WHAT IS A MUTUALFUND?

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. Anybody with an investible surplus of as little as a few hundred rupees can invest in Mutual Funds. These investors buy units of a particular Mutual Fund scheme that has a defined investment objective and strategy. The money thus collected is then invested by the fund manager in different types of securities. These could range from shares to debentures to money market instruments, depending upon the schemes stated objectives. The income earned through these investments and the capital appreciation realized by the scheme is shared by its unit in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low-cost.

WHY SHOULD YOU INVEST IN MUTUAL FUNDS? 1. Professional Management - You avail of the services of experienced and skilled professionals who are backed by a dedicated investment research team which analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme. 2. Diversification - Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. 3. Convenient Administration - Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and unnecessary follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient. 4. Return Potential - Over a medium to long term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities. 5. Low Costs - Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of reduction in share brokerage which translate into lower costs for investors. 6. Liquidity - In open-ended schemes, you can get your money back promptly at Net Asset Value (NAV) related prices from the Mutual Fund itself. With close-ended schemes, you can sell your units on a stock exchange at the prevailing market price. 7. Transparency - You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund managers investment strategy and outlook. 6 8. Flexibility - Through features such as Systematic Investment Plans (SIP), Systematic Withdrawal Plans (SWP) and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience. 9. Well Regulated - All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI.
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Hire purchase (abbreviated HP, colloquially sometimes never-never ) is the legal term for a contract, in which a purchaser agrees to pay for goods in parts or a percentage over a number of months. In Canada and the United States, a hire purchase is termed an installment plan although these may differ slightly as in a hire purchase agreement the ownership of the good remains with the seller until the last payment is made. Other analogous practices are described as closed-end leasing or rent to own. The hire purchase agreement was developed in the United Kingdom in the 19th century to allow customers with a cash shortage to make an expensive purchase they otherwise would have to delay or forgo. For example in cases where a buyer cannot afford to pay the asked price for an item of property as a lump sum but can afford to pay a percentage as a deposit, a hire-purchase contract allows the buyer to hire the goods for a monthly rent. When a sum equal to the original full price plus interest has been paid in equal installments, the buyer may then exercise an option to buy the goods at a predetermined price (usually a nominal sum) or return the goods to the owner.

If the buyer defaults in paying the installments, the owner may repossess the goods, a vendor protection not available with unsecured-consumer-credit systems. HP is frequently advantageous to consumers because it spreads the cost of expensive items over an extended time period. Business consumers may find the different balance sheet and taxation treatment of hire-purchased goods beneficial to their taxable income. The need for HP is reduced when consumers have collateral or other forms of credit readily available. These contracts are most commonly used for items such as cars and high value electrical goods where the purchasers are unable to pay for the goods directly.

Requisites Before any hire-purchase agreement is entered into in respect of any goods, the owner shall state in writing to the prospective hirer, otherwise than in the note or memorandum of the agreement, a price at which the goods may be purchased by him for cash (in this section referred to as the cash price):

Provided that this subsection shall be deemed to have been sufficiently complied with

(a) if the hirer has inspected the goods or like goods and at the time of his inspection tickets or labels were attached to or displayed with the goods clearly stating the cash price, either of the goods as a whole or of all the different articles or sets of articles comprised therein, or

(b) if the hirer has selected the goods by reference to a catalogue, price list, or advertisement, which clearly stated the cash price either of the goods as a whole or of all the different articles or sets of articles comprised therein.

(2) An owner shall not be entitled to enforce a hire-purchase agreement or any contract of guarantee relating thereto or any right to recover the goods from the hirer, and no security given by the hirer in respect of money payable under the hire-purchase agreement or given by a guarantor in respect of money payable under such a contract of guarantee as aforesaid shall be enforceable against the hirer or guarantor by any holder thereof, unless the requirement specified in the foregoing subsection has been complied with, and

(a) a note or memorandum of the agreement is made and signed by the hirer and by or on behalf of all other parties to the agreement, and

(b) the note or memorandum contains a statement of the hire-purchase price and of the cash price of the goods to which the agreement relates and of the amount of each of the instalments by which the hire-purchase price is to be paid and of the date, or the mode of determining the date, upon which each instalment is payable, and contains a list of the goods to which the agreement relates sufficient to identify them, and

(c) the note or memorandum contains a notice, which is at least as prominent as the rest of the contents of the note or memorandum, in the terms prescribed in the Schedule to this Act, and

(d) a copy of the note or memorandum is delivered or sent to the hirer within seven days of the making of the agreement:

Provided that if the Court is satisfied in any action that a failure to comply with the requirements specified in the foregoing sub-section or any requirement specified in paragraph (b), (c) or (d) of this subsection has not prejudiced the hirer, and that it would be just and equitable to dispense with the requirement, the Court may, subject to any conditions that it thinks fit to impose, dispense with that requirement for the purposes of the action.

