comprehensive study of financial assessment through

7/23/2019 Comprehensive Study of Financial Assessment Through

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COMPREHENSIVE STUDY OF FINANCIAL ASSESSMENT

THROUGH

FINANCIAL PRODUCTS (MUTUAL FUNDS, LIFE

INSURANCE, GENERAL INSURANCE, FIXED DEPOSITS)

BY

SNEHASISH BISWAS

Reg.no.-AO1-1122-2136-11

OF IISWBM

A PROJECT REPORT

Submitted to

BAJAJ CAPITAL LTD.

in partial fulfillment of the requirements for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

INDIAN INSTITUTE OF SOCIAL WELFARE AND BUSINESS MANAGEMENT

(UNIVERSITY OF CALCUTTA)

JULY 2015


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BONAFIDE CERTIFICATE

Certified that this project report titled A COMPREHENSIVE STUDY OF

FINANCIAL ASSESSMENT THROUGH FINANCIAL PRODUCTS. is the bonafide

work of SNEHASISHBISWAS (Reg no.-AO1-1122-2136-11) who carried out

the research under my supervision. Certified further, that to the best of my

knowledge the work reported herein does not form part of any other project

report or dissertation on the basis of which a degree or award was conferred

on an earlier occasion on this or any other candidate.

Signature Of MENTOR

NAVANEETA GADIArea manager

BAJAJ CAPITAL LTD.


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Acknowledgment

I profusely thank Dr.TANIMA RAY, HOD, IISWBM MBA (DAY), whose advice

and suggestions helped me carry out my project work smoothly. I am deeply

indebted to my faculty guide, for her expert and valuable guidance and whose

enthusiastic encouragement helped me complete my project successfully.

This project would not have been successfully completed by me if not for the

kind help, advice and cooperation in addition to the encouragement received

by me from BAJAJ CAPITAL Limited, for taking me under their wings for the

project.

I express my sincere thanks to Ms.NAVANEETA GADI, Branch Manager,

LORDS, for giving me an opportunity and for initiating me into the project and

whose support was invaluable for doing my project work.

My sincere thanks to all my colleagues and friends who patiently helped me in

collecting information for my project and helped me in bringing this project to

light.

SNEHASISH BISWAS


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TABLE OF CONTENTS

CHAPTER

NO.

CHAPTER NAME PAGE

NO.

REMARKS

1 INTRODUCTION CONCEPT OF LIFE

INSURANCE

CONCEPT OF GENERAL

INSURANCE

CONCEPT OF MUTUAL

FUND CONCEPT OF FIXED

DEPOSITS

ORIGIN OF

INSURANCE

ORIGIN OF MUTUAL FUNDS

INSURANCE IN INDIA

MUTUAL FUNDS ININDIA

6

7

8

8

9

12

15

16

2 STATEMENT OF THE PROBLEM 19

3 COMPANY PROFILE 20

4 OBJECTIVE OF THE STUDY 30

5 FINANCIAL PLANNING

THE PLANNING

PROCESS

OBJECTIVES OF

31

32

33


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FINANCIAL PLANNING

IMPORTANCE OF

FINANCIAL PLANNING

CASE STUDY 1 CASE STUDY 2

CASE STUDY 3

33

3542

47

6 RESULTS & FINDINGS 53

7 CONCLUSION 69

QUESTIONNAIRE

REFERENCES

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2. CONCEPT OF GENERAL INSURANCE:-

General insurance or non-life insurance policies, including automobile andhomeowners policies, provide payments depending on the loss from a

particular financial event. General insurance is typically defined as any

insurance that is not determined to belife insurance.It is calledproperty and

casualty insurance in the U.S. and Canada and Non-Life Insurance in

Continental Europe.

In the UK, insurance is broadly divided into three areas: personal lines,

commercial lines andLondon market.

The London market insures large commercial risks such as supermarkets,

football players and other very specific risks. It consists of a number of

insurers, reinsurers,P&I Clubs,brokers and other companies that are typically

physically located in the City of London. The Lloyd's of London is a big

participant in this market. The London Market also participates in personal

lines and commercial lines, domestic and foreign, throughreinsurance.

