Mashreq Egypt launches new five-year certificate of deposit

Mashreq Egypt announced on Sunday the launching of its new five-year certificate of deposit in Egypt, with fixed interest rates of 10.35 percent per annum to be paid annually, 10.30 percent semi-annually, 10.25 percent quarterly, and 10.10 percent monthly.

The medium-term investment product will offer customers instant liquidity, capital security, a stable source of return, and a guaranteed return rate, considered to be one of the “best” rates in the market, the company said in a released statement.

“Mashreq Egypt’s five-year certificate of deposit guarantees the highest fixed monthly, quarterly, or yearly return whether you are a customer or not,” said Tareq Fawzi, country manager of Mashreq Egypt, in the statement.

According to the company, holders of the certificate will also have an additional 1 percent above the basic saving rate on the saving account.

“The launch of our five-year certificate of deposit will enable customers to increase their savings in the medium-term according to their financial needs and provide them with a selection of convenient saving options at a remarkably attractive interest rate with the freedom of choice of interest frequency payment,” said Fawzi.

According to Fawzi, the five-year certificate of deposit is an expansion of Mashreq’s product line, where the customer can have the flexibility to choose from a wide range of certificates whether for tenor of 3 or 5 years based on customer choice.

Moreover, the company stated that they continue to offer customers the three -year certificate of deposit as the bank increased the rates of the three-year certificate to be 10.25 percent per annum paid annually, 10.20 percent semi-annually, 10.15 percent quarterly, and 10 percent monthly.

“With a minimum deposit of LE 5,000 and one of the highest fixed interest rates among different frequency payment, our certificates of deposit will provide customers with fixed term deposits that give them peace of mind, while their wealth accumulates. In addition it reinforces our strategic approach of introducing convenient range of products to our customers,” Fawzi added.

Founded in 1967 as Bank of Oman, Mashreq is currently one of the largest banks in the United Arab Emirates. Currently, the bank operates in several countries across the Middle East including Qatar and Egypt.

[Source- thedailynewsegypt]

Reinvest in fixed deposits

Babu Chettiar, who is 35 years old, is employed with a manufacturing company, while his 32-year old wife Sudha is employed with an IT company based in Chennai. They have two children aged 10 and 8 years. Both Mr Babu’s and Ms Sudha’s parents (in the age group between 65-70 years) live with them. The family headcount is thus eight persons.

They live in a large four bedroom house owned by Mr Babu’s father. They have two cars and have holdings in real estate and jewellery. Bank deposits of Mr Babu and his wife are around Rs 3 lakh. The aged parents get sufficient pension and have their own kitchen and take care of all their requirements independently. The medical needs are also assured through their erstwhile government employer.

This leaves us with only management of finances for Mr Babu and his immediate family. Their household expenses (driver’s salary, children’s schooling and other expenses, etc) amount to Rs 50,000 a month. They have a combined income of Rs 15 lakh per annum, post income-tax.
Their PF accumulation is Rs 12 lakh. Their bank balance is Rs 15 lakh, all in fixed deposit. They have an insurance policy of Rs 50 lakh. Mr Babu’s wife has jewellery worth Rs 30 lakh. The savings potential per year is Rs 6 lakh.

Financial goals

The goals to be achieved are medium-term and beyond. The educational expenses for the children till post-graduation shall require Rs 50 lakh, while marriage will take away another Rs 25 lakh. The maintenance of standard of living shall require accumulation of Rs 3 crore (assuming longevity as 85 years). The overall financial goals thus aggregate Rs 3.75 crore.

Where is he now?
Since there are no loans outstanding, the overall net worth is Rs 69 lakh. The liquidity in bank is sufficient and can help meet contingency requirements. Cash available shall help meet three years of living expenses.

Recommendations
The following is the suggested action plan to save and invest `6 lakh per year for the next 25 years (period until retirement) and assuming that the couple will continue to work till retirement:

Since the couple are in private sector and do not enjoy medical benefits as their parents, a family floater be taken to cover medical health and critical illness for self and the entire family for Rs 10 lakh (premium Rs 8,500 a year);

* Invest Rs 10,000 per month through an SIP into gold ETFs or mutual fund schemes. This will hedge against inflation and help you to purchase physical gold at later stage;

* Invest Rs 25,000 per month into two well performing diversified equity schemes. This will help in meeting educational needs of children;

* Foreclose your Rs 12 lakh fixed deposits. Of which, 50 per cent could be reinvested for 3-5 years at the higher rates prevailing now, while the balance 50 per cent could be invested into a fixed maturity plan for 1-3 years to gain on twin benefits of indexation and post tax efficiency;

* A sum of Rs 70,000 per annum could be invested in the names of the couple or their children, which will mature after 14 years to meet marriage expenses of children.

* A sum of Rs 5,000 per annum could be deposited in a recurring deposit for five years or more.

* Another Rs 50 lakh of term insurance could be contemplated by the couple (cost Rs 20,000 per annum)

* Mr Babu and his wife must also draw up a will in each other’s name to bequeath properties.

