Category: Finance

A council of finance ministers from India’s union and state governments on Wednesday failed to finalize the main rate of the goods and services tax and will again meet next month, raising concerns that the new sales tax might miss April’s deadline.
Union and state finance officials met for two days in New Delhi to resolve their differences over the rates as well as the administration of the tax. They will again meet on Nov. 3-4.
While the meetings could not break the deadlock, the contours of the discussions suggested India might end up with a tax structure with multiple rates.
Experts say that the best taxes have to be low, flat rates and few exemptions and warn that the proposed GST for India may – due to its relative complexity – deter compliance in a country where many businesses are skilled at minimizing their taxes.
“Having more rates will complicate the situation,” said M.S. Mani, senior director at Deloitte Haskins & Sells LLP, adding uniform rate in states would simplify current tax structure.
The new tax is a signature reform of Prime Minister Narendra Modi that is aimed at making India an investor friendly destination. The measure would harmonize a slew of federal and state levies.
Supporters say the rollout of the new tax would boost the country’s economic growth by as much as 70 basis points. But a compromise-ridden tax threatens to rob any potential gains.
At the meeting, some states sought to impose a surcharge of tax on luxury products such as sparkling water and tobacco products to keep lower rates on essential food items, Kerala Finance Minister Thomas Issac told reporters.
But the union government did not support the proposal, saying it would have a cascading impact, a senior Finance Ministry official told reporters after the meeting.
The ministry has proposed four tax rates, with the highest at 26 percent for about 20-25 percent of taxable items. Other slabs included 12 percent for food and fast-moving consumer goods (FMCG), and 4 percent for precious metals like gold.
Finance Minister Arun Jaitley, however, remained optimistic that the November meeting would resolve the differences, paving the way for the tax’s implementation from April 1.
To hit that timeline, union and state lawmakers need to pass key bills in this calendar year, and even then there will be a race against time to set up IT systems and ensure millions of businesses are ready to file returns online.

 

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US Trade Representative Michael Froman believes that India needs to do more on the foreign direct investment front. Froman, who is in India for the Trade Policy Forum (TPF), also stressed on addressing the intellectual property rights (IPR) issues. In an interview to BusinessLine, Froman, shared his thoughts on the bilaterals between the two countries and whether the potential has been realised. Excerpts:

What is the US agenda for the 10th round of TPF?
The Trade Policy Forum provides an opportunity to discuss core areas within the relationship, including agriculture, services, manufacturing and intellectual property rights (IPR). I think we have made important progress in each of these areas, but there is still more to be done, and this is a good opportunity to focus on that.
In which areas do you think full potential has not been realized?
The US and India are two large economies, currently trading just over $100 billion, which speaks to the fact that there is more that can be done. The relationship may benefit from more regulatory reforms, transparent rules and regulations, and address impediments to investment. There is a lot of innovation in India, in manufacturing and services, and we are interested in talking about further steps to implement strong intellectual property rights laws to support that environment.
India has recently opened up a number of sectors by easing foreign investment rules. Where do you see the impediments?
There have been some important steps in opening up certain sectors, but there continue to be impediments in certain retail, financial, and professional services sectors, among others.
On the WTO solar panels dispute concerning domestic content requirements (DCR), India has said it will be implementing the ruling in the next phase and not immediately. Does that concern you?
We strongly support efforts by India and other countries to develop renewable energy and deploy solar panels and other sources of renewable energy. This case was important because it underscored that local content rules lead to more expensive and less efficient solar panels, which is not in the interest of expanding the supply of renewable energy. We will continue to work with India, which has been an important partner in the Paris climate change negotiations and in broader areas of energy cooperation, to help expand our cooperation in renewable energies as well.
While the US filed a case against India on DCR in its solar programs, several US States were found doing the same. Isn’t that double standard?
We are confident that our programs are WTO-consistent. There are ways of promoting renewable energy that is WTO-consistent, and we think it is important to uphold our international obligations.
In the poultry dispute, India said it has made the required changes in import rules as per WTO ruling. Why is the US still not satisfied?
The US and India’s technical teams are talking to assess whether the actions that India has taken will bring it into compliance with the WTO ruling. We have expressed concern with the measures put in place in July, and we are now focused on reviewing an amendment that the Indian government recently put out to determine how it affects its compliance with its WTO obligations.
During the recently concluded India-US Strategic and Commercial Dialogue (S&CD), it seemed the Bilateral Investment Treaty (BIT) talks have been put on hold. What is your reaction?
Prime Minister Modi has made clear that he would like to improve India’s business environment for investment. We think that the negotiation of a high-standard Bilateral Investment Treaty could be consistent with his objectives of promoting Make in India and attracting investment. The US and India have their own model BIT, and we have had good, ongoing dialogue about the differences within our models and whether they may be bridgeable.
In the Nairobi Ministerial, US and India had a difference of opinion on whether the Doha Round should be continued. What are the new issues you are planning to introduce?
India has been an active participant in helping to rejuvenate the WTO, both in understanding the need to take new approaches to outstanding issues, and exploring new issues as well. Over the last year, there have been a number of good discussions in Geneva about what new issues might make sense to pursue. Whether it’s around e-commerce, small- and medium-sized enterprises, or others, these are issues WTO Member representatives in Geneva will continue to discuss to determine the best way forward.
India’s IPR regime has been a major bone of contention between both countries. The Indian government has also rolled out a National IPR Policy, yet why is the US still concerned?
We are now focused on how the policy will be implemented and will continue the dialogue with India on IPR issues, both under the National Policy and more broadly. There’s a lot to be done to address these IPR issues. But the sign of a good, strong, mature trade and investment relationship is one in which we can engage frankly with each other over our differences, even as we cooperate in areas of common interest.

 

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Indian rupee currency notesIndia’s PNB Housing Finance Ltd and Varun Beverages are looking to raise as much as $630 million combined from initial public offerings (IPOs) next week, underpinning a surge in first-time share sales in Asia’s third-largest economy.

Indian companies have raised $2.9 billion through IPOs in the first nine months of this year, a 171 percent jump from a year earlier and the best run since 2010, according to data compiled by Thomson Reuters.

PNB Housing Finance Ltd, the fifth-largest mortgage lender by assets in India, is selling new shares to raise up to 30 billion rupees ($450.5 million) in the second largest IPO this year. The sale will open on Oct. 25 and close on Oct. 27, according to an announcement on Tuesday.

The lender has set a price range of 750 rupees to 775 rupees a share. Indian state-run Punjab National Bank, which owns 51 percent of the lender, will see its holding diluted to about 38 percent, while Carlyle Group’s holding will drop to about 37 per cent from 49 per cent. Neither Punjab National Bank nor Carlyle will be selling shares in the IPO.

PNB’s share sale will be the second largest this year after private sector life insurer ICICI Prudential Life Insurance Co Ltd raised 60.57 billion rupees last month in the biggest local IPO in six years.

Varun Beverages, one of the largest bottlers for PepsiCo Inc, is looking to open an IPO to raise 11.5 billion rupees to 12 billion rupees on Oct. 26, two banking sources with direct knowledge said. Varun filed for the IPO in June.

Kotak Investment Banking, Bank of America Merrill Lynch, JM Financial, JPMorgan and Morgan Stanley are managing the IPO for PNB Housing.

Kotak, Axis Capital, Citic CLSA and Yes Securities are managing the IPO for Varun Beverages.

 

 

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Living in your own home would be one of your biggest dreams. It not only marks your independence but also gives you the feeling of success. Your home is probably the biggest investment you will make in your life.

You have found the perfect home and have also checked your eligibility for a loan. The only hurdle delaying the purchase is the down payment. Lenders provide loans for up to 90% of the property price. The balance must be paid through your personal resources, which is known as the down payment.

