Tag Archive | "General Insurance"

Will Indelible Ink Reduce Cash Crowd?

  • Easypolicy
  • 17 Nov 2016

Another masterstroke that came from the Modi led government on Tuesday in its fight against Black Money after its demonetization move is the use of indelible ink to prevent people from making more than one bank transaction from a single bank branch in a day. This inedible ink is much like the one used during elections, the banks have been given operational instructions to differentiate between repeat customers and first time customers for the day.

Economic Affairs Secretary, Shaktikanta Das told the media that Prime Minister Modi held a review meeting with top officials of RBI on the aftermath of the demonetization of INR 1000 and INR 500 notes. The decision to use the indelible ink on the fingers of customers was taken in that meeting. He also asked the public not to panic and don’t get mislead by some false messages floating on various social media platforms. He also reassured people that there is no dearth of cash with the government; it has enough cash to exchange.

This move has been started with a few cities to see how it goes. India being such a massive country by population has huge crowds gathering up at ATMs and bank counters. To control this massive army of customers, the government is taking all possible steps to make the situation for people in the crowds as tolerable as possible. Many businessmen or rich people have instructed their employees or servants to line up in the queue of banks to do the transactions of the former, these employees get early in the lines and other people are left standing in these long lines, thus limiting the number of transactions by the banks per person would give equal opportunity to other people to exchange their old notes.

This practice would also check money laundering as multiple small transactions cannot be done to whiten the black money. Banks have been asked to keep a watch on the people who return to their branches. This is also expected to curb the misuse of the facility. Also, in its efforts to make this trying situation as easy as possible the government has taken steps to enhance the cash availability with banks and post offices to meet the increased demand. In this regard various religious institutions have been asked to deposit all the smaller denomination notes received by them from the donors in their bank branches as soon as possible. This step would help increase the cash availability with the banks. Also, a coordination group, including senior representatives of banks, has been set up to monitor all the steps taken by the government.

The Jan Dhan Yojna (JDY) accounts are under high scrutiny as black money hoarders can use JDV account holders to stack their black money in the latter’s accounts. The government is leaving no stone unturned, special task force teams have been set up to study and investigate all the annulled notes received or collected by various banks and post offices. These teams also study the infusion of fake currencies in the system.

Possible Effects of New Currency Change in India

  • Easypolicy
  • 14 Nov 2016

The entire nation was hit by a financial hurricane on November 8, 2016 when the prime minister announced the demonetization of Rs 500 and Rs 1000 currency notes and the same to be replaced by new notes of Rs 500 and Rs 2000. The main reasons cited were to fight against the three main evils inflicting the society: black money, corruption and terrorism.  There are many who have welcomed the bold move of the government, many others have been criticising it as illogical political move lacking planning and direction.

The now “illegal” currency accounts for 86% of the total money that is in circulation, valued at Rs 14 lakh crore and 12% of the country’s GDP. Clearly, with these going out of circulation and new currency coming in the impact will be felt by one and all. To put things into perspective, let us look at the short, medium and long Term view of this decision.

In the short term, the move will hurt all Indians very negatively as transactions in India are mainly carried out in cash. While some are making noise  even if the actual impact of the decision is not so much on them, there are many businesses which are purely run on cash and such a sudden move to push a cash economy to a cashless economy is definitely going to be painful. With the limit on withdrawals from ATM and also currency exchange from bank, the slowdown is expected to continue across all industries for a couple of months. As the ATMs are yet to be calibrated for the new currency and transferring such high amount of currency in each and every branch of all banks is going to take time the amount of currency in the market is going to remain low. The country’s overall spending in the next 1 to 3 months will see a sharp decline as the process of changing the currency continues thus having a negative impact on the country’s GDP. The impact will be the seen the highest in sectors which are majorly dependent on liquid money such as real estate and jewelry.

