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How Does a Mortgage Bond Make Money?

An investor gets principal and interest in a single monthly payment when a borrower pays back a loan using specific real estate assets as security. In the event of a default by the borrower, the asset may be auctioned off to repay bondholders. [B-01] To what end do mortgage bonds serve? Lenders retain title to mortgages until the loan is paid in full. This happens when a person buys a home using a mortgage. Financial institutions and mortgage companies are two examples of potential lenders for such property loans. The mortgages are pooled by the banks. The bundles are then sold to investment firms or government entities at a discounted rate. By shifting the risk of loan default to investment banks, lending institutions get access to the funds they would have earned throughout the life of the loan upfront. Bonds for mortgage-backed loans are often issued by an investment bank after a bundle of loans is sold to an SPV (special purpose company). Bondholders in mortgage loans get regular interest and principal payments each month. Mortgage bondholders get a monthly distribution of funds generated by the mortgage pooling process. An investment bank keeps some of the interest on a loan and gives the rest, along with the principal, to bondholders. Mortgages are securitized when their cash flows are transferred to bondholders. Types There are a variety of mortgage-backed securities (MBS), including securities with a passthrough to mortgage When interest or principal is paid on these MBS bonds, the proceeds are divided among bondholders according to their respective ownership percentages. If ten people invested $1,000 apiece and 1,000 bonds were created, each person would get $1,000. Each investor would get a dividend proportional to their portfolio holdings. Any prepayments will be shared equally among bondholders. Payments on mortgage bonds would never exceed a bondholder’s proportionate share of bond proceeds. In the case of default, the loss would be distributed to investors according to their bond holdings (if the asset value drops below the face value of the bonds). Therefore, bondholders and MPS investors face similar prepayment and extension risks. Many financiers fret about the risks of prepayment and default. CMBS helps reduce these problems. They do this by segmenting mortgage cash flows into many classes or tranches. Each of these is exposed to a different set of risks. Under the CMBS structure, the retirement of each bond type would occur in a predetermined order. Each portion of the money has its own set of rules for how it may be used. In addition to the monthly interest payments, each tranche (a portion of money) also receives payments toward the principal and any prepayment amounts. This method of dividing up prepayment risk among tranches is common in the financial industry. The risk of prepayment is greatest for Tranche 1, whereas the lesser tranches act as shock absorbers in the event of borrower default. Tranche 4 gets prepayment only after the previous three tranches have been paid in full. So it can afford losses in the event of a default. It faces the highest default risk and the lowest prepayment risk in the aforementioned scenario. Example Let’s say ten people took out $100,000 in loans from ABC Bank, using the property as collateral, at a rate of 6% apiece, for a total of $1,000,000. The bank would sell XYZ a pool of mortgage amounts, and XYZ would issue bonds for $1,000,000 (one thousand bonds of $1,000 each) using this pool of mortgages as collateral at a rate of 5%. From there, XYZ would make new loans out of the collected funds. ABC Bank would send XYZ $5,000 in interest and the first month’s payment component, less any applicable margin or fee. For the first month, XYZ will get $4,500 plus the repayment amount if the fee retained is 0.6% (0.05% each month). In addition, XYZ would continue to pay mortgage bondholders the remaining interest on the $4000+ repayment amount for the first month at a spread of 0.6% (0.05% monthly). To implement this strategy, the investment bank may acquire mortgages from other banks using bond sale revenues. And the other banks can make loans with the proceeds of mortgage sales. If the homeowners default on their mortgage, the loan might be sold at auction to compensate the lenders. Home loan vs. financial responsibilities In contrast to a debenture, a mortgage bond is not backed by any collateral. It is backed by the full faith and credit of the issuing business alone. In contrast, in the case of borrower default, the mortgage bond is backed by real estate. This real estate may be liquidated to repay the bond. MBS have a lower interest rate than debenture bonds. This is because they are a lower-risk investment. There are also variations in payment schedules and procedures. Mortgage bonds are debt instruments that pay interest and principal every month. However, the principle on debenture bonds is not paid until the bond matures. The interest is paid semiannually or annually. Advantages Mortgage-backed securities have a higher rate of return than Treasury bonds. Mortgage-backed debentures provide higher risk-adjusted returns than other types of debenture bonds. This is because of the security provided by the underlying mortgages. They contribute to a diversified portfolio because of the low degree of correlation between them and other investment options. It provides regular and reliable income, especially in comparison to other fixed-income products. Interest on corporate bonds is paid annually or semiannually, whereas MBS payments are made monthly. Mortgage-backed securities are preferable to debenture bonds in the case of insolvency since the collateral may be liquidated to repay bondholders. Unlike traditional bonds, MBS do not have tail risk because their monthly payments include both interest and principal, the latter of which is amortised over the life of the bond. The risk to bondholders is elevated because of the single, large payment of principal at maturity seen in certain other bonds. Disadvantages Mortgage-backed securities have a lower yield than debenture bonds. Mortgage-backed securities, formerly seen as safe investments, were blamed for contributing to the subprime mortgage crisis of 2008. As a consequence of higher profits, some banks became complacent and extended credit to people who weren’t good risks. Several large investment banks, notably the Lehman brothers, had significant investor losses as a result of the subprime mortgage default crisis. Loans are secured by assets. So these bonds are essentially equivalent to the asset. If the market interest rate drops, these bondholders might be pre-paid. To make matters worse, they’ll have to invest the money they get at a lesser rate. This reduces their overall return. [B-02] Conclusion Mortgage bonds are a diversified investment option that outperform Treasury bonds and debenture bonds. They carry much less risk. To keep mortgage rates low and the market functioning, these financial institutions also provide loans to investment banks. Visit Piramal Finance to learn more.
08-11-2023
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GST