Experts advise you to start planning even before you make the decision to buy a home. The habit of saving smaller amounts will also help to meet your down payment. Here are five ways in which you may save money to pay the same.

  1. Plan and budget

If you plan to buy a home in the next couple of years, it is important to start setting a budget from now. It is also important that you check your home loan eligibility to know the exact amount you will need as down payment. You must eliminate avoidable expenses to accumulate funds for down payment.

2. Liquidate smaller savings

If you have saved in precious metals like gold or hold bonds, you may liquidate these. This money may be beneficial in meeting the down payment needed once your home loan is approved. However, you must retain some savings to meet any emergencies.

3. Ladder your savings

Investing your extra money in corporate deposits (CDs) is a good way to earn decent returns. These are relatively low-risk investments and are easily accessible. One way to maximize your returns is to spread your savings in different CDs with varying maturity dates. This is known as laddering and provides the flexibility that adjusts your savings based on the interest rates. It helps you to invest when the returns are higher and ensure you do not have to invest for longer periods in case of lower interest rates. These funds may be used to make the down payment towards your property before the lender disburses the home loan amount.

4. Borrow against savings and life insurance

Insurance companies offer loans against life insurance policies at a lower rate of interest. Furthermore, you receive flexibility because of several repayment options. The loan against life insurance is repayable during the policy term and ensures you do not face any financial constraints. You may compare the interest payout on the loan against life insurance and housing loan using an online home loan calculator. This will enable you to make an informed decision. You may also avail of loans against your savings to make the down payment. If you liquidate these, you do not have to pay pre-withdrawal penalties.

5. Pay-off credit card outstanding

Ensuring you pay the entire credit card bill each month ensures you do not pay the huge finance costs. This will enable you to save more money, which may be saved over a longer duration to meet the down payment towards your home.

You may seek help from your relatives or friends or procure a soft loan from your employer to fund the down payment. Consider taking up another job to earn more income.

While arranging for the down payment is important, it is recommended you check the title of the property prior to making your decision. Ensuring there are no legal issues prior to your home loan application is important to avoid inconvenience and delays.

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Several individuals avail of personal finance to meet emergency fund requirements. Such loans are available without any collateral, which makes these popular. Furthermore, the borrowed amount may be used for any legal purpose, thereby giving you flexibility.

It is most likely that you may avail of this loan with the intention of repaying it before the end of the tenure. Compared to other loans like home or auto, the interest rates on personal finance are higher.

There are several benefits of prepaying part or the entire loan amount before its tenure. Generally, you may choose a longer tenure to reduce the equated monthly installment (EMI). However, the interest paid over a longer duration is higher and, therefore, repaying earlier is beneficial.

  1. Lower the EMI

If you have funds available, it is recommended you use them to repay the outstanding personal loan. This will enable you to lower the EMI and also ensure the amount is repaid in a shorter period of time. When you repay the loan faster, you are able to save a significant amount for the longer duration.

2. Pre-closure penalty

Financial institutions may levy a certain penalty if you repay the personal loan before the end of its duration. It is recommended you check the penalty and make an informed decision. In most instances, you will still be able to save money when you prepay even after paying the pre-closure penalty. This is because the personal loan interest rates are higher than secured credit facilities, such as home or auto loans.

3. Improve credit score

Your credit score is directly related to the amount of your outstanding debt liabilities. When you prepay the loan, it is immediately reflected in your credit score. Repaying the money before the end of the loan tenure positively affects your credit score. A higher score will ensure lenders perceive you as low-risk in the future when you apply for another loan.

You may either prepay the entire amount or some part of the outstanding principal. The following will help you understand the advantages of repaying either part or full loan amount before its tenure.

4. Full prepayment

When you prepay the entire loan amount before the end of the duration, you are able to save a significant amount towards the interest payout. Furthermore, the interest savings are higher when you prepay during the initial years of the loan duration. Most lenders have a minimum lock-in period during which you are not allowed to prepay the loan amount. It is advisable that if you have extra money during the lock-in period, you invest in high-return instruments. The accumulated amount may then be used to repay the loan amount after the end of the lock-in period.