Commercial lines products are usually designed for relatively small legal

entities. These would include workers' comp (employers liability), public

liability, product liability, commercial fleet and other general insurance

products sold in a relatively standard fashion to many organizations. There are

many companies that supply comprehensive commercial insurance packages

for a wide range of different industries, including shops, restaurants and

hotels. Personal products are designed to be sold in large quantities. This

would include autos (private car), homeowners (household), pet insurance,

creditor insurance and others. ACORD which is the insurance industry global

standards organization. ACORD has standards for personal and commercial

lines and has been working with the Australian General Insurers to develop
https://en.wikipedia.org/wiki/Life_insurancehttps://en.wikipedia.org/wiki/Property_insurancehttps://en.wikipedia.org/wiki/Property_insurancehttps://en.wikipedia.org/wiki/Casualty_insurancehttps://en.wikipedia.org/wiki/United_Stateshttps://en.wikipedia.org/wiki/United_Kingdomhttps://en.wikipedia.org/w/index.php?title=Personal_lines&action=edit&redlink=1https://en.wikipedia.org/w/index.php?title=Commercial_lines&action=edit&redlink=1https://en.wikipedia.org/wiki/London_markethttps://en.wikipedia.org/wiki/London_markethttps://en.wikipedia.org/wiki/Protection_and_indemnity_insurancehttps://en.wikipedia.org/wiki/Lloyd%27s_of_Londonhttps://en.wikipedia.org/wiki/Reinsurancehttps://en.wikipedia.org/w/index.php?title=Commercial_lines&action=edit&redlink=1https://en.wikipedia.org/wiki/Product_liabilityhttps://en.wikipedia.org/wiki/Auto_insurancehttps://en.wikipedia.org/wiki/Home_insurancehttps://en.wikipedia.org/wiki/Home_insurancehttps://en.wikipedia.org/wiki/Auto_insurancehttps://en.wikipedia.org/wiki/Product_liabilityhttps://en.wikipedia.org/w/index.php?title=Commercial_lines&action=edit&redlink=1https://en.wikipedia.org/wiki/Reinsurancehttps://en.wikipedia.org/wiki/Lloyd%27s_of_Londonhttps://en.wikipedia.org/wiki/Protection_and_indemnity_insurancehttps://en.wikipedia.org/wiki/London_markethttps://en.wikipedia.org/wiki/London_markethttps://en.wikipedia.org/w/index.php?title=Commercial_lines&action=edit&redlink=1https://en.wikipedia.org/w/index.php?title=Personal_lines&action=edit&redlink=1https://en.wikipedia.org/wiki/United_Kingdomhttps://en.wikipedia.org/wiki/United_Stateshttps://en.wikipedia.org/wiki/Casualty_insurancehttps://en.wikipedia.org/wiki/Property_insurancehttps://en.wikipedia.org/wiki/Life_insurance


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those XML standards, standard applications for insurance, and certificates of

currency.

3. CONCEPT OF MUTUAL FUNDS:-

As the name suggests, a 'mutual fund' is an investment vehicle that allows

several investors to pool their resources in order to purchase stocks, bonds and

other securities.

These collective funds (referred to as Assets Under Management or AUM) are

then invested by an expert fund manager appointed by a mutual fund

company (called Asset Management Company or AMC).

The combined underlying holding of the fund is known as the 'portfolio', and

each investor owns a portion of this portfolio in the form of units .

4. COMPANY FIXED DEPOSITS:-

Company Fixed Depositsor Corporate Fixed Deposits are deposits accepted by

non-banking financial companies.As a fixed-income investment option, they

are similar to bank FDs in that they have fixed tenures and interest rates.

Company fixed deposits, however, offer higher rates of interest, in general,

than bank deposits. Interest rates on these products currently range between

9% and 16%. Company FDs come under the purview of the Companies Act of

1956 U/S 58A. Corporate FD schemes with a credit rating AAA or AA are

considered to be very safe i.e. the risk of default is very low.Under company FD
https://en.wikipedia.org/wiki/Non-banking_financial_companieshttps://en.wikipedia.org/wiki/Interest_rateshttps://en.wikipedia.org/wiki/Interest_rateshttps://en.wikipedia.org/wiki/Non-banking_financial_companies


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schemes, customers deposit a certain amount of money with a company for a

fixed period of time in return for a fixed rate of interest. This interest rate

remains unchanged until the end of the holding period i.e. until maturity. On

maturity, customers receive returns in the form of principal and the interestearned thereon.

Deposit periods can vary between 6 months and 7 years. Deposit certificates

are issued by companies to deposit-holders that state vital details of their

holdings under a particular scheme e.g. tenure, interest rate, maturity date etc.

These are akin to bank FD certificates.

Traditionally, banks have been the go-to institutions forfixed deposits in the

country. However, with increased financial awareness, investors portfolios are

now being diversified to include corporate fixed deposits. One of the main

reasons for this is the higher interest rates offered by companies on their FD

schemes vis--vis banks.

There are a number of non-banking companies offering FD schemes inIndia.

Private or state-owned institutions that can accept fixed deposits, from thepublic or its members, are Non-banking financial or non-financial companies

i.e. NBFCs or manufacturing companies or Housing Finance Companies (HFCs).

ORIGIN OF INSURANCE

Almost 4,500 years ago, in the ancient land of Babylonia, traders used to bear

risk of the caravan trade by giving loans that had to be later repaid with

interest when the goods arrived safely. In 2100 BC, the Code of Hammurabigranted legal status to the practice. That, perhaps, was how insurance made its

beginning.