Everything You Need to Know About GST Registration in India

You have heard of the Goods and Services Tax. You may have heard it even if you are a small businessman, a service provider, or a customer (GST). On July 1, 2017, the GST became active in India. It completely overhauled the country’s tax system. A GST tax is a single tax levied on the surplus value an organization creates in the marketplace. The government of India taxes businesses on their specific product or service. They tax businesses at each step of the production and distribution process. And, the cost falls on the end user. When it’s time to pay your GST, the first step is to register your business under GST. Suppose you’re the founder of a new business. In that case, you could feel completely overwhelmed by it all. Here’s all you need to know about GST registration [B-01] Who Should Register for GST? Any business with more than Rs. 40 lakh annual revenue must register as a regular taxable person. But, a firm in Jammu and Kashmir, Himachal Pradesh, or Uttarakhand must meet a lower barrier of Rs. 10 lakh. For service providers, the annual revenue must be Rs. 20 lakh. But, in special category states, it is Rs.10 lakh. Here is a list of businesses that must register for GST regardless of their annual revenue: Casual taxable person / Input Service Distributor (ISD) Non-resident taxable person Inter-state supplier of goods and services Supplier of goods through an e-commerce portal Any service provider Liable to pay tax under the reverse charge mechanism TDS/TCS deductor Online data access or retrieval service provider What Documents Do You Need for GST Registration? To register your business for GST, you will need the following items. PAN Card Aadhar Card Business registration documents ID proof and address proof Cancelled cheque or bank statement Proof of authority Digital signature Types of GST Registration in India Listed below are the various GST registrations available in India: Normal taxpayer A normal taxpayer is anyone with a yearly revenue of over Rs. 40 lakhs. But, his annual revenue must be less than Rs. 75 lakhs. GST registration is optional for the service and manufacturing sectors. Composition scheme To qualify for GST registration under this plan, a taxpayer’s yearly revenue must be less than Rs. 1.5 crores. Small taxpayers can use this arrangement to pay a flat tax rate. And, to also avoid the hassle of GST paperwork. Casual taxable person Consider a person who does not have a permanent place of business. But, he makes supplies in a region where GST is payable. In that case, he is a casual taxable person under GST. Non-resident taxable person These people are those who are present outside India. But, they supply products or services to whom GST applies. Non-resident online service distributor Suppose you’re an individual providing services internationally. And, you haven’t already registered for GST. In that case, you’ll need to do so. UN Body/Embassy/other notified individuals The UN agencies and embassies each have a unique identification number. The Ministry of Foreign Affairs provided this number. This number helps them accept deliveries from registered individuals. Such groups may access GST’s online application system. Special Economic Zone unit or developer Submit the required certificate and documentation. And, SEZ developers and units can begin the GST registration process. TDS/TCS Candidates who deduct tax on supplier payments totalling more than Rs. 2.5 lakhs per year are required to register for GST. People can bypass the intermediary and submit their registration forms online. How Much Does GST Registration Cost? Note that there is no cost to register for GST for taxpayers. As a result, there is no charge associated with GST registration. But, the government will impose a GST penalty for late or insufficient tax payments. Unless the total amount is more than Rs. 10,000, the penalty imposed by GST is 10% of the tax amount. If you avoid taxes on purpose, the government will hit the offender with a fine equal to the amount owed. What Are the Benefits of GST Registration? Listed below are some of the many benefits of registering for GST: Simplifies Taxation Services: GST in India is a comprehensive tax. It has helped to unify the country’s economic system. Reduction In Costs Of Products & Services: The implementation of GST has reduced prices for consumers. It has done so by eliminating the domino effect of many taxes. Helps In Avoiding Lengthy Taxation Services: GST registration has eliminated the lengthy tax processes. Also, these don’t have to pay taxes: Service providers with annual revenue less than 20 lakhs Product providers with annual revenue less than 40 lakhs Aimed At Reducing Corruption And Sales Without Receipts: GST focuses on ending shady dealings and cash transactions. Indirect tax compliance is simplified, which is especially helpful for smaller businesses. Uniformity In Taxation Process: GST registration ensures a standardized and centrally registered tax system. Because of this, you can now file quarterly tax returns digitally. Minimizing Tax Evasion: With GST in place, tax avoidance is significantly reduced. Higher Threshold For Registration: Before GST, companies with more than Rs 5 lakh in revenue had to pay taxes. The tax was also waived for businesses with annual revenue of less than Rs 10 lakh. But, this ceiling has been raised to Rs 20 lakh under GST. This regime allows many small businesses to avoid paying the tax. Composition Scheme For Small Businesses: The composition scheme is a great benefit. It helps small businesses make between Rs 20 and Rs 75 lakh annually. It helps them take advantage of GST’s tax savings. For many small enterprises, this change has reduced taxes and costs. Simple And Easy Online Procedure: The GST system is completely digital. Hence, this feature makes every step of the procedure quick and easy. Particularly new businesses have benefited from this. That’s because they no longer need to register their business painfully. Earlier, they did so by running from agency to agency. [B-02] Conclusion GST registration has several benefits. And, if you meet the requirements, you should register for GST immediately. You must have your firm registered and should avail the many benefits of GST. That’s because, with GST, several businesses have grown. This was a complete guide on things to know about GST registration in India. We hope you found this article useful. Need instant funds? Apply for a quick personal loan with Piramal Finance now!
08-11-2023
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FD

