Methods for debt repayment | A lot of millennials are getting into credit card debt because they

spend a lot of money on things. But there are ways to get out of debt with credit cards.
Statistics from the Reserve Bank of India (RBI) and credit rating agencies show that Indians are borrowing more. And this is true for both men and women, since more women are working now than in the past few decades. A credit bureau in India called CRIF High Mark says that the amount of personal loans taken out by women grew by 35% from December 2021 to December 2022, going from Rs 7.5 crore to Rs 10.05 crore. Outstanding credit card debt, which is a sneaky kind of debt, has also been going up steadily.

For example, in 2019, 27-year-old Aarti Gupta, who works in digital marketing and lives in Delhi, had Rs 90,000 in credit card debt because she lived a very expensive life in her early 20s. During the year she worked in Gurugram and was away from her family, she rented a very nice apartment. Gupta says, “I made Rs 40,000 a month, and out of that, Rs 15,000 went to rent and Rs 7,000 went to utilities.” She also says, “Because of how I spent my money, it was hard for me to keep up with my monthly bills.”

Gupta says that because she liked expensive things, she had to live from paycheck to paycheck. When her monthly salary wasn’t enough, she started using her credit card for everything, like shopping, eating out, and travelling. As a result, most of her salary went to paying her credit card bills.

Read our Blog – Silicon Valley Bank disaster lessons for Indian savers and depositors

Gupta lost her job when COVID-19 was locked down. That was the worst time for her.

A lot of millennials, like Gupta, get into credit card debt because they don’t pay their bills on time.

Credit card payments can hurt you.

Meena Kelkar, who lives in Pune and works at an institute for vocational training, started using credit cards when she was in her 40s.

She shopped with more than one card because each one gave her different benefits, such as reward points, discounts, cash back, etc. Kelkar says, “I started spending money before I thought about how I would pay my bills.” She also says that she only paid the minimum amount due and started to miss paying her credit card bills sometimes because COVID-19 caused her pay to be late.

When money is tight, most people choose to pay only the minimum amount due. But the problem is that interest rates and fees for credit card debt are very high. So, it’s not surprising that Kelkar also got caught in a debt trap. Outstanding dues were Rs 2.5 lakh in June 2020. In November 2022, she paid off all of her debts.

Sachin Vasudeva, director and business head of credit cards at Paisabazaar.com, says, “Unpaid dues and new purchases made with the credit card will continue to attract heavy finance charges of around 40 per cent per annum until you pay off the entire amount owed plus all fees and penalties.”

Also, a record of late or unpaid card payments can have bigger effects on your finances. Kelkar didn’t realise until much later that her credit card debt stopped her from buying a house. A low credit score makes it harder to get a loan. People with lower credit scores pay higher interest rates, and unpaid credit card bills hurt a person’s creditworthiness.

Here are some ways to get out of credit card debt if you are also in a debt trap.

Talk to your bank about your payment options.

First, look at the rules set by the bank that gave you the card. “Talk to your bank about the ways you can pay off your overdue credit card bills. Aparna Ramachandra, founder and director of rectifycredit.com, says, “Show that you want to pay back and that you don’t plan to stop paying your credit card bills.”

If you take out a personal loan to pay off your debts, you should pay close attention to the interest rate, the terms for paying it off early, and any other fees.

Bring in a credit counsellor.

Seek help from a credit counsellor. Gupta, for example, talked to FREED, a website that helps people solve their debt problems. “We work with borrowers, banks, and other lenders to come up with a plan for repayment so that people can pay off their loans and start over. “The goal is to pay back the debt, not to get out of it,” says Ritesh Srivastava, CEO of FREED.

Srivastava says that after they look at a debtor’s profile, they make a plan to organise her savings so that every month, they set aside a set amount of money. These savings are then used to slowly pay off debts.

“After hiring a credit counsellor, I was able to save money and pay off my credit card debts in 24 months,” says Gupta. She also says that saving money every month teaches you to be responsible with money.

Remember that credit counsellors only help people who can pay back their debts but may not know how. Credit counsellors are not there to forgive your debts and let you off the hook. Your credit counsellor may help you negotiate with your bank to lower your total debt, but you still need to pay off as much debt as you can.

Ways to get rid of credit card debt

A laddering strategy can be used if a person can’t pay off their credit card bills in full. Shyam Sunder, managing director of PeakAlpha Investment Services, says, “To use the laddering strategy, you need to list all your credit card balances from lowest interest rate to highest interest rate and pay off the one with the highest interest rate first.”

You can get money by selling investments that aren’t doing well or by getting credit from cheaper sources, like loans against gold or investments. Interest rates on loans backed by gold or investments won’t be as high as those on credit card debt. It makes sense to get a secured loan and use it to pay off credit card balances. Then, you can pay back the secured loan, which will have lower interest rates.

“If you get a one-time payment, like an annual bonus or the proceeds from an investment when it matures, pay down your credit card debt. Interest costs are higher than any returns you might get from investments,” says Sunder.

Take out a personal loan with a lower interest rate.

This isn’t really the best choice, because you shouldn’t take out a loan to pay off another loan. But if you use it right, it can help you get out of a debt trap.

“Usually, credit card companies charge an interest rate of around 40% per year, but you can get a personal loan with an interest rate as low as 11%,” says Vasudeva. He adds, though, that people with a lot of debt would not be able to get a personal loan with low interest rates. Those who are eligible and won’t have a big impact on their credit score may choose to go this route.

Use your credit card less.

