. It seems you have taken 6 years to complete your engineering.
Candidate : Actually I tried my best to finish it in 4 years. But you know, these cricket matches and football world cup, and tennis tournaments. It is difficult to concentrate. So I flunked in 2nd and 3rd year. So in all I took 4 + 2 = 7 years.

Interviewer: But 4+2 is 6.
Candidate: Oh, is it ? You know I always had KT in maths. But I will try to keep this in mind. 4+2 is 6, good, thanks. These cricket matches really affect exams a lot.. I think they should ban it .

Interviewer : Good to know that you want cricket matches to be banned.
Candidate : No, no… I am talking about Exams!!

Interviewer: Ok, What is your biggest achievement in life?
Candidate : Obviously, completing my Engineering. My mom never thought I would complete it . In fact, when I flunked in 3rd year, she was looking for a job for me in BEST (Bus
corporation in Maharashtra ) through some relative.

Interviewer : Do you have any plans of higher study?
Candidate: he he he.. Are you kidding? Completing ‘lower’ education it self was so much of pain!!

Interviewer : Let’s talk about technical stuff. On which platforms have you worked?
Candidate : Well, I work at SEEPZ, so you can say Andheri is my current platforms. Earlier I was at Vashi center. So Vashi was my platform then. As you can see I have experience of different platforms! (Vashi and Andheri are the places in Mumbai)

Interviewer : And which languages have you used?
Candidate : Marathi, Hindi, English. By the way, I can keep quiet in German, French, Russian and many other languages.

Interviewer: Why VC is better than VB?
Candidate : It is a common sense – C comes after B. So VC is a higher version than VB. I heard very soon they are coming up w it h a new language VD!

Interviewer: Do you know anything about Assembly Language?
Candidate: Well, I have not heard of it . But I guess, this is the language our ministers and MPs use in assembly.

Interviewer : What is your general project experience?
Candidate : My general experience about projects is – most of the times they are in pipeline!

Interviewer: Can you tell me about your current job?
Candidate: Sure, Currently I am working for Bata Info Tech ltd. Since joining BIL, I am on Bench. Before joining BIL, I used to think that Bench was another software like Windows.

Interviewer : Do you have any project management experience?
Candidate: No, but I guess it shouldn’t be difficult. I know Word and Excel. I can talk a lot. I know how to dial for International phone call and use speaker facility. And very important – I know few words like – ‘Showstoppers ‘ , ‘hot fixes’, ‘SEI-CMM’, ‘quality’, ‘version control’, ‘deadlines’ , ‘Customer Satisfaction’ etc. Also I can blame others for my mistakes!

Interviewer: What are your expectations from our company?
Candidate : Not much.
1. I should at least get 40,000 in hand..
2. I would like to work on a live EJB project. But it should not have deadlines. I personally feel that pressure affects natural talent.
3. I believe in flexi-timings.
4. Dress Code is against basic freedom, so I would like to wear t-shirt and jeans.
5. We must have sat-sun off. I will suggest Wednesday off also, so as to avoid breakdown due to overwork.
6. I would like to go abroad 3 times a year on short term preferably 1-2 months) assignments. Personally I prefer US, Australia and Europe. But considering the fact that there are Olympics coming up in China in the current year, I don’t mind going there in that period. As you can see I am modest and don’t have many expectations. So can I assume my selection?

Interviewer : he he he ha ha ha. Thanks for your interest in our
organization. In fact I was never entertained so much before. Welcome to INFOSYS.

The fellow was appointed in a newly created section ‘Stress Management’ in the HRD of Infosys.

So Excellence is not the only thing Needed. Its the Unique Quality of a Person which can let anyone to Success. Work on Your own Field rather then following somebody else's Path

Insurance is for protection, not wealth creation

Life Insurance has been invented by the society as a financial tool for creating a corpus to be utilised when financial support or protection is needed the most in someone's life. Insurance, therefore, is very different from savings, banking, and investment.

Any insurance scheme or policy is based on the principle of mutual pooling of small amounts of money by large numbers of people; using the amount for those few unfortunate members of the society who suffer financial loss or loss of financial support because of some tragic event. Insurance helps in recovery from an unfortunate situation; takes away stress from the social fabric; and helps the affected person in bringing life back to normalcy at least financially.