What Is an FD and How Does It Work: All You Need to Know About It

A fixed deposit (FD) is a financial instrument offered by banks and other financial institutions. It allows customers to invest their money for a fixed period of time, during which they earn interest at a fixed rate. FDs are a popular investment option because they offer security and stability, especially in times of economic uncertainty. However, they also come with certain risks, so it’s important to understand how they work before investing your money. In this blog post, we will explain everything you need to know about fixed deposits, including how they work, the advantages and disadvantages of investing in them, and some important things to keep in mind before you make a deposit. [B-01] What is a fixed deposit? An FD is a financial instrument provided by banks or non-financial bank companies (NBFCs) that offers customers the benefit of earning a higher rate of interest than what is offered on a regular savings account.The tenure of an FD can range anywhere between 7 days and 10 years, and the interest rate offered is also commensurate with the period of deposit. For instance, for an FD booked for a tenure of 1 year, the interest rate offered would be lower than that for an FD with a tenure of 2 years.The principal amount and the interest earned on it are both payable at maturity. In cases of premature withdrawal, customers are usually subject to a penalty fee.Fixed deposits are one of the safest investment options, as they are backed by the government and offer guaranteed returns. They are also simple to operate and can be easily accessed through online banking channels. How does a fixed deposit work? When you deposit money into a bank account, the bank pays you interest on that money. The interest rate is usually higher than the rate for a savings account, and the longer you leave your money in the account, the more interest you earn. This is called a fixed deposit or term deposit.To open a fixed deposit account, you need to have a certain amount of money to deposit, and you agree to leave it in the account for a set period of time – typically between 1 month and 5 years. During this time, you usually cannot access your money without incurring penalties.At the end of the fixed term, your money is returned to you, plus any interest that has accumulated over the term. Some banks allow you to roll over your fixed deposit into another term, or you can withdraw your money. What are the Benefits of a Fixed Deposit? The main benefit of a fixed deposit is that it offers fixed interest rates for a set period of time, meaning you know exactly how much your returns will be. This makes fixed deposits ideal for those looking to grow their money without taking on too much risk. Additionally, many banks and financial institutions offer higher interest rates for larger deposits, so if you have a large sum of money to invest, a fixed deposit account could be a good option. Another benefit is that fixed deposits are typically very low-risk investments, which can appeal to those who are risk-averse. Finally, most banks allow you to make withdrawals from your fixed deposit before the end of the term, though there may be penalties involved. What are the Types of Fixed Deposits? However, there are different types of FDs that cater to different needs. Here are the different types of FDs that you should know about:1. Regular Fixed Deposit: This is the most common type of FD where you can deposit a lump sum amount for a specific tenure at a fixed interest rate. The interest earned is paid out at the end of the term along with the principal amount.2. Cumulative Fixed Deposit: This type of FD allows you to earn compound interest on your investment. The interest earned is reinvested and added to your principal amount. This means that you earn interest not only on your original investment but also on the accumulated interest. At the end of the investment period, you get back the entire amount, including both the principal and accumulated interest.3. Recurring Deposit: A recurring deposit helps you make instalments over a period of time into your fixed deposit account. This type is best suited for those who do not have a lump sum amount to invest but want to build their corpus over time through systematic investments. The instalments can be weekly, monthly, or any other interval agreed upon by you and the bank through a signed contract. How to Open a Fixed Deposit Account? We have already explained above what a fixed deposit is; we will now proceed to tell you how you can open a fixed deposit account. This is quite simple and can be done by following the steps below:1. Find a bank or financial institution that offers fixed deposits. There are many banks and financial institutions that offer this service, so take your time to compare their interest rates and terms before choosing one.2. Once you have chosen a bank or financial institution, you will need to visit their website or branch to fill out an application form. Be sure to read the terms and conditions carefully before signing the form.3. After filling out the form, you will need to make a deposit into your account. The amount of money you need to deposit will depend on the bank or financial institution you choose, so be sure to check their requirements beforehand.4. Once the deposit has been made, your account will be activated, and you can start earning interest on your money! [B-02] Conclusion A fixed deposit is a great way to grow your money while keeping it safe and accessible. It’s important to understand how fixed deposits work before investing, and this article has hopefully given you a good overview. Be sure to shop around for the best interest rates and terms before committing to a fixed deposit, and always remember that your money is at risk if you choose to cash in your deposit early. You can visit Piramal Finance’s website for all your financial needs.
08-11-2023
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GST

How small businesss can be benefited with gst registration?