Gupta and Kelkar are no longer using their cards to swipe.

It makes sense to close those credit card accounts that are never used. Choosing the right credit cards to cancel is important. So get rid of credit cards with high annual fees and high-interest rates first.

“Don’t cancel a credit card that has been around for a long time. This is because making payments on time over a long period of time helps your credit score. “When you apply for a home loan, car loan, etc., lenders want to see a higher credit score,” says Parijat Garg, a digital lending consultant.

Gupta says, “I try not to waste money on things I don’t need. Now, I’m putting away 70% of my monthly salary.” She also says that her only goal is to save money so that she can go to college. “I’m trying to make up for any money mistakes I made in my early 20s.”

Kelkar says, “I can now tell the difference between what I need and what I want, and I keep a close eye on my monthly bills.”

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Young consumers don’t see health as an important issue, so they wait until it’s too late to get help. If you buy a policy when you are young, you can skip the required waiting time. You can also get more coverage for less money.

The pandemic changed the world in many ways, but one thing that will stay the same is that young people are more aware of their health and have different attitude about it.

They have since learned that health really is wealth and are doing everything they can to protect themselves. This means getting a good health insurance plan that will help you out financially in case of a medical emergency. After all, the early onset of lifestyle diseases and long-term diseases after the pandemic has shown that health problems can happen at any age.

Since medical costs are getting more expensive, health insurance is becoming more important.

The National Family Health Survey-5 says that India has one of the youngest populations in the world, with more than 52 percent of its people under the age of 30. It’s not surprising that the insurance industry of today is coming up with more and more products that meet the needs of young people and are also affordable. So, if you fall into this category and want to buy health insurance, here are some things to think about.

The early bird gets the worm

Young customers don’t see health as an important issue, so they wait until it’s too late to get help.

But if you buy a policy when you are young, you can skip the required waiting time. In some plans, you may have to wait anywhere from a few months to a few years before you can make a claim.

Also, if you have a higher immune system and are less likely to get serious health problems, you can get more coverage for less money.

So, it’s best to buy a health insurance policy when you’re young so you can use the benefits and get a lower premium.

Read our Blog – Silicon Valley Bank disaster lessons for Indian savers and depositors

Coverage of OPD

The traditional definition of health insurance, which was that you could only claim for hospital stays, is changing. It is changing to meet the needs of young consumers, which go beyond hospital stays and include doctor visits, lab tests, regular health checks, and even tele-medical consultation.

The good news is that if your plan includes coverage for an outpatient department (OPD), all of these costs can be paid for more efficiently throughout the year.

It also encourages young people to get health insurance for full protection, even if they don’t think they’ll need to go to the hospital. They might not buy a policy if they don’t think they’ll need to go to the hospital.

Also | Soon to come: more OPD health insurance products and services that add value to motor insurance

Benefit of unlimited healing

Before deciding on a sum assured for their health insurance, most people think about their age, family history, current way of life, and financial situation. But there are times when the amount of coverage bought might not be enough because of how serious or complicated the illness is or because there are multiple claims. In this case, one can get help from the unlimited healing benefits.

This gives the policyholder the option of filling up the sum assured all the way back to the base amount. Many plans now offer a benefit that pays for full recovery. To explain, this gives the insured amount a boost if it runs out or isn’t enough to cover the claim. Also, one of the best things about this feature is that it can be used for as long as the policy is in effect, even if it’s for something else.

Using how cost-effective something is

When buying young, the age factor is always on your side, which means you can save money. Even though having health insurance is the best way to protect you and your family financially in case of a medical emergency, it’s still true that prevention is better than treatment.

Realizing how important it is, the Insurance Regulatory and Development Authority of India (IRDAI) has told all general insurers that they should reward customers for staying healthy by giving them reward points when their policies are renewed.

So, always look for this feature and know what the benchmarks are. Some insurance companies give people in good health a discount up front and a lower annual premium. Under some plans, you may also get a 100% discount or waiver if you meet the insurance company’s requirements.

Depending on the terms and conditions, some plans also give you discounts on health checks or other nice perks.

Costs of giving birth

For young couples, it’s important to make sure they have maternity benefits, which cover things like normal and C-section deliveries, newborn baby costs like immunisation fees, ambulance costs, and stem cell preservation, so they can start their family with ease.

So, choose a plan early on before making plans for your family. Choose a plan that gives you all-around protection and keeps your finances safe from the costs of treatment, pre- and post-hospital stays, road ambulances, etc.

Health is hard to predict, and the only way to protect yourself is to live a healthy lifestyle and have health insurance that covers costs. So, always compare the different online options and look for features, what’s included, and what’s not.

Also, it’s a good idea to know how often claims are paid by the insurer. So, before you choose your policy, make sure you read the fine print to make sure you’re getting a good one.

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Most Indian banks are safe, and this is because the RBI keeps a close eye on them and forces them to fix problems before they get out of hand. Indian banks are not affected by the Silicon Valley Bank.

The speed with which Silicon Valley Bank (SVB) has gone down is scary. One of the biggest banks in the US fell like a house of cards in just a few days.

It’s interesting to think about why SVB failed.

The people who put money into SVB were mostly startups and founders who had gotten a lot of money from investors. A big part of that money was put into US Treasuries by the bank. Most of the time, the investments were in shorter-term papers. But the bank recently changed its plan to invest in longer-term securities in order to get higher returns. But when the US Federal Reserve started raising interest rates at a rate that had never been seen before, the bank’s plan went wrong. Its portfolio of longer-term securities lost value on the market. Then there were downgrades, which caused portfolio securities to be sold off quickly.