With the very first installment of premium paid to a life insurance company, the policy holder makes sure that the family acquires an umbrella of financial protection which is guaranteed to the family in the event of the unfortunate demise of the policy holder. It is, therefore, rightly said that there is no substitute for life insurance.

The wealth that it creates with very small amounts paid as premiums guarantees a decent life to the dependents; higher education to children; and even marriage or other important functions in a manner that would fulfill anybody's dream.

In fact, those who seek investment-oriented benefits from life insurance end up with inadequate sum assured when it is needed the most and they lose the basic benefits of insurance planning. Those who look for investment through life insurance may consider it at a later stage of life when sufficient savings have already been made over a period of time; but those who are in the early years of their earning life, need to focus on the insurance component of life insurance products.

There are so many other financial tools available which can guarantee medium-to-high returns over a period of time, but they cannot guarantee payment of a huge lump sum amount matching with the requirements of the dependents on payment of a few installments of premium which sometime may not be even 5% to 10% of the benefit received.

About a decade back, when the unit-linked insurance plans (Ulips) were introduced to the market in a big way by new life insurance companies, there was a sudden inclination on the part of the prospective policy holders to buy Ulips with a view to maximize return on the premium amount paid by them.

Over a period of time, Ulips became the favourite of the market and gradually the investment return started influencing the product design and development, marginalising the insurance component. Some products provided very negligible life insurance cover but focused on market linked returns. As a result, there has been substantial downsizing of the sum assured vis-a-vis total number of policies sold and it has finally resulted in massive erosion of life insurance protection, which was the very purpose of selling or buying of life insurance.

However, of late, there has been realisation on the part of the insurance regulator as well as the insurance companies for firmly dealing with this aberration and bringing back focus on the insurance component of the life insurance policy. Insurance companies, existing and prospective customers are slowly moving towards a more balanced view of the purpose and benefits of life insurance.

A person looking to buy life insurance should therefore, first look for adequacy of risk cover in the product and then choose a particular plan according to other features available with different products of different companies. Life insurance is for ensuring peace of mind and not for pieces of dividends and interests.


Kamalji Sahay
MD & CEO, Start Union Dai-ichi

The long and short of mark-to-market valuation

This process is crucial for valuing assets based on current market value.

What is mark-to-market?

Mark-to-market is the process by which an asset is valued based on its latest market price. It records the price or value of a security, portfolio or account on a daily basis to reflect the current market value. 

What is the purpose of mark-to-market?

The market price of a bond may be different from its face value. The longer a bond’s period to maturity, the more its prices tend to fluctuate as market interest rates change. Here arises the need for
mark-to-market. This valuation helps investors buy and sell units of a scheme at fair prices.

How does mark-to-market apply to mutual funds?

Mark-to-market in the case of mutual funds is more pertinent to schemes that put their money in government and corporate bonds of variable maturities. This is mainly because the prices of these fixed income securities will fluctuate corresponding to movements in interest rates.

How does one stand to gain or lose?   
Bond prices fall when interest rates rise and rise when interest rates fall. So, assuming interest rates were to decline, this would lead newer bonds to be issued at lower interest rates than existing bonds. This in turn will result in old bonds becoming more valuable leading to a rise in demand and hence prices of the older bonds would rise.          

In the same fashion, if interest rates rise, then the value of the old bonds would fall since the newer bonds would bear higher interest rates.

What if mark-to-market is avoided altogether?

If mark-to-market is avoided, then the investment will reflect the value of the cost at which the security was bought. Say the bond was bought when its price acquisition cost was Rs 100. One year later it is trading at Rs 110. So it is pointless to calculate the value at the old price of Rs 100 because if the scheme were to sell, it would sell it at Rs 110 and not Rs 100. In a scheme that is marked-to-market, the NAV will capture this difference.

What is the market regulator’s stance on mark-to-market?

In 2010, SEBI had revised the valuation norms whereby debt and money market instruments’ eligibility for mark-to-market valuation was reduced from 182 days to 91 days.

