Credit Card- A Plastic Money

Credit Card is a plastic card that is issued by financial company to the holders to borrow instant funds at the point of sale. It denoted the good credit ranking of the person and also is a promise that the borrower will repay the money within due date. It has become a lifestyle asset for the third generation people. But it can become liability to you if you do not have control on your spending. Here are some advantages and disadvantages of credit card payment.

Advantage of Credit Card Payment: 

• People can purchase items even they do not have money. The can take instant fund and can shop the items. 

• People are not required to carry cash to do shopping. 

• You can take the loan and at the same time have a reputation of good credit history. 

• People can do shopping anywhere. It helps you buy products online. Wireless Credit Card helps you make the payment online. Electronic payment system is really good and convenient mode to shop items. 

• It gives you reward points that you can redeem and enjoy the benefit.

Disadvantages of Credit Card Payment: 

• You are required to pay some extra amount for the product in the form of tax. Different companies levy different tax amount on Credit Card Processing. 

• You are levied heavy tax than that of normal loan if you cross the due date of payment. It also damages your credit rating. 

• It allows you to take more debt than that you can handle. It sometime makes you uncontrolled and you can buy unnecessary items at high cost.

Some Hidden Charges:

Nowadays most of the banks not informing the customers about the fees change and there is no clear intimation. It will affect your expenses and have to handle this clearly.

1. Avoid late payment fees

It is always keep in mind that the due date for all your Credit Cards. If you are missing the due, it will end up paying the late payment fees. Also periodically check for the due date, if there is any change by the bank.

2. Annual Fees

It is another expenses happening in the every year. If you taken the card with the life time free, then there should not be any fees for using the credit card. You have the rights to ask the company and they are responsible to provide the explanation.

3. Interest Rates

Learn about the Interest Rates of credit cards. There is lot of trick in explaining the interest rates by the banks. They will not tell you the annual rate for the credit cards. Because, it is higher than the other form of loans like Personal Loans, etc. It is always good to avoid taking the huge amount from the credit cards.

These are the advantages and disadvantages of credit card payment. Having a credit card is not bad rather it is an asset for you if you utilize it properly. You should try to make use of credit card only when you need urgently. It is for emergency and not for fun and entertainment. Understand the value of money and make its proper use. You will then find it to be an angel in distress.

Most of the people have a question in their mind that who give the instant loan to make the payment and how is credit card payment settled? The answer is – through merchant account. Merchant Accounts are special bank accounts that deal with credit card payment and settlement. These accounts are agreement between the credit card companies and the retailers to settle the payment.

Health Insurance :- Key Features & Benefits

The basic benefit of health insurance (also called mediclaim) i.e. covering the unforeseen medical expenses, there are few other features and benefits in most of the products offered in the market. Some of them are listed below:

Family Floater Policies: Most health insurance plans give the flexibility of covering up to 4 members of the family under the same plan with a slightly higher premium than an individual health insurance policy. It gives the flexibility of choosing say 4 or 5 lakhs of cover for the entire family. If one member in the family is hospitalized and uses about Rs. 2 lakhs for his treatment, then the rest 3 lakhs can be availed by others. It is very unlikely that more than 1 or 2 members would require hospitalization in the same year. Hence the family floater serves the purpose whoever in the family falls ill.

Hospitalization Cash Benefits: This benefit entitles the customer to cash benefits for every completed day of hospitalization, which helps him to take care of the increased financial burden incurred at the time of hospitalization, such as loss of earnings away from work and other expenses.

Cashless facility: There is a network of hospitals tied up with each insurance company which accepts the insured’s medical identity card (issued by the insurance company) for providing cashless facility to the insured. Hence either part or entire expenses are covered by the policy and the individual doesn’t need to spend from his pocket.

Pre-hospitalization and Post-hospitalization benefits Some mediclaim policies provide for up to 60 to 90 days of pre-hospitalization and post-hospitalization benefits, i.e. the cost of medical tests, medicines, scans, etc. This is usually provided under maternity benefits and treatments which do not require hospitalization.