5.Partial prepayment

You may receive an annual bonus or some of your other investments may mature during the loan duration. This amount may not be equal to the entire outstanding loan amount. However, it is beneficial to use the same to repay the loan. Partial prepayment reduces the outstanding principal, which decreases your EMI. Therefore, using the funds to repay the loan will help you save a huge amount in the long run.

The old saying “borrow less and repay early” is still applicable. Moreover, when you avail of a personal loan online, you are able to enjoy certain special offers. However, it is still debt and repaying it at the earliest is advisable to ensure your outflows are the least.

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The used car market in India is bigger than the new car segment. The affordability of second-hand cars makes these a popular option. Furthermore, you may buy a used car to hone your skills if you have just started driving.

There are a large number of options when you look for a second-hand car. Here are five things you should consider while buying a pre-owned vehicle.

  1. Car quality

Although a used car may not be in as good condition as a new vehicle, it must be in a decent condition. You must check the car’s condition in person by taking it for a test drive and seek assistance from an experienced mechanic.

2. Insurance papers

The insurance papers will help you understand if the car has undergone any repairs or has been involved in an accident. It will also allow you to understand the no claim bonus (NCB) benefits, if available. When you look at the insurance papers, ensure the chassis and engine number match. Once you finalize the deal, it is important to transfer the insurance to your name. However, remember that you need to transfer the insurance before the registration certificate (RC) is transferred to your name.

3. Registration certificate

The RC is the document that proves the ownership of the car. When you buy a pre-owned car, you must change the RC to ensure the ownership is transferred in your favor. You will have to submit forms 29 and 30 to the road transport office (RTO) to change the RC.

4. Car loan

It is possible that the previous owner may have taken a loan on the car. This information is available from the insurance policy. In case there is a loan, you need to procure the original invoice and a no objection certificate (NOC) from the lender. This is important especially if you are also planning to avail of a used car loan.

5. Other documents

An important but often overlooked factor is the service records. The service book will show if the services have been done in a timely manner. Additionally, you must check if the road taxes have been paid. The car must also have the pollution under control (PUC) certificate. All these are important when you buy a pre-owned car, especially through a second-hand car loan.

Financial institutions offer such loans both online and offline. The entire procedure is quick and hassle-free and completed in a short period of time. The documents needed for the loan are minimal, thus ensuring you have no difficulty in arranging for these. Contrary to popular belief, the used car loan interest rates are affordable with a flexible repayment schedule, thereby ensuring you have no financial difficulty in servicing the same.

You may buy a pre-owned car either online or through a licensed dealer. For added convenience, apply for a used car loan online and drive home your car today.

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Funds are the lifeline of any business and all requirements are not met by profits or reserves. Generally, businesses avail of finance from lenders, which may be for a long or short term, and secured or unsecured.

These loans may be used to meet the working capital requirements or fund capital expenses. These are often known as business loans and are disbursed after lenders assess several factors. Businesses that have an excellent track record, such as high and consistent profits and regular repayments to creditors are usually eligible for higher loan amounts at lower interest rates.

Even if your business performance has been good in the past, sometimes, due to a miscalculation, declining sales, an untoward incident, or a natural calamity, you might face difficulties to repay the loan on time.

If you are late in repaying an installment, then it would only attract a few charges. This is also known as delinquency, as long as it only occasional and the delay are very short. If the frequency increases and the delays get longer, your loan will be termed as default, and this is bad for the creditworthiness of your business.

Implications of default

It depends on the lender as to how long they will wait before they classify your loan as a default. To recover their money, lenders may choose one or more of the following options.

  1. Collection agency

Your lender may choose to send the details of your business loan to the collections agencies that specialize in recovering money from defaulters. This is not good for your credit history and you must avoid the same.