Earlier this year, SEBI decided to tighten the valuation norms for debt funds. It has decided to reduce the threshold for mark-to-market requirement on debt and money market securities from 91 days to 60 days. In this case debt securities below 60 days will follow the amortization method while securities maturing above 60 days will be valued at their market prices. SEBI has instructed that for debt or money market securities that are not traded on a particular valuation day, valuation should be conducted through amortization basis and it is to be restricted to securities having a residual maturity of up to 60 days, provided such valuation shall be reflective of the fair value of the securities.

Double Indexation

Double indexation simply means getting the benefit of two years of indexation when the holding period for investments has been substantially less than two years. Read on to gain clarity on double indexation.     

What is indexation?

It is adjusting purchase price of an asset to reflect the impact of inflation, primarily for the purpose of calculating capital gains tax. Adjusting purchase price implies scaling it upwards based on the inflation during the period.

Now let’s explore these terms one by one

In very simple terms inflation is price rise. It implies that more money has to be shelled out for the same set of goods. For e.g. the price of 1 kg sugar has increased from around Rs. 20 in 2008 to Rs. 40 in 2012. Inflation reduces the value of money i.e. Rs. 20 was more valuable in 2008 than it is today because today it can buy only half a kg of sugar.

Capital gain essentially means profit on sale of an asset. For e.g. If Mr. X invested Rs.1000 in a mutual fund and sold it for 1200, then Rs. 200 is his capital gain.

Depending upon the duration for which the asset was held with the investor, the capital gains are categorized as short term capital gains and long term capital gains. For equity mutual funds if the units are sold within 1 year of purchase, the return is considered as short term capital gain.  If the units are held for a period exceeding 1 year, the returns are called long term capital gains.

What is the need for indexation?

Apples can’t be compared to oranges. If return on investment has to be calculated then cost price and the selling price should be at the same scale.

Let’s take an example

Mr. ABC invested Rs.1000 in 2008 and sold it for 1500 in 2012. The Rs. 1000 of 2008 has to be increased to reflect the inflation during the year 2008 and 2012, brought to the scale of 2012 and then compared to the Rs.500 of 2012 to calculate the actual capital gain.

 How is indexation done?

Cost inflation index (CII) numbers are released every year. To adjust cost of purchase of the asset to reflect inflation the index numbers for the year of sale and year of purchase are required.

Let’s take an example

The CII number for 2001-2002 is 426 and for 2011-12 is 785. Mr. ABC invested Rs. 10000 in May 2001 and sold it for Rs. 20000 in July 2011. 

The inflation adjusted cost of purchase is calculated as:

10000 x (785 / 426) =18427 

His actual return for the purpose of taxation with indexation will be (20000-18427) Rs. 1573.

What is double indexation?

To understand the concept of double indexation let’s assume two cases:

A)    If Mr. ABC had bought 10 units of mutual fund for Rs. 10000 on 1^st April 2009 and sold them for 12000 on 1^st April 2010. (Holding period- 1 year).
B)    If Mr. ABC had bought 10 units of mutual fund for Rs. 10000 on 31^st March 2009 and sold them for 12000 on 1^stApril 2010. (holding period- 1 year and 1 day)

Year	CII Numbers
2008-09	551
2009-10	582
2010-11	632

In the two examples given above, the information is same except the year of purchase, which differs by just one day.
The difference in one day changes the financial yearof purchase for Mr. ABC, which changes the CII numbers to be used for indexation.
Case A: Single indexation

Particulars	Amount (Rs.)
Cost of purchase	10000
CII- year of purchase (2009-10)	582
CII- year of sale (2010-11)	632
Adjusted cost of purchase	10859.11
Taxable return- without indexation	2000
Taxable return- with indexation	1140.89

Case B: Double Indexation

Particulars	Amount (Rs.)
Cost of purchase	10000
CII- year of purchase (2008-09)	551
CII- year of sale (2010-11)	632
Adjusted cost of purchase	11470.05
Taxable return-without indexation	2000
Taxable return- with indexation	529.95

Mr. ABC’s taxable return (with indexation) varies in the two cases explained above because of the indexation number. His taxable return (with indexation) comes down drastically in Case B which reduces his tax liability (absolute terms) as well.
Mr. ABC can claim indexation for two years but he is actually holding the investment for just a day over 1 year.
Hence double indexation benefit is, enjoying indexation benefit for 2 years when the investment is not held for a substantial part of second year

