How to check EPF balance online?

A lot of us do not have even an idea on how much money we have in our Employee Provident fund account (EPF) and how to check EPF Balance online or offline. So in this post we will see how one can check his EPF balance online and get the details back through sms. 

How to check your EPF balance online ?

Go to this EPFO website link

There will be a link below the page to check your EPF account balance status online , click on that (direct link)

You will see a drop down there to select the PF Office State ( like Maharashtra, Karnataka , Delhi etc) . Select your PF office .

Once you select the State , you will see a list of different cities office, like for Karnataka , you can see one of the options as “Bangalore” along with the “data available upto” date , so you can get your PF balance till that date only .

Choose the city office

You will be taken to the page where you will have to fill in EPF account number , Your Name and mobile number and Submit.

How to enter your EPF account detail ?

For an example lets say Manish Chauhan worked in Bangalore and had a  Employee Providend Fund account with number KN/62345/876 . This name “Manish Chauhan” is the name appearing in EPF slip .

In that case 62345 will be the Establishment Code (which will be first blank column) and 876 will be the account number (third column) . The second column will be blank in most of the cases , it’s actually the sub code or extension of the establishment code.

Important Points

Note that the name should be exactly same as it appears in EPF slip

The office and state have to be selected properly , In a single start there can be many offices , make sure you choose the right one.

The SMS can come a little late , so please be patient

The amount can be only upto a certain date which will be mentioned in the SMS.

Auto Sweep Account – Enable it in your Saving Bank Account

Do you have a Bank Account? Off-course you do! How much money do you have in your account? 5,000? 20,000? or a few lacs? If you have a lot of cash, lying idle in your Bank Account, and at the same time you don’t want to commit to long-term investment, you need to enable the Auto-Sweep facility in your Savings Bank account. This will make sure you earn good interest on a major part on the cash lying in your Savings account.

What is Auto-Sweep Account ?

“Auto Sweep” is a facility which provides, the combined benefits of a Savings Bank account and Fixed Deposits. Auto-Sweep facility interlinks your saving bank account with a Deposit account and makes sure any extra amount lying in your bank account above a threshold limit is automatically transferred to Fixed deposits and you earn better interest on your money.

How ‘Auto Sweep’ works?

This is how Auto-Sweep works. You define a “threshold limit”, and money up to that limit will be in the form of cash in your savings account and any amount above this, “limit” will automatically be converted into a Fixed Deposit and you will start earning normal FD returns on that part of the money. At any point in time, if you need money more than is lying in your bank account, the money lying in the Fixed Deposits is Reversed-sweeped into your savings account and you can withdraw the amount you wish.

Example

Ajay opens a new Savings Bank account with SBI. He enables Auto-Sweep facility on his savings bank account and defines the threshold limit of Rs 30,000 . Now suppose he has Rs 10,000 lying in the bank, He will be earning normal 3-3.5% interest on this money. After that if he deposits Rs 60,000 in his account, his total balance would be 70,000. But as this is above his “threshold limit”, the extra amount of 40,000 will be converted into a fixed deposit automatically and start earning returns equal to normal Fixed deposits with SBI (for example 8%). This way he always has 30,000 in his account for his daily requirements, and he has 40,000 converted into Fixed deposits which again is available to him incase he requires it.

Now suppose he has to withdraw 10,000 from his account, he will actually withdraw it from the cash lying in saving bank , and his balance will reduce to 20,000. However on the other hand if he wants to withdraw Rs 50,000 . then in that case, as his account balance will be just 30,000, an additional Rs 20,000 will be auto-reversed from his Fixed Deposit and he can withdraw total 50,000 .

Opportunity cost

A lot of us don’t bother about how much idle money is lying in our account and for how long. This happens because we think “I might need it soon, so lets not commit to any investment.” But then, the money keeps lying in the bank for months and months and sometimes even years.

Suppose your account has Rs 1 lac for 1 year, it will earn 3.5% interest on it, which is Rs 3,500 for a year. However if you have auto-sweep enabled in your savings account with threshold limit of Rs 20,000, the additional 80,000 will actually be in form of a fixed deposit and it will earn an interest of 8% (assumption). In this, you will earn 3.5% of 20,000 which turns out to be Rs 700 and 8% of 80,000 which is Rs 6,400 , a total of 7,100 , which is almost 100% more than the first case .

A lot of people have much more than 1 lac in their accounts, not just 1 lac. You can earn some extra returns if you just enable auto-sweep on your saving account . So find out if your bank provides the facility, just do it, and get it right away!

