NON BANKING FINANCIAL COMPANY (NBFC)

Non-bank financial companies (NBFCs) are financial institutions that provide banking services without meeting the legal definition of a bank, i.e. one that does not hold a banking license. These institutions are not allowed to take deposits from the public. Nonetheless, all operations of these institutions are still exercised under bank regulation However this depends on the jurisdiction. NBFCs perform functions similar to that of banks; however there are a few differences in that an NBFC cannot accept demand deposits; an NBFC is not a part of the payment and settlement system and as such, an NBFC cannot issue cheques drawn on itself; and deposit insurance facility of the Deposit Insurance and Credit Guarantee Corporation is not available for NBFC depositors, unlike banks. SERVICES PROVIDED: NBFCs offer most sorts of banking services, such as loans and credit facilities, private education funding, retirement planning, trading in money markets, underwriting stocks and shares, TFCs(Term Finance Certificate) and other obligations. These institutions also provide wealth management such as managing portfolios of stocks and shares, discounting services e.g. discounting of instruments and advice on merger and acquisition activities. The number of nonbanking financial companies has expanded greatly in the last several years as venture capital companies, retail and industrial companies have entered the lending business. Non-bank institutions also frequently support investments in property and prepare feasibility, market or industry studies for companies. REGULATION: For European NCs the Payment Services Directive (PSD) is a regulatory initiative from the European Commission to regulate payment services and payment service providers throughout the European Union (EU) and European Economic Area (EEA). The PSD describes which type of organisations can provide payment services in Europe (credit institutions (i.e. banks) and certain authorities (e.g. Central Banks, government bodies), Electronic Money Institutions (EMI), and also creates the new category of Payment Institutions). Organisations that are not credit institutions or EMI, can apply for an authorisation as Payment Institution in any EU country of their URL choice (where they are established) and then passport their payment services into other Member States across the EU CLASSIFICATION: Depending upon their nature of activities, non- banking finance companies can be classified into the following categories: 1. Development finance institutions 2. Leasing companies 3. Investment companies 4. Modaraba companies 5. House finance companies 6. Venture capital companies 7. Discount & guarantee houses 8. Corporate development companies

GOLD & SILVER

Evening 13th Oct 2012

22 Carat 1 gm 24 Carat 1 gm 22 Carat 1 Sovergn 24 Carat 1 Sovergn

2,925.00 3,128.00 23,400.00 25,024.00

Evening 13th Oct 2012

1gm 1 Kg

65.40 61,160.00

Highest Last 30 Days 22 Carat 24 Carat Silver 1Gm Silver 1 Kg 14-09-12 14-09-12 14-09-12 14-09-12

3,053.00 3,265.00 70.50 65,925.00

Lowest Last 30 Days 22 Carat 24 Carat Silver 1 Gm Silver 1 Kg 05-10-12 05-10-12 13-10-12 29-09-12

2,905.00 3,107.00 65.40 6,310.50

Why Do People Invest in Gold?

The use of gold as an investment has gone on for millennia. It's been a currency and the basis of currency. Its popularity as an investment shows no sign of diminishing. Investors and traders tend to favor gold for several reasons, among them the safety of the metal. Gold is one of the few types of investments that does well when the economy is in bad shape. But people invest in gold for other reasons also.

Safe Haven

When times are tough, gold attracts investors. Current currency is called "fiat" currency; the value is not based on a backing precious metal. However, the worth of fiat currency can be unpredictable. Gold-backed currency offers more stability.

Demand Is Steady

Like all investments, the price of gold fluctuates. But gold tends to have steady demand. Notice jewelry on the fingers and necks of people on the street. Even if countries won't use gold to back their currencies, gold has a natural appeal. This demand can produce stability, especially in dark economic times.

Potential For Future Growth

As more developing nations prosper, the demand for gold is expected to go up. This creates price increases. Investors expect stability and safety from gold, but the upside potential is a solid benefit.

