When the entire world was upgrading its defence technology in preparation for a World War III or a
similar situation between neighbouring countries, no one taught us that World War III would be
fought with social distancing, wearing a double mask and getting vaccinated against COVID. Lesson
learnt “Human discipline is more important and critical than any technology to discipline machines”.
In India, the second wave arrived with a slew of new challenges. Earlier this year, no one was
bothered to get vaccinated. At the same time, the Government took early warnings very casually
and started exporting a few vaccines, which resulted in a complete disaster and failure for India and
us as Indians. We start taking things more seriously and responsibly when some of our known faces
lost their lives. The second wave disaster also showed us a mirror of how poor our health and
medical infrastructure in India. These results, like oxygen shortage and lack of accessibility of
medical infrastructure, have shown us how far we are in reaching the mission of Healthy India. Every
one of us saw immense frustration and our inability to do anything.
How India would react and what lesson it plans to take forward from this disaster will decide the
future of a healthy India? A country with 132 bn people should first have an excellent medical
infrastructure before thinking about any other advancement. We usually listen from big
management gurus that our failure will teach us the biggest lesson of your life and I hope with the
days gone by we learn some great lesson about our casual approach and indiscipline rather than
criticizing the Government or local body.
“Pahla sukh nirogi kaya, dusra sukh ghar main maya” COVID pandemic gives us callous times not
only physically and mentally but also financially. Now it’s time for us to question, “Are we seriously
managing our money well? How important is an emergency fund which we often overlooked and
withdrew to go on vacation with family?
In this short span, we saw many families where the children have lost their parents, sometimes both
their mother and father. Are their parents adequately covered, and have they made proper
arrangements so that their children will get the funds or insurance money smoothly? Also, as
responsible parents, do we teach them how to handle such unpredictable situations? It brings us to
a profound realization – Is earning money and investing enough? Educating our children on how to
manage wealth is equally important. Here are some of the outstanding money habits or lessons we
should essentially consider for a better situation-
- If both the parents are working, then it is advisable to keep three months’ mandatory expenses as
your Emergency Fund. If your spouse is not working, then six months of mandatory expenses should
be your Emergency Fund. Mandatory expenses mean your grocery expenses, EMIs, school fees,
house rent and any other expenses you can’t avoid in the coming 3 or 6 months’ time. It is also
advisable to open a separate bank account and deposit the amount there to remain untouched
- Educate kids about your investments and insurance policies if you have taken any. It is also
advisable that one of your loyal friends or relatives should also know about your insurance plans and
investments so that they could help and save the boat in case of any uncertainties.
- Your planned vacations or other big expenses like buying a car, luxury parties and hotel expenses
must have decreased from the last year. It is an excellent opportunity. If you don’t have an
emergency fund, do use this money to create an emergency corpus or invest this money for a long-
- The Pharma and Healthcare sector looks very promising in the next five years. Anyone who has
equity exposure can see Pharma and healthcare sector as emerging sector in coming years and can
allocate at least 20% – 25% of their equity corpus in health and Pharma stocks or Health and Pharma
sector mutual funds.
- We have to understand the importance of WILL. While you are at home, do accumulate all your
wealth details and prepare a simple excel sheet. Sit with your family (spouse and adult kids), disclose
it to them, and give them a fair understanding about it. Create a simple WILL without any
considerable legal troublesome effort. An ordinary paper-written WILL is also acceptable and helpful
in the smooth transmission of the assets.
- Understand the difference between direct investment and investment through some agents,
brokers or financial planners. In this challenging time, if your spouse or kids cannot do all the
exercise of getting insurance money and other transmission formalities, you should invest your
money with the help of some financial planners, agents or brokers? If a spouse or kids possess sound
knowledge and a fair understanding of how to get insurance claim money and other formalities, it is
advisable to take the direct route. Merely saving a few pennies (brokerage or commission) can
sometimes make your entire investment at stake. Take a decision wisely; your friend or neighbour,
or colleague’s situation may be different from yours.
A financial planning platform where you can plan all your goals, cash flows, expenses management, etc., which provides you advisory on the go. Unbiased and with uttermost data security, create your Financial Planning without any cost on: http://bit.ly/Robo-Fintoo
SBI’s corp loan book hints at a change in market growth dynamics-
India’s largest lender, State Bank of India, posted a total corporate credit growth of 2.6% in FY21, including loans and debt investments such as bonds and commercial papers; however, if only loans are considered, SBI’s corporate book contracted 3%. Indian banks are realizing that to be able to see any sustainable growth in corporate credit, they also need to invest in debt securities of their borrowers, signaling a shift from their loan-driven growth strategy. The bank’s chairman Dinesh Khara pointed out that working capital utilization for large corporates is even below 70%, and the bank is looking to support them in raising money from the debt market.
After Jio, Airtel plans to add airwaves in eight key markets-
Airtel is set to add airwaves in the 900 MHz band in Gujarat, UP-East, Kerala, Bihar, Odisha and Jharkhand to boost high-speed data capacity, a senior company executive told ET. Both Telcos aim to boost 4G broadband coverage as vast swathes of India’s corporate workforce operate from home amid lockdowns during the Covid second wave. The two operators are leveraging recent spectrum purchases to attract new data subscribers and users from Vodafone Idea.