MICR on your cheques

              

The MICR code is a 9 digit code, which is printed at the bottom of a cheque. The composition of the MICR code is as follows:
A MICR code is unique to each bank branch. Thus, a MICR code can be used to uniquely identify any bank branch.
It comprises of 3 parts:
1. The first three digits represent the city (City Code). They are aligned with the PIN code we use for postal addresses in India.
2. The next 3 digits represent the bank (Bank Code)
3. The last 3 digits represent the branch (Branch Code)
Example 1
Let’s say you have an account in the Andheri (West), Mumbai branch of State Bank of India (SBI). What would be its MICR code?
City code for Mumbai: 400
Bank code for SBI: 002
Branch code for Andheri (West): 003
Hence the MICR code is: 400002003
Example 2
Say you have an account in the Indira Nagar, Bangalore branch of ICICI Bank.
City code for Bangalore: 560
Bank code for ICICI Bank: 229
Branch code for Indira Nagar: 013
Hence the MICR code is: 560229013

If you have the MICR code, you can find out the bank name, branch and city by just reversing the process!

How a MICR code makes cheque processing faster?

As we saw, MICR stands for “Magnetic Ink Character Recognition”. Thus, it is actually the name of the technology using which the code is printed. And therefore, the code is known as MICR code.

So, how does this MICR technology work, and how does it help?

On the cheque, the MICR code is printed using a special kind of ink or toner – an ink that contains magnetic material (usually iron oxide). The code is also printed using a specific font. This ink is machine-readable due to the presence of the magnetic material (just like the strip at the back of a credit or debit card). When the cheque is inserted in a reading machine or a cheque sorting machine, it can read the MICR code even if there are other marks or stamps on it. Thus, the machine can easily find out which branch the cheque belongs to. This helps a lot in automating the cheque clearing process. And since this is automated, there is little possibility of any error! Hence Cheques get cleared faster, and you get your funds earlier!

Want to know the MICR code of a particular bank branch?
Download the spread-sheet containing the MICR codes of ALL bank branches in India fromhttp://rbidocs.rbi.org.in/rdocs/content/docs/67440.xls

Choose Your Attitude

A young girl walks on the lonely street unhappy with herself. She is not beautiful like others. “My friends have boyfriends and I do not. They are happy because they have boyfriends and since I am not beautiful, nobody is coming to me;” with this complex, she is lost in her self-talk.
There is a strong breeze, which blows and her silky hair starts dancing with the breeze and silently it says to her: “Be like me my child, go with the flow and you will glow.” The breeze teaches her to have an attitude, which will lift her beyond the physical beauty.
The breeze is constantly moving; so to move with the vastness of life and not get stuck to your body, be like it, constantly moving. The breeze says to her: “I do not move for happiness but out of happiness. I do not dance for happiness but out of happiness. A youth should learn this art to operate from happiness and not for happiness. Happiness is an attitude. To be a winner in life is also an attitude.”
As William James said, “It is our attitude at the beginning of a difficult undertaking which, more than anything else, will determine its successful outcome.”
Attitude is more important than facts for attitude makes us to be in an empowered state of being. When you are empowered, you are bigger than a problem rather than a victim to a problem, and living in such a space makes you a winner.
An easy task becomes difficult when you have a poor attitude. A difficult task becomes challenging when you have a good attitude.
What does it involve, having a healthy attitude?
Change your body posture.
A trainer while talking to students on the subject of Public Speaking told them: “When you talk of heaven your face must be glowing and radiating joy. Your eyes must shine and lips should reflect heaven.”
“What about talking of hell?” asked the student.
“Your ordinary face is enough,” replied the trainer.
Change your mind.
Always entertain healthy thoughts. Positive thoughts are a great asset. A pessimist sees difficulty in an opportunity and an optimist sees opportunity in a difficulty.
Understand that when one door closes another opens. Trust life. Insecurity invites you to be alert and not worried. It tells you to be creative and not complain. One has to know how to take it easy and float in life and not fight with life. You can’t fight with the waves but you can learn to float.
Change your emotions.
The quality of your life is the quality of your consistent emotion. When your emotion is low, just change it; think of a happy incident.
Change your values.
Have values that connect to goodness and connect to people.
What should be my psychological exercise?

