SEBI exempts PAN for MF investments up to 50,000; experts say this will boost industry

Capital market regulator SEBI has decided to exempt the requirement of permanent account number (PAN) for investments (both lump sum and SIPs) up to Rs 50,000 per mutual fund, per year. Now, instead of PAN, investors can submit their voter identity card, passport or driving license for photo identification. The rule is applicable with immediate effect.

Earlier investors were allowed to invest up to a maximum of Rs 50,000 per year across all mutual funds and a PAN card was mandatory to comply with KYC.

“Micro schemes such as systematic investment plans of mutual funds, micro products of micro finance institutions, up to Rs 50,000 per year per investor shall be exempted from the requirement of PAN. Such schemes may be operationalized with other standard specified identification instruments such as Voted ID Card, Government/Defence ID Card, card of reputed employer, driving license and passport. As per the Ministry of Finance circular, investments in mutual fund schemes (including investments in SIPs) of up to Rs 50,000 per investor per year per mutual fund shall be exempted from the requirement of PAN,” states a SEBI communication dated 24^thJuly addressed to AMFI.

“Earlier, investors were allowed to invest up to a ceiling of Rs 50,000 across all AMCs. Now technically you can invest Rs 50,000 in each AMC. There are separate set of KYC guidelines for this rule. These investments are now exempt from PAN. KYC is mandatory even now. However, small ticket size investors can invest without a PAN by submitting either their passport or driving license as a proof to comply with KYC,” says an operations head of a leading fund house.

Industry experts say that such a move will boost investments particularly from smaller towns. The move is likely to give a breather to mutual fund advisors who have been complaining about the complexity of KYC requirements. For instance, an investor can invest Rs 50,000 without a PAN card in each AMC. Technically, he/she can invest Rs 22, 00,000 across 44 AMCs. 

Officials say that earlier there was no mechanism to track investors investing up to Rs 50,000 across AMCs to comply with SEBI rule. With the relaxed norms, AMCs expect to cut down some of their operational hurdles.

Effective January 01, 2011 SEBI had made Know Your Customer (KYC) mandatory for all investments irrespective of the ticket size.

Standard Deviation and Variance

Deviation just means how far from the normal

Standard Deviation

The Standard Deviation is a measure of how spread out numbers are.

Its symbol is σ (the greek letter sigma)

The formula is easy: it is the square root of the Variance. So now you ask, "What is the Variance?"

Variance

The Variance is defined as:

The average of the squared differences from the Mean.

To calculate the variance follow these steps:

Work out the Mean (the simple average of the numbers)
Then for each number: subtract the Mean and square the result (the squared difference).
Then work out the average of those squared differences. (Why Square?)

Example

You and your friends have just measured the heights of your dogs (in millimeters):

The heights (at the shoulders) are: 600mm, 470mm, 170mm, 430mm and 300mm.

Find out the Mean, the Variance, and the Standard Deviation.

Your first step is to find the Mean:

Answer:

Mean =	600 + 470 + 170 + 430 + 300	=	1970	= 394
	5		5

so the mean (average) height is 394 mm. Let's plot this on the chart:

Now, we calculate each dogs difference from the Mean:

To calculate the Variance, take each difference, square it, and then average the result:

So, the Variance is 21,704.

And the Standard Deviation is just the square root of Variance, so:

Standard Deviation: σ = √21,704 = 147.32... = 147 (to the nearest mm)

And the good thing about the Standard Deviation is that it is useful. Now we can show which heights are within one Standard Deviation (147mm) of the Mean:

So, using the Standard Deviation we have a "standard" way of knowing what is normal, and what is extra large or extra small.

Rottweilers are tall dogs. And Dachshunds are a bit short ... but don't tell them!

Now try the Standard Deviation Calculator.

But ... there is a small change with Sample Data

Our example was for a Population (5 dogs were the entire number of dogs we were interested in).