India: Westbridge Capital-backed Star Health set to file for IPO-
Health insurer Star Health and Allied Insurance Co Ltd, owned by a consortium of investors including Rakesh Jhunjhunwala and Westbridge Capital, is planning a public share sale to raise at least ₹2,000 crores. The initial public offering (IPO) is likely to be a mix of primary and secondary share sales by the company and the investors, he added. “Around 10-12 investment banks are working on this IPO including Kotak Mahindra Capital, Citibank, Credit Suisse and Bank of America,” the second person said. Emails sent to Rakesh Jhunjunwala, Westbridge Capital, and Star Health remained unanswered. The investor consortium, which also includes Madison Capital, had in August 2018 agreed to acquire over 90% stake in Star Health from existing investors Star Health Investments Pvt. Ltd and private equity funds managed by ICICI Venture, Tata Capital and Apis Partners. The consortium had acquired the insurer at a valuation of close to ₹6,000 crores. Star Health has underwritten a gross written premium of ₹6,865 crores during 2019-20 and had a net worth of ₹1,889 crores as on 31 March 2020. It has over 12,800 employees and over 640 branch offices across India.
COVID-19 impact: FPIs net sellers of Indian equities worth Rs. 4,444 cr in May so far-
Foreign investors pulled Rs 4,444 crore from Indian stock markets in May so far in the wake of concerns over the second wave of the COVID-19 pandemic and its likely impact on the Indian economy. FPIs withdrew Rs 6,370 crore from equities but infused Rs 1,926 crore in the debt segment between May 1-21, as per depositories data, taking the overall net outflow to Rs 4,444 crore. The total net outflow from the Indian capital markets was at Rs 9,435 crore in April. FPI outflows are a temporary phenomenon as per Harsh Jain, co-founder and COO at Groww.
The number of covid cases in the country is falling and vaccination rates are slowly climbing; and as the economy reopens, FPI investments will “dramatically climb,” he said.
NBFC: NBFCs stop lending on fear of rising defaults-
Hit with a drop in installment collections due to the Covid-induced lockdowns across the country, non-bank lenders are slowing fresh disbursements and even halting them for unsecured loans.
From an average default rate in collection efficiency at 2-3% in pre-Covid times, non-banking finance companies (NBFCs) are now seeing 6-8% of borrowers missing their payment schedules during the second wave of the pandemic. IIFL Finance has halted fresh disbursements for unsecured loans for micro-businesses & personal loans.
It has also tightened scrutiny and disbursements for secured loans like loans against property, housing loan, and gold loan. According to chief risk officer Sanjeev Srivastav, even in secured advances like loans against property, the company has reduced the loan-to-value ratio to 50-40% from 70% earlier.
US: Manufacturing and Services PMIs reach new series highs in May-
The business activity in the US manufacturing sector continued to expand at a robust pace in May with the IHS Markit’s manufacturing PMI rising to a new series high of 61.5 from 60.5 in April. This reading came in better than the market expectation of 60.2.
Further details of the publication revealed that the Employment Index edged lower to 53.3, the lowest level since December, from 55.7 in April. On a negative note, “input costs rose in May at a pace not seen since July 2008,” the IHS Markit noted.
The US Dollar Index gained traction after this report and was last seen gaining 0.3% on the day at 90.01.
Manufacturing could return to China, as Covid cases spike in India and Vietnam-
Previously, the U.S.-China trade war caused companies to move their supply chains out of China. As a result, countries like Vietnam and India benefited as companies set up shop there. But the situation is changing, and supply chains could pivot back to China as cases spike in India and Vietnam, according to Zhang Zhiwei, the chief economist at Pinpoint Asset Management. “Before the pandemic, we saw factories moving out of China — Samsung, Foxconn these big-name companies — setting up factories in Vietnam, India,” he told CNBC’s “Street Signs Asia” on Monday.
DHFL lenders challenge NCLT order on considering Wadhawan’s offer-
The committee of creditors of DHFL has challenged the National Company Law Tribunal (NCLT) order directing the lenders to consider the offer by the debt-ridden mortgage firm’s erstwhile promoter Kapil Wadhawan.
An appeal challenging the NCLT Mumbai bench’s order has been filed before the National Company Law Appellate Tribunal (NCLAT) and is scheduled for hearing on Tuesday.
The matter will be heard by a vacation bench of NCLAT comprising Acting Chairman Justice A I S Cheema and Member Technical V P Singh.
The petition has been filed by the Union Bank of India on behalf of the Committee of Creditors (CoC) of Dewan Housing Finance Corporation Ltd (DHFCL). According to sources, lenders in their petition have requested the appellate tribunal to stay the NCLT order
DHFL had gone bankrupt with more than Rs 90,000 crore in debt to various lenders, including banks, mutual funds and individual investors who kept fixed deposits with the company.
Centre discusses with stakeholders abnormal rise in edible oil prices, asks for steps to soften rates-
Amid concerns over up to 62 percent spike in domestic edible oil prices, Food Secretary Sudhanshu Pandey on Monday discussed in detail the reasons for the “abnormal rise” in local prices, and asked the states and industry stakeholders to take measures to soften the prices.