Ambulance Charges In most cases the ambulance charges are taken up by the policy and the policy holder usually doesn’t have to bear the burden of the same.

Health check up Some health insurance policies have a facility of free health check-up for the well being of the individual if there is no claim made for certain number of years.

Cover for Pre-existing Diseases Some health insurance policies have a facility of covering pre-existing diseases after 3 or 4 years of continuously renewing the policy, i.e. if someone has diabetes, then after completion of 3 or 4 years of continuous renewal with the same insurer (depending on the plan offered and his age), any hospitalization due to diabetes will also be covered.

No-Claim Bonus Some health insurance policies provide a no-claim bonus. If there has been no claim in the previous year, i.e. if the person covered has not availed any hospitalization benefit, then a bonus is declared; either by reducing the premium or by increasing the sum assured by a certain percentage of the existing premium.

Tax Benefits of taking a Health Insurance Policy Under Section 80D of the Income Tax Act, income tax benefit is provided to the customer for the premium amount till a maximum of Rs. 15,000 for regular and Rs. 20,000 for senior citizen respectively.

Take Advantage of Nomination Facilities

Registering a nomination facilitates easy transfer of funds to the nominee on the demise of the investor.

What is a Nomination?

An investor can nominate a person(s) called nominee(s) to whom his/her Mutual Fund Units will be transferred on his / her demise.

Mutual Fund units get transferred to the nominee registered in the folio on the demise of the Investor.

What are the benefits of registering a nomination?

Registering a nomination facilitates easy transfer of funds to the nominee(s) on the demise of the investor. In the absence of the nominee, a claimant would have to produce a host of documents like a Will, Legal Heir-ship Certificate, No-objection Certificate from other legal heirs etc. to get the units transferred. The process is simple if a nominee is registered in the folio.

How can an investor make a nomination?

Nomination can be registered at the time of purchasing the units. While filling in the application form, there is a provision to fill in the nomination details.

Alternatively, an investor may register a nomination later through a form which may be submitted with relevant particulars of the nominee.

The forms are available on the mutual fund websites.

Investors may also request the registrar and transfer agent to send a form.

Can an investor make multiple nominations?

Yes! An investor may make up to three nominations and even specify the percentage of the amounts that will go to each nominee.

If the percentage is not specified, equal shares will go to the nominees.

Can a minor be a nominee?

Yes! A minor can be a nominee. However the guardian will have to be specified in the nomination form.

Can a nomination be changed?

A nomination can be changed and even cancelled. The relevant form should be filled and submitted to the Registrar or Mutual Fund Office.

If an investor has different schemes in a folio, will all units of all schemes be transferred to the nominee?

A nomination is at folio level and all units in the folio will be transferred to the nominee(s).

If an investor makes a further investment in the same folio, the nomination is applicable to the new units also.

Who can nominate and who is eligible to be a nominee?

Nominations can be made only by individuals applying for / holding units on their own behalf, singly or jointly.

Non-individuals, including societies, trusts, body corporates, partnership firms, the karta of an HUF, and the holder of a power of attorney (POA) cannot nominate.

Nomination can be in favour of individuals, including minors, the Central Government, State Government, a local authority, any person designated by virtue of his office or a religious or charitable trust.

A non-resident Indian can be a nominee, subject to the exchange control regulations in force from time to time.

Source:- The Hindu

Do's and Dont's Before Choosing Your Broker

DO'S

• Always deal with the market intermediaries registered with SEBI / Exchanges
• Give clear and unambiguous instructions to your broker / agent / depository participant
• Always insist on contract notes from your broker. In case of doubt of the transactions, verify the genuineness of the same on the Exchange website.
• Always settle the dues through the normal banking channels with the market intermediaries
• Before placing an order with the market intermediaries please check about the credentials of the companies, its management, its fundamental a recent announcements made by them and various other disclosures made under various regulations. The sources of information are the websites Exchanges and companies, databases of data vendor, business magazines etc.
• Adopt trading/ investment strategies commensurate with your risk bearing capacity as all investments carry risk, the degree of which vary according to the investment strategy adopted.
• Please carry out due -diligence before registering as client with any intermediary. Further, the investors are requested to carefully read and understand the contents stated in the Risk Disclosure Document, which forms part of investor registration requirement for dealing through brokers in Stock market.
• Be cautions about stocks, which show a sudden spurt in price or trading activity, especially low price stocks.
• Please be informed that there are no guaranteed returns on investment in stock markets.