• Always stand and sit erect. “If you want to be a colonel, walk like a colonel,” is an expression in the army.
• Keep the body posture like that of a winner.
• Keep your mind filled with positive thoughts.
• Keep your emotions on the top of the world.

Exercise yourself and keep the above alive in you; see and picture yourself doing this.
Fear is a hard way of making your life miserable. Fear is a fantasised experience appearing real.
There are many types of fear. Lots of people have a fear of failure, fear of death, fear of insecurity and fear of rejection.
Come from a commitment that failure is only a postponed success. Come from the understanding that failure is a fertilizer to success.
If you bring this energy into your life, it will give you methods of handling fear of failure.
Also understand that fear is a movement of thought. Thought is nothing but a movement of the mental word. If you get identified with a fear which is actually just a thought, which again is just a word, then this identification makes you a prisoner of fear.
Also, this thought-fear unconsciously pulls in the previous memories of fear and with the past fears, a snowballing effect happens.
So when fear happens, just become totally aware and don’t get identified with that thought. With wordless awareness, just watch. This watching will not allow the previous fears to have a snowballing effect. This is called as objective watching.
How does one handle the fear of insecurity?
You feel insecure because you have a concept of what is security and from that concept you are seeing life. Anything that does not fit that concept makes you insecure.
If you have an adventurous energy in you then insecurity is a great adventure for you to explore. You will have fun with that insecurity. It is like a hunter hunting in the forest, even though it is dangerous he enjoys it.
Learn to trust that insecurity is inviting you to be creative.

Swami Sukhabodhananda 

Your Breath Can Change Your Life

Breathing is the most important biological function. On an average, a person takes 15 breaths per minute, making it 900 breaths in an hour and 21,600 breaths in 24 hours. In every conscious breath, we touch the higher power of the Self to reach the sheath of the soul.

Way To The Soul
Yogic breathing consists of four parts — pooraka or inhalation, abhyantara kumbhaka or retention of the inhaled breath, rechaka or disciplined complete exhalation and bhayakumbhaka or retention after exhalation.
In pranayama, the sadhaka uses the body as a sacrificial altar. Inhalation is like pouring ghee on the altar, exhalation is the flame blazing out from the yajnakunda.
Retention is in the form of mantra, an offering so that the Self merges and dissolves in the Universal Soul or Paramatma.
Below the navel is a great nerve centre which stores the extra prana and this is the hawankhunda of the body where incineration takes place.
When you breathe through the left nostril you are awakening the human consciousness and breath drawn in through the right nostril awakens divine consciousness. When the breath is held either inside or outside the body it embraces shakti to enlighten the mind and attain spiritual bliss.
As you ascend in inhalation the sound resembles ‘so’ and in descending exhalation, the sound resembles ‘hum’. This is the ‘sohum mantra’ that we repeat unknowingly throughout life. To be aware of this mantra and the breath that we keep taking is the first step towards pranayama that takes us to the soul’s doorstep.

The Divine Path
With every passing thought, our energy gets consumed, depleting our prana and creating ambush on our path. Breath is the messenger of the body. Every action of life comes from kama or desire that is creative energy which leads us to moha or attachment. If kama is not handled well, it can turn to madha or arrogance and krodha or anger. The highest and purest form of desire is karuna or compassion. When you inhale and hold the breath within your body, compassion is awakened and there is a renewal and reversal of arrogance. Greed is destructive and gives rise to ahamkara or ego which paves the path of insecurity and jealousy and nibbles prana away. As you start inhaling through the opposite nostril, the manipulative ego gets anchored with the Self and there is no room for greed and undesirable emotions. The belly is the meeting point of matter and soul and bhayakumbhaka is its apex.

Breath Control
In part one, you inhale through your right nostril, blocking the left nostril with the little finger of your right hand. In part two, you hold the breath inside the body, closing the right nostril with the thumb. In part three, you exhale through the left nostril, releasing the little finger while the right nostril is closed. In part four, you hold the breath outside after a complete exhalation. Repeat the round by inhaling now through the left nostril in part one and proceed to complete the cycle as before.