Goods and Services Tax is an abbreviation for “GST.” It’s a replacement tax for old indirect taxes in India. Like excise duty, value-added tax, service tax, etc. On 29th March 2017, the GST Act was passed by the Parliament; it became law on 1st July 2017. The article highlights how the GST can help India’s nascent businesses. In the short term, GST hs positive and negative effects on Indian SMEs. The long-term effects are expected to be much more beneficial and value-adding. [B-01] Almost 40 per cent of India’s exports are by MSMEs. And 70 per cent of the country’s total employment is generated by the country’s MSME sectors. In a way, they have some valid concerns. Many previously tax-exempt businesses and organisations will now be subject to GST, significantly increasing the compliance burden. What are the advantages of GST? Indian taxpayers have received advantages thanks to the new GST act passed by the government. 1. There is a drastic reduction in tax. With the introduction of the new GST act, all other taxes have been drastically reduced. The new regime based on “One Nation, One Tax” has made it simpler for the Indian government to bring all taxpayers on their radar. This was previously difficult due to the inadequacy of the tax collection system. Among the many areas where GST has been instrumental, creating jobs and opening up new opportunities for startups and entrepreneurs is at the forefront. GST is seen as a more enlightened ease-of-doing-business index. It can increase the number of people employed across borders and much more. 2. It prevents the tax snowball effect. The snowball effect happens when you’ve paid off your debt, but the surplus left is higher than what you began. The implementation of GST centralised all indirect taxes in one place. The input tax credit (ITC) was introduced as a benefit to businesses to reduce the cascading effect, also known as “Tax on Tax.” 3. The minimum threshold is lower. GST raised the minimum revenue threshold required to register as GST for smaller businesses. The GST Council mandated that a business needs to have annual earnings of Rs. 20 lakhs to be registered under GST. The threshold is expected to reduce the conformity press gang on smaller businesses. For this reason, businesses with a yearly revenue under Rs. 20 lakh are not required to register for GST. Naturally, in the case of the North Eastern states, this limit is condensed to Rs.10 lakhs. It’s important to factor in both guaranteed sales + sales made possible through sample offers when figuring out your turnover. 4. GST supports various sectors. GST support has significantly boosted several subsectors of the Indian economy. GST can be beneficial depending on the field you work in. In the long run, GST benefits the Indian budget despite its low registration costs. Businesses with annual sales of up to Rs 75 lakh can benefit from the composite scheme’s flat tax rate of 1% to 5%. Only qualifying small businesses can enrol in this plan. This annual cap was originally Rs 1.5 crore but has since been reduced to Rs 75 lakh. 5. It helps save money. Companies can save on cross-border shipping costs now that GST is in effect. Small businesses can expand their footprint. This can happen without incurring high additional costs for transportation owing to improved management and fewer checkpoints. There is no domino effect, which is an important point. The taxation structure had a cascading effect. This means that the same product was taxed at different production levels. This lead to higher costs and less pricing efficiency. Value-added taxes like GST, which only tax the difference between the original price and the new one, are the answer. What are the disadvantages of GST? Both technological obstacles and a lack of working capital pose problems for small businesses. 1. Businesses can face problems with technology. This affects companies that lack the necessary infrastructure to operate within the online GST system. They have to hire someone else to do their online GST filing because they don’t understand how it works. The cost of filing and registering is increased because of this. Additionally, if a company’s annual turnover is Rs 20 lakh or more, it must register for GST in each state it conducts business in. 2. It can bring a halt to the flow of operating funds. There are rarely any instances of this issue. Exports used to enjoy tax exemption on the goods exported, but this perk is no longer available under the GST regime. Delays in receiving tax refunds disrupt business operations. Although this situation is unusual, it hinders a company’s ability to function. Business owners and companies have a lot on their plates, but registering for GST should be at the top of that list. Ignoring the initial stress of GST registration will help business owners reap additional benefits. Having a GST number will make several things easier, such as applying for loans and streamlining general operations. Therefore, business owners should consider registering their businesses if they meet the minimum threshold. What is the eligibility for GST registration? Businesses in the manufacturing sector with a turnover of Rs 40 lakh or more are required to have a GSTIN. Service-sector businesses with a turnover of Rs 20 lakh or more are required to have a GSTIN (this includes those that provide online shopping only). Businesses from northeastern India should have an annual turnover of Rs 10 lakh. Which documents are required for GST registration? Passport-sized photographs of the business owner. Company Identification Number Card. Aadhaar cards, passports, or driver’s licences are acceptable forms of identification. Certificate of Incorporation for Limited Liability Partnerships, Organisations, and Corporations. Bank account details. Partnership agreements (if applicable) [B-02] Conclusion Now that you know about how small businesses benefit from GST registration, keep reading more on the subject. Reading about this topic will improve your knowledge. GST registration (as a whole) has many perks. Therefore, registering your business under the GST Act is important. As the Indian government moves to simplify the tax structure for the end-users and businesses, such laws will help bring change. You can read more articles on GST registration before registering your business. If you want to read more articles about personal and business finance, visit Piramal Finance now. Piramal Finance has comprehensive articles and guides on investing, loans and many other financial products.
08-11-2023
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Personal Loan