Not surprisingly, this made it seem (or spread the idea) that the bank was in trouble and might fail. This made people afraid and rush to get their money out of the bank, which is exactly how a “bank run” happens. And SVB failed, for lack of a better word.

Even though the US insures deposits up to $250,000 in case a bank fails, the majority of SVB’s depositors were Silicon Valley business owners who had a lot more than $250,000 in the bank. And this is where the danger of being too focused comes in.

Not only in the United States but everywhere. Now, let’s talk about India.

Read our Blog – Online auctions: How to buy cheaper property in India?

India has deposit insurance.

If you want to know what would happen to Indian depositors if something like what happened to SVB happened here, here is a short explanation.

• In India, the Deposit Insurance and Credit Guarantee Corporation (DICGC) protects bank deposits (such as savings accounts, fixed deposits, recurring deposits, etc.) up to Rs 5 lakh per customer/depositor.

For insurance purposes, the deposits kept in different branches of the same bank are added together, and a maximum of Rs 5 lakh is paid.

But if you have money in more than one bank, the limit on how much each bank will cover is applied to each deposit separately.

This means that if you have Rs. 15 lakh in one bank, only Rs. 5 lakh is covered by insurance (in case of a bank failure). But if you put Rs. 500,000 in three different banks, each Rs. 500,000 in each of the three banks is insured separately.

People who keep less than Rs 5 lakh in the bank will be fine with the Rs 5 lakh DICGC insurance. But what about people who keep a lot of money in bank fixed deposits (FDs)? And I’m not just talking about the wealthy. Many retirees also put most of their money into bank FDs because they are safe and give them a guaranteed return.

When people put money in banks, most of them don’t even think about losing their money or whether or not the bank will be able to pay back its debts. But, as we have seen in recent years in India with PMC Bank, Yes Bank, etc., when things like this happen, people start to wonder if banks are safe and will be able to stay in business.

Which Indian banks should you put your money in?

The Reserve Bank of India (RBI) does a good job of running the banking system in India. Every time there is a global crisis, it becomes clear that Indian banks are tightly regulated, which keeps big surprises from happening.

To be honest, most Indian banks are usually safe. And the reason is that the RBI keeps a close eye on them and makes them take corrective steps before something goes wrong. Still, not every bank is the same.

The RBI has chosen State Bank of India, ICICI Bank, and HDFC Bank as the three most important banks in India. Simply put, the RBI says that these three banks are too big and important for the country’s economic system to let them fail if that happens.

Please keep in mind that the RBI and the government would have come up with this list of banks. Also, this doesn’t mean that the rest of the banks aren’t safe. Just that the three mentioned are so big and important to the economy of the country that the government will do anything to make sure they don’t fail.

How to put a lot of money in a bank

If you have a lot of money (more than Rs 5 lakh) to put in banks, you should do the following:

• Put your fixed deposits in more than one bank. Put at least 60–70% of your money in the SIBs that RBI has picked out. You can put the rest of your money in other banks that may appeal to you because they offer higher rates. This is the same as putting your eggs in more than one basket.
• It doesn’t make sense to be greedy for a few basis points of extra returns on large deposits where capital safety is the most important thing. Just put your money in different SIBs. If not all, at least a large portion.
• Since the insurance limit is Rs 5 lakh per depositor, you can spread money among family members to use the Rs 5 lakh cover for each family member instead of just one person.

I know that a lot of people these days are tempted by corporate deposits that offer very high-interest rates (of 9-10%). What do you think? Remember that the company is offering you higher returns to make up for the higher risks you are taking by giving them your money. So, there are obviously more risks. This doesn’t mean you should never deposit money with a company. Just watch out for companies that offer interest rates that seem unusually high. Only a small part of your portfolio should be at risk. Also, check the company’s history and credit rating, and try to stick with the most well-known and reliable names with AAA ratings or similar high scores.

What about some of the big cooperative banks that are popular in different parts of the world? In general, you should try to stay away from these.

In the end, we need to remember that putting money in a bank is not about getting the most money back. Instead, it is about safety and keeping money. So there’s no point in taking risks you don’t need to. Just use a few of the largest public and private banks.

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Today, I’ll tell you about foreclosed properties and how you can buy cheaper property less than the market price.

What is Foreclosed Property?

When people don’t make their EMI payments for a long time, banks often seize their homes. These homes are called “foreclosed properties,” and banks put them up for auction to get their money back. Under the Sarfesi Act, once the banks seize the properties, they are the rightful owners of the properties and have every legal right to sell them.

Most of the time, banks sell these properties for less than the market price because their main goal is to get back what they owe, not to make money. So, if you are willing to go through the process of buying foreclosed properties, you can get a very good deal.

Also, Read – What is a Cashflow vs Networth committed mindset?

The Benefits of Purchasing a Foreclosed Property

• Price: Properties at auction are usually 20–25% less expensive than they would be on the market.
• Legal and safe: Banks and other financial institutions only give out loans after checking that everything is legal. The SARFAESI Act and the DRT Act protect bank auctions from being broken the law.
• Process is quick: The whole deal will be done in less than two to three months. Within a month, the new owner will take over.

The Drawbacks of Foreclosed Property

• No guarantee of quality or condition inside: The bank can’t tell you anything about the history or condition of the property. If the property is damaged in any way, the bank won’t fix it up and give the money back. Damage done by angry homeowners could make the property look bad.
• Needing a lot of money up front: You have to put down a large amount as a guarantee, so you can only deal with serious buyers.
• Process That Takes a Long Time: The process may seem long and hard to some people.