DONT'S

• Don’t deal with unregistered brokers / sub-brokers, intermediaries
• Don’t deal based on rumors generally called 'tips'
• Don’t fall prey to promises of guaranteed returns.
• Don’t get misled by companies showing approvals / registrations from Government agencies as the approvals could be for certain other purposes a not for the securities you are buying.
• Don’t leave the custody of your Demat Transaction slip book in the hands of any intermediary
• Don’t blindly follow media reports on corporate developments, as they could be misleading.
• Don’t get carried away with onslaught of advertisements about the financial performance of companies in print and electronic media.
• Don’t blindly imitate investment decisions of others who may have profited from their investment decisions

Health Insurance in India Part I

In mid 80’s most of the hospitals in India were government owned and treatment was free of cost. With the advent of Private Medical Care the need for Health Insurance was felt and various Insurance Companies (New India Assurance, National Insurance Company, Oriental Insurance & United Insurance Company) introduced Mediclaim Insurance as a product.

According to recent news report health insurance continues to be the fastest growing segment with annual growth rate of 25%. Health Premium has risen to Rs. 8100 crores in 2009-2010. As per the recent reports from various agencies the health sector has the potential to become a Rs. 30000-crore industry by 2015. Estimates of leading Chambers of Commerce also confirm these estimates.

On August 15, 2007 Prime Minister had announced Rs 2000 Crores for Health Insurance for poor citizens and the impact of the same is being seen by us in the form of success of RSBY (Rashtriya Swasth Bima Yojna).

In 2001 with entry of various private Insurance companies now the customers have choice of buying this insurance from 21 Insurance companies.

The Companies, which offer Health or Mediclaim Insurance, are;

Apollo Munich Insurance Company Limited Bajaj Allianz General Insurance Co. Ltd. Bharti AXA General Insurance Co. Ltd. Cholamandalam MS General Insurance Co. Ltd. Future Generali India Insurance Co. Ltd. HDFC ERGO General Insurance Co. Ltd. ICICI Lombard General Insurance Co. Ltd. IFFCO Tokio General Insurance Co. Ltd. Larson & Toubro General Insurance Co. Ltd. Max Bupa Health Insurance Co. Ltd. National Insurance Co.Ltd. New India Assurance Co. Ltd. Oriental Insurance Co. Ltd. Raheja QBE General Insurance Co. Limited Reliance General Insurance Co. Ltd. Religare Health Insurance Co. Ltd. Royal Sundaram Alliance Insurance Co. Ltd SBI General Insurance Co. Ltd. Shriram General Insurance Co. Ltd. Star Health and Allied Insurance Company Limited Tata AIG General Insurance Co. Ltd. United India Insurance Co. Ltd. Universal Sompo General Insurance Co. Ltd.

India is the only country where hospitalization insurance policy was being sold as Mediclaim Insurance Policies. The very name gives a feeling to the insured that claim has to be lodged. If motor insurance policy is not sold as motor insurance claim policy and household insurance policy is not sold as household claim policy then why this be named as Mediclaim?

In the recent years the trend has emerged that some Insurance companies have started calling this product as Health Insurance.

Health Insurance and Mediclaim are two different names for the same product. The change has started coming and now we have started calling it Health Insurance. ICICI Lombard has even named it as Health Insurance Policy.

Calling is as Health Insurance is a positive way of looking at this Insurance. It also giving us a feeling that we as a society have started moving from curative medical care to preventive medical care.

