Mutual funds in DEMAT form- Should you opt for it?

If you are holding Mutual Fund Units in the physical form, which are represented by a Statement of Account, you have an option to convert the units into dematerialised form (Most of the funds provide this option) in your demat account with any Depository Participant (DP) of NSDL or CDSL. 

Once you  mutual funds which  are in demat form, you can sell them either through stock broker through the Exchange platform (BSE Star & NSE MFSS) or through the off market mode i.e by selling/redeeming it through your Depository Participant.

For Mutual funds in demat form- Redemption request can be placed through Depository Participants & Exchange platforms like NSE MFSS/ BSE STAR platform which are available for trading of Mutual Fund Units.

In case the Investor desires to redeem units through the mutual fund, the Dematerialised units have to be converted into physical form (represented by statement of account.

Benefits that are seen in holding your MF in demat form- paperless transactions and  consolidation of all your mutual funds in a single Demat account and at units can be freely transferred to the accounts of nominees or legal heirs.

MF statement of account is actually a statement that you can demand from the MF anytime and this knocks off the need for a dematerialised form and consolidation of portfolios can be done through any web portfolio tracker like moneycontrol, valueresearchonline etc

However your transaction costs increase due to holding MF in demat form like demat fee, brokerage ,etc . SWP/STP are also not straight forward options when you hold your units in demat form.

In total, there is no concrete benefit of holding MF units in demat form.

3 simple ideas to spend less!

If you have been finding your expenses go off the roof and been wanting to bring down your spending then you may follow these simple tips.

1) Budget and track expenses-

Please budget your expenses on various heads and then start tracking every spend of yours against the budget. You may classify your spend under heads like house rent, food,clothes, medical, education, etc and track it. You can choose to use some web based tool or smart phone apps ( which are free!) to do this!.

2) Lock your credit and debit card-

Try to do all your spend through cash.The pain of withdrawing money every time and counting cash "physically" while paying can have a positive impact on your expenses.

When you swipe with a card, you actually don't feel the same "pinch" which you may feel when you spend by cash. This method will also help you avoid some impulsive spends.

3) Avoid sale or discount offers-

Always buy ' what you need' and done buy ' what you want!' if you are trying to bring down your expenses. Don't buy something just because the 'offer' is good. When you buy using an 'offer' , you actually save some money. But you may have avoided the overall spend if you didn't fall for the 'offer.'. So, evaluate the offer- Need or Want?

Happy saving!. 

#Bank charges for ATM usage?

Warning:- Please do not read this article on a "serious" note.

I found this news item this morning on proposed charges for ATM usage by banks.

Banks want to recover the cost of "additional" security and hence want to charge customers for ATM usage. if this trend is encouraged, banks will start fleecing the customers with following charges!! :-))

1) Charges for opening an account.

2) Charges for safeguarding cash in account as a % of amount in the bank account or a minimum amount if balance falls below 100000

3)Charges for using the bank premises for any transaction

4) Charges for calculating interest every half-year

5) Charges for every "login" through Internet banking as it causes a "Strain" on the IT infrastructure of banks

6) Charges for using "Debit " card as indirect cost incurred on maintaining POS terminals

7) Charges for NPAs when the bank is not able to recover from a BIG borrower

8)Charges for issuing passbook or account statements

9)Charges for talking to "telephone" banking
10) Charges for using various application forms/ pay in slips, etc as cost is involved in printing them.
11)A/ C  charges for visting an A/C branch.
12) Service charges for maintaining the ledger balances of customers!
13) Parking charges outside bank, ATM
and the list can go on.

Bottom line is, Banks should know how to manage their cost and maintain margins, If they start charging customers for their "inefficiencies"- then they will eventually "suffer"as people will start storing money in "lockers".

Private and PSU banks

With an aim  to bring down the no: of savings bank accounts that I hold, I decided to close one of my dormant SB account of mine with a leading private sector bank.

Closing down the account was very simple. I submitted a request for closure of my account at a branch near my home and a few weeks later, I received the closure confirmation and a "Manager's cheque" from my home branch in Bangalore.

I deposited this cheque with one of India's biggest PSU bank. The branch manager called me up and returned the cheque. The reason provided was that "their machine" didn't accept the cheque and they were not sure what a "Manager's cheque" was. The branch manager somehow managed to return the cheque to me without a written explanation ( I didn't persist either, quite unusual of me ).

One retired PSU bank executive came to my help when I was discussing about this with him. He suggested that I tell the bank manager that "Manager's cheque" was nothing but a "pay order" and he can send it for collection to the private bank in other city like he does for any "outstation cheque".

When I carried this message back to the bank, the branch manager was not enthusiastic. He was  halfheartedly willing to send my cheque for collection and he said that he will not do any follow up in case the private bank doesn't respond back to his branch.

Unwilling to let my cheque go with an ambiguous process and an unenthusiastic person, I finally  deposited the cheque with  another bank ( private) account of mine.

The whole episode left me wondering about the attitude of PSU banks in such a competitive environment and the "knowledge " levels of a branch manager ( in a metro city!)

Although PSU banks have some inherent advantages, such "excellent? customer service attitude", "knowledgeable?? managers" and "reckless lending " may eventually kill them.

After this episode, When I  see a PE of 5 or less  for a PSU bank and private sector bank having a much higher P/E number , I have definitely stopped asking "Why?"

Also read, Money with PSU banks