2. Report to credit rating agencies

The records for all types of credit facilities including business loans in India are maintained by Credit Information Bureau (India) Limited (CIBIL). Therefore, if you delay the repayment of a particular installment or are classified as a defaulter, it will be informed to the credit rating agency. As a result, your credit score is negatively impacted. A lower credit score may increase the interest rates on all the future borrowings.

3. Seizure of collateral

In case you have mortgaged any asset, such as equipment, the lender will liquidate or take possession of it to recover the money. The appointed collection agency that has taken over the loan from the lender may also seize your asset to recover the dues.

4. Lawsuit

In cases of unsecured loans wherein no collateral is pledged, a lawsuit is unavoidable.

In order to avoid all such problems, you could take the following tips.

5. Restructure the loan

You should always call the lender at the earliest and explain the situation to them. Once convinced, they could be willing to temporarily reduce payments, or work out a better repayment schedule.

6. Refinance

Although not very economical, you could choose to get a bigger loan for a longer duration so that you are able to repay the current outstanding and reduce the installment. Debt consolidation has its pros and cons and you must evaluate all these before choosing this option.

7. Reduce costs

You may want to grow your business quickly. However, this is not easy and, therefore, reducing the costs to meet your current cash flow needs is recommended.

A lender’s first priority is to recover their money back. Financial institutions offer competitive business loan interest rates to help grow your business. However, if you are unable to repay on time, lenders are willing to relook at the loan and structure it to help you out.

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The availability of funds has increased remarkably over the past decade because banks and non-banking financial companies (NBFCs) offer different types of loans. This has enabled businesses to grow without any constraints.

Loans may be classified into secured and unsecured loans. Both types have their unique features, pros, and cons. Based on your requirements, it is recommended to choose the most appropriate type of loan.

A loan availed of by mortgaging a property is secured and is known as a loan against Property (LAP). When you avail of a LAP, you receive a certain percentage of the asset value. This is known as Loan to Value (LTV). Loans issued without any collateral are known as unsecured loans.

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When you consider a business loan or any other type of credit facility, you should keep in mind certain factors. These include equated monthly installments (EMIs), the rate of interest, loan tenure, and LTV.

  1. Rate of interest

All types of loans include a certain interest rate. It is the cost of availing of the funds and using them for a period of time. This rate of interest is determined based on your credit rating and the repayment tenure. Generally, lenders levy higher business loan interest rates because these are unsecured and are risky.

2. Loan tenure

When you choose a longer repayment tenure, the EMI is lower. Generally, a loan against property offers longer duration when compared to unsecured business finance. Furthermore, when you compare the servicing charges and interest rates, the unsecured business finance rate is higher than the loan against property interest rates. If you require the funds for a longer duration, a LAP is more advantageous.

3. Eligibility

When you choose to avail of a loan, you need to meet the eligibility criteria. These include your income, credit score, age, and documentation. Your credit rating plays a crucial role in determining your eligibility for an unsecured business loan, loan against property eligibility on the other hand, depends on the asset value.

4. Documentation

Generally, documents needed to avail of an unsecured credit facility are lesser when compared to those required while applying for a LAP. This is because in addition to your basic documents, you will need to submit property-related documents when you avail of a LAP.

The following table summarizes the differences between an unsecured loan and a LAP.

DifferenceBusiness loanLAP
CollateralUnsecuredAny property (commercial, residential, or industrial)
Loan amountINR 3 lakh – INR 75 lakhINR 5 lakh – INR 10 crore
Repayment tenure1 Year – 4 yearsUp to 15 years
EligibilityRetailers, doctors, chartered accountants, traders, professionals, and manufacturers, and private and public limited companiesPartnership and sole proprietor firms, salaried or self-employed professionals, micro, small, and medium enterprises

Before you decide on one of these loans, it is important you compare the various products offered by different financial institutions. Furthermore, assessing your personal requirements will help you make an informed decision. In addition to your needs, you must consider your repayment capability to choose one of these options.

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