How do I locate a foreclosed property?

Data and information on foreclosed properties are dispersed. There is no single central database of information, but it is widely dispersed. Here are some resources for learning about foreclosed properties.

• Foreclosure India.com, NPAsource.com, Bank e-auctions, and BankDRT.com are examples of online aggregators.
• Bank Publications in local newspapers
• Bank branch advertisements (mostly PSU)
• This webpage is dedicated to SBI.

What comes next after making a short list of foreclosed properties?

Once you know the basics about an auction, you can go to the property with an official from the bank that is taking over the property.

On the website, you can find exact information about the property, such as the name of the borrower, the state and city where the property is located, the reserve price of the property, the exact time and date of the auction of the property, and so on.

What do I have to do if I want to buy something at the auction?

To take part in the auction, you must send the bank an application, KYC (know your customer) documents, and a bid value that is between 5% and 20% of the reserve price.

Then, on the main day of bidding, the person who bids the most money wins and has to pay the rest of the money to get the property. There may be a small down payment, and the rest of the money is due in a few weeks. So you can get a home loan if you need to, but keep in mind that you will still need a good amount of cash to bid at the auction.

Watch out for these small problems with the foreclosed home.

Remember that the foreclosed property was previously owned by someone who was having trouble paying their bills, and there is a good chance that there may be some damage.

• Taxes on a property
• Depending on Upkeep to Society
• Due bills for electricity, gas, etc.

Banks won’t be able to get these back, so they’re your problem. However, even if you pay them, you may still be getting a great deal.

Before you buy a Foreclosed Property, there are three things you should do.

Do hire a lawyer so that all of the legal papers can be checked carefully, especially if there is a lot of money at stake.
Do not buy a very old house because it will need a lot of work.
Before putting a house up for auction, banks usually ask the previous owners to leave. This makes it less likely that the previous owners will stay in the house. But if the house is already rented out, the tenants may still be living there, and it will be your job to kick them out. It’s hard to get a tenant out of a house, especially if they’ve been there for a long time. The best thing to do is to stay away from houses that already have people living in them.

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Let us now discuss these two types of mindsets.

Cashflow Committed Mindset

When you buy things and pay them back, you depend too much on your future cash flow. This makes you a cashflow-committed person. If you need to buy a car, a vacation, a training course, an expensive phone, or anything else, you tell yourself, “Let’s get a loan and use my future earnings (cashflow) for this purchase.”

You basically trust and rely on the future to get what you need RIGHT NOW.

You don’t think twice about whether you can afford something or not because everything seems within reach because everything will be taken care of in the future. The future has no limits, is always amazing, and is a place where you can easily EARN.

You are a cashflow-committed person if you think this way all the time or if you are almost addicted to buying things on credit.

Also Read – Artificial Intelligence chips battle, your portfolio profits.

Networth committed Mindset

On the other hand, there is a different way of thinking going on!

If you want to buy something, you’re committed to building up your net worth first, and you prefer to pay for things with your net worth. You tend to spend money when you have it, or you don’t want to spend money or put things off until later.

You feel a little uneasy about committing your future cash flow to the purchase because your plan is to first get rich and then pay for things with that money. Even if it’s easy for you to get the loan, you turn it down because, in your world, you want to be in full control of how your money flows in the future.
What if there is no money coming in? But what if you don’t make enough money? Why make yourself crazy by keeping track of how much of the loan is left? This is how you talk to people when you want to buy something.

Which way of thinking is better?

If you look closely, you’ll see that the cashflow-committed way of life has become popular in India over the last 20 years. Before the 1990s, it was almost unheard of for the average person to borrow money to buy something and pay it back later. People used to save up for things and build up their wealth before buying them. So everyone had to be a committed investor with a high net worth.

But in the last 25–30 years, it has become more common to buy first and pay later, and we are being pushed in every direction to become cashflow-committed investors. Most young people today are becoming cashflow-committed investors because it’s easy to get loans for anything and everything, they want to live like their friends, and they don’t have much control over their wants.

When a person doesn’t work on making money when they should and when they want more than they can afford, it’s only natural that they will become cashflow-committed.

A focus on cash flow could lead to a debt trap.

But you will also see that most cashflow-committed investors fall into a debt trap. When this happens, cashflow commitment stops being a choice and becomes a way of life.

On the other hand, I’ve noticed that most people who make good money and are on their way to financial freedom have a “networth committed mindset.” This means that they keep their wants in check and are able to put off their wants until it makes sense and balances things out.

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AI (artificial intelligence) is starting to change the world. And international businesses are putting together their plans. Almost all of the big names in technology have started making their own chips. There is also a list of some smaller, profitable ones that could be interesting stock picks.

Reports from McKinsey and PwC say that by 2030, the AI revolution could add between $13 and $15 trillion to the global GDP every year. Some of these numbers aren’t the most recent estimates, but they still give us a good idea of where things are going. Adding in the latest developments in AI could make these estimates much higher. Here’s a good idea for people who want to invest internationally, in the US tech industry and in chip makers around the world.

Also Read – ESG filters prevent stock market shocks.

We think that the current state of the art in AI is so advanced that companies have been trying to hide or downplay its capabilities to avoid panic from the media, hysteria from the general public, and calls from politicians for strict and highly restrictive rules on how data and AI techniques can be used.