Benefits Of Pranayama
1. Pranayama frees the mind from any clutter that is obstructing soul growth
2. Helps memory and concentration and improves focus and balance
3. Tackles the problem of insomnia and anger, bringing peace and calm
4. Improves the health of the heart, lungs, brain and the digestive system
5. Corrects the metabolic rate to overcome obesity and helps in weightloss
6. Builds up immunity and helps you fight infections and diseases
7. Purifies the aura and alleviates energy loss
Five to 15 minutes of pranayama can bring about a dramatic change in your physical, emotional, psychological and spiritual well-being.

CARRMINE IREENE
 

Six smart things to know about funding for IPOs

Here is a look at six smart things to know about funding for IPOs

1) An individual can take a loan to apply for shares in an equity IPO. The lender finances a part of the amount, while the balance, which is the margin, is to be provided by the investor.

2) NBFCs and banks usually offer funding for IPOs. As per the RBI guidelines, banks can provide a maximum loan of Rs 10 lakh. In case of NBFCs, the quantum of loan depends on the issue.

3) The lending rates depend on the prevailing trends in interest rates as well as IPO features, such as the expected over-subscription and listing premium.

4) The tenure of the loan is usually between 10 and 15 days, depending on the time it takes for the allotment to be complete and the shares listed on the stock exchange

5) The borrower typically executes a PoA in favour of the lender to operate the demat account. In case of a default, the lender may sell the holding to cut lending losses.

6) The risk arises from the fact that the borrower benefits from the transaction only if he is able to liquidate the allotted shares at a price that is adequate for covering the borrowing cost. 




Economic Times

The best way to streamline one's credit card usage?

Nikhil has to first deal with the question of whether he needs multiple credit cards and, if so, how many. Having more than one card is useful when a large payment has to be made or when a particular card cannot be used. 

Ideally, the cards should have different affiliations, such as MasterCard and Visa. It is also a good idea for Nikhil to dedicate one card for official use, so that there is no confusion while claiming reimbursement for payments. 

Since his job involves a lot of travelling, using a co-branded card that is linked to an airline will help him in official use as he can get credit for usage. Two cards for personal use and one for work-related expenses should be enough for his needs. 

While reducing the number of cards, Nikhil should consider retaining older cards with a good credit history since they are likely to have a positive impact on his credit score. The other factors he needs to consider include the acceptance of the card, authorised limits, billing cycles and costs associated. 

The cards that he should first consider closing are those that are linked to stores or products since they add very little value and may even encourage spending. 

Nikhil should also set up an online payment process for his card, so that he is able to pay his bills from his bank account using the Internet or mobile banking services. Several online services enable paying bills on time, which Nikhil should make use of. He should set in place a system to keep track of the expenses charged, the payment and dates of payments. 

Having a place to keep credit card slips will make it easy to access them for checking against card statements. He should sign up for online/mobile reminders of due dates, online statements and payment facility. These are things that Nikhil can do to continue enjoying credit facilities in an efficient manner.




Economic Times

Floating rate term deposits

Floating rate term deposits (FRDs) are a variant of fixed deposits, wherein the rate of interest is not fixed for the entire duration and keeps changing depending on the market rates.

The interest rate is reset with reference to a benchmark rate. Banks offer their base lending rate as the benchmark, and reset the deposit rate on a quarterly basis.

FRDs may be attractive for the retail investors who borrow at floating rates (say, for home loans), but invest at a fixed rate. It ensures that their loans and deposits move in tandem.

Investment in FRDs is also beneficial when the interest rates are expected to rise as it enables the investors to take advantage of periodic increase in the market rates.

On the flip side, since the interest rate is floating, the income from FRDs may be adversely impacted when the rates fall.

The fluctuations in the interest rate component mean that the investment in FRDs may not offer a fixed nominal return.