A Tangible Asset

For some investors, gold is one of the few tangible assets. Stock investors may never hold a piece of paper signifying company ownership in their hands, but gold investors can actually hold their investments (and see its golden shine).

The Supply Is Dependable

Gold is mined in countries in precarious situations. War and labor strife can affect this supply. But most investors agree that those dangers are much less worrisome than the wild swings of the stock market and currency exchanges.

POST OFFICE SAVINGS SCHEMES

These schemes are offered by the Government of India. Safe, secure and risk-free investment options. No Tax Deduction at Source (TDS). Nomination facility is available. Nomination can be changed at any time The instruments are transferable to any Post Office anywhere in India. Attractive rates of interest.

Post Office Monthly Income Scheme (MIS)

Salient Features:
Interest rate of 8.5% per annum payable monthly w.e.f. 01.04.2012 Maturity period is 5 years. No Bonus on Maturity w.e.f. 01.12.2011. No tax deduction at source (TDS). No tax rebate is applicable. Minimum investment amount is Rs.1500/- or in multiple thereafter. Maximum amount is Rs. 4.50 lakhs in a single account and Rs.9 lakhs in a joint account. Auto credit facility of monthly interest to saving account if accounts are at the same post office. Account can be opened by an individual, two/three adults jointly, and a minor through a guardian. Non-Resident Indian / HUF cannot open an Account. Minors have a separate limit of investment of Rs. 3 lakhs and the same is not clubbed with the limit of guardian. Deduction of 1% if account is closed prematurely at any time after three years. Suitable scheme for retired employees/ senior citizens and for those who need regular monthly income.

National Savings Certificate (NSC)

Salient Features:
NSC VIII Issue (5 years) Interest rate of 8.6% per annum w.e.f. 01.04.2012 NSC IX Issue (10 years) - Interest rate of 8.9% per annum w.e.f. 01.04.2012 Minimum investment Rs. 100/-. No maximum limit for investment. No tax deduction at source. Investment up to Rs 1,00,000/- per annum qualifies for Income Tax Rebate under NSC - section 80C of IT Act. Certificates can be kept as collateral security to get loan from banks. Trust and HUF cannot invest. A single holder type certificate can be purchased by an adult for himself or on behalf of a minor or to a minor..

Public Provident Fund (PPF)

Salient Features:
Interest rate of 8.8% per annum w.e.f. 01.04.2012. Minimum deposit is 500/- per annum. Maximum deposit is Rs. 1,00,000/- per annum The scheme is for 15 years. Investment up to Rs 1,00,000/- per annum qualifies for Income Tax Rebate under section 80C of IT Act. Interest is completely tax-free. Deposits can be made in lumpsum or in 12 installments. One deposit with a minimum amount of Rs 500/- is mandatory in each financial year. Withdrawal is permissible from 6th financial year. Loan facility available from 3rd financial year upto 5th financial year. The rate of interest charged on loan taken by the subscriber of a PPF account on or after 01.12.2011 shall be 2% p.a. However, the rate of interest of 1% p.a. shall continue to be charged on the loans already taken or taken up to 30.11.2011. Free from court attachment. Non-Resident Indians (NRIs) not eligible. An individual cannot invest on behalf of HUF (Hindu Undivided Family) or Association of persons. Ideal investment option for both salaried as well as self employed classes.

Post Office Time Deposit Scheme

Salient Features:
1 year, 2 year, 3 year and 5 year time deposits can be opened. Interest payable annually but compounded quarterly:
P PERIOD RATE OF INTEREST

One Year

8.2%

Two Years

8.3%

Three Years

8.4%

Five Years

8.5%

Minimum amount of deposit is Rs 200/- and in multiples of Rs 200/- thereafter. No maximum limit. Investment up to Rs 1,00,000/- per annum qualifies for Income Tax Rebate under section 80C of IT Act. Interest income is taxable. Facility of redeposit on maturity of an account.

