Life events: Why you should review your Will periodically

I have been married for 15 years. My husband’s previous marriage ended in a divorce. From his first marriage, my husbhas two children. He has not been in touch with them. He executed a Will prior to our marriage, left a large part of his estate to his siblings, nothing for his first wife or children, a flat for me. Now, my husbis trying to reconnect with his children expressed his desire to leave some assets for them. Should he update his Will that would reflect the change in circumstances?

–Name withheld on request

Without a doubt we would recommend your husbto rewrite his will. Any lapse may result in an undesirable scenario where both you as well as his children will be deprived of a majority of his assets. In fact, this could even result in litigation among family members.

While a Will is perhaps one of the most basic elements of succession planning, it is also, the most essential. However, succession planning does not stop at Will writing. It’s equally crucial that one reviews the Will at least once every 5 years or when a significant life or financial event occurs.

Reviewing ones Will means forming an assessment, as to whether it still meets one’s succession goals at the present time into the (near) future. In this scenario, the last Will is not representing the changed circumstances. Now that you your husbare married, he may wish to leave some more assets for you. Moreover, it appears that your husbis even attempting to establish a relationship with his children. In such a scenario, we would certainly advise your husbto review his last Will.

We would also advise him to ensure the nominations on his bank accounts investments are up to date. A nomination is a very effective tool which enables the nominee to access financial assets in the event of death enabling immediate liquidity to family members. However, it is important to remember that a nominee is a trustee for the legal heirs family members must resolve this in case the nominee legal heirs are different. The value of having a proper succession plan should not be underestimated. It is therefore recommended that your husbproactively reviews his existing Will updates it to ensure it reflects the requirements of the present-day.

Jahnavi Dwarkadas is an associate partner at SNG & Partners.

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Updated: 06 Jun 2023, 11:01 PM IST

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Decoding zero forex markup on debit, credit cards

Starting 1 July, there will be significant changes in the way you spend during foreign holidays, including for food, shopping, commuting as well as for recreational activities. International transactions on debit or credit cards exceeding 7 lakh will be subject to a 20% tax collected at source (TCS), but loading a prepaid forex card or purchasing local currency in India will attract TCS from the very first purchase.

The regulation presents a dilemma for individuals whose foreign expenses are not likely to cross 7 lakh. They will be inclined to use a debit or credit card to save the 20% upfront cost levied on forex, but the downside is that they will have to shell out an extra 2.5-6% per transaction in the form of forex markup transaction fees, which is less than the 1% in the case of zero-cost forex cards..

Nevertheless, there is some relief. Select fintech firms have partnered banks to offer zero forex markup debit cards, significantly reducing the cost of international spending. Presently, three such credit cards are available that also waive markup fees, which typically range from 1.5% to 3.5%.

Read the fine print

Niyo Global card, Fi Visa Platinum debit card Jupiter debit card have zero forex markup fee. While Niyo has tied up with Equitas Small Finance Bank SBM Bank, Fi Jupiter have a partnership with Federal Bank.

In early 2023, the Reserve Bank of India had put restrictions on international debit credit cards issued by SBM Bank after finding slip-ups in regulatory compliances. The clamp down hit Niyo Travel card users, said Swapnil Bhaskar, head, strategy, Niyo, which is in the process of inking a partnership with other banks. “Niyo Global customers can take credit debit cards from multiple bank partners with zero mark- up forex charges,” he added.

In the case of these debit cards, the issuing bank waives off its own markup fee but the markup charged by the payment network, though small, is still levied. “Rates offered by payment networks to these fintechs are already marked-up,” said Sudarshan Motwani, founder CEO, BookMyforex. This means the conversion rate on these cards is slightly higher than mid-market exchange rates despite the zero markup promise.

Moreover, in the case of Fi Jupiter, forex fee is not waived for all debit card users (see graphic). Fi charges 2.5% forex mark-up on accounts that do not mandate minimum balance. Accounts that require 10,000 minimum balance are offered zero forex markup up to 50,000 monthly spends those with 50,000 minimum balance mandate get zero forex fee on all spends. Also, 2.5% 3.5% markup is charged on all transactions at first on Fi Jupiter, respectively, but is reversed for eligible transactions within 7-30 days.

Zero-forex credit cards too have certain conditions. For example, the IDFC First Wow credit card is issued only against a fixed deposit (of 5,000) opened with the bank. “Credit limit is equal to the FD amount,” Sumanta Mandal, founder, TechnoFino, said.

This could be a costly proposition for some as you have to lock-in money in an FD, which is akin to locking in 20% with the government through TCS. It can be argued that an FD earns an interest of 5-7%, unlike the TCS, the two are similar as they require you to pay the amount upfront.

RBL Bank World Safari credit card could be a good option for those travelling overseas frequently in view of the zero forex fee free medical insurance, despite not earning any rewards on international transactions.

Axis burgundy private credit card is another option but it is available only for HNIs. “One needs burgundy private relationships with Axis bank to get the card, which requires 5 crore NRV (net relationship value in the form of salary, deposits, demat holdings etc),” said Mandal.