For more information visit to: http://deal4investments.blogspot.com/

[Source- Deccan chronicle]

For banks, Casa ratio outlook is dim

Just when banks need them the most amid rising cost of funds, low-cost deposits may not come to their rescue.

Rising fixed deposit rates have prompted depositors to shift their funds from savings deposit accounts. At the same time, the share of current account balances in total deposits have also started shrinking, as companies and businesses don’t want their funds lying idle in these accounts.

This is likely to cap any increase in the share of low-cost current account savings account (Casa) deposits for banks and foil the scope for margin improvements in the near term.

“I don’t think for the banking sector as a whole the Casa ratio will go up. There is a larger differential between the savings and fixed deposit rates. The customers are much more conscious now and don’t want their deposits earning lower rates in savings deposits,” Chanda Kochhar, managing director and chief executive of ICICI Bank, told Business Standard.

“Even in current accounts, with the cost of money going up, people don’t want to leave idle cash balances. They are using it for projects, investments and working capital requirements. Whether it is the individual or the corporate, they are managing money more efficiently,” she added.

The country’s largest private sector bank closed the April-June quarter with a Casa ratio of 41.9 per cent. Kochhar expects the share of Casa to remain at around 40 per cent in the coming quarters.

While higher rates offered on fixed deposits led to 7.8 per cent growth in term deposits since the start of this financial year, demand deposits have narrowed by 12.6 per cent since April, latest data from Reserve Bank of India shows. On an annual basis, term deposits have grown 21.6 per cent and demand deposits have shrunk 7.6 per cent.

“Mostly current accounts are used for settlement purposes in capital market transactions. Currently, markets are dull, so there is not much transactions in these accounts. As of now there is not much growth in current account deposits,” R K Bansal, executive director and group head, retail banking at IDBI Bank, said. He expects the expansion of current deposit accounts for the public sector bank to be slower this year than the usual annual growth of 15-20 per cent.

While many banks have started offering attractive schemes like waiver of minimum balance requirements and the option of insurance cover to mobilise savings deposits, lenders are now exploring options to take similar initiatives for current account deposits.

“Growth in current account as of now is static. We are thinking of offering customers some incentives to open current accounts from the next month. We are aiming to grow our current deposits by 10 per cent by March,” Ashok Dutt, executive director at Dena Bank, said.

For more information visit to: http://deal4investments.blogspot.com/

[Source-BS]

Banks eye NRI deposits to boost biz

With deposit rates expected to dive after the RBI's move to slash key rates, bankers are banking on NRIs to supercharge their lockers. Moneymen say Wednesday's cut in repo rate and reverse repo rate would result in lesser movement of funds from NRE and FCNR (B) to NRO (non-resident ordinary rupee account) accounts.
The interest earned from NRO, which can be maintained jointly with resident Indians, is liable to tax in India. "The propensity to shift from NRE and FCNR (B) to NRO will reduce now as the interest rate arbitarage would be narrowed down," says M S Sundara Rajan, CMD ofIndian Bank.
However, the banking meltdown in the US and Europe will force many NRIs to look homewards to park their money. "The Indian banking and financial system is sound and that is prompting many NRIs to remit funds to India," says Rajan. The bank's FCNR(B) (foreign currency non-resident account bank scheme) and NRE (non-resident external rupee account) portfolio currently stands at Rs 3,000 crore. Rajan says that the bank has seen an increase in NRI deposits in the last couple of months. Adds Y L Madan, executive director of Indian Overseas Bank, "Worldover, fixed deposit rates offered by banks are pretty low. Our bank has seen a growth in NRI remittances since the advent of the slowdown."
Some banks have already effected a rise in their FCNR(B) and NRE deposit rates and others are expected to follow suit. While banks periodically review their FCNR(B) and NRE rates in accordance with the RBI guidelines, a hike in interest rate in such deposits assumes importance in the current scenario. "These deposits are normally of longer duration (upwards of one year) compared with domestic deposits like fixed deposits (upwards of 7 days). Given the current market scenario, our bank is in favour of mobilising long duration and low cost deposits," says P Y Nagar, general manager of Union Bank of India. Interest rates on the Union Bank of India's FCNR (B) deposits for five years now stand at 3.66% up from 3.45% earlier.

Similarly, Indian Bank recently hiked interest rates on its FCNR (B) and NRE deposits. FCNR (B) deposits of five years duration will now carry an interest rate of 3.66% up from 3.45% before the revision. Indian Overseas Bank is also expected to announce a hike in its FCNR (B) and NRE deposits after its assets liabilities committee meeting which is expected to be held this weekend.