Everything You Need to Know about Flexi Loans in India

In emergencies, a personal loan may be beneficial. It is a type of loan that is offered by both banks and other non-banking financial institutions. Due to the absence of collateral, this debt is among the most sought-after ones on the market, despite having high bond rates. A personal loan with a predefined limit that the bank specifies is known as a “flexi loan.” You may take out money when you need it. Depending on your credit history, the lender determines the initial limit amount. A flexi personal loan might be useful for meeting your immediate monetary demands in an emergency. [B-01] What Exactly Are Flexi Loans? A personal loan with a specified credit limit is a flexible loan. The bank will offer a pre-approved credit limit in the form of an overdraft facility and credit line based on your credit profile. The flex loan’s interest rate is only assessed on the amount you used, not the whole amount allowed. The principal amount is refundable whenever you like. However, you must pay the interest each month. Anytime you have additional money, you may repay the loan. A flexi personal loan can be applied for by any salaried or self-employed individual to meet any financial needs. What Is a Flexi Personal Loan and How Does It Work? Overdraft services function similarly to the Flexi loan. When you apply for a Flexi personal loan, the bank determines the loan amount based on your credit score, income, and other characteristics, as well as your capacity to repay. Your account will receive money without any further paperwork or formalities. Within this loan limit, you may withdraw money as often and for whatever reason you choose. On the amount spent, interest is assessed. The remaining loan amount is not subject to interest payments. Flexi Personal Loan Features and Benefits The features and benefits of a Flexi Loan are as follows: Liquid cash supply You can always be prepared for any sudden financial demands with Flexi loans. The loan sum may be withdrawn as often as possible under the credit line granted. Repayment Ease Flexi personal loans are among the simplest to repay. This is because they guarantee that you take cash within the credit limit allowed. Thus, loan repayment is easy since you take cash as needed and pay just what your budget permits. Free Prepayment in Parts With no-cost prepayment, you may pay off your loan in instalments whenever you have extra cash, without any trouble or extra interest charges. Several Withdrawals Since the full loan sum is granted and paid at once, you may make as many withdrawals as you choose. There are no extra papers or costs for any withdrawals made after the payout. Lower interest rates Flexi loans can also help you lower your interest payments. The interest is calculated based on the sum withdrawn rather than the total amount approved by the lender. If a debt of Rs. 10 lakh is granted, but only Rs. 5 lakh is withdrawn, interest is charged only on the first Rs. 5 lakh. This also implies that EMIs are minimal, making loan payments simple. Eligibility to Apply for a Flexi Personal Loan Eligibility criteria between self-employed individuals and paid employees Self-Employed Person You must be of Indian origin. Your CIBIL score should be 685 or above. Your company’s (or your experience with freelancing) age should be at least three years. It would be best if you were between the ages of 24 and 70. Paid Employees You must be an Indian citizen residing in an Indian city. Your CIBIL score should be 750 or above. It would be best if you worked for a public, private, or multinational corporation. It would be best if you were between the ages of 21 and 67. All of the information above is general. Check with your bank for the specific qualifying conditions before applying. How Do You Apply for a Flexi Personal Loan? The application process for a Flexi Personal Loan is as follows: Go to the official site of the banking firm where you want to get the loan. Select ‘Flexi Personal Loan’ from the drop-down menu. This choice is most likely to be found in the product section of your bank’s website. Select the ‘Apply Now option. Fill out the request form with the required information. Upload all the required papers. After validating your application and papers, the bank will credit the money to your bank account. You may also apply for a Flexi loan at your nearest bank branch or banking firm. Things to Consider When you need money, getting a flexi personal loan is a good alternative. However, there are a few things to keep in mind before applying for the loan: Interest Rate: Even though the interest rate is only applied to the loan amount you borrow, you should be sure to verify and compare the interest rates provided by different lenders. Other Fees: Although the majority of lenders that provide flexible personal loans don’t impose a prepayment fee, you should verify the other fees assessed by the lender since they may have an impact on the loan’s cost. Examine Your Repayment Capacity: Although the amount you will have to return will depend on how much of the authorised loan amount you withdraw, you should make sure to evaluate your repayment capacity before accepting the loan. Make sure you have the money to pay off your EMIs since missing payments might hurt your credit. Trustworthiness of the Lender: It is essential to get loans from reputable lenders. Ensure the lender is trustworthy by carefully examining the customer service options, online reviews, the lender’s reaction time to your inquiries, etc. [B-02] Conclusion When you are approved for a Flexi loan, your lender sets a loan amount cap after evaluating your creditworthiness. You have access to this credit limit via a Flexi personal loan. You may withdraw money as often as necessary within the acceptable credit limit. Only the amount of your withdrawal will be subject to interest. There is no interest to be paid on the unused part of the credit limit. Visit Piramal Finance for related posts if you want to learn more about Flexi personal loans. You may look at their offerings as well.
08-11-2023
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Cards