Since most of the trade took place by sea, there was also the fear of pirates. So

these guilds even offered ransom for members held captive by pirates. Burial
https://en.wikipedia.org/wiki/Rate_of_interesthttps://en.wikipedia.org/wiki/Fixed_depositshttps://en.wikipedia.org/wiki/Indiahttps://en.wikipedia.org/wiki/Indiahttps://en.wikipedia.org/wiki/Fixed_depositshttps://en.wikipedia.org/wiki/Rate_of_interest


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expenses and support in times of sickness and poverty were other services

offered.

In 1347, in Genoa, European maritime nations entered into the earliest known

insurance contract and decided to accept marine insurance as a practice.

The first step

Insurance as we know it today owes its existence to 17th century England. In

fact, it began taking shape in 1688 at a rather interesting place called Lloyd's

Coffee House in London, where merchants, ship-owners and underwriters met

to discuss and transact business. By the end of the 18th century, Lloyd's had

brewed enough business to become one of the first modern insurance

companies.

Insurance and Myth...

Back to the 17th century. In 1693, astronomer Edmond Halley constructed the

first mortality table to provide a link between the life insurance premium and

the average life spans based on statistical laws of mortality and compoundinterest. In 1756, Joseph Dodson reworked the table, linking premium rate to

age.

Enter companies...

The first stock companies to get into the business of insurance were chartered

in England in 1720. The year 1735 saw the birth of the first insurance

company in the American colonies in Charleston, SC.


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modern mutual fund. The Alexander Fund featured semi-annual issues and

allowed investors to make withdrawals on demand.

The Arrival of the Modern Fund

The creation of the Massachusetts Investors' Trust in Boston, Massachusetts,

heralded the arrival of the modern mutual fund in 1924. The fund went public

in 1928, eventually spawning the mutual fund firm known today as MFS

Investment Management. State Street Investors' Trust was the custodian of the

Massachusetts Investors' Trust. Later, State Street Investors started its own fund

in 1924 with Richard Paine, Richard Saltonstall and Paul Cabot at the helm.Saltonstall was also affiliated with Scudder, Stevens and Clark, an outfit that

would launch the firstno-load fund in 1928. A momentous year in the history

of the mutual fund, 1928 also saw the launch of the Wellington Fund, which

was the first mutual fund to include stocks and bonds, as opposed to direct

merchant bank style of investments in business and trade.

Regulation and Expansion

By 1929, there were 19open-ended mutual funds competing with nearly 700

closed-end funds. With the stock market crash of 1929, the dynamic began to

change as highly-leveraged closed-end funds were wiped out and small open-

end funds managed to survive.

Government regulators also began to take notice of the fledgling mutual fund

industry. The creation of the Securities and Exchange Commission (SEC), the

passage of the Securities Act of 1933 and the enactment of the Securities

Exchange Act of 1934 put in place safeguards to protect investors: mutual

funds were required to register with the SEC and to provide disclosure in the

form of a prospectus. The Investment Company Act of 1940 put in place
http://www.investopedia.com/terms/n/no-loadfund.asphttp://www.investopedia.com/terms/o/open-endfund.asphttp://www.investopedia.com/terms/s/securitiesact1933.asphttp://www.investopedia.com/terms/s/seact1934.asphttp://www.investopedia.com/terms/s/seact1934.asphttp://www.investopedia.com/terms/i/investmentcompanyact.asphttp://www.investopedia.com/terms/i/investmentcompanyact.asphttp://www.investopedia.com/terms/s/seact1934.asphttp://www.investopedia.com/terms/s/seact1934.asphttp://www.investopedia.com/terms/s/securitiesact1933.asphttp://www.investopedia.com/terms/o/open-endfund.asphttp://www.investopedia.com/terms/n/no-loadfund.asp


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additional regulations that required more disclosures and sought to minimize

conflicts of interest. (For further reading, see Policing The Securities Market:

An Overview Of The SEC.)

The mutual fund industry continued to expand. At the beginning of the 1950s,

the number of open-end funds topped 100. In 1954, the financial markets

overcame their 1929 peak, and the mutual fund industry began to grow in

earnest, adding some 50 new funds over the course of the decade. The 1960s

saw the rise of aggressive growth funds, with more than 100 new funds

established and billions of dollars in new asset inflows.

Hundreds of new funds were launched throughout the 1960s until the bearmarket of 1969 cooled the public appetite for mutual funds. Money flowed out

of mutual funds as quickly as investors could redeem their shares, but the

industry's growth later resumed.

Recent Developments

In 1971, William Fouse and John McQuown of Wells Fargo Bank established

the first index fund,a concept that John Bogle would use as a foundation on

which to build The Vanguard Group, a mutual fund powerhouse renowned for

low-cost index funds. The 1970s also saw the rise of the no-load fund. This

new way of doing business had an enormous impact on the way mutual funds

were sold and would make a major contribution to the industry's success.

