Business standard news updates 2-12-2012

Manage expenses using a budget

FINANCIAL PLANNING STEVEN FERNANDES Rajeev ( 29) and Shweta ( 26) go through a harrowing time during the last 10 days of the month. Their bank balances hover near the minimum balance forcing them to live on credit for the rest of the month. Both are earning well and do not have kids, yet their monthly commitments towards home and car loan and their lavish spending habits seem to be taking a toll on their overall finances. Many urban households where there is no dearth of good income, often face similar situations today, as high expenses lead to depleted savings. When Rajeev was growing up, his father was the only earning member in a family of five and his mother managed the entire family’s expenses from the fixed amount handed over to her by his father. While inflation and rising prices do have their share in the increased expenses, the fact remains that today, most luxuries have become necessities and odd working hours ensure that we end up spending more than we should in normal circumstances. What’s the way out Sir Benjamin Franklin had said, “ A penny saved is apenny earned”. Unless you are serious of the fact that there is an urgent need to start saving something from your monthly income, nothing can be achieved. For this, first try to figure out how much is your total net income. That is the amount you receive in your account every month after the mandatory deductions like income tax, gratuity, and provident fund. For the salaried it will be very easy to figure out based on your pay- slip or your salary credit. Then make a list of all your fixed and variable expenses. All loan repayments, insurance payments, children’s school fees and so on are fixed expenses that have to be mandatorily paid on a fixed date every month. Other expenses such as food and grocery, utilities like electricity bill, gas and mobile bills, and others are variable expenses, since the spending on them varies each month. These including your entertainment, dining out, gifting and so on. After you have listed out all your expenses, subtract your total expenses from your monthly income and see if there is a surplus or deficit. Initially, it will take a long time to list down your expenses and you may go off the mark. Therefore, it is suggested that you maintain a small diary in which you can jot down your daily expenses. The same can be then copied to an excel sheet every day. Either the husband or wife should take charge of this activity or else it is doomed to fail. Doing this exercise over a few months will enable you to correctly estimate your expenses and allocate funds accordingly. Once you start off with the monthly budget, don’t forget to add your annual expenditures such as vacation, festival spending and so on. Regularly monitor your bank account and try to save any additional amount over and above your contingency fund requirements. At times good bank balances can be tempting enough to go on a shopping spree. Save first and then spend In order to inculcate discipline in your spending habits, another better way is to estimate your expenses and keep only that much amount in your account, while saving the rest at the beginning of the month itself. Consult your advisor and start systematic investment plans so that a fixed amount of savings gets invested every month. Initially you can begin with a smaller amount and then scale it up over a few months. Once you are conscious of the fact that limited resources are now available at your disposal after the fixed savings, you will make a genuine effort to control unwanted expenses. Budgeting is not among the most exiting activities, but once it becomes a habit, this activity will bring immense benefits in the form of good savings and investments which can then be channelized for your various financial goals. Like Rajeev, we can take inspiration from our mothers who did a commendable job in budgeting and managing our family’s expenses. Remember there is no gain without some pain. So take out some time and make budgeting an exciting and rewarding activity for your family. Chief Planner, Proficient Financial Planners Once it becomes a habit, benefits like high savings and investments follow Items Monthly Yearly INCOME Salary 80,000 9,60,000 Rental income 8,000 96,000 Total 88,000 10,56,000 EXPENSES Home loan EMI 15,500 1,86,000 Car loan EMI 5,400 64,800 Insurance premium 2,500 30,000 Total 23,400 2,80,800 VARIABLE Food & Groceries 12,000 1,44,000 Utilities 5,000 60,000 Conveyance 6,000 72,000 Housemaid 4,000 48,000 Entertainment 5,000 60,000 Medical 2,000 24,000 Total 34,000 4,08,000 Surplus / Deficit 30,600 3,67,200

Information Technology Act needs to be modified

Since April this year, a professor of Jadavpur University, two Air India employees and two college girls of Maharashtra, among others, have been subjected to short spells of police custody for casual e- mail messages sent for fun, merely because they annoyed politicians in high places or ( in one case) questioned the propriety of bringing Mumbai to a standstill for the funeral of Bal Thackeray. All of them had been arrested under Section 66A of the Information Technology Act, obviously misapplied and interpreted according to the sweet will of some policeman. It is in the fitness of things, therefore, that the matter came up before the Supreme Court in the form of a public interest litigation on Thursday. It is also significant that soon after that Union IT and Communications Minister Kapil Sibal felt the need to chair a 40- minute meeting of the country’s apex cyber law panel where Section 66A was high on the agenda. The moral of all this is that well- worn adage about eternal vigilance being the price of democracy. But the moment some vigilant souls take such violations of Article 19 to court, there is an inevitable flurry of activity to undo such infringements and to pretend that they were never intended. It is our submission that laws like Section 66A of the IT Act constitute a negation of the provisions of Article 19 of the Constitution and should, in all fairness, be quashed. The Sentinel, December 1 Section 66A negates right of freedom 0f speech and expression >OTHER VIEWS