In any case, ChatGPT is a clear sign that the AI revolution has arrived. In a previous article, we talked about how ChatGPT could be a threat or an opportunity from an investment point of view.

If AI is like the human mind in that it thinks and comes up with new ideas, then AI chips are like the human brain in that they store and process information from the senses. When the human brain processes new sensory inputs, stored sensory inputs, and thoughts, it comes up with new ideas. AI chips also use memory chips to store information from the senses and to process that information to come up with insights.

In this piece, we’ll talk about some of the most important companies in the ecosystem for designing and making AI chips, as well as possible investment opportunities. Of course, just because a company name is mentioned, it doesn’t mean that you should buy its stock. Even though a company may be an important part of the ecosystem, buying the best company is not enough to make a good investment. It should include how strong its resources are, such as its financial, human, and intangible assets, as well as its competitive advantages and the difference between its market price and its true value. In several other articles, we’ve talked about the Scientific Investing Framework.

Why Artificial Intelligence will revolutionise technology

AI needs a lot of storage space and fast storage and retrieval, so it needs memory chips that are made specifically for AI applications. It usually needs five times as much bandwidth and could cost three times as much. Some of the companies that make these chips are Micron, SK Hynix, and Samsung.

But the more interesting battle is going on in the processor chips that are used for AI. Normal CPUs can be used to do AI computing, but they are much slower and less effective. AI chips include GPUs (Graphics Processing Units), FPGAs (Field-Programmable Gate Arrays), and ASICs (Application-Specific Integrated Circuits) (Application-Specific Integrated Circuits).

In a typical AI process, the first step is training, where a lot of data is fed into the AI engine and used to build a model. Now, you can give this model new information, and it will draw conclusions from it and share them with the user. For training, the system requirements are much higher, and this is where GPU chips shine. FPGA chips are better for making assumptions. Both can be done with ASICs.

Putting together a map of the companies and their plans

NVIDIA is a well-known company that makes AI chips. But Intel, AMD, Qualcomm, and a lot of other companies are also in the market. Most of the big names in tech have started making their own chips, which is interesting. For example, Google’s TPUs (Tensor Processing Units) are ASICs made to solve matrix and vector operations for deep learning neural network models.

Amazon has been making chips for nearly a decade. In 2015, they bought Annapurna Labs, which was a big deal. At the moment, it has two chips: Trainium and AWS Inferentia. These chips are obviously made for training and inferencing. The Graviton series is another powerful AWS chip.

The AIU (Artificial Intelligence Unit) is another ASIC made by IBM, which was one of the first companies to work on AI. This is the most recent change to their Telum AI chip. IBM opened its AI Hardware Center in 2019, and its goal is to train and run AI models 1,000 times faster by 2029.

Microsoft’s Project Brainwave is also working on FPGA-based AI chips that are tailored to specific needs. Microsoft recently bought Fungible, a company that makes chips.

Apple has been making its own chips, which it calls “Apple Silicon,” for a long time. All of their own hardware, like the iPhone, iPad, Mac, etc., use these chips. Apple has a chip called ANE that is made for AI (Apple Neural Engine). ANE is a neural processing unit (NPU) that is made to speed up matrix operations and convolutions, which are needed for neural network operations.

Meta Platforms (Facebook) has also tried to make its own chips, but it has teamed up with Qualcomm and Broadcom to make custom chips for its AI, VR, and Metaverse needs in the near future.

Even though we haven’t said much about NVIDIA’s GPUs, they are the AI chips that sell the most right now. Other important mainstream players are Intel, AMD, and Qualcomm. These are the traditional, well-known companies that make semiconductor chips, so we wanted to focus on the other things that are being done in the AI battle besides these.

Also Read: Why an ELSS is a good option for long-term investors

What can investors do?

Aside from these, there are a lot of other AI-focused companies, but many of them may not be listed, be too small, or not be making money yet. But they give a sneak peek of what’s to come.
Investors who want to put money into the US technology sector or even some of the other chip makers around the world should use this as a starting point to learn more about this very interesting battle for AI chips. This is only the start. In the future, this space will talk about many other interesting parts of the growth vector of the AI revolution.

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The NCD issue has some credit risk because it is not rated AAA, which is the safest rating.

Indiabulls Housing Finance, a non-banking financial company (NBFC), started its secured issue of non-convertible debentures on March 3. (NCDs).

The base issue size for this tranche is Rs 100 crore, and there is an option to keep up to Rs 800 crore in oversubscriptions, for a total of up to Rs 900 crore.

The company wants to use these NCDs to raise up to Rs 1,400 crore. Which is the maximum amount that can be raised.

The company plans to use 75% of the money to lend, finance, or refinance existing debts. The rest will be used for general business purposes.

About the issue

In the latest round, investors can buy different series of NCDs with coupon rates that range from 8.88 to 10.15 percent per year. The terms of the issue are 24, 36, and 60 months.

For NCD holders in Category I (institutional investors) and Category II (non-institutional investors), the effective yield (per year) ranges from 9.24 to 9.64 percent. Category III (high nett worth) and Category IV (regular) holders pay 9.64 to 10.15 percent.

Investors can choose a series of NCDs that pays interest once a year, once a month, or all at once.

In the proposed Tranche V issue. The company is also giving investors in Categories III and IV an extra bonus of 0.25 percent.

Both CRISIL Ratings and ICRA have given the NCDs an AA rating with a stable outlook.

Each NCD will be worth Rs 1,000, so the minimum amount you can apply for is Rs 10,000.