Different Benefits of Virtual Credit Cards in India

Virtual credit cards can transform the way companies handle and make payments. They can save businesses hundreds of hours and a lot of money on fees and formalities. Let’s look at the main benefits of virtual credit cards and what they mean for your business. Virtual credit cards are growing in popularity, with a CAGR of 12% annually. Many financial service providers are coming up with new credit cards every year. Let’s learn how virtual credit cards work and the benefits of having a virtual card in detail. [B-01] How Do Virtual Credit Cards Work? To put it simply, virtual credit cards are real credit cards that only work online. Virtual credit cards have random 16-digit numbers, a card verification number, and an expiration date. They work like traditional credit cards, but you don’t need a physical card. Virtual credit cards are made by Mastercard, Virtual Visa card, and American Express and can be used anywhere you can use a credit card. But what makes these cards different from real credit and debit cards is how easy they are to use. Most importantly, you no longer have to depend on your bank. You can choose the currency, limit how much you can spend, and choose the types of stores where the card can be used. There are many compelling reasons to switch to virtual payment cards as a means of payment for your company’s suppliers and merchants. Virtual vs. Physical Cards Virtual credit cards improve their plastic counterparts’ capabilities in virtually every way. In 2022, the global market for virtual credit cards will be worth $411 billion USD. Since everything is done online, you only have to tap a few times to add money, make transactions, and pay suppliers or buyers. Therefore, you are not tied down to one place, nor do you have to waste time sitting in a bank while they process the tedious paperwork. Because who has the time? The 16-digit number on the virtual card is generated only for the transaction between the user and the recipient. So, it is very safe because it protects both enterprises and buyers from beginning to end. This is better than traditional payment methods like ACH or cheques, which have more security flaws, because you don’t have to give out your bank information to complete the transaction. Benefits of Virtual Credit Cards There are several advantages to using virtual credit cards. Here are some of the top benefits: 1. Better Safety With the known security flaws of traditional bank account cards, payment fraud is more likely to happen with physical cards. People think virtual cards are much safer and more secure because you can limit how much you can spend ahead of time. You can close your account at any time with a button if you are worried about your information getting out. To prevent third parties from gaining access to your personal banking information, a new, unique bank account number will be issued for each transaction. Compared to traditional payment methods like paper cheques or electronic funds transfers, this can significantly increase the safety of your financial information and keep your transactions private. With virtual cards, account theft and e-commerce fraud are impossible because thieves can’t get into your bank just by getting your physical card. So you have nothing to worry about if you lose your card and someone steals your important bank information. 2. Easy to Use Unlike traditional banks, which have set hours, virtual banks are open all the time, 24 hours a day, 7 days a week. This way, they are always ready to help you with your international business whenever you need it. Even better, you may do your business with the utmost efficiency with just a few clicks on your phone, laptop, or tablet, instead of wasting time driving to and waiting in line at a physical branch. And you don’t have to wait ten working days to activate your account, or whatever the time frame is. Since computers control everything, don’t worry about paperwork or making mistakes by hand. Accept the simplified accounts that take care of everything. The single-issued model frees up your accounts payable staff to concentrate on other crucial aspects of your business’s finances. 3. Affordable Many financial institutions tend to charge their customers much less in fees. If you pay your suppliers or buyers, you can get cash back for every rupee you spend. On the other hand, you don’t have to pay anything for a virtual card. Since everything is done online, the virtual bank can lower its operating costs, which means it can charge its customers less. So you can do nothing and still make money. 4. Keep Track of Cash Flow Wherever, Whenever Cash flow can get a little complicated when you’re trying to pay vendors or suppliers before a certain date. But with a virtual credit card, you can track how much money you have because the system tells you so that you can make the payment process more open and efficient on the inside. There are also extra features, such as giving virtual cards to specific people, such as vendors or suppliers, and keeping every source of transactions neat and clean. To ensure that your A/P department does not have to keep track of all invoices or chase down expenses from others, keep everything simple and clean. 5. Easy Card Management Users of virtual credit cards have more flexibility and control than traditional cardholders. Instead of the bank setting a fixed limit on how much you can spend, users can set their own limits or decide when to freeze or close their accounts. You can also give these single-use virtual cards to a specific person for a set amount of money. This gives you more control over how much you spend. [B-02] Conclusion Virtual credit cards are an extra feature you can add to your existing credit card. They make your sensitive card information more secure. Indians can use their virtual credit cards anywhere that accepts online payments. You can read more blogs about virtual credit cards at Piramal Finance.
08-11-2023
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COVID-19

Impact of COVID – 19 on the Finance Industry

Due to the coronavirus outbreak, global financial markets have become volatile. There is no full way to measure Covid’s effects. But they have made things worse for the future. In our report, we look at the parts of the banking industry where changes are most likely to happen. The effect may be such as value and profitability. Profitability, risk management, and the cost of borrowing are the impact of covid – 19. There was a low-interest rate environment. Also, the significant influence of the coronavirus outbreak. Because of this, core banking in industrialised nations is becoming less profitable. So, banks depend more on commissions from sectors. [B-01] One immediate effect of the healthcare crisis on the economy is that the risk of defaulting on a loan has gone up. The risk comes from the bank’s business and private clients. Banks must differentiate between: those absorbed by the real economy those that will persist for longer and need management and reclassification. Characteristics of a coronavirus outbreak The most important consideration is implementing new information. Into risk parameters and updating forward-looking information. This may not last as long as cyclical downturns caused by the impact of coronavirus on the economy; Determining the most appropriate timeframes for updating “recovery rates,”. This is to be able to take into account the favourable effects, albeit in the medium term. The fall in economic activity hurts the quality of credit. This is because banks have to set aside more money for bad loans. Some European banks said they lost a lot of money in the first quarter of 2020. They are now trying to get ready for a likely rise in bad loans. In a securitisation setting, Increased disposal incentives are one way. Using this, the government takes remedial action to lower risk profiles. The synthetic securitisation market may need revitalisation. It is in light of current events and their severe economic implications. The number of NPLs has gone down. It’s because of a huge number of operations to get rid of bad loans. Several European banks have been doing them for the past few years. One important change in the market is the growing demand for UTP loans. It is a good place to buy and sell bad debts. Portfolios are made by putting together similar, high-value asset classes. The market is the main reason. Commercial structures and connection with clients The spread of the coronavirus could affect the economy and how banks work with their customers. It could be a “good break” for the digitization of the sector. And be able to provide great customer service. Or it could lead to a real-world economic crisis. Even banks that are most focused on their branches and locations have to do it now. They encourage people to use channels that have never been important to them. This stage is complicated in a big way. So, banks will have to show how much they care about their clients. Understanding the services gap that the coronavirus outbreak has made clear. Now bank operators are more encouraged to speed up the pace of their transformation. You can achieve this via partnerships and collaboration with the fintech sector. Maintaining regular business activity and management. Banks can enjoy the availability of technological innovation. It should be the form of robotics solutions or artificial intelligence. For example Advanced BOTs support the adoption processes. It includes the technologies displayed on the channels and mobility. Platforms for the management of promoters and system authorisations. This is for critical processes. The necessity for fluctuating availability of infrastructure resources. The financial sector provides a perfect opportunity. This opportunity is to test the benefits of applicable Cloud technologies. The extreme volatility of the stock market led to the devaluation of banks. The global financial markets have become very volatile. It also became unpredictable due to the coronavirus outbreak. The financial services industry has taken a significant blow. It resulted in a general decline in bank values across the board in each nation. The P/NAV many has declined, going from 1.00x on the 31st of December 2019 to 0.69x on the 30th of April 2020. Banks in Asia and Europe are selling at considerable discounts. But, North American banks are still trading at a P/NAV equal to an average of 1.15x. The average P/NAVs of 0.56x and 0.52x) Here are some things that could go wrong. In the banking and financial markets business, these things could happen: During a crisis, it’s important to talk to people clearly and shortly. Financial institutions can only do business if people trust them and they have a good name. They also help with important business services related to investments. Many people are interested in how the sector grows. But three things are very important right now: The regulators will place a high premium on knowing active boards. Enough capital, liquidity standards, and efficient risk management practices are also necessary. Customers are experiencing challenges. They still want to think that the banks they do business with are safe. This is true whether the customers are retail, commercial, corporate, or institutional. Workers are responsible for both their health and the advancement of their careers. Exactly how can financial sectors adopt this? A key factor is how quickly things change. It’s only used when clients have something to say. The process will be less frustrating if you can do something right away to fix it. Risk should be in constant contact with bank teams. Also, make sure that compliance departments and procedures are in place to reduce risks related to conduct and compliance. [B-02] Conclusion There is a moment of transition happening in the financial services industry. The financial sector needs to make better investment decisions. That is, with information on the long-term effects of the coronavirus outbreak. It might impact the future growth of banks. It will also impact asset management firms and other financial institutions. As opposed to the leaders of most other companies. People who work in the financial sector are in the best position to help the economy get better. They can do this by taking out loans and taking other steps. Talk to an expert from Piramal Financing House to find out more about the effects.
08-11-2023
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How Can You Go For Systematic Withdrawal Plan(SWP) Easily?