Pandey also said in the meeting that suggestions offered by stakeholders would help the government to arrive at “wholesome solutions” to ensure edible oils are available at reasonable rates to consumers.
Pandey further said that the suggestions presented in the meeting would help in arriving at wholesome solutions to address the issue of edible oil prices and achieve growth in the domestic oilseeds sector. Besides Pandey, Union Agriculture and Consumer affairs Secretaries and senior officials from Gujarat, Maharashtra, Madhya Pradesh and Tamil Nadu governments were present. According to the government data, retail prices of palm oil rose by 62.35 percent to Rs 138/kg on Monday from Rs 85/kg in the year-ago period.
Positive Start of Financial Market for FY-22
- The FY 2021-22 came up with a ray of hope and positivity as the Financial Markets regained Momentum and the Indian Economy witnessed Traction in the Manufacturing & Other Economic Activity, despite the rising cases of COVID amidst the splurge of Second-wave in the Country.
- The IMF (International Monetary Fund) projected the GDP Growth of India to be 12.5% for the coming Fiscal Year, which is the highest amongst the Emerging Economies.
- The DII’s were the Drivers in the First month of FY- 2021-22 as they Invested Approx. 9,900 Cr. In the Indian Markets, whereas amidst the Rising tensions amidst the second wave of COVID and negative sentiments, the FPIs pulled out their money from the markets after a brief period of nearly 6 months.
- Fearing the second wave, the Promoters of many companies look to file an Asset Protection Trust that would provide a cushion against investigations, in case of defaults & bankruptcy.
- View- This move will enable the Lenders to cushion their Contingency Reserves & allow them to tackle adverse situations arising out of Defaults, once they come out of the ‘Moratorium Mode’.
Outlook on Sectors to be affected
- The Hospitality Industry which includes Restaurants, Aviation, Travel & Transport will yet again be affected due to the Local Restrictions from the State Governments in order to curb the Second wave of Covid.
- Aviation Industry is likely to be affected worse even than the first wave, as the DGCA has Extended the Ban on International Travel till 31st May’21. The Airlines have declared that the Bookings have declined by nearly 50% which will also result in further decline in the Passenger flying & Air traffic.
- As India produces over 70% of the Global Vaccines for COVID, the recent spike of second wave & shortages in Vaccination would lead to a lowering of Exports of Pharmaceutical Products which will hamper the economic activities in the Short term at least.
Growth Drivers for the Indian Economy in coming Quarters
- Despite the Rising infections, the Rapid pace of Vaccination has helped lower the Death rate amongst the affected once, and as we proceed further with Providing vaccination to the Youth of the country, the Economic activities are likely to normalize steadily.
- The Manufacturing industry revived at a Good pace led by the key sectors like Cement, Metal & Mining & Automobiles who were coping with the Pent-up demand. It is expected that as the supply chains have lesser restrictions in certain regions, this will help in the growth of economic activity further.
- As per the Analysts, Private Investments in the Markets will increase in the coming 2 Years as the Manufacturing activities will be incentivized by the government which will add as a boost for the sector and further lead to Higher Valuations for the companies.
- The Government is also likely to carry the Divestment process for reducing the Fiscal Deficit in the coming years, as it will also be a Major Contributor in providing aids to the affected industries.
- India will remain to be the Hot Market for Investors globally as they look at China + 1 Alternative for various activities, the Broader Outlook for the next 3 Years looks Attractive & Positive.
20% salary of mutual fund managers to come by way of scheme units: SEBI
- A minimum of 20% of a fund manager’s salary shall be paid in the form of units of mutual fund schemes that they manage. Aside from fund managers, all other “key employees” of the fund house will also be covered, such as the chief executive officer, chief investment officer, and other employees that the fund house identifies as key employees.
- In the case of a fund manager managing only one scheme, he has the option to receive half of the compensation in the units of the scheme he manages. The other half would come by way of other schemes whose risk profile (as defined by SEBI’s risk-meter guidelines) are the same or higher.
- Index funds, exchange-traded funds, overnight funds and existing close-ended schemes will be excluded from unit allocation.
- View- Though this is expected to increase the transparency and may boost the confidence of the investors as the key employees will have ‘skin in the game’ – aligned interest, the norm is expected to hit the fund house employees hard.
Mutual Fund – Low-interest rates. Where should you invest?
IRDA sets a time limit to approve cashless claims in COVID-19 cases
- All insurance companies have to convey a decision on approving all cashless claims against COVID19 hospitalisation within an hour.
- View- This move has been implemented to keep a check on delays in discharging patients. It will help to make hospital beds available to new patients at a time when the second wave of coronavirus has crippled the healthcare system across the country.
- Bad bank to get Rs 2 lakh crore of defaulting companies’ loans
- The Indian Banks’ Association has asked members to identify large loans where they are lead bankers and get approval from co-lenders so that these loans can be sold to a bad bank (NARC). Approval from 75% of the lenders by value is required to transfer the loans to an ARC.
- The association has identified 102 corporate bad loans of Rs 2 lakh crore, where the amount outstanding in each is over Rs 500 crore.