Challenges faced by factoring

Factoring is a financial transaction in which a business sells its accounts receivable (i.e., invoices) to [1] a third party (called a factor) at a discount. In "advance" factoring, the business owner sells his receivables in the form of invoice to the factor, who makes an advance of 70-85% of the purchase price of the receivable amount. The factor collects the full amount from the customer in due course and pays the balance amount due to the business owner after deducting his commission and other charges. In "maturity" factoring, the factor makes no immediate advance on the purchased accounts; but sees to it that the customer pays the invoiced amount within the stipulated time i.e. on maturity. However, if the customer fails to make payment within the stipulated time e.g. 30 days, the factor makes payment to the client and proceeds to collect the payment from the customer.

Challenges faced by factoring sector FACTORS: MANAGING CHALLENGES One of the main challenges faced by Factors is finding the right clients. To finance potential clients and new business, they rely on their ability to gather accurate and authenticated information from various sources. Thorough due diligence of the client organization, its invoices and the credit information of its customers helps them to make the appropriate risk evaluations.

Because of the need for accurate market intelligence, Factoring companies categorize seller and buyer deals and deal with them differently. With the intensely competitive nature of the business, building the competencies and technology infrastructure prove to be competitive advantages in turning around financing decisions and customizing specific deals for key clients with flexibility. Other key challenges faced by Factors is accurately pricing products and managing risks taken on during the course of business. Any inadequacy has adverse effects especially since risks are dynamic and demand the ability to respond dynamically as well. Clearly, technology has a crucial role to play in helping Factors monitor the risks in their portfolio efficiently. Debt recovery continues to be a major challenge especially in the developing world and could be slower compared to that in developed nations. Factors are often forced to write-off large volumes of invoices as a result of nonpayment from debtors. There can be substantial legal issues associated with Factoring deals at various stages of transactions, making it increasingly important to track and manage, and thereby mitigate such risks. Factors also deal with clients and buyers located across the globe. In this business environment, ensuring sustainable quality service is a challenge. Factors should opt for technology that supports the front office and allows sellers and buyers to login remotely to make their transaction requests. They also should be able to monitor transaction request status from their respective premises and generate all necessary reports.
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34. Though the enactment of the Factoring Regulation Act has potentially removed all the major impediments that the factoring sector faced in the country, nevertheless, the sector has few other items on its wish list, the primary among which are introduction of credit insurance in the factoring business and extending the scope of SARFAESI Act to cover NBFCs for speedy enforcement of 8 security interest . As regards credit insurance, the Finance Minister, in the Union Budget 2013-14, has made an announcement for setting up a Credit Guarantee Fund with SIDBI for factoring, with a Rs 5 billion corpus. As far as extension of the provisions of the SARFAESI Act to NBFC is concerned, the final call rests with the Government of India. 35. Low penetration of factoring business in the country still remains a challenge which could be on account of lack of awareness among the users. With the necessary law now in place, sincere attempts need to be made by the industry through its associations and other fora for articulating the benefits of factoring as not just an alternative source of finance but also an avenue for providing a bouquet of financial services vis--vis traditional finance, to small scale industries. They should be able to identify the untapped potential clientele, especially in various SME industry sectors, and create awareness on how the higher cost of factoring vis--vis the traditional finance is justifiable and cost effective for the businesses in the long run. Factoring companies should also constantly endeavour to upgrade their expertise on both technological front as also on the operational level for offering cost effective services to their clientele. 36. I thank the IFG for holding its annual conference in India as I sincerely believe that organizing more such events would have two-pronged benefits of one, creating general awareness about the potential benefits that the factoring services holds for the businesses in general and more so for the SME segment and more importantly, helping the Indian companies learn from the experiences of their counterparts in the developed economies where factoring business is well entrenched. I hope that the deliberations during the two day conference would throw up some practical ideas on increasing the penetration of factoring services in the country. I am quite sure that the distinguished speakers would bring a lot of valuable inputs to the table about what could be the most appropriate and cost-effective delivery model for the factoring services in its nascent stage in India. However, it is imperative that the domestic factoring industry works hard to take the momentum generated by this conference forward by implementing the ideas emanating from the conference in right earnest. Only then will the gains from the conference be truly realized.