In case of premature closure of 1 year, 2 Year, 3 Year or 5 Year account on or after 01.12.2011 between 6 months to one year from the date of deposit, simple interest at the rate applicable to from time to time to post office savings account shall be payable. 2 year, 3 year or 5 year accounts on or after 01.12.2011 if closed after one year, interest on such deposits shall be calculated at a discount of 1% on the rate specified for respective period as mentioned in the concerned table given under Rule 7 of Post office Time Deposit Rules. Account can be pledged as security against a loan to banks/ Government institutions. Any individual (a single adult or two adults jointly) can open an account. Group Accounts, Institutional Accounts and Misc. account not permissible.

Senior Citizen's Savings Scheme

Salient Features:
Interest @ 9.3% per annum from the date of deposit on quarterly basis w.e.f. 01.04.2012 Minimum deposit is Rs 1000 and multiples thereof. Maximum limit of 15 lakhs. Maturity period is 5 years and can be extended for a further period of 3 years. Age should be 60 years or more, and 55 years or more but less than 60 years who has retired under a Voluntary Retirement Scheme or a Special Voluntary Retirement Scheme on the date of opening of the account within three months from the date of retirement.. TDS is deducted at source on interest if the interest amount is more than Rs 10,000/- per annum. Investment up to Rs 1,00,000/- per annum qualifies for Income Tax Rebate under section 80C of IT Act. Interest can be automatically credited to savings account provided both the accounts stand in the same post office. Premature closure is allowed after one year on deduction of 1.5% of the deposit and after 2 years on deduction of 1%. No withdrawal permitted before the expiry of a period of 5 years from the date of opening of the account. Non-resident Indians (NRIs) and Hindu Undivided Family (HUF) are not eligible to open an account.

Post Office Savings Account

Salient Features:
Rate of interest 4.0% per annum Minimum amount Rs 50/- in case of non-cheque account, Rs.500/- in case of cheque account. Maximum balance permissible is Rs 1,00,000/- in a single account and Rs 2,00,000/- in a joint account. Interest Tax Free. Any individual can open an account. Cheque facility available. Group Account, Institutional Account, other Accounts like Security Deposit account & Official Capacity account are not permissible.

COMMERCIAL PAPER In the global money market, commercial paper is an unsecured promissory note with a fixed maturity of 1 to 364 days. Commercial paper is a money-market security issued (sold) by large corporations to get money to meet short term debt obligations (for example, payroll), and is only backed by an issuing bank or corporation's promise to pay the face amount on the maturity date specified on the note. Since it is not backed by collateral, only firms with excellent credit ratings from a recognized rating agency will be able to sell their commercial paper at a reasonable price. Commercial paper is usually sold at a discount from face value, and carries higher interest repayment rates than bonds. Typically, the longer the maturity on a note, the higher the interest rate the issuing institution must pay. Interest rates fluctuate with market conditions, but are typically lower than banks' rates HISTORY: Commercial paper, in the form of promissory notes issued by corporations, have existed since at least the 19th century. For instance, Marcus Goldman, founder of Goldman Sachs, got his start trading commercial paper in New York in 1869

ISSUANCE:
There are two methods of issuing paper. The issuer can market the securities directly to a buy and holdinvestor such as most money market funds. Alternatively, it can sell the paper to a dealer, who then sells the paper in the market. The dealer market for commercial paper involves large securities firms and subsidiaries of bank holding companies. Most of these firms also are dealers in US Treasury securities. Direct issuers of commercial paper usually are financial companies that have frequent and sizable borrowing needs and find it more economical to sell paper without the use of an intermediary. In the United States, direct issuers save a dealer fee of approximately 5 basis points, or 0.05% annualized, which translates to $50,000 on every $100 million outstanding. This saving compensates for the cost of maintaining a permanent sales staff to market the paper. Dealer fees tend to be lower outside the United States. LINE OF CREDIT: Commercial paper is a lower cost alternative to a line of credit with a bank. Once a business becomes established, and builds a high credit rating, it is often cheaper to draw on a commercial paper than on a bank line of credit. Nevertheless, many companies still maintain bank lines of credit as a "backup". Banks often charge fees for the amount of the line of the credit that does not have a balance. While these fees may seem like pure profit for banks, in some cases companies in serious trouble may not be able to repay the loan resulting in a loss for the banks. Advantage of commercial paper: High credit ratings fetch a lower cost of capital. Wide range of maturity provide more flexibility. It does not create any lien on asset of the company. Tradability of Commercial Paper provides investors with exit options.