Source:timesofindia

Tata Capital opens doors to retail investors

Tata Capital is a non-banking finance company (NBFC), which provides small and
Medium enterprises (SME) loans, retail loans and infrastructure loans. Through its
subsidiaries, the company is also present in fee-based businesses like brokerage, investment banking and portfolio management; however most of its asset book comprises of fund-based assets.
Recently, the company came out with an issue of non-convertible debentures (NCD) offering the yield of 11.57%-12% per annum (p.a.). The issue closes on February 24,’09. Considering the rates on the fixed rate instruments, the issue appears to be attractive. A couple of months back even banks were offering fixed deposit rates (FD) of 11% p.a.
However, the Reserve Bank of India (RBI) has cut the key rates dramatically leading to a low interest rate regime. Therefore, the banks have cut the FD rates. Going ahead, it seems unlikely that the banks will offer interest rates exceeding 10% p.a.
This makes Tata Capital’s issue of NCD even more attractive as the investor is assured of 12% p.a. at least for the first three years of the bond’s tenure. After 36 months, there is a put/call option, which means that the company and the investor have the option to redeem the bond. Moreover, NCD is a secured instrument, which adds to its creditworthiness unlike FD, which is not a secured instrument
The issue is coming at a time, when the economy is slowing down. As a result, most of the banks and NBFCs have gone slow on disbursements in order to take stock of the asset quality. Gone are the days, when NBFCs were expanding at high rates of 50% p.a. The outlook is challenging for companies in financing business. Tata Capital has said that it will be focussing on the companies within the Tata ecosystem. The company is prohibited from lending to the companies of the Tata Group.
However, it can lend to the suppliers and vendors of Tata Group companies. This is where it stands a great advantage, as sector expertise is crucial while deciding upon the borrower. And, it takes years for financing companies to build expertise and to this extent Tata Capital does have a head start. The company also has presence in big-ticket personal loans, where the repayment risk is much lower than low size loans. The slowdown has been severe to the markets which the company is targeting namely SME, personal and infrastructure loans. However, the slowdown fears are more relevant to bigger players, which have already tapped the market. As far as Tata Capital is concerned, its asset book stood at Rs 8,000 crore approximately on Sep 30,’08.
The company plans to raise maximum of Rs 1,500 crore with the current NCD issue.
Moreover, it has adequate capital to deal with any eventuality. Its capital adequacy ratio stands at 26.1% much higher than the 10% prescribed by RBI.
A strong capital base indicates that company has been efficiently managing the liquidity risk and it intends to scale up the operations. All these factors combine minimize the repayment risk on this NCD issue from an investor’s perspective. Moreover, ICRA and CARE, the credit rating agencies, have assigned LAA+ and AA+ rating to the issue, thereby affirming the company’s creditworthiness. It seems that the company wants to build a relationship with retail investors. This is evident as the minimum an investor can invest is Rs10,000. In a nutshell, it seems worthwhile for investors to subscribe to Tata Capital’s NCD considering that it is a secured fixed rate instrument, the yield is higher than other instruments, there is a lock-in of three years and the company has strong brand name. Basic understanding of its borrowers in SME space is an added advantage

Source:Economicstimes

Time to lock your money in bank FDs

Investors looking at high returns on deposits should soon lock their money with banks since interest rates on retail
deposits may have peaked.
Bankers say the cut in repo rates on Monday indicates that this is the beginning of a soft interest rate regime. Further, they said they would first lower their fixed deposit rates and then reduce lending rates. This indicates that banks may come under pressure to reduce deposits rates.

Currently, most banks are paying a maximum rate of 10.5% for one to less than three years while senior citizens are entitled for 11%. Interestingly, the 10.5% offered on deposits for three years was last offered in 1999-00, following which the interest rate cycle began to turn southwards. Rates had fallen sharply to 5.25-5.50% in 2003-04.

The country’s largest housing finance company, HDFC, offers as high as 10.90% for 30 months if an individual deposits Rs 1 lakh and above. While for deposits below Rs 1 lakh, HDFC offers 10.55%. Among others, ING Vysya Bank is offering 11% for 365 days and 10% for 99 days.

ICICI Bank, which offers 10.5% for 390 days, 590 days and 890 days while rates for other tenures are lower. Although 10.5% for 390 looks attractive, ideally, a depositor should
invest in long-term deposits like 890 days. This will help them avoid a negative impact of lower interest rates.

This means that if a depositor parks his money in long-term deposits, even if the interest rate cycle turns, the depositor would gain. The highest rate on longest tenure is 10.5% offered by India’s largest bank, SBI, which is for 1,000 days. Similarly, Indian Overseas Bank offers 10.5% for 720 days and Canara Bank offers 10.5% for 500 to two years.

However, while parking money with banks, particularly for long term, depositors should carefully see the clause regarding the pre-payment of penalty. Penalty varies from banks to banks. SBI and Indian Overseas Bank charge 1% penalty if deposits are broken during the tenure.

Source: Economictimes

IDBI Bank revises interest rates on fixed deposits

IDBI bank reduced the interest rate on retail term deposit by 50-150 bps in the maturity bucket of 46-90 days upto 10 years wef January 1, 2009 and also realigned its maturity buckets.

Further, the Bank is introducing a longer maturity term deposit of 1100 days with interest rate for normal depositors @9.5% pa and @10% pa for senior citizens in lieu of the existing 890 days term deposit. This new Deposit is available from January 1, 2009.

Source: Economictimes