- Once the lenders decide on selling the loan, the NARC will make them an offer based on the scope of recovery. With the NARC’s offer on hand, the lenders will hold a ‘Swiss Challenge’, where rivals are allowed to better the offer made by a chosen bidder.
Zomato files for Rs 8250 crore IPO
- Food aggregator business Zomato filed its much-awaited draft red herring prospectus (DRHP) with SEBI for INR 8,250 Cr IPO this year. The offer consists of fresh issue amounting to INR 7,500 Cr and a secondary component of INR 750 Cr, which will come from the company’s largest stakeholder Info Edge.
- Zomato has reported a revenue of INR 1,367 Cr in the first three quarters of the financial year 2021. The company’s expenses were at INR 1,724 Cr in the same period, leading to a loss of INR 684 Cr. The company’s overall revenue for FY21 is bound to increase as the company witnessed more stability in the last quarter due to a decrease in covid cases.
- View- Zomato is obviously one of the two main food delivery service companies in India. It is a duopoly structure as of now and that goes in its favour. Clearly, they are meeting a need that exists currently and there is a lot of excitement in this sector. This kind of business has a potential high operating lever. So, as the business scales up, costs do not go up in line and as a result, one cannot look at the profitability in the coming years.
Related Article: Upcoming IPO in India 2021
Tata gets nod by CCI for the proposed acquisition of BigBasket
- The CCI approves acquisition by Tata Digital Ltd of up to 64.3% of the total share capital of Supermarket Grocery Supplies Private Ltd and SGS’ sole control over Innovative Retail Concepts Pvt Ltd. The proposed combination will result in the acquisition by Tata Digital of the majority stake of and control over SGS.
- While SGS is engaged in online business-to-business sales through business.bigbasket.com, IRC is engaged in online business-to-consumer sales and operates the BigBasket website.
- Tata Group is into diversified businesses; including steel, software, retail, tea and FMCG. It plans to launch a super app to bring all the Tata consumer-facing brands and products on one platform. The acquisition of Bigbasket is a part of these plans.
- View- The Tata Super app might take on Reliance Industries’ JioMart and the e-commerce giants like Amazon and Walmart-owned Flipkart with robust business strategy.
The Monetary Policy Committee is entrusted with the responsibility of deciding the different policy rates including MSF, Repo Rate, Reverse Repo Rate, and Liquidity Adjustment Facility. Monetary Policy Committee (MPC) has six members and the main objective of this body is to maintain price stability and boost up the growth rate of the country’s economy.
The MPC also maintained an accommodative stance “as long as necessary to sustain growth on a durable basis” and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward
The RBI MPC decided to keep the repo rate unchanged at 4 percent on the back of rising COVID-19 cases, imposition of restrictions, and lockdown in the state of Maharashtra. The reverse repo rate remained changed at 3.35 percent and the marginal standing facility (MSF) rate and the bank rate at 4.25 percent. The projection of real GDP growth for FY22 is retained at 10.5 percent because of the ongoing vaccination program, the gradual release of pent-up demand, and the investment-enhancing and growth-supportive reform measures taken by the government
The Government Security Acquisition Programme GSAP will reduce some of the uncertainties created by long-term bonds. It is very simple to understand that the Government wants to acquire high yield long-term bonds to reduce the debt burden for a longer period of time and also this will help to pump into the ecosystem.
Related Article: Rules that will knock your pocket from 1st April 2021
RBI has extended NEFT and RTGS facilities to non-bank payment system operators. So far, only banks were allowed to use these facilities. With RBI’s announcements, prepaid payment instrument (PPI) issuers, card networks, White label ATM operators, and Trade Receivables Discounting System (TReDS) platforms can also use these facilities. Also in an attempt to promote digital transactions, RBI has proposed to increase the limit of the outstanding balance to Rs 2L from Rs. 1L
In order to maintain Liquidity RBI Governor announced liquidity support of Rs 50,000 crore for fresh lending during 2021-22. RBI will provide Rs 25,000 crore to Nabard (National Bank for Agriculture and Rural Development); Rs 10,000 crore to National Housing Bank (NHB); and Rs 15,000 crore to Sidbi (Small Industries Development Bank of India).
The entire RBI Monetary policy indicates that the Government is focusing on maintaining liquidity that seems necessary for economic activity. It is striving to keep the cost of funds low by anchoring bond yields. These measures are aimed at keeping financial conditions agreeable, ensure orderly evolution of the yield curve and support the ongoing recovery.
The most feared and most awaited event of the year; The Budget. Every person, every industry waited patiently for the announcement from our respected Finance Minister Nirmala Sitharaman.
With COVID-19 pandemic on the backdrop, India was waiting for a “get well soon”.
Let’s see what the Budget 2021 brought forward for us – Decoding Budget 2021:
1. No changes in personal income tax
Budget 2021 did not alter the personal income tax structure which meant that the common man is not burdened with tax levy this time. However, we have tried to summarise a few pointers to understand the changes
2. No ITR filing for senior citizen above the age of 75 years
Budget 2021 dictates that Senior citizens above the age of 75 years need not file Income Tax returns henceforth. However, this exemption is valid only if the senior citizen has income from pension and interest.
