Money & Banking
RBI to issue clarification on new bank licences soon

The central bank would shortly come out with its clarifications on issuing licences for more private sector banks

The Reserve Bank of India (RBI) has received queries from different individuals and entities on various aspects of 'guidelines for Licensing of New Banks in the Private Sector' issued on 22nd February and would soon come out with its clarifications.


Minister of State for Finance Namo Narain Meena, in a written reply to the Rajya Sabha, said, "RBI is currently examining the queries, and clarifications on the same will be placed on the RBI's website shortly."


The minister said the RBI has reported it has not received any application for opening of new banks till date.


To promote financial inclusion and further infuse competition in the banking sector, the RBI had issued the guidelines and invited applications from public and private sector entities for setting up banks by 1 July 2013.


Later in March, RBI asked the interested parties to seek clarifications they might have on the issue, by 10th April.


Startup Village gets SEBI nod for raising $10 million fund

Startup Village, mentored by Kris Gopalakrishnan, is India's first PPP model technology business incubator

Angel fund Startup Village, which has Kris Gopalakrishnan, the co-founder of Infosys as chief mentor, has received permission from the market regulator to raise funds. Securities and Exchange Board of India (SEBI) has approved the Startup Village angel fund of $10 million that could go up to $20 million with a 'green shoe' (over-allotment) option.


The focus area of the fund will be telecom and internet, and it would start investing once the initial close of $2 million is achieved.


In a release, the Startup Village, said, it received the approval from SEBI on 23rd April.  "The need to create the fund was felt as the angel investment ecosystem in India is still maturing, and for the vision of Startup Village to have 1,000 product start-ups by 2020, it has to influence policy, infrastructure for incubators/ accelerators, angel network and angel funds," Kris Gopalakrishnan said.


The angel fund will be investing not only in the most promising start-ups located in Startup Village but also in similar enterprises across the country. "We are looking to broad-base the investor profile with a large set of angel investors, many of whom might be first time angel investors in India," Sanjay Vijayakumar, chairman of Startup Village said.


Startup Village is India's first public private partnership (PPP) model technology business incubator. The promoters of Startup Village are Department of Science and Technology, Government of India, Technopark Trivandrum and MobME Wireless.


KPMG is Advisor and ILFS is Trustee of the fund.


Dilemmas in investments can be reduced if risk is accepted

An expert opinion or textbook answers may not be the best possible solution for dilemmas like generating returns to beat inflation, investing in short term or long term and how to recover from losses. Of course, these dilemmas can be reduced but like systematic risk, they have to be accepted

Generally, investors start investments with an objective to generate return, which will help them meet their future requirements. Some expert investors go one-step ahead and try to create a so-called optimal portfolio, which is meant to help them create a fine balance between risk and return. Whatever may be the expertise and experience of an investor, every investor comes across dilemma in investments. Some such dilemmas are as follows:


My investments must generate returns to beat inflation, but which inflation:

Inflation has been considered as such a villain in investments that all other strategies of investment planning have taken a back seat. Fortunately, or unfortunately, beating inflation has become centre point of all investment strategy. It is often said that investments made by an investor should beat inflation but which inflation is hard to guess. Should it beat consumer price index (CPI), wholesale price index (WPI), or something else? Though inflation is a number published by the government for economy, this number does not affect everybody equally.

Let us take two examples. For a person who has a monthly income of Rs20,000, food inflation has more significance than a person having monthly income of Rs80,000. Therefore, the impact of inflation will not be same for both the person. In addition, if a person’s income continues to beat inflation with a salary of wage hike, inflation does not remain so critical. With increased salary, he can allocate more income for savings and in turn for investments.

In recent times, inflation data has shown that though it is moderating, practically real impact of inflation is different from what the data shows. Inflation in a common man’s life continues to be more pinching than what data shows. So, can these indicators of WPI or CPI be made base to create strategy to beat inflation? Will an investor end up understating, or over estimating inflation number, if he uses these numbers for beating inflation? Even if inflation data published by government becomes the benchmark, will it actually help beat inflation?


Investment in equity pays in long term, but how long is long term: 

Investments should always be made for long term. However, there is no definite answer to the question on what can be classified as long term. Even, if we ignore the fact that we are all dead in the long term, we cannot deny that we need to find the answer for the long-term time horizon. One easy way is to link it with the investment horizon and the goal that one has, but it still does not serve the purpose.

Suppose, an investor has set a goal of corpus creation for child’s education and for this he had started a couple of systematic investment plans (SIPs). The initial investment objective was of 10 years. The SIP did not deliver in first six years and generated a poor return, which is not good enough to create the corpus that was planned initially. 


This has happened with many investors especially those who had started mutual fund investment when stock market was peaking up in late 2007. In addition, there are some investors, who are stuck in some not so well performing mutual fund schemes, for instance, Reliance Growth fund for more than five years now. Now what should this investor do? Should he continue with the investment, switch to a new fund or move to debt and increase investment amount per month to achieve his goal?

Once again, there is no easy answer to this question. Of course, exit route option is always open but does this experience raise doubts on investments in long term. Is long term more important or being lucky in long term?

I have made a loss, what should I do: 

This question is somewhat linked to the previous question. Many investors, who have invested in equity and other such similar products, face this situation.  It has nothing to do with a wrong stock selection. This can happen with companies, which have been performing and doing well. After all, companies have no control on macro economy variables and government policies. The loss can happen in some cases when the company negatively surprises with its performance. Infosys is a live example.

Booking a loss is a nice idea, but what will be the next course of action for an investor who agrees to book loss. Move to debt from equity or move to another equity investment with no idea about what will happen in future.


It is not easy to answer these dilemmas. An investor probably needs to live with them and handle them as and when they arise. An expert opinion or textbook answer may not be the best possible solution. Of course, these dilemmas can be reduced but like systematic risk they have to be accepted.


(Vivek Sharma has worked for 17 years in the stock market, debt market and banking. He is a post graduate in Economics and MBA in Finance. He writes on personal finance and economics and is invited as an expert on personal finance shows.)




4 years ago

There would always be Dilemma on Investment, the only way you won't have to worry is when you work your own money out and even there you still have to be carefull with money.


4 years ago

These things are already known...we also know it is not easy to answer these dilemmas..then what do we investors do so these dilemmas can be reduced.

Yes, we know that systematic risk they have to be accepted...


vivek sharma

In Reply to CHOON TSHERING LEPCHA 4 years ago

There is no generic answer to these dilemmas. Every investor need to watch how is he placed and initiate action. The article tries to highlight the fact the investor has to overcome these dilemmas without resorting to generic solutions.

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