Before taking your pick, do find out about annual maintenance fee or transaction fee, to calculate how much you will effectively be saving (see graphic).

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Updated: 06 Jun 2023, 10:50 PM IST

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How Bajaj Finserv plans to sell mutual funds to its 100 million clients

Bajaj Finserv AMC, India’s 41st mutual fund house, is gearing up to launch inaugural new fund offers (NFOs). With 87 funds filed across equity, debt hybrid categories, Bajaj Finserv seeks to capitalize on its existing 100 million customers, leveraging its clientele for the new fund house. To lead this initiative, Nimesh Chandan, a former fund manager at Canara Robeco AMC, has been appointed as the chief investment officer, while the group’s head of strategy a former BCG Partner Ganesh Mohan takes on the role of chief executive. In an exclusive interview, Sanjiv Bajaj, chairman managing director, Bajaj Finserv, Mohan, share insights into their vision strategy. Edited excerpts:

Why are you launching Bajaj Finserv AMC?

Bajaj: Our journey began in 2007. We decided to focus on India’s middle class because they knew us well. They already bought scooters, motorcycles electrical appliances from us. We started with the early part of a person’s life cycle—getting a loan. So, we started expanding Bajaj Finance. We then said, okay, as a person makes a lot of money, they will buy a house, or a two-wheeler a four-wheeler. So, asset protection life protection came in the form of general life insurance. And accordingly, we started setting up each business. We applied for the mutual fund licence in 2011. That was around the time when the Securities Exchange Board of India (Sebi) dramatically changed its first set of regulations for MFs cut its commissions. We decided we would wait for those things to settle down.

Then we built our digital distribution. We let the customer start experiencing our products. The biggest challenge for any new fintech or insurtech firm is your customer acquisition cost. We pay to get customers on board one time. After that we never pay. The first time also, acquisition cost is not direct the way startups are paying. For us, it is our investment in digital, in 150,000 stores, in creating a strong sales team.

Two, we realised that a large number of distributors are common across different products services. So, now we have a large number of distributors who know what is different unique about us. Our focus has always been the right product, with transparency. For example, even in 0% financing our documentation says what our IRR (internal rate of return) is, because the manufacturer is paying us. Third, is the entire culture we have built on empowerment, innovation, the rewards for our teams, for them to feel like owners in building their businesses rather than a top down approach. Simple things like being in Pune, not being in Mumbai, was a very conscious decision 10 years ago, to signal that we don’t wish to be in the midst of all that noise in Mumbai.

What will set apart Bajaj Finserv AMC?

Mohan: There are three possible sources of alpha. One is information. But today, we all get the same information, so that isn’t a big edge. The second is analysis. Can you process that information with better tools models? Again here, there’s still some juice but by large it’s squeezed. That brings us to the third the biggest advantage, which we believe is really going to be the key driver for the future, that is, the behavioural edge. Can we keep on improving on our decision-making ability over a period of time, using the right kinds of checklists, templates, nudges, as well as tools screeners? That’s the edge we aim for.


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You will need five years to establish a track record. So, shouldn’t you have launched earlier?

Mohan: We have built-in experience of investment management in group businesses such as insurance. Plus, our fund managers individually have a huge amount of industry experience.

What will set your products apart?

Mohan: We will only launch products where we see a definite scope for alpha. For example, we will not launch a large cap fund where you end up tracking or mimicking the index for 75-80% of your portfolio.

Distributor margins are shrinking expense ratios are getting lowered. Isn’t this a challenge?

Mohan: As any industry matures, margins shrink. To compensate for it, the industry has higher volumes. We think distributors can compensate for shrinking commissions by expanding volumes.

Can you sell MFs to loan customers?

Bajaj: Today on the Bajaj Finance app we distribute many MFs. As a lending institution, it is allowed. This is not allowed in insurance by the insurance regulator, which does not allow an insurance company to sell any other products to customers. We have been presenting other financial products to customers of one product for the past 10-15 years at their concurrences within the framework of the law. The ability to be visible present itself is a very big advantage.

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Updated: 07 Jun 2023, 12:46 AM IST

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Rate hike or pause? Here’s how RBI’s monetary policy decision on June 8 may impact your home loan EMIs

In the previous policy (April 2023), RBI kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50%. Subsequently, it also kept the standing deposit facility (SDF) rate unchanged at 6.25%, while the marginal standing facility (MSF) rate the Bank Rate were also unchanged at 6.75%.

Prior to this, RBI has hiked the repo rate by 250 bps points since May last year, which had led to a significant jump in banks’ lending deposit rates. The reason behind this would be that rate hikes usually lead to a spike in the cost of funds for banks hence the lenders pass on the impact to end borrowers.

RBI’s 3-day monetary policy meeting has begun from Tuesday onward. On June 8, 2023, RBI is most likely to choose another pause.