Only snitch here is that the bank interest should have been received from the same bank where the pension gets deposited.
3. Prefilled Income Tax Returns
Ease of filing will be achieved as a result of Prefilled Income tax returns with the details of interest, dividend, capital gains etc. This is a welcome change since time will be saved and accuracy will be achieved.
Capital gains especially for trading in shares and mutual funds is a very cumbersome task. Prefilled details of capital gain will be a relief.
4. Dividend not required to be considered for determining the advance tax
The dividend has been made taxable only on the receipt or declaration of the same from the view of Advance Tax calculation.
Earlier the taxpayers would need to pay the interest due to underestimation of dividend income while calculating the advance tax. However, with the change in Budget 2021, the taxpayer need not consider dividend in advance tax calculation unless it is declared or paid. This will reduce the interest and penalty on advance tax payments of the taxpayers.
Related article: Reviewing Your Financial Plan? Keep This Checklist Handy
5. Taxability of Interest on Employees Provident Fund (EPF) contribution
Interest on EPF contribution in excess of Rs. 2.5 lakhs, however, will be taxed only if withdrawn in such year.
This move is expected to divert the investors away from EPF, so that the investors would prefer to move in the funds to more lucrative options.
6. Double TDS rate where the taxpayer does not file Income Tax Return (ITR)
Budget 2021 has prescribed TDS at double rates where the taxpayer does not file Income Tax return.
This will encourage and push the non filers to file their ITR, which will increase the coverage of Income Tax.
7. Deduction for interest exemption of Affordable Housing remains unchanged this year too
The deduction will be allowed till the year-end i.e. March 2022, on the Affordable Housing Scheme for Rs. 1.5 lakhs.
This was a specific benefit given by Budget 2019, however, FM has reconsidered extending the same to the year 2021 is a positive sign for especially migrant workers and the lower working class.
Related article : How to select a suitable Tax regime for Yourself?
8. ULIPs brought into the tax net
Budget 2021 has brought in ULIPs under taxability net, prescribing that the capital gains on ULIPs will be taxable if the yearly premium is more than Rs. 2.5 lakhs.
ULIPs were having a specific advantage over regular ELSS (Equity Linked Saving Schemes) Funds due to no restriction on premium payments. However, with this amendment, ULIPs are pretty much at par with Mutual Funds.
9. Revision of return preponed by 3 months
Henceforth the taxpayers would be required to file the revised / belated returns by December 31st of every assessment year.
10. Rush start to Startups
Budget 2021 has boosted up the way ahead for the startups by prescribing some booster doses for revival and growth.
11. Removal of condition of waiting period for conversion of One Person Company (OPC)
Budget 2021 has removed the waiting period of 2 years for converting the OPC into a public limited company or private limited company.
12. No Cap on paid-up capital and turnover
Budget 2021 has eliminated the restrictions with respect to paid-up capital and turnover.
13. Non-Resident Indians (NRI) can incorporate OPC in India
This amendment will bring in the most required capital inflow in India especially in start ups.
14. Emphasis on healthcare
COVID-19 was an alarming state of events in the year 2020, which has reaffirmed the need to improve healthcare and sanitization activity.
15. Increased spending to 137% on Healthcare facilities.
Prime Minister Atmanirbhar Swasth Bharat Yojana will have competitive healthcare facilities with this spending.
16. COVID-19 Vaccine
FM has assured that more vaccines will be available soon and an amount of Rs. 35000 crores would be spent on vaccine efforts.
17. Privatisation, Divestment and Foreign Direct Investment (FDI)
Budget 2021 hs been truly an example of a progressive budget since it has talked in lengths and details about Divestment, privatization and foreign direct investment in government companies and public sector units
18. The monetisation of assets of PSUs
FM has announced that assets of Railways, Airports etc will be monetised through National Asset Monetisation Plan.
19. Disinvestment of PSUs (Public Sector Units)
List of PSUs will be made which are targeted for disinvestment and strategic disinvestment will be carried out to garner the funds
20. Changes in the Insurance Act to attract FDI (Foreign Direct Investment)
Budget 2021 has raised the FDI limit to 74% which was 49% earlier. This will attract more international players into the Insurance field due to allowability f foreign ownership.
21. Acche din for Government schemes
- Free Cooking gas
- Application of Minimum Wages Act to all workers inclusive etc.
Decoding Budget 2021 in all can be looked like more of an ambitious budget which has paved the way for the much sluggish economy bearing the impact of COVID19 hit. However, there is too less for the common man in terms of tax impacts and exemptions, apart from health and wellbeing concerns.
For any assistance on Financial planning and Tax planning book your appointment now – Click here
Mr. Sharma seemed quite tense while having a morning walk, which was either his work stress or retirement or something else maybe. I tried confronting on the same; “Hey Buddy, you look worried. Is there something you wish to share with me?” “Oh yes! I am not quite sure how to share my concern. But I can talk to you as a friend and maybe you can advise me as my Financial Planner.” Mr. Sharma and we both share a professional relationship.