Also Read: How to Get Your Consolidated Account Statement in Three Easy Steps (CAS)

How it works

Rating agencies gave NCDs an AA rating. Which means there is a high level of safety that financial obligations will be met on time.

Indiabulls Housing’s nett profit for the quarter that ended in December 2022 was Rs 229.38 crore. Which was up 21 percent from Rs 190.02 crore for the same time last year.

Also, the company’s nett sales were Rs 1,985 crore, which was 2% less than in December 2021, when they were Rs 2,030 crore.

The interest rates on NCDs, which can go as high as 10.15 percent, are also on the high end.

CRISIL Ratings says Indiabulls Housing Finance has good capitalisation and asset risk coverage.

“As of June 30, 2022, the capitalisation has a large nett worth of Rs. 16,727 crore, which is supported by healthy internal accruals. The sale of most of its OakNorth Bank investment in fiscal 2021 increased capital by Rs 1,988 crore. “As of June 30, 2022, the nett worth coverage for nett non-performing assets (NPAs) was also comfortable at around 13.4 times,” the agency said in its rating reasoning.

What doesn’t work

The issue is not rated AAA, which is the highest level of safety when it comes to credit quality.

In February and March 2020, CRISIL, ICRA, and CARE downgraded company’s long-term debt and bank facilities from AA+ to AA. (with a negative outlook).

“We and the HFC industry are still struggling to diversify our funding sources after the IL&FS default.” Indiabulls Housing Finance said in the issue document.

ICRA says that the company is still having trouble getting resources from different places. And investors are still not willing to take risks.

“Over the past two and a half years, it has been hard to do business because of the long-term liquidity squeeze and investors’ reluctance to take risks on wholesale-oriented NBFCs and HFCs. This made it hard to get money from people. In FY2020, lawsuits and accusations against the company made lenders and investors even less willing to take risks. Which hurt the company’s ability to raise money.

“While the legal processes are still going on, none of the inspecting/auditing agencies have made any materially negative observations in the past year,” ICRA Ratings said in its explanation of the rating.

Also Read: ESG filters prevent stock market shocks.

What should people who invest do?

Since the NCD issue is not rated AAA, it comes with a fair amount of credit risk.

Synergee Capital Services’ founder and managing director, Vikram Dalal. Says risk-takers can invest a little.

But keep in mind that the best way to use any kind of capital. Especially when allocating debt, is to use it in more than one instrument.

Also, NCDs aren’t as good as debt funds when it comes to liquidity. Since the Indian debt market is not that deep, it might be hard to cash in NCDs before they mature.

Also, when it comes to fixed income, some small finance banks have interest rates that range from 9% to 9.5 %.

According to rules set by the government, each depositor is protected up to Rs 5 lakh for both the principal and the interest on her deposits in that bank.

The Indiabulls Housing Finance NCD Tranche V Issue started on March 3 and will end on March 17, 2023.

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For small investors, it might not be possible to consistently and accurately spot governance problems, but there are signs that a time bomb is about to go off. ESG funds help, but there’s a reason why an active ESG fund works better.

The Adani group, which is a large industrial group, was recently accused of “brazen” market manipulation and fraud by a short seller in the US. This caused a big drop in the stocks of its group companies.

The Adani group denied the accusations and said they were “bogus,” but the short-seller stood by its report, and the markets seem to be punishing the overvaluation of these stocks, to say the least.

Even though activist short-selling is rare in Indian markets, problems with corporate governance are not.

A long history of bad government

Investors in Indian markets may remember the Satyam Computer Services fraud, which was found out after the Lehman Brothers bankruptcy caused a global financial crisis.

It turned out that Satyam made up profits that didn’t exist, and its auditor, PwC, didn’t raise any red flags. A lot of the money that went missing was put into real estate. In late 2008, a south Indian city’s real estate market collapsed, revealing Satyam’s scam.

The biggest corporate fraud in India was at IL&FS. Two IL&FS subsidiaries defaulted on loans and inter-corporate deposits to banks and lenders in July 2018. This found a deliberate accounting fraud, such as loans that kept getting renewed over and over again.

At the time of the fraud, IL&FS had a balance sheet worth $12 billion, and its fall had a big effect on the credit market.

These are just a few examples of real economic losses that come from bad leadership. Investors who don’t care about governance and just look at a company’s profits are taking on too much risk. Most of these and other problems could be stopped if there were better ways to run things.

So, what is the management of a business? It is a set of rules, practices, and processes that a company uses to guide and control itself. It’s the “G” in the ESG investing acronym. A company’s shareholders, senior management executives, customers, suppliers, financiers, the government, and the community are all stakeholders. Good corporate governance means balancing the needs of all of these groups.

Bad corporate governance can make people question how a company works. How much money it makes in the end, and how the money is split up.

Also Read: 7 UNIVERSAL THUMB RULES When It Comes To Investing

Keeping an eye on the warning signs

Every time there is a problem with corporate governance, the same questions come up: Were there no warning signs before the accusations or the collapse, which sometimes happened quickly? What could a regular investor have done to prevent the damage that happened?

When badly run companies run into business problems, they can fall apart quickly, but looking back, there were always signs. Some of them have relied for years on what is called “crony capitalism”. Which is when business contracts or permissions are given to people only because they have ties to the government.

Some companies rely on a complicated set of corporate structures and accounting methods that may boost their earnings and, in turn, the price of their stocks for a long time. Large economic risks are hidden by these structures.

For the average investor, it can be hard to spot governance risks like these. But they could count on institutional investors who pay a lot of attention to governance.