Disadvantages of commercial paper: Its usage is limited to only blue chip companies. Issuances of Commercial Paper bring down the bank credit limits. A high degree of control is exercised on issue of Commercial Paper. Stand-by credit may become necessary

YIELDS:
Like Treasury Bills, yields on commercial paper are quoted on a discount basisthe discount return to commercial paper holders is the annualized percentage difference between the price paid for the paper and the par value using a 360-day year. Specifically: icp(dy) = [(Pf - P0)/Pf] x (360/h)

TREASURY BILLS

Treasury Bills are the instruments of short term borrowing by the Central/State govt. They are promissory notes issued at discount and for a fixed period. These were first issued in India in 1917.

Objectives These are issued to raise funds for meeting expenditure needs and also provide outlet for parking temporary surplus funds by investors. Investors Treasury bills can be purchased by any one (including individuals) except State govt. These are issued by RBI and sold through fortnightly or monthly auctions at varying discount rate depending upon the bids. Denomination Minimum amount of face value Rs.1 lac and in multiples there of. There is no specific amount/limit on the extent to which these can be issued or purchased.

Maturity : 91 days and 364 days . Rate of interest: Market determined, based on demand for and supply of funds in the money market .

Other features These are highly liquid and safe investment giving attractive yield. Approved assets for SLR purposes and DFHI is the market maker in these instruments and provide (daily) two way quotes to assure liquidity. RBI sells treasury bills on auction basis (to bidders quoting above the cut-off price fixed by RBI) every fortnight by calling bids from banks, State Govt. and other specified bodies

CERTIFICATE OF DEPOSIT
CDs are negotiable money market instrument issued in demat form or as a Usance Promissory Notes. CDs issued by banks should not have the maturity less than seven days and not more than one year. Financial Institutions are allowed to issue CDs for a period between 1 year and up to 3 years. CDs are like bank term deposits but unlike traditional time deposits these are freely negotiable and are often referred to as Negotiable Certificates of Deposit. CDs normally give a higher return than Bank term deposit. CDs are rated by approved rating agencies (e.g. CARE, ICRA, CRISIL, and FITCH) which considerably enhance their tradability in the secondary market, depending upon demand. SBI DFHI is an active player in secondary market of CDs.

Features of CD

All scheduled banks (except RRBs and Co-operative banks) are eligible to issue CDs. They can be issued to individuals, corporations, trusts, funds and associations. NRIs can also subscribe to CDs, but on non-repatriable basis only. In secondary market such CDs cannot be endorsed to another NRI. They are issued at a discount rate freely determined by the issuer and the market/investors. CDs issued in physical form are freely transferable by endorsement and delivery. Procedure of transfer of dematted CDs is similar to that of any other demat securities. For CDs there is no lock-in period. CDs are issued in denominations of Rs. 1 Lac and in the multiples of Rs. 1 Lac thereafter. Discount/Coupon rate of CD is determined by the issuing bank/FI.Loans cannot be granted against CDs and Banks/FIs cannot buy back their own CDs before maturity.SBI DFHI Limited, participates in both the Primary and Secondary Market for CDs. Investors can buy CDs through SBI DFHI Invest Plus scheme of SBI DFHI Ltd. (details available on website).