When we all reach adulthood, we start realizing the importance of savings and investments. Every individual has a different perspective on the same. Several people like to invest huge amounts of money in one particular place, whereas some choose to move ahead with a systematic investment plan. Many investors also wish to see capital growth, whereas some wish to receive regular income from their made investments. [B-01] Considering investors’ different needs and requirements, one such facility offered by multiple banks is a systematic withdrawal plan. What Is A Systematic Withdrawal Plan? A systematic withdrawal plan is very different from a systematic investment plan. A SWP in mutual fund lets you reap financial benefits from your investments promptly. The SWP plan helps you withdraw money in instalments, which makes it different from SIP. A systematic withdrawal plan also allows you to customize the cash flow as per your needs; you can withdraw just the capital benefits of the investment or even a fixed amount. This plan helps ensure you have your money invested and receive regular returns. It is also important to note that the money you withdraw from SWP plan can be used to reinvest in other funds or consumed by you in cash. What Is The Need For A Systematic Withdrawal Plan? We all know there is a high chance of losing the profits of mutual funds due to market fluctuations. This means you can lose the profits that have hit the chart if not consumed or withdrawn on time. A SWP plan can directly impact your mutual investments. This means that the profits will be reaped on time, and you can get the withdrawals as per your financial needs. An SWP will ensure the availability of funds for you whenever needed. An SWP can also help all investors to open doors for a second source of income apart from their salary. Along with SWP, you can create a regular source of cash flow with the help of your investments and anticipate a periodic income to use that finance for your leisure such as travel, dine-out, shopping, etc. A systematic withdrawal plan can also act as a freedom of cash during retirement. You can withdraw money from your existing mutual fund investments at alternate intervals such as monthly, weekly, quarterly, annually, or even half-yearly. How To Make The Best Use Of SWP? An SWP ensures a regular cash flow from the end of a market if an investor has a particular amount in the investment. Although it is suggested that the investors start their SWP plan in their equity scheme at least one year after the investment to be saved in a short-term gain of capital tax of at least 15%. If you plan things better financially, SWP will also add to your finances every year. Since you started your investment 5-7 years back, this amount will help you reap the capital appreciation and a larger quantum of regular cash flow. Apart from your mutual fund schemes, you can also merge the investments made by SIP with the SWP feature whenever you’d like. If you have started your investment with a SIP till your retirement and do not wish to invest more, you can opt to discontinue the SIP but ensure not to stop complete redemption. Instead, activate an SWP plan over your SIP to receive the benefits of a sizeable amount of income. This way, it will become a regular cash flow for you like a pension plan, and you can sustain it for a long period because your capital will remain invested and will also keep on appreciating. The System Of Taxation Via SWP The regular consumption of finances with the help of the SWP feature is subject to tax. If your investment in equity funds is available with a holding period of less than a year, your short-term benefits will result from redemption through SWP and will attract an STCG tax of around 15%. But if you hold the investment for more than a year, your gain can be over 100,000, and it will be released after applying a tax of LTCG of 10% without the indexation. In this scenario, if you realize that your unit with an LTCG of 125,000, you may not have to pay the taxes on the first finances of 100,000, but the rest of 25,000 will be taxed at 10%, ultimately resulting in a tax of 2500+ applicable cess charges. Whereas on the other side, on your debt funds, if your investment holding is less than 3 years, your capital gains that are made through the SWP will be given to your income and will be taxed as per your particular income tax slab rate. If the holding is for more than 3 years, the capital can be long-term and will also attract a 20% of tax with the indexation. Irrespective of all, such regular withdrawals are not always subject to the TDS as is also the case with fixed deposits. [B-02] Summing Up A systematic withdrawal plan can be one of the most effective ways to generate regular and planned cash flow. It can also be planned to keep your future financial goals in mind. Moreover, an unplanned way of implementing the strategy of SWP plan can prove to be of loss, so make sure you plan your investments wisely. To know more visit Piramal Finance and read further articles on finance-related topics.
08-11-2023
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Investment