Then he went on about his concern about retirement planning and also was unsure about COVID’s impact on retirement planning. He is a private sector employee earning decent earnings but the uncertainty and panic clouded his mind about his retirement planning with COVID on rising.
“I have worked for almost 15 years for XYZ Ltd. and would be willing to continue for 5 more years. But with this COVID 19 impact on the global economy, I am not sure whether I would be able to survive the market.”
It is indeed true that these are uncertain times and we should strive to look for any fallback alternative. I assured him to help on Retirement Planning considering COVID 19 Impact.
Let’s see why Mr Sharma is worried about his Retirement Planning even when he is still investing and try to come up with a suitable retirement planning.
Why is that you should do the Retirement Planning? There are two basic reasons:
- To maintain the current lifestyle
We may have reached our goals of owning a car or enjoying foreign vacations. But when we have retired and don’t have any stable income, how are we supposed to maintain this lifestyle? Retirement Planning helps us to invest well in advance considering the amount we wish to receive in future.
Related Article – Financial Planning – Tips For Every Generation
- Inflation factoring and other relevant disruptions
Inflation is the biggest wealth killer if we don’t plan our retirement considering the Inflation impact on the same. Also, the markets are always subject to risk. Now we do see a visible impact on the economy due to pandemic, which has resulted in job loss, lesser production and lesser disposable income.
How COVID 19 has impacted Retirement Planning?
- Job loss or pay cuts
Covid 19 has affected the Job markets since lockdown resulted in shutting off of various businesses like hotel businesses, schools, colleges, Gyms etc.
A very huge section has suffered business losses or has suffered pay cuts or have lost their jobs, leading to lesser cash flows towards retirement planning.
- Increased medical and sanitization expenditure
Most of the businesses are trying to keep up with Unlock, however, the increased burden of the sanitization and medical expenditure (medical insurance) has again impacted the disposable income.
- Impact of Moratorium and loan restructuring
The government had declared Moratorium for all types of loans, however, with Unlock 1 and 2, banks are also expecting a payback. It is unsure how they would restructure the loan considering the EMI deferred in the Lockdown period.
- Stock markets uncertainty
Stock markets kept tumbling due to stress caused by COVID 19 induced Lockdown. However, again the markets started to surge with Unlock 1 and 2, leaving the retail investors in awe. This has created a what-if question in the investor’s mind.
How Mr Sharma Plan his retirement in the wake of COVID 19 impact in the Retirement Planning?
- Mr Sharma should try to defer retirement or try to earn some extra income in case of pay cuts
Mr Sharma was thinking of early retirement with a small business set up within the coming 5 years in a Pre-COVID setup. However, COVID 19 impact is yet to subside and it would be better if he could postpone his retirement by at least 5 more years to compensate deficit income.
He could as well try to look at some simultaneous earnings options if he could manage the same. This will help him balance his Corpus investment in retirement Planning even in COVID 19 scenario.
- Mr Sharma should reassess his Risk Appetite and Investment threshold
With the increased medical premium for COVID cover and sanitization expenditure, Mr Sharma needs to revisit his existing investment plan towards Retirement Planning. The interest rate of bank deposits have soared low and markets are beaming due to news of COVID vaccine.
However, it would be pertinent to assess whether he could take the risk to invest in markets or mutual funds at this juncture.
Related Article – 6 Retirement Planning Mistakes To Avoid – Fintoo Blog
- In no case, the contingency funds are to be touched
Every family maintains a contingency fund which might be in the form of Fixed Deposits, Gold or some government securities. Mr Sharma should not divert these emergency funds towards allocating his retirement planning.
- Mr Sharma will need to reduce unnecessary expenditure
Dining outside or multiple OTT platform subscriptions were okay in Pre-COVID scenario. However, Mr Sharma should cut down on all unnecessary expenditure which would burden his investment portion.
When there is cut back on the expenditure, Mr Sharma could easily tap the usually drained out funds which could be easily allocated to Retirement Planning.
- Mr Sharma shall think of loan restructuring
RBI had come up with the facility of deferring the EMI payments for a certain period of time considering the COVID impact. Now, the interest rates have soared much on all loans. This calls for loan restructuring and the deficit in retirement planning would be filled in with the money so saved in interest.
- Never put all eggs in one basket
Once Mr Sharma is done with Risk profile assessment, he can think of diversified investment towards retirement planning. It is a seen and verified fact that bank interest rates are diving lower and markets are shining.
If emergency funds are already invested in safe instruments, then Mr Sharma should think of setting aside funds and investing in Mutual Funds and Stocks. The COVID cover is also necessary until vaccination materializes. This will cover the financial health as well as will not hamper the Retirement planning aspect too.
It all started from the month of December 2019 that we started witnessing the spread of coronavirus. The contagious viral infection that still doesn’t have any cure as no vaccine is introduced yet has kept us under lockdown for over 100 days now.
Covid-19 positive cases have risen in these past few months but at the same time people are getting recovered too. So that’s something positive we can look forward to. We are living in a world of uncertainties which are increasing day by day.
Millions of people are infected all over the world. During this time, there has been a flood of questions related to medical insurance. I am glad that people are now talking about the need for medical insurance. During such times, it is even more crucial to seriously consider including medical insurance in your financial planning.
