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The Reserve Bank will come out with its third quarter review of monetary policy tomorrow. Reserve Bank of India's monetary policy review will be a decisive factor for markets this week. Analysts are widely expecting the apex bank will keep interest rates on hold. RBI has indicated earlier that its priority would be to rein in inflation, although India Inc has been pushing for cut in interest rates as a booster dose for economic growth. RBI in January raised the key repo rate by 0.25 per cent to 8 per cent says market analyst Sachin Karpe.
Tremendous pressure on the exports was observed as there was inflow of foreign currency and strengthening of the rupee against dollar. According to MD Shyam Srinivasan of Federal Bank, RBI may go in for a pause this time. Punjab National Bank’s chairman and managing director K R Kamath says the RBI action will depend on an outlook on inflation. According to Morgan Stanley volatility in food prices might result in CPI inflation. The present economic situation may not warrant any rate hike says SBI’s economic research team. Last December, RBI pressed the pause button on its monetary tightening measures and said it might go for rate cuts in the future depending on moderation in inflation. Mr. Sachin Karpe says RBI has gone public on targeting CPI-based inflation down to 8 per cent by January 2015 and further down to 6 per cent by January 2016, as per the recommendations of the Patel committee. Observing neutral sentiments and given the country’s economy, Sachin Karpe also feels that RBI may just maintain a status quo.
Sachin Karpe talks about the fundamental principles of a sound banking system. A sound banking system must have a heavy handed regulator that enforces a number of best practices upon the supervised banks. This regulator is usually a Central Bank, such as the FED. These best practices are, in sum: 1. Asset/Liability pricing at market levels ensures banks' numbers reflect the current reality/ health of their finances. 2. Controls: banks must monitor their activities, liquidity and solvency daily. They must have sound systems and controls in place. 3. Capitalization: Regulators must ensure banks hold enough capital to absorb potential losses. The capitalization handbook is the Basel regulation, that establishes leverage levels for all banks worldwide. 4. Risk Controls: Banks must manage risk exposures pro-actively. Mr. Karpe also adds on the market side, this means measuring value-at-risk, stress testing portfolios, etc. On the credit side, it must analyse and monitor clients constantly, and provision losses based on credit ratings and probabilities of default says Sachin Karpe.
Let us take a look on the top 5 tax saving funds worth investing for purpose of claiming tax benefit under Sec. 80C of Income tax Act. Franklin India is a new entrant in our Top 5 pipping Sundaram BNP on account of excellent Risk Rating.The fund has above 35,000 crore Avg. Mkt. capitalization and equity exposure is more than 97% of the assets explains Sachin Karpe. Birla Equity offers excellent returns from all parameters, but standard deviation of 24.42 , this growth comes with comparatively high risk. The fund has 9394 crore of AMC with high exposure in Engineering, Services and Financial service sectors.
The Employee Provident Fund, or provident fund as it is normally referred to, is a retirement benefit scheme that is available to salaried employees. Under this scheme, a stipulated amount (currently 12%) is deducted from the employee's salary and contributed towards the fund. This amount is decided by the government.The employer also contributes an equal amount to the fund. The Public Provident Fund has been established by the central government. You can voluntarily decide to open one says Sachin Karpe. You need not be a salaried individual, you could be a consultant, a freelancer or even working on a contract basis. You can also open this account if you are not earning. Any individual can open a PPF account in any nationalized bank or its branches that handle PPF accounts. You can also open it at the head post office or certain select post offices.The minimum amount to be deposited in this account is Rs 500 per year. The maximum amount you can deposit every year is Rs 70,000.