In the medium term, as the excess supply of cash is eliminated in the market, it will have a positive effect on the inflation. The economy will eventually start picking up and the volume of transactions would increase over time. The legitimate money will be deposited in the banks. The huge amount of deposits with banks will bring about lowering of the interest rate. For those who are sitting with unaccounted money, estimated to be 50% of total money, will either be extinguished or find its way back in the system through income disclosures or money laundering. Given the severity and strictness of the Government the chances of the latter are grim. Each note is a liability of the RBI and hence each note extinguished or which comes to the government by the way of taxes or penalties reduces the liability of RBI. With the current demonetization the government is hopeful to get one-third of such money extinguished which in value terms can take care of fiscal deficit of the country for a year or two. Interestingly, in 1978 when the previous demonetisation was carried out 25% of the unaccounted money was extinguished.

In the short and medium term the impact of this decision will mostly be may have negative on all sectors especially those in the unorganised business, in the long term such a move will have a positive impact on the economy.  The banking sector will be greatly benefited as more money will enter the banking system. Inflation would come down as the circulation of money in the market is reduced. Other sectors such as real estate and jewelry will also stabilise in the long-term, with certain amount of price correction. As the price of physical assets correct, people would relook their investment portfolio and financial planning would be looked at from a whole new perspective. There would be more participation in the equity and bond market by retail investors.

Though there are still few who believe that with Rs 2000 currency note it would be much easier to hoard cash, going forward the government will make it more difficult to spend cash and make it mandatory to produce PAN Card in high value transactions, so people would have little choice to break rules. Also, the current demonetisation will create an everlasting psychological fear in the mind of people.

Two Wheelers and Their Insurance in India

  • Easypolicy
  • 10 Nov 2016

Two wheelers are an important means of transport in India and thus form an integral part of Indian roads. Various reasons can be accredited to the wide use of two wheeler in the country; common ones are affordability, convenience, passion etc. With the ever exceeding demand for the two wheeled vehicles the need and knowledge about the two wheeler insurance cover is also increasing. The Coverage under the insurance covers varies from Policy to policy. Although, almost all Insurance companies cover the loss to vehicle due to natural and unnatural causes but the cover for losses to the driver, pillion, or third party may not form part in the policy of every insurance company.

As India is the second most populated country in the world and a big section of its population is middle class among whom the two wheeler vehicles are very popular, the Indian two wheeler industry is one of the largest in the world as per volume of production and sales. The entry of many foreign players launching their stylish scooters in the Indian market the industry has grown starkly. Moreover with increasing incomes of people the demand for high end bikes like Harley Davidson and Suzuki Hayabusa has seen a high increase. The ‘Make in India’ campaign of the Modi Government may further push the industry forward with inflow of more and more FDI in the sector.

With the anticipated growth in the sector owning to the expected high FDI flow the government has also focused on boosting the two wheeler insurance segment, as there are many people especially in smaller cities and towns who don’t get their two wheelers insured. Recently, India’s first three year comprehensive cover for scooters and motorcycles was launched by government. The comprehensive cover is 30 percent cheaper than buying annual policies and comes with lucrative offers for the buyers. This new scheme will surely help in tackling the problem of uninsured two wheelers plying on Indian roads. It is observed that many people become lethargic when it comes to get their two wheelers insured; however, when it comes to cars they exhibit a prompter approach. They take first time insurance for their bikes or scooters as it is bought along with their purchase but many fail to renew them the second year. Thus, a comprehensive cover would ensure that their vehicle is Insured at least for three years.

However, people should voluntarily get their vehicle’s insurance on time as it is very important as insurance provides lot of benefits towards their protection as well as protection of the third parties. With expending a very affordable Premium you not only secure your vehicle but also get immunity against third party claims. Without third party insurance on your vehicle you are eligible for penalty if caught by the traffic policeman. Moreover, in case of Accident if you do not have third party insurance cover you can be booked under ‘attempt to murder’ charges. All this trouble can be avoided by depositing that petty amount as premium to the insurance company and get a vehicular insurance for your two-wheeler.

With the world now getting hitched to the internet everything is performed online and buying insurance for your vehicle is no outcaste in this practice. Online sites are user friendly and a great place to start as they help you to compare the cost of insurance easily among the plethora of options. If you feel uncomfortable without any human guidance then hold on, many insurance comparison websites provide phone support to navigate customers easily through the policy purchase process. The expert on the call can guide you in selecting the plan based on your suitability and requirements.