With the 1980s and '90s came bull market mania and previously obscure fund

managers became superstars; Max Heine, Michael Price and Peter Lynch, themutual fund industry's top gunslingers, became household names and money

poured into the retail investment industry at a stunning pace. More recently,

the burst of the tech bubble and a spate of scandals involving big names in the

industry took much of the shine off of the industry's reputation
http://www.investopedia.com/articles/02/112202.asphttp://www.investopedia.com/articles/02/112202.asphttp://www.investopedia.com/articles/02/112202.asphttp://www.investopedia.com/terms/a/aggressivegrowthfund.asphttp://www.investopedia.com/terms/i/indexfund.asphttp://www.investopedia.com/terms/p/peterlynch.asphttp://www.investopedia.com/terms/p/peterlynch.asphttp://www.investopedia.com/terms/i/indexfund.asphttp://www.investopedia.com/terms/a/aggressivegrowthfund.asphttp://www.investopedia.com/articles/02/112202.asphttp://www.investopedia.com/articles/02/112202.asp


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INSURANCE IN INDIA

Insurance in India can be traced back to the Vedas. For instance, yogakshema,

the name of Life Insurance Corporation of India's corporate headquarters, is

derived from the Rig Veda. The term suggests that a form of "community

insurance" was prevalent around 1000 BC and practised by the Aryans. Burial

societies of the kind found in ancient Rome were formed in the Buddhist

period to help families build houses, protect widows and children.

Bombay Mutual Assurance Society, the first Indian life assurance society, was

formed in 1870. Other companies like Oriental, Bharat and Empire of India

were also set up in the

1870-90s. It was during the swadeshi movement in the early 20th century

that insurance witnessed a big boom in India with several more companies

being set up.

As these companies grew, the government began to exercise control on them.

The Insurance Act was passed in 1912, followed by a detailed and amended

Insurance Act of 1938 that looked into investments, expenditure andmanagement of these companies' funds.

By the mid-1950s, there were around 170 insurance companies and 80

provident fund societies in the country's life insurance scene. However, in the

absence of regulatory systems, scams and irregularities were almost a way of

life at most of these companies.

As a result, the government decided nationalise the life assurance business inIndia. The Life Insurance Corporation of India was set up in 1956 to take over

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For years thereafter, insurance remained a monopoly of the public sector. It

was only after seven years of deliberation and debate - after the RN Malhotra

Committee report of 1994 became the first serious document calling for the

re-opening up of the insurance sector to private players -- that the sector wasfinally opened up to private players in 2001.

MUTUAL FUNDS IN INDIA

The first introduction of a mutual fund in India occurred in 1963, when the

Government of India launched Unit Trust of India (UTI). Until 1987, UTI

enjoyed a monopoly in the Indian mutual fund market. Then a host of other

government-controlled Indian financial companies came up with their own

funds. These included State Bank of India,Canara Bank,andPunjab National

Bank.This market was made open to private players in 1993, as a result of the

historicconstitutional amendments brought forward by the then Congress-led

government under the existing regime of Liberalization, Privatization and

Globalization (LPG). The first private sector fund to operate in India was

Kothari Pioneer, which later merged with Franklin Templeton. In 1996, SEBI

formulated the Mutual Fund Regulation which is a comprehensive regulatory

framework

Mutual funds are an under tapped market in India

Despite being available in the market less than 10% of Indian households have

invested in mutual funds. A recent report on Mutual Fund Investments in India

published by research and analytics firm, Boston Analytics, suggests investors

are holding back from putting their money into mutual funds due to their

perceived high risk and a lack of information on how mutual funds work.

There are 46 Mutual Funds as of June 2013. The primary reason for not

investing appears to be correlated with city size. Among respondents with a
https://en.wikipedia.org/wiki/Mutual_fundhttps://en.wikipedia.org/wiki/Indiahttps://en.wikipedia.org/wiki/Government_of_Indiahttps://en.wikipedia.org/wiki/Unit_Trust_of_Indiahttps://en.wikipedia.org/wiki/State_Bank_of_Indiahttps://en.wikipedia.org/wiki/Canara_Bankhttps://en.wikipedia.org/wiki/Punjab_National_Bankhttps://en.wikipedia.org/wiki/Punjab_National_Bankhttps://en.wikipedia.org/wiki/Constitutional_amendmenthttps://en.wikipedia.org/wiki/Liberalizationhttps://en.wikipedia.org/wiki/Privatizationhttps://en.wikipedia.org/wiki/Globalizationhttps://en.wikipedia.org/wiki/Private_sectorhttps://en.wikipedia.org/wiki/Franklin_Templeton_Investmentshttps://en.wikipedia.org/wiki/Investorhttps://en.wikipedia.org/wiki/Investorhttps://en.wikipedia.org/wiki/Franklin_Templeton_Investmentshttps://en.wikipedia.org/wiki/Private_sectorhttps://en.wikipedia.org/wiki/Globalizationhttps://en.wikipedia.org/wiki/Privatizationhttps://en.wikipedia.org/wiki/Liberalizationhttps://en.wikipedia.org/wiki/Constitutional_amendmenthttps://en.wikipedia.org/wiki/Punjab_National_Bankhttps://en.wikipedia.org/wiki/Punjab_National_Bankhttps://en.wikipedia.org/wiki/Canara_Bankhttps://en.wikipedia.org/wiki/State_Bank_of_Indiahttps://en.wikipedia.org/wiki/Unit_Trust_of_Indiahttps://en.wikipedia.org/wiki/Government_of_Indiahttps://en.wikipedia.org/wiki/Indiahttps://en.wikipedia.org/wiki/Mutual_fund