But if the data is a Sample (a selection taken from a bigger Population), then the calculation changes!

When you have "N" data values that are:

• The Population: divide by N when calculating Variance (like we did)
• A Sample: divide by N-1 when calculating Variance

All other calculations stay the same, including how we calculated the mean.

Example: if our 5 dogs were just a sample of a bigger population of dogs, we would divide by 4 instead of 5 like this:

Sample Variance = 108,520 / 4 = 27,130

Sample Standard Deviation = √27,130 = 164 (to the nearest mm)

Think of it as a "correction" when your data is only a sample.

Formulas

Here are the two formulas, explained at Standard Deviation Formulas if you want to know more:

The "Population Standard Deviation":
The "Sample Standard Deviation":

Looks complicated, but the important change is to
divide by N-1 (instead of N) when calculating a Sample Variance.

*Footnote: Why square the differences?

If we just added up the differences from the mean ... the negatives would cancel the positives:

4 + 4 - 4 - 4 = 0 4

So that won't work. How about we use absolute values?

|4| + |4| + |-4| + |-4|   =   4 + 4 + 4 + 4   = 4 4 4

That looks good, but what about this case:

|7| + |1| + |-6| + |-2|   =   7 + 1 + 6 + 2   = 4 4 4

Oh No! It also gives a value of 4, Even though the differences are more spread out!

So let us try squaring each difference (and taking the square root at the end):

		√ 42 + 42 + 42 + 42 = √ 64 = 4 4 4
		√ 72 + 12 + 62 + 22 = √ 90 = 4.74... 4 4

That is nice! The Standard Deviation is bigger when the differences are more spread out ... just what we want!

In fact this method is a similar idea to distance between points, just applied in a different way.

And it is easier to use algebra on squares and square roots than absolute values, which makes the standard deviation easy to use in other areas of mathematics.

Why Reforms are so important to a nation

For India to try to get back on the growth path the following may need to happen

1) Inflation moderates

2) Interest rates soften

3) Growth picks up

For this to happen, the reform process needs to be re-kindled. People are talking about renewing reforms but why are reforms vital? Let's say there is a small factory that is manufacturing goods and services. The population of the town buys everything from this factory. As the population grows, the demand for goods also grows. Naturally, the factory raised prices because of the excess demand. This is how inflation steps in. So how does one fight inflation and bring prices down? One way may be to reduce the amount of money people have so that they buy less. To make this happen the Central Bank will increase interest rates. This way, money is less and prices are controlled. But people may not be satisfied because they cannot buy much. But if money is supplied cheaply, prices could go up and inflation could be back. So what does the government do? The government may need to make it easy for people to set up more factories and increase supply. To set up more factories, entrepreneurs would need

1) Land

2) Good quality people

3) Reasonably cheap capital

4) Good infrastructure

In order to make the above available the government has to initiate reforms as explained:-

• Land: To get land, the government has to make policies so that both buyer and seller of land are happy.

• Labour: To get good people, the government has to make policies that will encourage entrepreneurs to set up educational and vocational colleges. This would also include FDI in the Education sector. Since we need to be efficient and competitive with the rest of the world, our labour needs to be productive. For this to happen, we need Labour Reforms.

• Capital: To get reasonably cheap capital the government can do one of the following:-

1. Frame policies to encourage people to invest so that capital is formed. However, people will invest if they have sufficient funds and if they are optimistic about the future. To have adequate funds, money should be available cheaply which means interest rates should be low. But if interest rates are low without commensurate economic production, inflation is likely to step in. Nevertheless reducing interest rates can spur investments.

2. Frame policies that attract foreigners to invest in India. When foreign capital comes in, the value of the rupee goes up and inflation is kept at bay. With inflation at bay, the government can take measures to reduce interest rates. However, the profits arising out of foreign investments have to be shared with them. Either people share and move forward or stay standstill. Hence the need of reforms in the retail sector such as FDI in retail.

