Money & Banking
Seven banks in Aadhaar payment system; seven more in line: NPCI

AEPS is the the payment system that will be used to support direct cash transfer for the government's welfare schemes

Mumbai: As the government is all set to roll out direct cash transfer for its welfare schemes, the National Payment Corporation of India (NPCI) has said seven banks have already implemented the Aadhaar-enabled payment system (AEPS) and seven more are in the process of doing so, reports PTI.


"As the government is set to roll out the direct cash transfer in welfare schemes, the NPCI is ready with the infrastructure for facilitating the process. As of now, seven banks have implemented the AEPS, which is the the payment system that will be used to support direct cash transfer, and seven more banks are in the process of doing it," NPCI Managing Director and Chief Executive AP Hota told PTI.


As per the NPCI, there are two forms of payment systems under the AEPS. One will facilitate crediting money into the beneficiary accounts, while the other will enable account-holders to withdraw cash.


Seven commercial banks such as State Bank of India, Syndicate Bank, Union Bank of India, Central Bank of India and ICICI Bank among others have already implemented the first form of AEPS.


Similarly, another seven banks are in the process of adopting it.


Talking about the second form of AEPS, which enabled the withdrawal of money by the beneficiary, Hota said around 11 banks have already implemented it.


The government has already announced that it will operationalise a phased shift from subsidy-based system to direct cash transfers for its various welfare schemes from next January in 51 districts to start with through the Aadhar card developed by the Unique Identification Authority of India (UIDAI).


The cash transfer will be enabled by the AEPS, which is the payment system developed by NPCI.


Last week, the finance ministry had held discussions with bank Chairman, UIDAI officials and NPCI authorities to assess the preparedness of the whole process for this.


"The infrastructure is ready for the whole process and presently pilots are going on in states like Jharkhand, Karnataka and Andhra," Hota said.


Investment Strategy : SIP Vs Lump Sum


The Vanguard Group, the largest mutual fund company in the US and pioneer of index funds, has just come up with a startling piece of research debunking the myth that systematic investment planning (SIP) is a better strategy than a lump-sum investment (LSI), regardless of the asset allocation strategy used. It analysed 10-year rolling returns of SIP and LSI in the US, UK and Australian markets for the periods between 1926 and 2011. It found that LSI outperformed SIP two-thirds of the time, when SIP was used monthly only for the first year. Findings were similar for UK and Australia as well. However, although this research is interesting, it has limited value.
Firstly, Vanguard had taken SIP only for a limited timeframe of six to 36 months rather than for the entire 10 years. In order to make meaningful comparisons, Vanguard should have taken SIP for the entire 10-year period. Secondly, the differences between SIP and LSI will depend on how the market turns out in the future. Yes, SIP does not always work, despite what pushy mutual funds say, but works stupendously if one is able to use some market-timing method—however rudimentary. The Vanguard study states that SIP would be ideal if one is uncomfortable with markets over the short term. But then forecasting short-term market movements is more dependent on luck than skill, for the average investor. Thirdly, while instituting the SIP method, the unused portion of LSI is not supposed to be left idle as cash. This is why, while comparing the returns of LSI Vs SIP, one must assume that part of the LSI not invested via SIP is earning steady returns from liquid funds. 
The argument Vanguard offers in favour of LSI is that market has always gone up and, therefore, it is better to buy when the prices are low than ‘average up’. While this is true over a very long period, it certainly is not true for many investing lifetimes. After all, the S&P500 is today—13 years later —exactly where it was in late-1999. We had already written extensively about when and how to use SIPs in Moneylife (issue dated 28 June 2012).




4 years ago

It can never be an either / or kind of a situation.

There are times when it is better to be investing in SIPs and there are other times when it is far more profitable to undertake lump sum investments.

However, SIPs are for those who find it difficult to invest lump sum. The biggest advantage of SIPs is, they are a mechanism to commit people to invest when the markets are down (and in their favour) - but we have seen in 2008 and 2011-12 that people either suspend their ongoing SIPs or worst they redeem it altogether.

It is far more important to invest and stay invested rather than worry and debate about which is better and end up doing nothing and staying out of the market - as is the case now with millions of mutual funds investors in India.
A recent study has found that only 7.2% of the Indian urban households own mutual funds.

Mutual funds are an excellent vehicle for accumulating wealth over the long term - but, there can never be any method, which can 'guarantee' better returns than other methods across all market conditions.

A mutual funds investor must be happy if he gets a few percentage points more than 10 yr g-sec or say at best 12% - 15% CAGR on his investments.

The problem is people are never satisfied with what they have.. .

United Bank to raise Rs300 crore through rights issue

United Bank of India plans to raise at least Rs250 crore but not exceeding Rs300 crore, including premium from rights issue

New Delhi: United Bank of India has said its board has given approval to raise up to Rs 300 crore through a rights issue, reports PTI.


The Board meeting has approved to create, issue and allot up to such numbers of shares of Rs10 each at a premium to be decided subsequently on rights basis to the existing shareholders of the bank as on the record date to be fixed subsequently, United Bank of India said in a filing on the BSE.


The state-owned bank proposes to raise at least Rs250 crore but not exceeding Rs300 crore, including premium from rights issue, it said.


Government of India holds 81.56% stake in the Kolkata-based bank. This means that if it decides to raise fund through rights issue then the Government of India being the largest shareholder has to subscribe shares to the extent of its holding in the bank.


Prior board approval has been secured to enable capital infusion by the government in the bank.


Besides, the board of the bank also given approval to raise up to Rs500 crore by allotting perpetual bonds through private placement.


It also approved issue and allotment of perpetual bonds in the nature of promissory notes of Rs10 lakh each for cash at par up to a maximum amount of Rs250 crore with a green shoe option up to a maximum of Rs250 crore through private placement, the filing added.


Earlier, Financial Services Secretary DK Mittal had said the government will finalise Rs15,000-crore capital infusion for public sector banks soon to help them enhance capital base and increase lending capacity.


Rights issue is under consideration for recapitalisation of banks, he had said, adding that if the government opts for rights issue for banks, it will be done for all banks.


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