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high savings rate, close to 40% of those who live in metros and Tier I cities

considered suchinvestments to be very risky, whereas 33% of those in Tier II

cities said they did not know how or where to invest in suchassets.

Mutual fund distribution in India

Mutual fund investments are sourced both from institutions (companies) and

individuals. Since January 2013, institutional investors have moved to

investing directly with the mutual funds since doing so saves on the expense

ratio incurred. Individual investors are, however, served mostly byInvestment

advisor and banks. Since 2009, online platforms for investing in Mutual funds

have also evolved.

Average Assets under Management:Assets under management (AUM) is a

financial term denoting the market value of all the funds being managed by a

financial institution (a mutual fund, hedge fund, private equity firm, venture

capital firm, or brokerage house) on behalf of its clients, investors, partners,

depositors, etc.

The average Assets under management of all Mutual funds in India for the

quarter Jul-13 to Sep-13 (in INR billion) is given below.

Sr No Mutual Fund Name Average AUM %

1 HDFC Mutual Fund 1,034.42 12.70%

2 Reliance Mutual Fund 952.28 11.69%

3 ICICI Prudential Mutual Fund 853.03 10.48%

4 Birla Sun Life Mutual Fund 773.44 9.50%

5 UTI Mutual Fund 700.57 8.60%

6 SBI Mutual Fund 595.58 7.31%

7 Franklin Templeton Mutual Fund 448.12 5.50%

8 IDFC Mutual Fund 396.65 4.87%

9 Kotak Mahindra Mutual Fund 352.99 4.34%

10 DSP BlackRock Mutual Fund 304.86 3.74%

11 Tata Mutual Fund 179.66 2.21%

12 Deutsche Mutual Fund 170.59 2.10%
https://en.wikipedia.org/wiki/Savings_ratehttps://en.wikipedia.org/wiki/Investmenthttps://en.wikipedia.org/wiki/Assetshttps://en.wikipedia.org/wiki/Investment_advisorhttps://en.wikipedia.org/wiki/Investment_advisorhttps://en.wikipedia.org/wiki/Assets_under_managementhttps://en.wikipedia.org/wiki/Birla_Sun_Life_Asset_Management_Company_Ltd.https://en.wikipedia.org/wiki/Birla_Sun_Life_Asset_Management_Company_Ltd.https://en.wikipedia.org/wiki/Birla_Sun_Life_Asset_Management_Company_Ltd.https://en.wikipedia.org/wiki/Assets_under_managementhttps://en.wikipedia.org/wiki/Investment_advisorhttps://en.wikipedia.org/wiki/Investment_advisorhttps://en.wikipedia.org/wiki/Assetshttps://en.wikipedia.org/wiki/Investmenthttps://en.wikipedia.org/wiki/Savings_rate


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Sr No Mutual Fund Name Average AUM %