Based on my experience and interaction with so many people and their families, I have realised that the ones who are young and healthy do not opt for medical insurance. This is because they feel nothing is going to happen to them. And the ones who have medical conditions find it difficult to get a cost effective and adequate cover.
So the point I would want to make here is getting an adequate health insurance is a preventive measure to protect your finances in case something as unfortunate as corona or any accident happens. It is better you get it early in your life so that you can enjoy more features and better coverage.
Now coming to questions that you might have in your mind regarding the current covid-19 and health insurance plans.
Read here: 7 Reason Why You Should Buy Insurance
Let me answer some frequently asked questions. I have divided these questions in two segments i.e. one for someone who already has taken some health insurance policy and others who do not have any insurance at all till now.
FAQs from people who have medical insurance
Q1 – If I get diagnosed with covid-19, Will my treatment be covered by my insurance company?
Answer: Well, as per IRDA all the health insurance companies offering indemnity based covers are instructed to settle the claim for covid-19 patients on priority. Also, it is important to know that the main features of your health insurance policy remains the same be it covid-19 or any other disease.
Let me brief you about 2 important features of health insurance policies to get better clarity on whether it be covered or not.
- Hospitalisation of 24 hours – This is common ground on which all health insurance policies work. If you get admitted into the hospital for at least 24 hours then only the cost will be covered by your insurance company. Few day care treatment is also covered in most of the policies but it does not apply to coronavirus. So if you are not admitted to the hospital, then you will not get your cost reimbursed.
- Pre and post hospitalisation expenses – Once you get hospitalised, majority of the insurance companies will also cover your pre and post hospitalisation expenses up to 35 and 60 days respectively. This means if you had incurred cost on covid-19 test pre hospitalisation, then that cost will be covered. However, if you are someone who got yourself tested and the report said negative then you cannot claim that expense from your insurance company. In short, diagnostic expenses are not covered by insurance companies unless there is a positive case and it leads to hospitalisation of at least 24 hours.
Q2 – What about expenses incurred for quarantine?
Answer: Based on the above two features, quarantine that does not require hospitalisation and treatment will not be covered.
Q3 – Can insurance company ask for additional premium in my existing policy to cover COVID-19?
Answer: No. As all the current health insurance policies which are indemnity based are already covering the novel coronavirus. You need not pay extra to cover the same. However, if you wish to enhance the sum assured then you will have to pay more premium.
Q4 – One of my friends already had a medical insurance, but still the company rejected the claim. What could be the reason?
Answer: Like I said before, all the features of health insurance policy remains the same. Let us say, if a person would have purchased the health insurance policy just 10 days prior to testing positive for coronavirus then definitely insurance company will not settle the claim. As the general rule, be it corona or any other disease, you cannot file for a claim in first 30 days of the policy purchased.
Q5 – I have a critical illness cover that I purchased 2 years ago. Is COVID-19 covered under this plan?
Answer: No. Existing critical illness covers do not provide cover for Coronavirus.
FAQs from people who do not have any insurance
Q1 – Which policy to buy that covers COVID -19?
Answer: All the health insurance companies offering products which covers covid-19. So study the detailed inclusions and exclusions before buying a health plan for you and your family. Low premium should not be the criteria to select a health plan. Instead look out for maximum coverage and a claim settlement ratio of over 90%.
Q2 – I have heard about standalone health insurance policies. What are those?
Answer: IRDA has instructed all health insurance companies to come up with a standard Benefit Based Covid-19 health insurance product by July 10, 2020. This is mandatory for the companies to offer. The cover ranges from 50,000 to 2.5 lacs with a single premium for 105 days or 195 days or 285 days. As proposed, benefit equal to 100% of the Sum Insured shall be payable on positive diagnosis resulting in hospitalization.
I hope all your questions are answered related to health insurance plans amid COVID-19. I highly recommend to invest in a good health insurance plan providing adequate cover. For the ones, who already have health insurance should check whether the cover is adequate. If not, it is suggested that buy additional cover.
Maintain social distance, wash hands regularly and stay insured!
The drastic changes that we have seen in the world economy due to the global spread of COVID-19 need no introduction. You would have already witnessed the volatility of the market. As we all have seen in news reports, around 25% of the workforce have lost their jobs and many others have witnessed pay cuts. Country Lockdown has caused some small businesses to shut down permanently and others have witnessed a fall in business. All this has led you to have an indepth look at your own investment portfolio.
As coronavirus continues to spread and there is no vaccine that is being invented yet to cure this disease, it is crucial that we take steps to keep our personal finances in place. You might be having a question as to how we need to do it? In this blog, we will discuss all those important steps that you need to take, to make sure you are securing yourself for the coming months and also for the years to come.
Let us discuss these steps in detail.
1. Manage your cash flow – First and most important step is to revisit your cash flow. When I say cash flow, I mean income and expenses. You need to review your current income and also estimate your future income for at least 2 years. Put some thought on how the lockdown has impacted your current income and till when this effect will last.
It is suggested that you try to explore more sources of income. For example, if you are good in maths, you can start teaching maths to students. Explore your talents and start monetising it. It is always good to have more sources of income rather than depending on just one. Apart from income, put some serious efforts in reducing your expenses, if possible to the extent of a pay cut, if any.