Economic Times

PAN explained

                           

PAN is a 10 digit alpha numeric number, where the first 5 characters are letters, the next 4 numbers and the last one a letter again. These 10 characters can be divided in five parts as can be seen below. The meaning of each number has been explained further.
1. First three characters are alphabetic series running from AAA to ZZZ
2. Fourth character of PAN represents the status of the PAN holder.
• C — Company
• P — Person
• H — HUF(Hindu Undivided Family)
• F — Firm
• A — Association of Persons (AOP)
• T — AOP (Trust)
• B — Body of Individuals (BOI)
• L — Local Authority
• J — Artificial Juridical Person
• G — Government
3. Fifth character represents first character of the PAN holder’s last name/surname.
4. Next four characters are sequential number running from 0001 to 9999.
5. Last character in the PAN is an alphabetic check digit.
Nowadays, the DOI (Date of Issue) of PAN card is mentioned at the right (vertical) hand side of the photo on the PAN card.

Understanding Debt Funds

Debt investment is the most popular form of investment in India. Most of the debt investments are in the form of bank deposits, bonds, company deposits etc. But when we think about mutual funds we only think of "equity". Debt mutual funds have not gained much popularity at the retail level. So let us take the patch that leads us to discover the elements and dynamics of debt mutual funds.

1) A debt fund is an aggregation of different debt instruments. A debt fund manager

a) Gets inflows from investors b) Buys debt securities usually of varying maturities as per the Fund's investment objective. (If the fund is an FMP the debt papers will be of maturities matching the maturity of the fund.) c) Makes sure the interest income that the debt securities generate is invested. d) Ensures that he is in a position to pay investors who wish to redeem.

2) The returns of a debt fund are a combination of

a) Return from interest earned (called accrual) b) Change in the market value of securities (called mark-to-market or MTM). Here it is important  to note that when interest rates are expected to drop, the price of the debt securities rise and vice versa. To understand the concept of combined income think of the hair dresser who earns a fixed salary on one hand but also earns tips from customers on the other hand. If the hair dressers' luck is good and his customers like him, he can make a lot of money through generous tips. Similarly, a debt fund earns an interest income like a salary and can stand to gain in terms of capital gains which are like the extra income of the hair dresser. Just as the extra income is not stable, the capital gains too are not certain. However there exists one difference between the hair dresser and the debt fund. While the hair dresser does not stand a chance to lose money and in the worst case scenario may have zero extra income if nobody tips the hair dresser, the debt fund on the other hand could experience capital losses if the prices of debt securities the fund holds falls. The capital gains / losses that can affect a debt fund are a function of the fund manager's ability to judge the future direction of interest rates by analyzing the overall macro-economic environment. The fund manager's skill thus lies in estimating the interest rate outlook well in advance and altering his portfolio accordingly so that his investors stand to gain from the same.

3) There are some debt funds like "Liquid" funds where the returns are attributed mainly to interest accrual whereas there are other debt funds like "Income" funds where the returns are attributed mainly due to the change in the market value of securities. However returns of most debt funds are a combination of these two factors in varying proportions. In funds like Liquid funds where the returns are primarily due to interest accrual, the growth of NAV (Net Asset Value) is seen to be very steady. But in funds such as Income Funds where the proportion of the MTM component is large, the NAV shows a volatile journey. Wherever the fund manager's call is right, the NAV gets a boost. Otherwise it can unexpectedly fall. However since the component of interest accrual is steady in character over the long term, the debt fund's NAV continues to move upwards. 4) Your choice of fund should be a function of your investment horizon and risk appetite. If your investment horizon is short then you should invest in a safe Liquid Fund where the return is primarily due to interest income. As such, over a short time horizon there does not exist much of an opportunity for MTM gains. Hence for short term investments it does not make sense to invest in a debt fund which has even a small element of risk. However if your investment horizon is long and if you have a reasonable appetite for risk, you could look at investing in an Income / Gilt Fund having securities of longer durations. These funds stand to gain from the MTM component if the fund manager's outlook on interest rate turns out to be accurate. 5) During times of high interest rates when expectations of rate cuts by RBI is high, one should seriously consider long duration debt funds like Income and Gilt funds as they are well poised for both MTM and high interest accruals. 6) Expenses directly impact the return of debt funds. If a fund earns 10% as interest income and pays 2% as expense, 20% of its direct income is gone. Between two debt funds with similar average maturity, NAV volatility, and return, simply select the one with a lower expense ratio.

 Tata MF