• Infrastructure

To be competitive, the manufacturer may need to be efficient; gets supplies in time and can deliver finished goods in time and needs to hold minimum inventory. This is possible on the back of good infrastructure like roads and railways, storehouses, refrigerated vans etc. For infrastructure to come up, we need land reforms so that people are clear what they will get when they hand over their land for infrastructure projects.

So when we have reforms in place, more factories will come up. When more factories come up, the country will produce more goods. When more goods are produced, more money can be printed without losing value. When more money is printed, the interest rates can be reduced. When interest rates are reduced more entrepreneurs jump into the fray creating more production and more jobs. With more jobs, people have more money and are in a good position to consume the additional production. This gives rise to more investment and thereby a virtuous cycle kicks in. With adequate supply, inflation is kept at bay even as people have cheap money for investment and for consumption. With interest rates low, inflation low, value of rupee stable, high production, the GDP of the country improves. With higher GDP, more jobs and prosperity in place, the tax collection increases. With higher taxes from higher GDP the situation turns win – win. People don't mind paying more taxes because they are earning more. Higher taxes help the government keep its fiscal deficit in check. In the meanwhile, the government is in a good position to invest in bigger infrastructure projects and improve the productivity of the nation. The moot point of the above explanation is that if the country wants to get a glimpse of utopia, it must reform its policies to infuse efficiency and productivity in the system.

CEO’s morning meetings

More often than not, companies tend to attribute downslide in business to external factors. My own experience suggests that it is mostly on account of internal factors that a company is not able to align itself to emerging needs of customers, product ranges and pricing of products, leading to downslide. Often leadership keeps managing today’s need with yesterday’s methodology and mindset. They are found wanting to change the prevailing culture of excessive bureaucracy, risk aversion, turf war between different functions, lack of coordination and insensitivity to communicate with customers and employees. The internal factors that support status quo are the biggest barriers to innovation and hassle free service. As Einstein said, “We cannot solve problems by using the same kind of thinking we used when we created them.”

One of the key challenges in pursuing a transformation agenda is to improve the prevailing internal environment characterized by constraints. Everyone in the management, especially at the top, has to learn the new habits of collaboration. In the competitive reality, where speed very often determines the business outcome, our traditional ways of working and communication style could be the biggest handicaps in our transformational program. It is like pushing a giant wheel. No matter how gifted a leader is, the organizational transformation cannot be successful without the support, engagement and commitment of the top team.

The top management needs to pursue the change agenda with grit and determination. They need to see the larger picture, pull together as a team, reinvent themselves and work in coordination with each other, to deliver results. Transformation program will yield good results when the top team thinks together, acts in unison and delivers on time.. Rudolf Giuliani, the legendary Mayor of New York city during the 9/11 crisis, used collective genius of key functionaries by organizing morning meetings with various departmental heads such as health, operations, fire, sanitation to effectively coordinate the successful running of the city post-terrorist attacks.

In the transformation program, one of my major challenges was to rid the corporate office of its culture of red-tapism, finger pointing, lack of accountability and ineffective communication, which affected our business relationship with customers, resulting in negative business outcomes. The need was to move on to a facilitative and open culture mode in shaping a new future and identity for the bank.

To bring radical changes in the way we do business, I introduced the system of ‘morning meetings’ as powerful means of constructively engaging the top management team to pursue the fast track transformation agenda with vigor and commitment. There was certain discipline about these meetings. We met for an hour from 9.30 am to 10.30 am, and membership was confined to general managers, advisors and my executive secretary. Later on, we brought in deputy general managers too. Ground rules were that anyone can place any item or point for discussion, even if it was beyond one’s own area of responsibility.

Problem solving

Rigorous discussions took place on anything or everything that mattered especially processes - speed of response, pattern of response, our successes, our failures, competitor’s strategies, regulatory environment, talent stock taking, issues of leadership, etc.