13 L&T Mutual Fund 150.79 1.85%

14 Sundaram Mutual Fund 139.47 1.71%

15 JPMorgan Mutual Fund 132.57 1.63%

16 Religare Invesco Mutual Fund 125.12 1.54%17 Axis Mutual Fund 123.18 1.51%

18 LIC NOMURA Mutual Fund 79.76 0.98%

19 Canara Robeco Mutual Fund 76.16 0.94%

20 HSBC Mutual Fund 67.18 0.83%

21 JM Financial Mutual Fund 62.44 0.77%

22 Baroda Pioneer Mutual Fund 52.63 0.65%

23 IDBI Mutual Fund 47.71 0.59%

24 PRINCIPAL Mutual Fund 43.00 0.53%

25 Goldman Sachs Mutual Fund 41.49 0.51%

26 BNP Paribas Mutual Fund 35.38 0.43%

27 Morgan Stanley Mutual Fund 32.90 0.40%

28 Peerless Mutual Fund 28.35 0.35%

29 Taurus Mutual Fund 27.32 0.34%

30 Pramerica Mutual Fund 21.66 0.27%

31 Union KBC Mutual Fund 19.80 0.24%

32 Indiabulls Mutual Fund 16.06 0.20%

33 ING Mutual Fund 11.05 0.14%

34 PineBridge Mutual Fund 11.03 0.14%

35 BOI AXA Mutual Fund 10.82 0.13%

36 Mirae Asset Mutual Fund 5.08 0.06%

37 Motilal Oswal Mutual Fund 4.37 0.05%

38 Quantum Mutual Fund 3.15 0.04%

39 PPFAS Mutual Fund 2.67 0.03%

40 Escorts Mutual Fund 2.52 0.03%

41 Sahara Mutual Fund 2.33 0.03%

42 IIFL Mutual Fund 2.07 0.03%

43 Edelweiss Mutual Fund 1.94 0.02%

44 Daiwa Mutual Fund 0.51 0.01%

45 IL&FS Mutual Fund (IDF) - 0.00%

46 Shriram Mutual Fund - 0.00%

47 SREI Mutual Fund (IDF) - 0.00%

Grand Total 8,142.68 100.0%
https://en.wikipedia.org/wiki/L_%26_T_Mutual_Fundhttps://en.wikipedia.org/wiki/L_%26_T_Mutual_Fundhttps://en.wikipedia.org/wiki/L_%26_T_Mutual_Fund


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360 Degree Financial Assessment Tool

Our proprietary 360Financial Assessment Tool is a unique scientific method

that takes an all-round view of investments using 3 steps:

i) Need Analysis:

"Know Your Client" principle is at the heart of our business. We believe that we

need to know our clients risk profile, basic financial situation, to present them

the right selection of investment products/schemes.

ii) Scheme Selection:

We will use our best judgment and ability to present you with the best of the

breed investment schemes, for you to choose from.

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Our service really begins when you have completed your first transaction

through us. Our aim is to be continuously in touch with you with new

offerings.

Bajaj Capital is a distributor of financial products and is remunerated by the

product providers. Bajaj Capital is not an Investment Adviser or Financial

Planners.

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http://www.bajajcapital.com/financial-assessment/introduction.aspxhttp://www.bajajcapital.com/financial-assessment/introduction.aspx


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Pan-India presence:

With over 120 offices in 70 cities across India, we strive to maintain a

consistency of relationship and experience. So if you happen to relocate, there

will be a nearby Bajaj Capital office with the same standard of service.

Why Bajaj Capital

SEBI licensed Category I Merchant Banker, ARN Holder, DP of NSDL.

Nearly 50 years of experience in helping people protect and grow their

wealth.

We help in need analysis, scheme selection and efficient execution

through our proprietary 360 degree financial assessment tool.

We offer an incredibly diverse range of financial products and

personalized services.

Over 120 offices in 70 cities across India, to maintain a consistency of

relationship and experience.

Strong team of qualified and experienced professionals including CA's,

MBA's, MBE's, CFP's, CS's, Legal Experts and others.


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India's first Mutual Fund, Unit Trust of India (UTI) was incorporated in the

same year.

1965

Bajaj Capital is incorporated as a Company. In the same year, the company

introduces an innovative financial instrumentthe Company Fixed Deposit.

EIL Ltd. (Oberoi Hotels, then known as Associated Hotels of India Ltd.) becomes

the first company to raise resources through Company Fixed Deposits.

1966

Bajaj Capital expands its product range to include all UTI schemes and

Government Saving Schemes in addition to Company Fixed Deposits.

1969

Bajaj Capital manages its first Equity issue (through an associate company) of

Grauer & Wells India Ltd.; right from drafting the prospectus to marketing the

issue.

1975

Bajaj Capital starts offering 'need-based' investment solutions to its clients,

which today is popularly known as 'Financial Planning' in the investment

world.

1981


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SAIL becomes the first Government Company to accept public deposits,

followed by IOC, BHEL, BPCL, HPCL and others; thus opening the floodgates for

growth of retail investment market in India.

Bajaj Capital plays an active role in all the schemes as 'Principal

Brokers'

1986

Public Sector Undertakings (PSUs) begin making public issues of bonds. MTNL,

NHPC, IRFC offer a series of Bond Issues. Bajaj Capital is among the top ranksof resource mobilizes.

1987

SBI leads the launch of Public Sector Mutual Funds in India. Bajaj Capital plays

a significant role in fund mobilization for all these players.

1991

SBI issues India Development Bonds for NRIs. Bajaj Capital becomes the top

mobilizes with collections of over US $20 million.

1993


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The first private sector Mutual FundKothari Pioneeris launched, followed

by Birla and Alliance in the following years. Bajaj Capital plays an active role

and is ranked among the top mobilizes for all their schemes.

1995

IDBI and ICICI begin issuing their series of Bonds for retail investors. Bajaj

Capital is the co-manager in all these offerings and consistently ranked among

the top five mobilizes on an all-India basis.

1997

Private sector players lead the revival of Mutual Funds in India through Open-

ended Debt schemes. Bajaj Capital consolidates its position as India's largest

retail distributor of Mutual Funds.