Also note that different banks have different names for this facility. For eg., ICICI Bank calls it ”Auto Sweep” , HDFC Bank calls it “Sweep-In” account , and SBI calls it “Saving Plus.” . Here is a list of other banks and the name by which they call this Auto-Sweep facility (thanks for Gopal Gidwani for the info)

IDBI Bank – Sweep-in Savings Account

Axis Bank – Encash 24

Union Bank – Union Flexi Deposit

HDFC Bank – Super Saver Facility

Bank of India – BOI Savings Plus Scheme

Oriental Bank of Commerce – Flexi Fixed Deposit Scheme

State Bank of India – Multi Option Deposit Scheme

Allahabad Bank – Flexi-fix Deposit

Bank of Maharashtra – Mixie Deposit Scheme

Corporation Bank – Money Flex

United Bank of India – United Bonanza Savings Scheme

Disadvantages of Auto-Sweep Account

Auto-Sweep has some disadvantages too. In general the interest rates of normal fixed deposit and FDs under Auto-Sweep are same, but some banks charge a penalty if the FD under auto-sweep accounts are broken before some duration like 1 yr and 1 day . But I think that’s fine.  If not 8% , you will at least get 7%, still better than 3.5% .

Some banks are also known to give simple interest on the Auto-sweep Fixed Deposits and not compound interest as in case of normal fixed deposits .

Don’t over do it

While Auto-sweep is a wonderful thing for salaried class people who want to maintain liquidity, as well as want to earn more interest on their unused money, one should not over do it. If you are very sure that the money lying in your account will really not be used for long, better to use the normal Fixed deposit or Debt funds. Only if you are unsure of your money lying in bank and when you might need it, you should be using Auto-Sweep facility.

The way auto-sweep works, it makes it an ideal place to park emergency funds . So if you have kept 6 months of expenses as your emergency fund in Saving Bank, then you can enable auto-sweep facility and set threshold limit as 2-3 months of expenses, so that rest of the money can earn a better interest.

Cheque Truncation System – New Benchmark for Cheques in Banks

It might happen that your cheque’s start bouncing and do not get accepted from Jan 1, 2013 . There is a new standard in banking called as Cheque Truncation System or CTS 2010 , which all the banks have to follow now. RBI has issued a cricultelling all banks that they should only process and accept those cheques which follow CTS guidelines.

What is cheque truncation system or CTS?

Its just a new improved structure for chqeues and a set of guidelines which will change the way cheques are being processed and cleared. Right now, all the cheques are sent directly physical to the other bank for clearance, but with this new Cheque Truncation System guidelines, the banks will send the digital version of cheques (read scanned image) to the other bank and the clearance will happen almost same day or very fast. Some of the features of CTS cheques would be

·         It would have the wordings “please sign above this line” at right bottom

·         All CTS-2010 cheques will have a watermark with the words “CTS INDIA”, which can be seen against a light

·         A bank logo will be on cheque with a Ultra Violet Ink , which can be seen only under UV Scanners.

·         The Cheque Truncation System 2010 enabled cheques will not allow any alterations. If there is any mistakes, the cheque will be invalid

·         “payable at par at all branches of the bank in India” text will be at the bottom of all the cheques

·         There will be IFSC and MICR code on the cheque

·         You will have to sign the cheque will a darker ink, so that your signatures are valid for scanning.

If you look at these features, you can simply see that these are required for digital processing and once these Cheque Truncation System enabled cheques arrive , the whole banking system will start clearing the cheques in a must faster time. This will improve banking and save paper . 

You already have CTS compliant cheque books?

Note that RBI has directed all banks to issue Cheque Truncation System 2010 enabled cheque books already from last many months. So it might happen that your cheque books are already complaint with those standards . So please check it once and dont rush to bank to issue you new cheque books . 

Exchange Traded Funds

Exchange Traded Funds (ETFs) have been in existence in India for quite some time now. But so far ETFs have not enjoyed the kind of popularity that the conventional Mutual Funds enjoy. One reason could be the lack of understanding of the concept of ETF amongst the general investor and also most people lack the awareness about the existence of such funds. In this post, let us understand what are exchange traded funds, how they work, their pros and cons.

What are ETFs?

As the name suggests, ETFs are a mix of a stock and a MF in the sense that 

·         Like mutual funds, they comprise a set of specified stocks e.g. an index like Nifty/Sensex or a commodity e.g. gold; and

·         Like equity shares they are traded on the stock exchange on real-time basis.

How does an ETF work?

In a normal fund we buy/sell units directly from/to the AMC. First the money is collected from the investors to form the corpus. The fund manager then uses this corpus to build and manage the appropriate portfolio. When you want to redeem your units, a part of the portfolio is sold and you get paid for your units. The units in a conventional MF are, therefore, called in-cash units.

But in ETF, we have something called the authorized participants (appointed by the AMC). They will first deposit all the shares that comprise the index (or the gold in case of Gold ETF) with the AMC and receive what is called the creation units from the AMC. Since these units are created by depositing underlying shares/gold, they are called in-kind units.

These creation units are a large block, which are then split into small units and accordingly bought/sold in the open market on the stock exchange by these authorized participants

Therefore, technically every buy and sell need not change the corpus of an ETF unlike a conventional MF.