After a slow start, these meetings became effective vehicles for generation of ideas, exploration of solutions, problem solving, strategy formulation and learning. For example, when our credit portfolio was not picking up, these morning meeting debates led us to take some key decisions relating to structure of credit department, targeting new corporates, reviewing credit delivery mechanism, rehashing training of credit officers, reviewing outlook for interest rates, etc. This allowed us to achieve around 40 percent growth in our credit portfolio – highest in 2005-06 among the public sector banks.

Promoting strategic thinking

The morning meetings also helped us promote strategic thinking, as we laid great emphasis on diagnosis as the starting point for problem solving. In our discussion on any live problem, the emphasis was always on diagnostic questions like: Did we analyse the root cause of the problem; did we provide a bandaged solution or take long lasting corrective steps to avoid recurrence of the problems; did we handhold the managers in solving the problem; did we show knee-jerk reaction to a situation or did we explore alternate ways of handling the problem? Further, the collective creativity helped in making possible many customer centric innovations.

A forum for business review

Morning meetings became the forum for setting in motion the spade work needed for our vision exercise 2005-2010. We discussed our ambition for the future in relation to the economic environment, competitors’ growth strategy and our unique strengths. Every week, we also reviewed our business growth, merits and demerits of our products in relation to competitors’ products. These sessions were very intense with arguments and counter arguments. There was an increasing openness in the group. It was in these meetings that we discussed our aspirations for rapid expansion globally and many other strategies such as revamping our subsidiaries and creating new joint ventures for life insurance and mutual funds.

Set the tone for execution

Napoleon Bonaparte is famously quoted as saying, “Take time to deliberate, but when the time for action has arrived, stop thinking and go in.” So was it for Bank of Baroda. During 2005-08, we had an ambitious agenda for transformation that included introduction of core banking solutions, and doubling the business mix of the bank. These projects required impeccable treatment and time-bound implementation. They also required a high degree of coordination amongst various functionaries across the bank. The morning meetings allowed us to collectively discuss the implementation details of each project, identifying owners for each, support required and implementation schedules. The coordinated efforts helped in achieving extraordinary results, including doubling of business in just 3 years.

In effect, these morning meetings created an environment of espirit de corps in the ranks of management and helped stitch many loose ends in our programs and policies. It invigorated the top management and helped in de-bureaucratizing the working of the bank. It enforced the discipline of execution and promoted the culture of accountability for outcomes. They allowed us to function as a learning organization where new and expansive pattern of thinking was nurtured, where collective aspiration was set free and where we continuously learnt how to learn together – all in the setting of our aspiration to reach new milestones of achievement.

I feel truly gratified that as many as ten of my colleagues rose to become chairman or executive directors in public sector banks, and the training and grooming through these conversations helped them manage their transition and play leadership roles with great elan. A general manager who rose to become an executive director of a public sector bank had this to say, “I have learnt many management lessons at the morning meetings in Bank of Baroda, what even a regular MBA would have not taught me. These meetings helped me to transform myself into a better person and a better banker/business manager.”

Personally for me, morning meetings were sessions of exploration, discovery, coaching, guiding and persuading everyone to raise their aspirations. I truly feel that much of what we could achieve in the 3 years of my tenure, can be attributed to our informed and engaged sessions in the morning meetings. I personally benefited a lot as these meetings provided me deep insights into many operational and organizational issues. Truly, morning meetings were my ‘sapiental circles’ (knowledge generating group). Finally, leadership grooming is all about engaged conversations about real life issues and distilled learning derived from such engaged sessions, where people benefit from their own collective wisdom in solving problems and architecting the future for their organizations.
 By Dr. Anil K. Khandelwal

15 GREAT THOUGHTS BY CHANAKYA

1) "Learn from the mistakes of others... you can't live long enough to make them all yourselves!!"

2)"A person should not be too honest. Straight trees are cut first and Honest people are screwed first."

