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Most CMDs of state-run banks have taken a leaf out of Barack Obama’s ‘change’ mantra to send out fever-pitch messages to consumers. Stylish TV ads, chic logos and slick new launches are communicating their change. But just as Obama is discovering the difference between ‘campaigning’ and ‘implementation’, PSBs will need to wake up and smell the coffee, says Aditi Prasad. For now however life rocks for PSBs - as the global turmoil is boosting their credibility among the young and old alike

Sujeet Beura is the dapper, 33-year-old Accounts Director at a thriving ad agency in Mumbai. When he is not fighting the mad traffic to get to work, Beura concentrates his creative energies on ways to add value to client State Bank of India (SBI) – his agency is one of the eight empanelled with the bank. The fact that the global financial crisis has cast a shadow on SBI’s biggest competitor and private bank ICICI is simply a convenience that divine intervention has pushed his way. So convinced is Beura of SBI’s expertise that sitting in his plush office at Church Gate, all he can think about is shifting his personal savings account to the state-run bank, a move he wouldn’t have contemplated a year ago. After all, SBI then was for the old and doddering, while smarter and sexier private & foreign banks were for his generation.

But things have changed over the last few months. For one, ATMs of his ‘private bank’ are almost always ‘out of order’ – or at least when he needs urgent cash; and two, the global crisis has made him jittery and he wants his hard-earned money safe from the clutches of private and foreign banks. “SBI is more reliable. God forbid there’s some financial chaos here; then at least my money would be safe,” he avers. He swears that his preference for SBI is not dictated by the mere fact that the bank is a client but because of their long-standing credibility. “Besides, I’m 33 and planning to take my first home loan now and SBI is offering the most competitive interest rates,” he adds.

Beura’s musings are not unfounded. The findings of the exclusive 4Ps B&M and ICMR survey echo a similar sentiment. More than 51% respondents said that they trust state-run banks more when it comes to credibility and future security. Interestingly, the survey has been conducted in India’s five metro cities (across 836 respondents) – where till only some time ago private and foreign banks dominated both in actual market share and in consumer mind space. Welcome news for PSBs, many of whom are now vying to win back market share in these very metros. SBI for one, which hogs the chunkiest market share at an all-India level (42% of its branches are located in rural areas, with little competition from private banks), is planning its next ad campaign in a sleeker avatar to appeal to both retail and corporate consumers in these big cities. Explains Beura: “Currently SBI is reassuring people with the slogan The Banker for Every Indian. The next quarter, they are likely to launch a new positioning for SBI, targeted specifically at the metro audience.” Nationalised banks had lost the plot in metros and big cities when private banks came in. In aggregate deposits, the share of PSBs declined from 92% in FY 1991 to 73.9% in FY 2008; in advances, the share of PSBs fell from 92% to 72.5% in the same period, the losses mostly accruing from metros.

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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TAX PLANNING? for 2009-10 Naah... It’s wealth creation!!!

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Noted chartered accountant G. D. Singla explains, “Early tax planning provides ample time to analyse the options, assess the risk and returns and above all, it allows greater bargaining power to the tax payers to an extent that in many cases, one need not even pay advance taxes!” If that sounded Hebrew, perish the painful thought, as this cover story is made with an atypical contrarian objective of putting penny to the foolish and pound to the wise. Revisiting the books, and at the cost of sounding back to the basics, we put forth the well respected S. Kumar of the leading chartered accounting firm Simon & Cailand, who explains, “In simple terms, tax planning means availing of the benefits of deductions, rebates, exemptions in taxation law to reduce the total tax burden of an assessee.” He further explains that tax planning does not merely imply putting money in some designated options; if envisaged properly it can be a great source of prudent wealth planning that could help to focus primarily on post tax yield taking into consideration the basic parameters of safety and liquidity. Ergo, if the philosophical Zeusian change has been implemented by thyself, you could test new waters with your second move.

And that is to make tax planning a monthly feature rather than an end of the year quarter feature beginning in January and calling it quits by March. The ‘instead’ approach sprains and strains one’s cash flow many a time; some even are forced to borrow to make these investments, certainly a double whack. Add to this the fact that the individuals suffer losses on account of compounding benefits (in case the investment avenue happens to be public provident Fund) and the rupee cost averaging (in case of investment in ELSS, Equity Linked Service Scheme). Change in government’s economic policies, closing of several attractive investment schemes, et al may further add on to the loss. Tax planning early on in the year can actually take care of all such losses. As the tax payer in such a case tends to spread his tax saving investments over 12 months rather than concentrating in three months.

And then we come to the third move. Apart from ‘when’, a tax payer also needs to know ‘where’ to invest. It is of prime importance that he is aware of the investment avenues so that he does not lose out on any opportunity. A host of investment avenues exist in the market: Mutual Funds, National Saving Certificates (NSC), Public Provident Fund (PPF), Monthly Income Scheme (MIS), Employee Provident Fund (EPF), Life Insurance, Systematic Investment Plan (SIP), Unit Linked Insurance Plan (ULIP), et al. The choice of these instruments rests on the individuals need for liquidity. The stock market benders could favour Equity Linked Saving Schemes, or ELSS, as the dividend income earned from units invested in ELSS are exempted from IT Act; and moreover, on redemption of the units the capital gain income is also tax exempted. And the otherwise bent could favour PPF, as the interest paid on it is on a compounded basis and tax free on withdrawal. Also, any amount lying in the PPF a/c cannot be attached by a court of law, thus providing maximum social security.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
1500-plus IIPM students placed across the country with 44 bagging international offers
IIPM set to beat economic slowdown
IIPM Admission Detail
IIPM, GURGAON
IIPM : EXECUTIVE EDUCATION