Laws alone won’t do

The Lok Sabha has approved the changes suggested by a parliamentary committee in the Indian law against money laundering to make it compatible with similar laws of other countries. Money laundering has become a global menace after reports surfaced that terrorist activities are funded by organisations in hostile countries. Given the magnitude of the problem, the laws need to be made strict, no doubt. The amended law, once the proper procedure is completed, will introduce the concept of a “reporting entity” under which the onus will be on banks, financial institutions and other intermediaries to report cases of money laundering, if any. Besides, the amended Act empowers the authorities concerned to attach and confiscate the “ proceeds of crime” even if there is no conviction. These are commendable enabling provisions. While the removal of shortcomings in the Prevention of Money Laundering Act is welcome, it is not because of the inadequacy of laws that strict action against money laundering could not be taken. Criminals often take advantage of loopholes in the laws and the dilatory justice system. Besides, India has to be tough with financial institutions and countries which do not cooperate in unearthing black money and bringing the tax evaders to book. More than laws political will is required to take on the twin challenge of money laundering and black money. The Tribune, December 1 Money laundering requires tough action

Cleared ~ 33,000- cr OFCD liability, says Sahara

NSUNDARESHA SUBRAMANIAN New Delhi, 1 December Sahara India Parivar has said it has “ cleared around ₹ 33,000crore liability” towards optionally fully- convertible debentures (OFCD) issued by two of its group firms. “We started OFCD in these two companies in 2008- 09. Most of the money deposited with us was for five to ten years. But, we have now cleared around ₹ 33,000- crore liability,” the group said today. “Sahara has tendered payment of ₹ 5,120 crore to the Supreme Court as OFCD outstanding liability,” it added. The statements were part of an advertisement war of sorts launched by the group against the Securities and Exchange Board of India ( Sebi). In newspaper advertisements, spread across two full pages in national dailies, the group alleged Sebi had given “ unnecessary public notices through national media” which had not “ served any purpose/ interest of investors”. Denying conversion of OFCD money into other group schemes, Sahara termed such statements “childish conclusion”. “It is a childish conclusion and allegation made on the basis of one thousand or two thousand complaints, as Sebi claims, against 30 million investors,” the group said. It asked Sebi to take the truckloads of documents it had sent and begin repaying investors. “We have been requesting Sebi to accept documents – 60 truckloads are lying in our Mumbai godown, awaiting Sebi’s acceptance. Unless Sebi has application forms to match the signature and payment vouchers to see who has been paid, how can it make repayments?” the group challenged the regulator, adding: “If Sebi had any interest of payments to small investors, it would have started taking documents. Right from the beginning, everyone has understood that Sebi’s only objective is to act against and malign Sahara’s image. Why is Sebi doing this?” It is not clear whether Sebi would accept the statement that Sahara has cleared the ₹ 33,000- crore liability to the relevant customer accounts. In aJune 2011 order, Sebi wholetime member K M Abraham had presecribed a specific method of repayment to be followed for the refund of OFCDs. He had also asked Sahara to get peer- reviewed auditors to certify this refund. Asks regulator Sebi to sit with it ‘ amicably and clear remaining payments’ Groups net worth ₹ 68,174 crore ( After recording ofassets atfair marketvalue ofone group companypursuantto BombayHC’s demerger order) Land bank 36,631 acres Workforce 1.1 million salaried and field workers Establishments 4,618 SAHARA GROUP AT A GLANCE Provisional finanacial statement of the group as on Sep 30 Total liabilities Book value (₹ cr) Total fund recieved/ raised from public since 1978 till Sep 30, with acrrued 2,25,000 interest including Life insurance policy holders fund, mutual funds, ( 1*) credit credit cooperative, ( 2*) Q Shop customers advance, bank loan in India and oveseas Total repayment including interest ( to 14.70 crore account holders) 1,70,636 Net outstanding liability ( including accrued interest) 54, 364 Book Potential NPV of potential Total assets ( in ₹ cr) value (₹ cr) earning (₹ cr) earning (₹ cr) Banks fixed deposits, cash 18,630 18,630 18,630 and bankbalance Governmentsecurities 2,234 2,271 2,271 Fixed assets 9,475 18,714 13,657 Inventory, WIP projects, etc 36,258 264,350 104,072 Investments, sundrydebtors, loan 10,693 13,888 13,888 and advances, taxrefundable Total group assets 77,290 317, 853 152,518 Note: 1* Sahara Credit Cooperative Society Ltd is promoted by workers of the group, is not related to the group and accepts deposits from memebers only. 2* Advance in sahara Q Shop is adjusted regularly on purchases and discount incentives for buying products and services WAR OF ADVERTISEMENTS Sebi had lastweekissued ads in dailynewspapers, cautioning bond holders of two Sahara companies. Sahara yesterday responded with two- page ads, giving its numbers and defending itself ( bottom) Note: The group benefited from exchange appreciation. Source: Sahara advertisement Foreign investments ₹ 3,701 crore: Total money remitted to 100% subsidiary ₹ 5,156 crore: Hotel, other assets & various cash advances ₹ 2,558 crore: Bankbalance