3)"Even if a snake is not poisonous, it should pretend to be venomous."

4)"There is some self-interest behind every friendship. There is no friendship without self-interests. This is a bitter truth."

5)" Before you start some work, always ask yourself three questions - Why am I doing it, What the results might be and Will I be successful. Only when you think deeply and find satisfactory answers to these questions, go ahead."

6)"As soon as the fear approaches near, attack and destroy it."

7)"The world's biggest power is the youth and beauty of a woman."

8)"Once you start a working on something, don't be afraid of failure and don't abandon it. People who work sincerely are the happiest."

9)"The fragrance of flowers spreads only in the direction of the wind. But the goodness of a person spreads in all direction."

10)"God is not present in idols. Your feelings are your god. The soul is your temple."

11) "A man is great by deeds, not by birth."

12) "Never make friends with people who are above or below you in status. Such friendships will never give you any happiness."

13) "Treat your kid like a darling for the first five years. For the next five years, scold them. By the time they turn sixteen, treat them like a friend. Your grown up children are your best friends."

14) "Books are as useful to a stupid person as a mirror is useful to a blind person."

15) "Education is the Best Friend. An Educated Person is Respected Everywhere. Education beats the Beauty and the Youth."

 

Public Speaking Exercise: How to Appear Confident by Adjusting Your Body Language

Purpose

Many people find public speaking daunting. They get butterflies in stomach, feel nervous and sometimes simply refuse to give a public presentation when they can get away with it. It doesn’t have to be this way and a great way to overcome the lack of confidence is to adopt the behaviour artificially.
Research shows that when you adopt a particular facial expression, such as smiling, you start to feel happy. In other words, the physical imitation of a smile can make you feel happy. Using a similar approach, this exercise aims to boost the delegate’s confidence so they can present confidently to public.

Objective

Adopt a series of confidence boosting gestures, body language and behaviours to prepare yourself for public speaking.

What You Need

• An empty area where people can freely walk around.

Setup

• This exercise is carried out over several days prior to presenting to public. As a result, you will need to explain the exercise to delegates, get them to practice parts of it in the class to get the hang of it and then instruct them on the rest of the activities which they would need to carry out after the course in an ideal time.
• Explain the theory to delegates that by imitating a particular gesture (such as smiling) we can feel the emotion associated with it (happy).
• Ask everyone to stand in the empty area. Line them up so that they can walk in parallel without hitting each other.
• Explain that the following exercise is useful to put them into a positive frame of mind. They can use it when they are about to meet an important person or face the public when giving a presentation, talk or an interview.
• Tell them the following instructions:
  • Relax your body and distribute your weight equally on both your feet.
  • Think of the following and repeat them to yourself in your mind for the duration of the exercise:
    • “I am cool”
    • “I am calm”
    • “I am sexy”
    • “I am the best”
  • Shrug your shoulders back and walk confidently.
  • Once you reached the other side of the room, turn back and walk several times back and forwards in the area while walking firmly with your head held high, shoulders held back, arms relaxed on your side and not in front of you and constantly repeating the above statements to yourself.
  • To get everyone used to it, you can get them to state this aloud first which would make the experience more memorable (expect laughs) and then ask them to state it in their mind.
• After a few minutes stop everyone and explain the next part which they need to carry out after the course. Find a busy part of town and walk on the sidewalk with the same pose as you practiced now while stating the above statements in your mind. There is only rule you need to follow; do not get out of the way ofanyone or any group. Walk confidently right in the middle of the sidewalk and do not give way.
• To do this, it helps to think in your head that:
  • “I own the world. This is my sidewalk, so get the hell out of my way.”
  • “Clear out. You don’t want to mess with me.”
• Repeat this walk of confidence exercise for a few days. You will need to be able to walk through a group rather than round a group of people, and do it confidently and with pleasure. You can say “excuse me”, but you cannot say “sorry”. Let’s repeat that again; saying “sorry” is not allowed. There is nothing there to be sorry about. By the end of the third day of repeating this exercise, you will start to see that something is different in the way you feel about yourself. Nothing has changed in the world and certainly no harm is done by walking down a sidewalk. However, you have managed to reprogram your mind to think differently about yourself. With this new positive, confident, world-owning mindset you can now face a demanding audience and deliver a brilliant and confident speech.