1999

Bajaj Capital begins marketing Life and General Insurance products of LIC and

GIC (through associate firms) in anticipation of opening up of the Insurance

Sector. Bajaj Capital achieves the milestone of becoming the top 'Pension

Scheme' seller in India and launches marketing of GIC's Health Insurance

schemes.

2000

Bajaj Capital implements its vision of being a 'One-stop Financial

Supermarket.' The Company offered all kinds of financial products, through its

Investment Centers. Bajaj Capital offers 'full-service merchant banking'


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Bajaj Capital launches Just Trade, an online Platform for investing in

Equities, Mutual Funds, IPO's.

Our Mission, Aims Objectives

Mission Statement

Bajaj Capital aims to be the most useful, reliable and efficient provider of

Financial Services. It is our continuous Endeavour to be a trustworthy partner

to our clients, helping them protect and grow their wealth, and achieve theirlife goals.

Our Aim

To serve our clients with utmost dedication and integrity so that we

exceed their expectations and build enduring relationships.

To offer unparalleled quality of service through complete knowledge of

products, constant innovation in services and use of the latest

technology.

To always give honest and unbiased financial solutions and earn our

cilent's everlasting trust.

To serve the community by educating individuals on the merits of

investments and in turn help shape a financially responsible citizen.


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CHAPTER 4

OBJECTIVES OF THE STUDY

Primary Objective:

To get a deep insight into the financial planning before investing.

Secondary Objectives:

To find out the investment avenues that is availed by customers.

To probe into the customers knowledge about companies offering life

insurance.

To find out the reasons which pull customers towards financial planning

.


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CHAPTER 5

FINANCIAL PLANNING:-

In general usage, a financial planis a comprehensive evaluation of someone's

current and future financial state by using currently known variables to

predict future cash flows, asset values and withdrawal plans.[1]This often

includes abudget which organizes an individual's finances and sometimes

includes a series of steps or specific goals for spending and savingin the future

. This plan allocates future income to various types ofexpenses,such as rent or

utilities, and also reserves some income for short-term and long-term savings.

A financial plan is sometimes referred to as aninvestment plan, but in personal

finance a financial plan can focus on other specific areas such as risk

management, estates, college, or retirement.

Do you need a financial Plan?

If youre looking to invest, buy a financial product or plan for the longer term,

whether or not you need financial plan will depend on a number of factorssuch as what product you are looking for, how complicated your finances and

personal circumstances are and your short and long-term goals.
https://en.wikipedia.org/wiki/Financial_plan#cite_note-1https://en.wikipedia.org/wiki/Financial_plan#cite_note-1https://en.wikipedia.org/wiki/Financial_plan#cite_note-1https://en.wikipedia.org/wiki/Budgethttps://en.wikipedia.org/wiki/Expensehttps://en.wikipedia.org/wiki/Investmenthttps://en.wikipedia.org/wiki/Investmenthttps://en.wikipedia.org/wiki/Expensehttps://en.wikipedia.org/wiki/Budgethttps://en.wikipedia.org/wiki/Financial_plan#cite_note-1


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THE FIN NCI L PL NNING PROCESS

The financial planning process consists of 6 steps:-

Determine the current financial situation

Develop your financial goals

Identify alternative course of action

Evaluates alternatives

Create and implement your financial action plan

Review and revise financial plan


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3. Financial Planning ensures that the suppliers of funds are easily

investing in companies which exercise financial planning.

4. Financial Planning helps in making growth and expansion programmes

which helps in long-run survival of the company.5. Financial Planning reduces uncertainties with regards to changing

market trends which can be faced easily through enough funds.

6. Financial Planning helps in reducing the uncertainties which can be a

hindrance to growth of the company. This helps in ensuring stability an

d profitability in concern.


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Case study: How Mr

Rams ream Home became a reality

All of us have some or the other aspirations in life beginning from good

education, a well-paid job, a successful career, a beautiful house to live in with

best amenities, a car, travel abroad for leisure and a blissful retired life after

having achieved all.

But amid all these aspirations, our experience shows that most individuals

often put buying a dream home at priority, so that they can live in with their

near and dear ones. But very often, the way to own it prudently is not known

to many. You see, all of us do dream for a big house but rarely an action is

taken to make it a reality. Remember, dreams do turn into a reality for those

who really want to achieve it and strive hard for it.

We recognize that elevated property prices are making this aspiration of yours

a distant dream, but prudent planning is the way to make your dream home a

reality.

Let me explain you this with the help of a case study of one of my relative who

wanted to plan for his dream home but didn't know how to achieve it because

of the limited surplus he had.


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Personal Details

Mr. Ram a 40 year old married individual was staying with his wife and 2 kids

in Mumbai. Since most of his employment opportunities were available in

Mumbai only, he wanted to settle down here for the rest of his life. His salary

income was Rs 1 lakh per month and he was also getting an annual bonus of

Rs 2 lakh. Most of his monthly income was spent on his regular expenses

which included a hefty Rental Expense of Rs 25,000 per month, and at the end

of the month he was able to save just Rs 20,000 (Rs 1,00,000 Income - Rs

80,000 Expenses) for his future financial goals.