However, as and when there is more demand, these authorized participants deposit more shares with the AMC and get more creation units to satisfy the demand. Or if there is more redemption, then they give back these creation units to the AMC, take back their shares, sell them in the market and pay the investor. 

All this may seem to be a bit complicated and time-consuming. But, in effect, it is all system driven and hence happens on real-time basis with minimal effort & cost.

Benefits of investing in ETFs

·         Convenient to trade as it can be bought/sold on the stock exchange at any time of the day when the market is open (index funds can be bought only at NAV based on closing prices)

·         One can short sell an ETF or buy on margin or even purchase one unit, which is not possible with index-funds/conventional MFs

·         ETFs are passively managed, have low distribution costs and minimal administrative charges. Hence most ETFs have lower expense ratios than conventional MFs

·         Not dependent on the fund manager

·         Like an index fund, they are very transparent

Disadvantages of investing in ETFs

·         SIP in ETF is not convenient as you have to place a fresh order every month

·         Also SIP may prove expensive as compared to a no-load, low-expense index funds as you have to pay brokerage every time you buy & sell

·         Because ETFs are conveniently tradable, people tend to trade more in ETFs as compared to conventional funds. This unnecessarily pushes up the costs.

·         You can’t automatically re-invest your dividends. Secondly, you may have to pay brokerage to reinvest dividends in ETF, whereas dividend reinvestment in MFs is automatic and with no entry-load

·         Comparatively lower liquidity as the market has still not caught up on the concept

It may, therefore, be concluded that if an investor is looking for a long-term and defensive investment strategy in equities by backing the index rather than looking at active management, ETF offers an alternative to index-based funds. It offers trading convenience & probably lower costs than index funds. A case-to-case comparison is, however, important as some index-funds may be cheaper. Also for SIPs, index-funds may prove better than ETFs.

However, in the absence of conventional MFs like in Gold, ETFs is but a natural and better choice than buying/selling physical gold.

The Power of Compounding

Eat less and exercise more, that is the mantra to be followed if you have a weight-loss goal in mind, they say. Well, it is no different when there is money involved.

A parallel universal truth with regard to money is spend less,  save more,  for you to reach your ideal level of wealth. The

 earlier you start saving for  your rainy day (read retirement) the richer you will be when it finally arrives.

In this context, you need not be a whiz in your attempt to make yourself financially secure for the future. You simply need to be consistent in saving a portion of your money and let it compound over time. The fascinating effect of compounding gathers up momentum over longer periods of time and becomes an avalanche of wealth.

How is compounding the eighth wonder of the world? Here is an example.

When you save Rs 100 and get an annual interest of 10%, you will have Rs 110 at the end of one year. Due to compounding the next year you will get a 10% interest on Rs 110, which will then leave you with Rs 121. The next year, interest will be calculated on Rs 121 at 10% and so on. In time, these savings will grow exponentially.

So, if you invest Rs 100 with a compounding interest of 10% per annum, the rule of 72 gives 72/10 = 7.2 years as the approximate time frame required for the investment to become Rs 200.

If you equate the same to a larger amount of Rs 1 lakh in approximately 7 years, it would grow to 2 lakh. Remember you will be consistently saving up too, topping up existing funds.

Fortune favors the early bird!

Compounding interest is like wine, yields better results when money is saved over longer durations. So, if you are planning to save crores for your retirement funds, then start as early as possible, with your first salary or at least by 25 years of age. 

If you set aside a sum of say Rs 5,000 every month from the age of 25, at a return interest rate  of 10%, in 60 years you will have with you funds worth about a crore and more

Let us assume the individual plans to invest Rs 10,000, every year at a return interest rate of 10%. You will realize from the chart that starting early counts a lot! 

Age at which investment begins	Retirement fund
20	49 lakh
25	30 lakh
30	18 lakh
35	11 lakh
40	6 lakh

You will notice from the above comparison, that even a matter of five years can make a huge dent on how much you retire with.

Start saving, it’s never late.

Bye J

Bank Deposits. What you need to know?

You would have always heard people saying that "Ek % interest kam khaa lo, lekin invest sirf nationalised banks/post office deposits main karo". Let them know that they are wrong. This is why:

1. The Deposit Insurance and Credit Guarantee Corporation (DICGC) insures deposits of up to Rs 1 lakh per customer across all branches of a bank. So you can deposit upto 1 lakh per customer in any bank including Co-operative banks who offer high rates of interest. 

Tip: Just ensure that the bank has been paying all premiums of DICGC regularly before investing.

2. I hope you know the difference between scheduled banks and non scheduled banks. Google it, if you are unaware.

RBI guarantees that in case any scheduled bank fails to repay the deposit of any investor, RBI would repay your deposit within 6 months along with interest. 

So why invest your money at lower rates when you have the privilege of investing at higher rates with security. Hope you make wise decisions going forward.

Stay tuned for my next article where i will tell you about the excellent secured investment opportunities available.

:)