Parag Sharma, Whole-time Director & Chief Financial Officer, of Shriram Finance said, “With the customer inflation level at 4.7%, well below RBI’s upper tolerance limit of 6%, the conditions seem favourable for a pause in rate hikes. The latest GDP forecasts also point towards inflation becoming less of a concern.”

Accordingly, Sharma added, “We expect that the MPC, in its upcoming meeting, will hit the pause button on the policy rate hikes, for the second time running. However, accurately forecasting the potential impact of El Nino on the economy has become the primary concern. Considering our economy’s heavy dependence on farmers small businesses, we feel that the Government would do well to take steps to mitigate the adverse effects of El Nino.”

Also, according to a Refinitiv poll, all 64 economists expect no change to the 6.50% repo rate at the conclusion of the RBI’s June 6-8 meeting.

Brokerage Reliance Securities also believes that RBI could keep rate unchanged at 6.5% on June 8 the bank could wait to see the economic impact of a series of hikes over the past year.

Similarly, Shishir Baijal- Chairman Managing Director, Knight Frank India said, “In its upcoming MPC meeting, we expect the RBI to keep the repo rate unchanged at 6.5%, continuing with a pause, as inflation, supported by statistical base has moderated, will likely remain so. This provides enough support for the RBI to keep its key policy rate unchanged.”

In April 2023, CPI inflation eased to 4.7% which is the second consecutive month where this economic indicator has stayed below RBI’s upper tolerance limit of 6%. Inflation has been above RBI’s upper tolerance target from January 2022 until March 2023 where the retail inflation experienced a decline to its lowest point in the past 15 months.

But not everything is merrier. Baijal also explained that inflation in other components, such as core inflation, which accounts for price pressures in households’ products, has remained elevated albeit with a slight moderation in April 2023. High core inflation affects the discretionary spending of the households, which in turn leads to moderation in the overall consumption demand.

This has already been witnessed in FY 2023 GDP growth. Although the overall economy grew by 7.2%, the share of private consumption to GDP moderated to 60.6% in FY 2023 from 61.1% in FY 2022.

Thus, Baijal added, “potential impact of the persistent price pressures on the domestic consumption growth will likely keep the RBI cautious enough to continue with a repo rate hike.”

Read here: Buy vs rent: HDFC CEO confident on India’s growing real estate demin coming years. Here’s why

Pause or rate hike, how will they impact home loan EMIs?

As per Ramani Sastri, Chairman MD, Sterling Developers., while the RBI’s decision to keep the repo rate unchanged will unlikely have an immediate impact on homebuyers, it does offer some stability to the real estate sector. Hence, in such a context, another repo rate hike by the RBI will not augur well for the real estate sector as home loan interest rates are already at a higher level.

Sastri further explained that any further increase in policy rates means that interest rates on home loans may hit an all-time high touch almost double-digit, which could have a substantial impact on buyer sentiments affordability, which in turn can curtail demand. Another hike will lead to even higher borrowing costs for developers too. Hence, we expect a continuation of existing policy rates through 2023 undoubtedly, a further reduction in interest rates in the near future would be preferred to bolster overall market confidence make it more enticing for home buyers.

Lastly, Knight Frank’s MD said, the implication of the rate hike on home loan demhas been minimal so far. Residential demhas remained upbeat indicating a strong consumer preference towards home ownership despite high interest rate inflation over the last one year. However, with economic growth facing headwinds from the global slowdown, the full impact of the high-interest rates yet to be seen, we remain cautious of the impact on housing market.

Since the previous status quo in policy repo rate, there has been a mixed trend in lending rates.

Data from RBI revealed that the weighted average lending rate (WALR) on fresh rupee loans of SCBs decreased by 23 basis points (bps) from 9.32 percent in March 2023 to 9.09 percent in April 2023.

Furthermore, the WALR on outstanding rupee loans of SCBs increased by 4 bps from 9.72% in March 2023 to 9.76% in April 2023. Meanwhile, the 1-Year median Marginal Cost of Fund based Lending Rate (MCLR) of SCBs remained unchanged at 8.60% in May 2023.

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Updated: 06 Jun 2023, 10:00 PM IST

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S&P/TSX composite up in late morning trading, U.S. stock markets mixed

Canada’s main stock index was up in late-morning trading, helped higher by gains in the base metal stocks, while the technology financial sectors also rose U.S. stock markets were mixed.

The S&P/TSX composite index was up 49.02 points at 19,980.64.

In New York, the Dow Jones industrial average was down 27.64 points at 33,535.22. The S&P 500 index was up 6.19 points at 4,279.98, while the Nasdaq composite was up 45.43 points at 13,274.86.

The Canadian dollar traded for 74.57 cents US compared with 74.44 cents US on Monday.

The July crude contract was up eight cents at US$72.23 per barrel the July natural gas contract was up four cents at US$2.29 per mmBTU.

The August gold contract was up US$1.00 at US$1,975.30 an ounce the July copper contract was down a penny at US$3.76 a pound.

&copy 2023 The Canadian Press

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