According to sources in Oriental insurance it is being felt that mindset has started changing over the last couple of years “ The new middle- class of of India aspires for quality healthcare service and doesn’t mind going to expensive hospitals like Apollo or Escorts. There is no reason why healthcare insurance should not be successful with this class. RQVADMDZ9M44

Thinking Clearly About Inflation

The subject of inflation, which occupied the media and the politicians in 2008 until the global financial crisis put an abrupt end to it, has returned to the centre stage of the policy debate. The big difference, however, is that this time around the government has been much calmer.

Previously, the increase in the year-on-year wholesale price index (WPI) to 8% in April 2008 from 4.5% in January 2008 had the government reach out to every conceivable weapon in its arsenal regardless of its suitability for combating inflation. The government’s actions included cuts in import duties, bans on exports, appreciation of the rupee, rise in the cash reserve ratio, suspension of the futures trade, cuts in excise duties, export taxes and threats of price controls.

In the current bout, the WPI inflation has been higher and the reaction of the opposition parties much fiercer. Yet, delightfully, the government has refused to panic. It has firmly carried out the deregulation of petrol prices and, in large part, confined the policy action to monetary instruments.

Most importantly, the government has shown great sensitivity to possible adverse impact of overly aggressive actions against inflation on growth, which is so essential to poverty alleviation. The ruckus in the Lok Sabha notwithstanding, finance minister Pranab Mukherjee has boldly stated that excessive hikes in the interest rates would lead to “no investment, growth or job creation.”

Because inflation can cut both ways even from growth perspective, it often poses a dilemma for the policymaker. Undue tightening of monetary policy to contain inflation may choke off investment and therefore growth. At the same time, excessively high inflation rates, which result in highly negative real interest rates, may be detrimental to savings and hence growth.

They may also make the relative price signals noisy and distort the allocation of investment. Luckily, so far, the annual increases in the WPI of all commodities, shown in the accompanying chart, give us no reason to panic. While inflation began to accelerate in February 2010, taking 2009-10 as a whole, the inflation rate has been just 3.8%.

Admittedly, WPI inflation from February to June 2010 has been in the 10-11% range. But inflation at these rates is scarcely unprecedented. Similar rates had been experienced not just on monthly but annual basis in the first half of the 1990s.

Moreover, the current high rates are largely reflective of low rates in the corresponding months in the previous year. Ultra-low monthly inflation rates of –1 .0 to 3.5% between February and October 2009 left the base over which the inflation rates for the months of February to October 2010 are calculated low. This fact implies that monthly year-on-year inflation rates will remain high until October 2010.

While the measured response of the government to overall inflation is, thus, to be admired, its performance with respect to food-price inflation cannot escape criticism. At 14.7% in 2009-10, wholesale price inflation in food articles has been much higher than the WPI inflation for all commodities. Recent monthly data yield even higher rates: between December 2009 and June 2010, monthly food inflation ranged from 14.6 to 20%. 

No doubt, some factors relevant to this inflation such as crop failures, diversion of grain supplies to biofuels, shifts in cultivation patterns away from food crops and rising food grain demand in India and China are beyond the government’s control. Nevertheless, the government’s mismanagement must be held responsible for a significant part of the people’s plight over this inflation.

Thus, consider the scale of resources and network the government deploys in food distribution in the name of helping India’s poor. Nationwide, it runs a staggering 450,000 fair price shops. Its public distribution system (PDS) currently absorbs a gigantic Rs 47,000 crore (approximately $10 billion) in subsidies annually. This is more than Rs 10,000 per year per rural household below the official poverty line.

Above all, the Food Corporation of India (FCI) currently sits on top of a 60.5 million tonnes foodgrain mountain. This supply is sufficient to give every single household in India 21 kilograms of grain every month for a whole year. Sadly, almost 18 million tons or 30% of this stock is stored in the open. If the past experience is any guide, a significant part of the stock will eventually be washed away by rains, eaten by rats and pests or rendered unsuitable for human consumption due to rotting.

If private traders held even a tiny proportion of this stock, they would become subject to prosecution under the Essential Commodities Act, 1955. But the same does not hold true for the government. Even the failure to release the stock when food prices escalate carries no punishment for it. And, of course, corrupt politicians and officials can deliberately slow down the release of the grain to profit private traders at the expense of the public.