Tips for investing in fixed deposits

It may be a good time to open a fixed deposit and lock in at high levels before the interest rate cycle turns. Listed are the key things you need to know before investing in these fixed income options. 
1. FDs are not entirely safe 

Don't think your money is completely safe when you invest in a fixed deposit. While corporate deposits are unsecured loans that do not guarantee anything to the investor, in case of banks, the Deposit Insurance and Credit Guarantee Corporation (DICGC) insures deposits of up to Rs 1 lakh per customer across all branches of a bank. 

So, if you have Rs 3 lakh to invest, split it into 3-4 investments across different banks. While this will safeguard your money, an added advantage is that if you need the amount in case of an emergency, you won't have to break the entire deposit. This means that you will have to pay the premature withdrawal penalty only for the sum that you need, even as the rest of the money keeps growing. 


2. Ladder your investments 

Spreading your investments across different banks controls the default risk, but what about the risk of locking in your money for long periods at low rates? Fixed deposits are prone to uncertainty because interest rates tend to move in multi-year cycles. To avoid this, build a ladder of fixed deposits which have different tenures. 

If you have Rs4 lakh to invest, split the amount in four deposits of Rs1 lakh each for one, two, three and four years. When the 1-year deposit matures, reinvest the maturity proceeds in the 4-year FD. By doing so, the highs and lows in interest rates will balance out over a period of time. This will also ensure liquidity because you will have one deposit maturing every year. 

3. Premature withdrawals invite a penalty 

Make sure you get the tenure right while investing in a fixed deposit. Locking up money for the long term and then making a premature withdrawal means lower returns. If your bank is offering a 9% interest on a one-year deposit, and 9.5% for a 5-year term, don't be tempted to go for the longer term if there is a possibility that you may need the money earlier. 

If you opt for the 5-year fixed deposit and then break it after one year, you will get the rate applicable to the one-year deposit. Worse, you may be slapped with a premature withdrawal penalty that will lower the rate by 1 percentage point. So, instead of gaining half a percentage point, you may end up losing 1 percentage point. To avoid this, go for the ladder system mentioned earlier. 

4. TDS is only an interim tax 

The interest earned on your FD is fully taxable. If the interest amount exceeds Rs 10,000 in a year, the bank or corporate house will deduct 10.3% tax at source before you get the amount. Your tax liability doesn't end here. If you are in the higher income bracket (annual income of over Rs 5 lakh), you will have to pay more tax on this income. 


Even if the TDS has not been deducted, you should mention the income from fixed deposits and bonds in your tax return. Remember that the tax on the interest is levied on an accrual basis. You may have invested in a cumulative deposit, but tax will be paid every year. 

On the other hand, if your income does not exceed the basic tax exemption, you can get this TDS back by filing your tax return. To avoid the TDS, submit a declaration under Form 15G that your income is below the taxable limit. Senior citizens should submit the Form 15H. 

5. FD income will be clubbed with yours 

Don't think you can avoid tax if you invest in the name of your spouse or children. While you won't have to pay tax on the money given to a spouse or a child, if it is invested, the resulting income is added to the income of the giver and taxed accordingly. So, if a husband invests in fixed deposits in the name of his wife, the interest earned will be treated as his income. 

The rules are slightly different in case of investments in the name of minor children (below 18 years). The earning is treated as the income of the parent who earns more. However, there is an exemption of Rs 1,500 a year per child for a maximum of two children.

ET Wealth