Individual investors don’t have as many tools as institutional investors do to judge the quality of governance.

A company’s financial statements and disclosure documents may not always show governance risks. There isn’t a lot of data, definitions aren’t clear, and disclosures don’t guarantee good behavior on their own.

Also Read: Why an ELSS is a good option for long-term investors

Are ESG funds that do something better than ones that don’t?

Institutional investors can do more than just check the box, do desk research, look at how minority shareholders were treated in the past, and ask the management tough questions about governance.

Here, actively managed portfolios with a focus on good governance will be better than passive investing. Which doesn’t give governance issues the attention they deserve.

Are ESG indices a good alternative to governance as a way to include them?

Even if we assume that ESG indices are a good way to judge a company. Investors can’t rely on them completely.

Many traditional ways of making ESG indexes involve sorting a universe of stocks by their ESG scores, getting rid of the ones with the worst scores, and cap-weighting the rest.

This doesn’t make them true to their mandate because ESG is just a filter and the weight of a portfolio is based on market cap, not ESG. Due to its size, an ESG company with a low score that just makes the cutoff can have a large weight in the index.

This is the main problem with these kinds of indices. They usually choose only the biggest companies so that they can be compared to a standard index. Some indices are heavily weighted towards single stocks, which stretches the definition of what an index is.

So, until better regulations bring more transparency, standardization of disclosures, and high-quality ESG actions, as well as accurately built ESG indices, investors would do well to trust an active ESG fund to take into account the fact that what you see isn’t always what you get.

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The new product will be like the Aarogya Sanjeevani, Corona Rakshak, and Corona Kavach products that came out before it. However, insurers set prices, which will be crucial when choosing products. People with mental health problems, HIV/AIDS, or disabilities will soon be able to get an insurance plan that is made just for them.

The Insurance Regulatory and Development Authority of India (IRDAI) recently told insurers that they have to cover these conditions under a model product framework that it made. “It is a model that shows the minimum scope and design parameters for the product. In other words, insurers can make this product cover more things, but they can’t make it cover fewer things. This is what the IRDAI circular says.

A model scheme

In India, laws already require that people with both physical and mental illnesses be treated the same way.
In May 2018, the Mental Healthcare Act, 2017 went into effect. This made the Insurance Regulatory and Development Authority of India (IRDAI) tell insurance companies to follow the rules.

Still, people with these conditions continue to have trouble getting health insurance. Depending on how bad the condition is, insurers can also decide to turn down the proposals.

Now, though, the insurance regulator has taken another step to make sure that people with mental health problems, HIV/AIDS, and disabilities are covered. It has come up with a model product structure for giving coverage to people with these kinds of problems.

Before covering such lives, companies must implement a board-approved underwriting policy. Underwriting is the process of figuring out risk and setting premiums.

“It’s good for customers that IRDAI has been given the task of putting in place a board-approved underwriting policy to make sure that no proposal is turned down because of these diseases. 6-7 percent of the people living in India have mental disorders. Parthanil Ghosh, President of Retail Business at HDFC ERGO General Insurance, says that the move will make health insurance plans clearer and give customers more options.

This product will be like IRDAI-mandated Aarogya Sanjeevani, Corona Kavach, and Saral Pension. In this case, insurers can add features and benefits that exceed legal requirements.

Simply put, people in this group will have a better chance of getting health insurance.

Also Read: Indian markets will do better and better than other markets.

Coverage for disabilities, mental health conditions, and HIV/AIDS that were there before.

Insurers will have to start making products based on the model scheme that IRDAI has put out. “This is a plan for people with mental health problems, HIV/AIDS, or physical disabilities. The pre-existing conditions are known.” It’s a good idea because it makes things clear. When it’s time to settle a claim, insufficient disclosures make things hard for insurers. Royal Sundaram General Insurance’s Chief Product Officer, Product Factory (Health Insurance), Nikhil Apte, says, “We are looking at our claim experience with such lives and working on the structure and pricing.”

In addition to these known pre-existing conditions, insurers will also look at other health problems. “For example, if someone just had a heart attack, there could be a time to let things calm down. Or, someone might be getting treatment for cancer. Which will have to be taken into account in the medical underwriting,” he says. Even though HIV/AIDS, mental illnesses, and disabilities will have to be covered, there are still other illnesses that could cause this product to not cover them.

Those who follow the industry say that premiums could be on the high side. “Premiums will be higher because the pre-existing conditions are known up front and the risk is higher,” says Girish Malik, Principal Officer and Director, Xperitus Insurance Brokers. He also says that insurers could start selling the product in May or June.

Important details and rules

The model product’s sum assured is Rs 4 lakh or Rs 5 lakh (SA). Reimbursement-based adults 18–65 can buy it. Covers can also be bought for babies and people under 17 years old.

To qualify for this product, the Disability Act of 2016 requires a 40% disability. In the policy’s fine print, it says that blindness, hearing loss, mental illness, cerebral palsy, Parkinson’s disease, and muscular dystrophy are among the nearly 20 disabilities that will be covered.

Also, people with HIV/AIDS will be covered as well. “Right now, people with HIV/AIDS could have their insurance applications turned down right away. Now, IRDAI’s move will make sure that health insurers give these people a fair chance to get coverage, says Policybazaar.com’s Business Head of Health Insurance, Siddharth Singhal.

Hospital stays and daycare are covered, but there are limits.