Best Sectors To Invest In The Indian Stock Market

Since the stock market is expected to grow over the next 10 years, many individuals think that now is the best time to invest in India. Most investors first evaluate well-known shares when deciding which companies to invest in. They take this action in stock market investment because they think it will generate enormous riches. On the other hand, trying to choose stock market investment winners by going along with the crowd would ultimately fail. Investors should, thus, change their investment approach to focus on the best companies in the sectors that are expected to grow quickly. [B-01] Stock market investment in rapidly expanding industries is your best chance of making long-term wealth gains. Listed below are the best stock market investment. Markets for Healthcare and Health Insurance People have realised how crucial it is to take care of their health and get insurance after two years of the COVID epidemic. The healthcare and insurance sectors have seen substantial changes due to this. This is why healthcare stocks are the best stocks to invest in. Due to a rise in the number of people who need insurance, the proportion of premiums reached 4.2% in 2021. Stock market investment in the healthcare sector will be a wise decision. FMCG Since it creates items that people need, India’s fast-moving consumer goods (FMCG) industry is the most stable. People may put off buying non-essential items like jewellery, electronics, and apparel, but they won’t put off buying necessities like food, medicine, household goods, and transportation. The greatest long-term option if you’re looking for a reliable sector to invest in is fast-moving consumer goods (FMCG). Because of this, fast-moving consumer goods (FMCG) companies have a lot of room for growth and are well-liked by Indian investors. Stock market investment in this sector will be a lucrative decision. IT Between 1990 and 2010, there could have been a time when the internet expanded quickly. Due to the speedy development of technology, businesses in the information technology sector grow a lot more quickly than those in other sectors. To advance IT and meet economic needs, the Indian government has implemented several useful programs, such as Digital India. Undoubtedly, IT stock market investment will bring fortune shortly. By 2026–2027, the IT sector is expected to generate nearly $350 billion in revenue, increasing 15% annually, according to NASSCOM. The IT sector will expand thanks to artificial intelligence (AI), analytics, and cloud computing. So if you are planning to make a stock market investment in the IT sector, then you are on the right path. The Business of Infrastructure New infrastructure building still depends a lot on people. This explains why stock market investment in this sector is constantly gaining popularity. It would help if you thought about stock market investment in a company in the infrastructure sector since it is a growing industry. Additionally, the government has started several programs, including Make in India and the Smart Cities Vision. Alternative Energy Business All countries must lower their carbon emissions to make progress toward this goal. This is the right time for stock market investment in this sector. India ranks third in the world for carbon emissions. Therefore, other countries are putting a lot of pressure on it to create several initiatives to promote the use of renewable energy. The Indian government has introduced several programs, such as tax breaks for loans used to buy EVs, to encourage more people to use them. Therefore, it makes sense to make a stock market investment in renewable energy. So if you want to increase your wealth, stock market investment in this sector will be very profitable. The construction business The real estate market is predicted to be worth Rs. 65,000 crores in the next two years, or 13% of the nation’s GDP. Real estate investing is becoming more appealing as the market starts to provide homes at lower prices. Property loans often have acceptable interest rates as well. Among the most important cities in India for purchasing or selling real estate are Bangalore, Pune, Hyderabad, Mumbai, and Ahmedabad. This is the right time for stock market investment in the building business. Automotive industry The automotive sector makes many vehicles, including cars, motorbikes, tractors, SUVs, scooters, and more. The automotive industry is anticipated to expand at a compound annual growth rate (CAGR) of 7% during the next several years. Due to the Paris Agreement, the electric vehicle market is expected to grow more quickly than any other automotive industry in the coming years. Undoubtedly, stock market investment in this sector will bring sure profits shortly. Remember that the auto industry is very cyclical and that economic shifts affect sales. It’s important to keep this in mind. Therefore, spreading your stock market investment across many markets is crucial. Industry for Financial Technology Analysts believe that the financial technology market will continue to grow steadily over the next two years. This makes this sector ideal for stock market investment. This is why it is now one of India’s regions with the quickest growth rates. A financial technology company’s main goal is to simplify life for its consumers by always coming up with new, creative concepts. [B-02] Conclusion You can invest in such sectors now that you know which ones are anticipated to grow over the next few years. When choosing stocks to invest think about the best industries to invest in if you want to make long-term investments. Focus on businesses that are the best in their fields if you want a good return on your long-term investments. Find out how the market is predicted to grow over the next 10 to 15 years. On the other side, stock market investing might be risky. Consider your investment goals, risk tolerance, and time availability before selecting a plan. One must always keep their eyes open while making stock market investments. Users should always look into things on their own. There are also more in-depth, educational articles on Piramal Finance.
08-11-2023
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