2. Create an Emergency Fund – Next step would be to create an emergency fund. It is important to be prepared for any uncertainty which may come. If you had an emergency fund and you used it already during current lockdown owing to pay cut or job loss then refill it at the earliest.
The amount in the Emergency fund should be equal to 6 to 12 months looking at current uncertain times. This fund can be created by utilising the money from non performing funds. Also, you can utilise your vacation fund for this purpose.
3. Protect yourself and family from this novel Coronavirus – Another important aspect of financial planning is having adequate health insurance policy. If you already have one, check if that amount is adequate if anyone or all the family members become COVID-19 positive. While selecting a health insurance plan, it is important to check inclusions and exclusions in the policy.
4. Protect your family’s expenses from future uncertainties – Not only health Insurance but also you should have an ideal life insurance cover. This is because your family’s goal like children’s education should not be affected in your absence. There are multiple types of life insurance policies, you should choose the one that suits your needs the best. If you have a limited budget, then term insurance would be the best bet.
5. Debt Management – If you have too many loans and most of your income is going towards your EMIs, then now is the time to streamline your debt. Do not take any more loans until and unless it is the only option left. Start creating a plan to pay off your high interest loans.
6. Short term Goals – After doing all of the above, you should be focussing on short term goals first which are critical. For e.g, if your child’s education is 2-3 years down the line then you should be focussing on how to create that fund or refill that fund before jumping in for long term goals. It is highly recommended that you review all of your short term investments.
7. Delay Discretionary goals– It is suggested that you keep all your discretionary goals at hold for some time till this COVID-19 situation eases out. Postpone your goals like buying a second home, vacations, buying a Car etc. Instead, if you have already invested some amount towards these goals, you can utilise this corpus either towards emergency corpus or short term goals.
8. Long term Goals – Long term goals will be the last to review. You should also know that the investment you made for these goals are long term in nature so no need to worry about short term volatility. You can get help from a financial advisor to get your portfolio reviewed.
9. Organise your finances – Last but not the least, you should organise your paperwork. You may update nominee details in banks, insurance plans, Mutual fund investments etc. If you have not linked your aadhaar with PAN, you may do it now. It is further suggested to switch to digital platforms wherever possible so that your time is saved.
Read More :- Importance of Insurance amid COVID-19
So these were some of the pointers that you should keep in mind while doing your Financial Planning amid this pandemic. If you are one of those who make active decisions to review their investments, there’s something you definitely need to double-check based on the above points. You can always consult a financial planner to make this process easier for you.
Given the widespread outbreak of the coronavirus (COVID-19) around the world, radical actions are being taken by the governments and authorities. Country lockdown owing to this pandemic has caused widespread impacts on employment, supply chains, capital markets and more. It is now a necessity for the businesses to take actions. This is required to mitigate risks, tackle immediate priorities and ensure business continuity and stability.
Situations like this made us realise how important it is to have a contingency plan in place to deal with such extreme circumstances. Contingency planning is having a plan B to keep you afloat. A contingency plan is a proactive strategy that describes the course of actions or steps the management and staff of an organization need to take in an unforeseen event that could happen in the future. It plays a significant role in business continuity, risk management and disaster recovery.
Given below is a checklist for you to set up a contingency plan for your business:
- Set up a cross-functional Task Force: Establish a task-force that reports directly to the CEO regarding all the business spread across world wide and about every department including HR, IT etc. This team will assess the impact of the disaster on the business, check if the business is compliant to the government guidelines and of course cashflow planning, including business continuity and workforce management.
- Protect your Employees: Monitor the WHO guidelines to safeguard your employees from this virus. The employer need not only look after the employee in terms of health but also look after him in good faith which is owed to the worker. The employer can also provide for the necessary equipment for safety and offer flexible working hours.
- Supply Chain Disruptions: The supply chain and the logistics of any business are bound to get hampered. Therefore one has to evaluate and make corrective plan for the potential supply chain disruptions and factory/warehouse closures. You should consider short-term changes to supply chain and logistics models.
- Financing Needs: Ensure the availability of liquid cash to storm the weather and implement proactive cash management measures. You can also check if you are eligible for any subsidies or other financial support from the government or central bank with regard to financial losses incurred due to COVID-19.
- Customer Handling: Companies need to update customers about delays and adjust customer allocations to optimize profits on near-term revenue or to meet contractual terms.
- Insurance: As far as your insurance is concerned you will have to take care of the following:
- Review insurance policies to assess potential recoveries for any business disruption.
- Ensure notifications to insurers are made as required under existing policies.
- Review and clarify needs for additional insurance coverage as the situation develops.
- Data Privacy: Start by identifying the potential data privacy/leakage risks due to disruption of business-critical functions. Then update technical and organizational measures ensuring a hundred percent assurance to the customers, vendors and employees regarding the safety of their private data.
Given these difficult times, the business functions can take a serious toll, but you can curb the impact by undertaking these emergency measures.
Note: This checklist is for general information purposes only and should not be construed as legal advice or any other advice on any specific facts or circumstances.