It will pay for costs like hospital stays and day care. But room rent can’t be more than 1% of the SA, and ICU charges can’t be more than 2%. For these people, the most they will have to pay for cataract surgery is Rs 40,000.

Other than disabilities and HIV/AIDS that are listed in the policy, there will be a 48-month waiting period for pre-existing diseases. More importantly, the product has a 20% co-pay, which means that if the claim is approved, the patient will have to pay 20% of the costs before the insurance company pays the rest.

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The co-founder of a wealth management firm says that India has handled inflation better than other countries and is in a good position to deal with price worries.

Bengaluru-based wealth management company called True Beacon runs Alternative Investment Funds (AIFs) for onshore investors and a Nifty 200 product called Portfolio Management Service (PMS). For foreign investors, the company is also in Gujarat International Finance Tec-City.

True Beacon co-founder and CEO Richard Pattle says India has controlled inflation well, but it is still a global issue.

In reality, PMS and mutual funds pay attention to about 300 stocks. So, what do you do differently than, say, mutual funds to create alpha?

Most of our AIFs are focused on the Nifty 50, so that part of the market is even smaller. We have a small team in Bengaluru that works very hard and is very focused. They have obviously done this a lot before. So there, we’re trying to make some alpha.

Many of our clients love the PMS since it considers all of these data factors. How these stocks behave is based on maybe 120 different factors that could be in play at any given time. So we know when to get in and when to get out. There is a bit more churn because it’s a very active set of strategies. But this isn’t just about stock pickers sitting there on their own. The fundamentals are, of course, fed into our own algorithms to make the model portfolio. Nevertheless, it involves analyzing 10 years of data for each company.

Also Read: Don’t know what to do with the money from death insurance claims?

What kind of problem is inflation?

I think it’s a big worry for the whole world. Since about 18 months ago, we at True Beacon have been talking about and pointing out the dangers of inflation, before it became a common topic of conversation in the financial markets. We’ve seen central banks all over the world show up too late with too little. India, on the other hand, has done a great job of controlling inflation. It has been very careful and so on. But if we look at how other economies are doing, we still have inflation in the double digits. Before the pandemic, the normal rate of inflation was somewhere between 2% and 3%. There are some signs that inflation is not going up. But it’s also not going down as fast as it could.

Getting inflation under control takes a few years. I’m most worried about wage-pull inflation, which may be happening in some other economies around the world. This makes the situation even more difficult to fix because once you start putting that into the economy. It’s not just about slowing down consumption; it’s also about what you do for companies, like pay bills, going forwards. So it’s still a big worry for us when we look at other markets. India, on the other hand, is less of a worry because it has had moderate inflation for a long time. It seems to be in a good place to handle that. India’s government has been cautious to keep it under control and avoid a recession.

Last year, India did better than most other markets, but in the first few weeks of this year, things have kind of turned around. Do you think that India’s outperformance will get stronger in the future now that inflation worries are coming back?

Yeah, I do. Even though the rupee fell, India was the only one in the black in dollar terms, and it was doing better than all the other global indices by between 10% and 45%. Things have changed, and that isn’t necessarily what has happened to the Indian markets in isolation. It has happened to other markets around the world.

I think there has been a bit too much excitement on the markets, especially in the US, and even where I live in the UK in the last couple of months. So, I wouldn’t worry too much about it. I would also mention how strong the dollar is. Of course, the dollar is at a level that has never been seen before in the last two decades. And that doesn’t help when we look at returns in terms of dollars. It will be temporary, and everything will return to normal in the second half of the year.

Also Read: How people who run alternative investment funds try to make money

Under the Liberalized Remittance Scheme (LRS), the Budget has proposed a 20% Tax Collection at Source (TCS) for money sent abroad. How much will that change you?

It’s not going to help at all with LRS. I think we’re looking at ways to develop portfolios for our onshore clients in India and elsewhere. Most people, no matter where they are in the world. Have exposure to the world, India, their home country, and so on. I think what we want to be able to do is stop LRS from going to places like Dubai, Singapore, London, and the US. Instead, we want India to be able to set up a hub in GIFT City so that Indians can trade on the global markets on the GIFT City exchanges. This way, they can diversify their portfolios and India doesn’t lose that business to places like the UAE.

How long should an investor wait for that outperformance in the alternative segment?

I’m happy because, from our point of view, if you look at the weighted benchmark for our AIFs, we’ve actually doubled the weighted benchmark over the past three and a half years by analysing where the market is going. And within that, running very effective strategies and substrategies in our fund that will add to the overall P&L. (profit and loss). For PMS, it’s still early, but we already have 3–4% alpha over a six-month period, which will go up and down. But I think it doesn’t matter where an investor puts their money. You have to take an approach where we really need to look at two, three, or four years to see if that player can not only score alpha or do better than the weighted benchmark, but also do that consistently. So, I think that’s what our investors are interested in.

Can what George Soros says about India or what the Hindenburg report says about the Adani group affect how attractive India is as a place to invest?

I don’t think that these kinds of news stories will ever be good for India or any other country. We have to remember where the report came from and that the people who made it have a vested interest in making sure that the company is looked at closely and that the stock price and other metrics go down. But I don’t think it’s helpful to say things that imply there isn’t enough government or rules in a country.

But whether this group or other global groups are being looked at, I think you have to be patient to find out if any of these accusations are true and to give the regulator in whichever country time to do their job and look into them fully. So, it’s clear that anything bad that happens to a company anywhere in the world isn’t going to look good in the country where it does business, but this isn’t just an issue in India. It has happened all over the world, and it will continue to happen.

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