Most analysts now agree that the solution to the problem is a highly downsized FCI with its operations limited to regions that private traders will not serve. Other needy households should be provided cash subsidy that leaves them free to choose what they buy, when and from whom. The government must also give up its monopoly on international trade in many food items and rely on custom duties to regulate trade flows. Private traders can handle exports and imports at least as efficiently as the government.

But, alas, the government is moving in the reverse direction. It wants to implement the right to food in a way that gives it the right to distribute more food, further expand the FCI food stocks and put yet more grain in the open for destruction by the rains, rats and pests — all in the name of helping the poor and at the expense of the honest taxpayer!

(The author is a professor at Columbia University)

Source:- Economic Times

Indian Rupees Symbol

Finally Indian Rupees got an International Recognized Symbol.Finance Minister Pranab Mukherjee announced that a new numerical symbol which will be like US Dollar, Euro and Pound for the Indian Rupee.
Reserve Bank Of India already shortlisted five symbols.The final symbol for India Rupee is announced on June 24th 2010.

The shortlisted design apparently plays on the Hindi letter ‘R’ with a .

Railway Budget 2010-2011 Highlights

On 24th of Feb 2010 Mamata Banerjee had presented Railway Budget in the Indian Parliament House. These are the some highlits for railway Budget 2010.

·  Railway Minister Mamata Banerjee appeals to business houses to join hands for building partnership with Railways. Presenting Railway Budget for 2010-11, Banerjee says a special task force will be set up for early clearance of projects.

·  No fare hike for passengers.

· Railways not to be privatised; It will remain with the government, says Banerjee. While not privatising, Railways have to develop business models for improving earnings, says Banerjee.

·  Railways 2020 vision document will contain short, medium and long-term goals. Commitments fulfilled to the maximum. Out of 120 trains announced in last budget, only three remain to be flagged off because of lack of broad-gauge lines, says Banerjee.

·  Plans to launch a pilot project for fire detection.The government also plans to construct more underpasses for safety, the minister said while presenting the Railway Budget.

·  Railways to start six water bottling plants in places like Ambala, Thiruvananthapuram, Farakka, Amethi and Nasik to provide clean and cheap drinking water to passengers.

·Indian Railways aims to add 25,000 route kilometers by 2020. The railways currently has 64,015 route kilometers, she said.

· India's railways has set up a special task force to clear investment proposals in 100 days

· Indian Railways plans to keep rail freight rates unchanged, Bloomberg-UTV news channel reported, without saying where it got the information.

· Railways to set up mobile e-ticketing centres at hospitals, universities, courts, IITs, IIMs, district headquarters and village panchayats. All 13,000 unmanned level crossings to be manned in the next five years.

· Railway Protection Force to be strengthened through amendments in RPF Act; women's wing to be formed in RPF to ensure security of women. Ex-servicemen to be inducted in RPF. Railways will be the lead partner in the Commonwealth Games in Delhi.

· Railways to set up Rabindra Museum in Howrah and Geetanjali Museum in Bolpur -- both in West Bengal  to commemorate Rabindranath Tagore's 125th birth anniversary.

· Railways will provide houses to all its employees in the the next 10 years in collaboration with the Urban Development ministry.

·  Railways to enhance contribution to central staff benefit fund. Centre for Railway Research to be set up at IIT-Kharagpur. Chittaranjan Locomotive Works capacity to be augmented from 200 to 275 engines a year.

·  Work on Rae Bareli Coach Factory in Uttar Pradesh to start within a year. Wagon Repair Shop to be set up in Badnera near Amravati in Maharashtra.

· Integral Coach Factory in Chennai to be modernised and a new unit to be set up there. If land is available, Railways willing to set up a Diesel Multiple Unit factory in West Bengal.

· No forcible acquisition of land for freight corridor project. One member of each family of land losers to be given employment in the freight corridor as also in the new projects.

· High-speed dedicated passenger corridors to be constructed; National High Speed Rail Authority to be set up.

