ASBA

When a retail investor invested in an IPO ( Initial Public Offer ) or an FPO ( Follow Up Public Offer ) , the Investor had to pay the entire application amount upfront and it would take upward of 15 days to get through this process, before stocks are finally listed .

This means that your application money would we LOCKED up during this period and in case there has been over subscription to a issue , you will not be allotted your entire applied quantity of shares and then you would have to wait for your refund

So in order to avoid all these confusions ASBA or Application Supported by Blocked Amount was introduced .

This is how it work , when you apply instead of actually transferring the entire amount to a escrow account, the amount would continue to be in your account , but this amount would be LOCKED , hence you cannot withdraw this amount .

So after all the allocation process have been completed , the requisite locked amount will be debited from your account .

So what does this mean to the investor

a) The Investor's money would continue to earn interest for him ,untill it is finally debited

b) In cases of over subscribed issues, only amount for the allocated shares would be debited , so there is no question of refund and hence all delays and disputes associated with refund is removed.

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MF Dividend and Stock Dividend

When i mean MF , i would be referring to Equity mutual funds ( Those with greater then 65% invested in equity .Would start off with

Similarities
a.The Investor gets cash in hand
b.The Dividend is tax free in the hands of the investor
c.Investor may not get dividends each year
d.Dividend always a percentage of the face value

Differences
a.The stock price may or may not be affected after a dividend , But NAV of a Mutual Fund invariably reduces by an amount equal to the dividend
b.Dividend stripping law , would be applicable to the MF units, once the dividend has been received
c.When a company declares dividend it would be from its profits or may be reserves ,but a MF would have to sell its underlying assets to pay the dividend .

The final point in "Differences" is what makes all the difference . That is , in case of MF it is AMC just selling off something that already belonged to you and giving you the money and then making it look like they have been phenomenally generous.

The only occasion where a dividend from MF may make sense ,not from being invested in equity for long term ,but purely from money in hand sense would be dividends declared by ELSS , as you claim tax deduction for money invested and dividends here mean you are indirectly claiming higher percentage of tax deduction
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Number Portabiliy and Dual SIM phones

Mobile number protability is the next of services to be lauched , But in our country where more than 90% of the mobile phone subscribers are post paid customers , not sure if this is really going to be such big game changer . Well i do see one product , whose purchase may be severely dented going forward , the Dual SIM mobile phone .

I have been a mobile phone user for ten years ( Intially it costed Rs.4/min to call and Rs.2/min to receive a call ) but never felt the need to either carry more than one mobile nor for a dual SIM phone . But for some reason this species of phone has been a huge hit , forcing even market leader Nokia to reluctantly introduce dual SIM phones .

We just have to wait and watch how much churn of subscribers will this new service cause . May the operators with strongest signals survive !!! .

Well , when on this topic , IDEA cellular, seems to be the only operator looking forward to this service. Kind of liked their new number portability Ads..but don't think i'am going to change my operator anytime soon .

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Using your Airline Miles

I had occasion to travel abroad a few years back . After the end of my travel, one of things i had done was to enroll in the loyalty program of the airlines .

But one of the things that i noticed was that, thought i had lots of miles with me , I did not have much option of utilizing those miles, either i may use them during my next travel ( i never travelled after that ) or else use it on the airlines website to purchase some stuffs , this was a problem too as most of the stuff would be shipped from abroad , hence would be subjected to customs and other duties .

It was about a year back that while i was browing casually , i noticed that there were websites in India , which were letting you purschase and pay using those airline miles . This was something great , as it opened a whole new way of shopping.

The airline i used was Lufthansa and web site i finally used those miles on was http://shopping.indiatimes.com/

So whenever you travel , make sure you do enroll and save those miles . you never know when you can use them
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Saving without Goals

I have been reading a lot of articles across blogs about goal based saving . I agree it may be easier to save when you kind of know what you are saving for .

But i have a problem with this . I believe many of us know that we have A GOAL we would like to accomplish but are not clear of when we would like to hit that goal . Lets say buying a house , we may all want to buy one , but may be unsure when or where . Would that mean we should not be saving or not know how much to save .

I think it would be a far better idea to make saving in itself a goal . May be trying to save a certain percentage of your salary or Income as a goal may be a far better strategy . Say i would like to save 30% of my income

Another positive of this strategy would be that , you would start being more value conscious , as every penny you save would be a step towards your goal .

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CIBIL

With increasing rate of defaults of loans , the Government and RBI felt the need for a mechanism where by the credit worthiness of a borrower could be found , so that risk involved in lending to that person or institution could be better assessed.

This was when CREDIT INFORMATION BUREAU (INDIA) LIMITED [CIBIL] was formed , which would collect data from a crossection of lenders and then share it with Banks, Financial Institutions, Non Banking Financial Companies, Housing Finance Companies and Credit Card Companies.

The collection of data is done using PAN details and such other uniquely identifiable atributes of the borrower . So before a lender lends any loan , he would first get a report from CIBIL about this borrower , see if there are any other liabilities for this borrower and then try to take a much better informed decision .

For a individual ,it is possible to get a copy of their own Credit report either from a Financial institutuion where they have applied for a loan or directly from CIBIL

CIBIL website can be accessed at http://www.cibil.com/

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Begining of End of Teaser Home loans

Teaser Home loans are those home loans that would be initally ( for first 2 or 3 years ) offered at a low rate of interest and then the rate of interest would be increased to the prevailing market rate, which is definitely higher.

The problem with Teaser Home loan was that , the initial low rate of interest kind of gave the borrower a false sense of confidence that , they can borrow more and also that they can repay the loan without much problem . But it would be only after the initial teaser period is over that , the borrower realises that , he actually would have to shell out much more, as Interest rates are from then on ( may be for next 12 - 18 years ) at a much higher rate .

What this does is , there are higher risk of borrower defaulting on his payments as he start feeling he does not have the repayment capacity at the higher rate of interest , thus making teaser loans a high risk lending for the banks .

But despite this banks had continued with teaser rates , as they wanted to increase their loan disbursements . But now with RBI stepping in and increasing teaser rates loans risk weightage , banks have to keep aside a bigger amount of money , for every teaser loan disbursed , thus making it less attarctive for bank to continue with teaser rates home loans.

This is welcome move from RBI .

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