· Revenue from non-core business of Railways to go up from Rs 150 crore to Rs 1,000 crore. Indian Railways has set a target to transport 944 million tons of goods in the year beginning April 1.

· Railways expects to increase earnings from non core activities. The government aims to increase non core earnings to Rs10 billion rupees from Rs1.5 billion.

· Railways expects to increase earnings from non core activities. The government aims to increase non core earnings to Rs10 billion rupees from Rs1.5 billion.

· Despite slowdown, Railways to exceed freight loading target by eight million tonnes during 2009-10. Freight loading target for 2010-11 fixed at 944 million tonnes, 54 million tonnes more than the current year's revised target. Gross traffic receipt for 2010-11 pegged at Rs94,765 crore.

·  Allocation for construction of new lines increased from Rs2848 crore to Rs 4411 crore.

· Rs1,302 crore provided for passenger amenities in the 2010-11 railway budget against Rs 923 crore last year.

· Indian Railway Finance Corporation (IRFC)will borrow 91.2 billion rupees ($1.97 billion) from the market in 2010-11.

·  Railways to have master plan for North Eastern region. Special train between India and Bangladesh to be started to commemorate 150th birth anniversary of Rabindranath Tagore.

· 101 additional services to start on Mumbai suburban railways. Survey will be conducted to connect Sealdah and Howrah stations in West Bengal. To commemorate Rabindranath Tagore's 150th birth anniversary, 'Bharat Teertha' trains to connect several pilgrimage centres across the country.

·  Indian Railway Finance Corporation will borrow Rs91.2 billion ($1.97 billion) from the market in 2010-11.

Budget Expectation 2010

This Year Finance Minister of India Mr Pranab Mukharji will present the Union Budget in the parliament for the Financial Year 2010-2011 on 26th February 2010. Everyone (Including all types of citizen of India & NRIs) is as eager to know the India Budget 2010 expectations as the final budget itself. After recession or Economic slowdown this is the 1st Union Budget will be going to  Present in front of the House.This year Corporate house have more expectation from this budget as well as Common people too.

Corporate House:- Corporate house is waiting for Some stimulus package for the industry.Specially IT & Banking industry most affected from this economic slow down.

Common People:- Common People Expectation have a  to control Sky Rocketing of the food prices.

This time Government should more focus on

1. Control on High Inflation Rate

2. Sky Rocketing Food Prices

3. Education Sector

4. Control on Government Expenditure.

5. Tax Rebate for Corporate & Individuals

6. More Focus on Priority Sector (Agriculture & Service) & ETC.

Taxes:

The common men and the corporates are looking for decrease in taxes. The Finance Minister is likely to augment exemption limit of individual taxes to Rs 3 lakh from Rs1.60 lakh for salaried people. Exemption limit for women is expected to be increased from 1.80 lakh to 4 lakh and for senior citizen from Rs 2 lakh to 5 lakh.

However, taxes levied on the perks availed by income earners are expected to be restructured on higher level. This arrangement may satisfy junior employees and senior citizens. But, it may not go well with the people belonging to higher position.

Corporate Tax:

A reduction of 30% is expected in the corporate tax. The expectation is found in line with the introduction of Direct Tax Code (DTC) suggesting a 25% rate. The individual rate was lowered by 30% previous year also.

Capital Gains Tax:

As far as the 2010 India Budget expectation in the area of capital gain tax is concerned, finance minister is unlikely to bring any reform in this category of tax. It is predicted to be included under the Direct Tax Code, to be implemented from April 2011.

Re-fixing of Tax Slabs:

As mentioned earlier, the tax slab for women is expected to be revised to 4 lakh and senior citizens to Rs 5 lakh. However, second and third slabs of tax would see significant change.

The second tax slab is expected to be augmented from the existing Rs 3 lakh to Rs 1 million to be taxed at 20%. The third slab is likely to be increased from Rs 5 lakh to Rs 25 lakh to be taxed at the rate of 30%.

These revisions would act in favor of the reputed advocates as well as the doctors.

Stimulus:

India Budget 2010 speculations suggest that it is not the right time for the government to roll back stimulus packages, despite the fact that GDP growth of the nation in the Q2 (July – September) of the current fiscal stood at 7.9%.

However, experts believe that government would withdraw few of the subsidies from the market. The oil companies were aided with the stimulus package to check loss. Government did not allow the Oil companies to raise product costs of kerosene and diesel, which would have forced the common men to pay more.

As high prices of diesel and petrol would bear adverse effect on the transport rates of food products, the stimulus packages are expected to continue in the oil industry. However, partial withdrawal of the stimulus aid can be expected in this sector to tackle the situation of increasing fiscal deficit.

Agriculture Sector:

According to India Budget 2010 expectations, the agriculture sector would be the highlight of the session. This sector is likely to receive enormous boost from the government. Finance minister's invitation to the farmers for the pre-budget meet is held to be the main reason behind such speculation.

Infrastructure and Social Sector:

Infrastructure industry is also expected to be the focus of the budget results of 2010. Many believe that development in this sector would account for massive growth in GDP. However, it is unlikely to ease monetary policy to better infrastructure. Interest rate cannot be reduced as well.

Other Sectors:

While taking into account the India Budget 2010 expectations of various sectors, it was found that the garment industry of India is looking for considerable cut in interest rates in its exports segment. The garment exporters also want the ministry to remove all the confusion faced in the case of excise as well as custom duties. The sector wants major commercial as well as fiscal relief. Similarly, the Indian tea industry is expecting to get an allocation of more than Rs 130 crore, which was granted in the fiscal year 2009-10.

List are many and expectations are more. In a very few days the government will open their magic box to lure the Indian Common people or they will only for the Corporate House.

Application Supported by Blocked Amount (ASBA)

Application Supported by Blocked Amount (ASBA) refers to an application mechanism for subscribing to initial public offers (IPO). The system, which ensures that the applicant’s money remains in his/her bank account till the shares are allotted, was introduced by SEBI for retail investors in 2008. Now it has been extended to corporate investors and HNIs as well (from January 1, 2010, onwards). The mechanism requires the applicant to give an authorization to block his/her application money in the bank account for subscribing to the IPO. His/her bank account is debited only after the basis of allotment is finalized, or the IPO is withdrawn or fails. In case of rights issue, the application money is debited after the receipt of instructions from the Registrars.

Can one subscribe to all IPOs through ASBA?

No. You can avail of ASBA only to subscribe to book-built public issues and a select few rights issues.

How does one avail of this facility?

Only certain designated banks — Self-Certified Syndicate Banks (SCSB) — can offer this facility to the applicants. A list of these banks and their branches can be accessed from the websites of Sebi, BSE as well as NSE . The applicant can submit the ASBA application to the SCSB with whom he/she is maintaining the account to be blocked (to the extent of the application money) for the purpose. The application can be submitted either by filling up the form or online, by using the Internet banking facility.

Is it compulsory to submit bids through this system?

No. You can choose to opt for the existing process of applying through cheques. However, remember that you cannot avail of both the modes to send in your applications. If you apply through a cheque as well as ASBA, it will be rejected on grounds that it constitutes multiple application.

How does an investor stand to benefit from ASBA?

Despite not being mandatory, it makes sense to opt for ASBA as it scores over the traditional mode of cheque payment in several areas. It enhances the transparency of the share allotment process. Only that amount that is required to make share allotment is debited to the account after the bid is selected for allotment after the basis of allotment is finalised. Therefore, the applicant need not worry about the refund in case he/she is not allotted any share. Moreover, since the money remains in the bank account, he/she does not lose out on the interest that can be earned during the period.

Is an applicant allowed to withdraw ASBA bids?

Yes. During the bidding period, one can approach SCSB, to which he/she had submitted the application and make a withdrawal request, post which, the bank will unblock the amount. After the bid closure period, applicants need to send their withdrawal requests to the Registrars in order to withdraw their bids. Subsequently, the Registrar will ask the SCSB concerned to unblock the application money in the bank account after the finalization of basis of allotment.