Personal Details

Name Ram chatterjee

Age 40 years

Marital Status Married

Kids 2 Kids

City Mumbai

Income (post tax)

Salary Rs 1,00,000 per month

Bonus Rs 2,00,000 per annum

Expenses (per month)

Household Rs 20,000

Lifestyle Rs 10,000

Medical Rs 3,000

Travel Rs 7,000

Kids Rs 15,000

Rent Rs 25,000

Total Rs 80,000


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He did not have any liabilities.

And here was Ram's Aspiration!

He wanted to buy his own flat in Mumbai worth Rs 1 crore but didn't knew

how to fund it as he had surplus of just Rs 20,000 per month.

recommended him the following:

Self-funding vs. Home Loan: Buy a flat in Mumbai of the aforesaid value i.e.worth Rs 1 crore, with Rs 25 lakh self-funding and a home loan of Rs 75 lakh

at 10% per annum rate of interest, with a loan tenure of 20 years; whereby the

Equated Monthly Installment (EMI) amounts to Rs 72,377 .

A) The self-funding of Rs 25 lakhs was funded from following sources:

1. View on Equity Mutual Funds: Equity Mutual Funds worth Rs 5 lakh were

asked to redeem as these were either non-performing funds or did not suithis risk appetite. Redemption proceeds to be utilized for funding the house

purchase.

2. View on Equity Shares:You see, he had invested Rs 10 lakhs in Equity

Shares on his friend's recommendation, but the current value of these was

just Rs 5.50 lakh. Since he did not have time to track these shares,

recommended him to sell these, to fund his house purchase. We also

recommended him not to invest in equity without any researched based

recommendation.

3. View on Debt Mutual Funds:Long term income funds worth Rs 2.5 lakh

were asked to redeem as these are interest rate sensitive funds and did not


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suit his risk appetite. Redemption proceeds to be utilized for funding the

house purchase.

4. Withdrawal from EPF:He was working for last 15 years and had

accumulated Rs 6,50,000 in EPF, so he was eligible to withdraw Rs 4 lakh

from this account to buy a new house.

5. Withdrawal from PPF:He had opened a PPF account 10 years ago and was

eligible to withdraw Rs 4 lakh from this account to buy a new house.

6.Fixed Deposit:

Existing fixed deposit worth Rs 3 lakh were asked to be

utilized to buy a new house.

7. Bonus:He was eligible to get his annual bonus of at least Rs 2 lakh, in next

2 months; so he was asked to keep it to buy a new house.

Self-funding (Rs)

Equity MF 500,000

Equity Shares 550,000

Debt MF 250,000

EPF 400,000

PPF 300,000

FD 300,000

Bonus 200,000

Total 2,500,000


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Mr. Ram will struggle for few years as he will have very limited surplus, but

the next few years will make sure that he has his own house in Mumbai. He

also have an added benefit as EMI will not increase except in case of increase

in interest rate on home loan; whereas his rent was growing at 10% everyyear.

Learning's from this case study and 5 Points to Remember:

1. If you buy your own house then you will save rental expense which will be

available to fund your EMI.

2. Rental expense increases every year while EMI increase only in case of

increase in interest rate which will always be less than increase in growth

rate in expense.

3. If you have a vacant house, then consider giving it on rent for additional

source of income.

4. If possible second source of income from spouse can help you fund for your

goals.

5. Do not allocate your entire surplus for paying EMI as you have to plan for

other financial goals as well.


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Case study: How Mr Mrs Raj planned for their Child Education Marriage

All of us want our kids to have a successful career and a joyful life but

successful career does not come with ease. We all know there is a huge

competition and to ensure successful career, we need to provide quality

education to our children. While we do our best to give our children the best

food, clothing etc. then why not give them the best education. After all

education is the path to success which will make the child financially

independent.

Having similar thought in mind, one of my neighborsMr. & Mrs. Raj wanted

to secure the future of their child, by planning for his education and marriage.

Let's take up their case and see how proper planning can help one plan for

their child's education and marriage.

Personal Details

Name Age IncomeMr. Vivek Raj's

Salary

35

years

Rs 40,000 per

month

Mrs. Soniya Raj's

Salary

30

years

Rs 30,000 per

month

Son 3 years N.A.

ExpensesRs 45,000 per

month

SurplusRs 25,000 per

month

Personal Details

Mr. Raj a 35 year old married individual and his wife whose age was 30 years

had a 3 year old son. Mr. Raj was earning Rs 40,000 per month while his wife


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was earning Rs 30,000 per month, thus having a total family income of Rs

70,000 per month. As their expenses were around Rs 45,000 per month, they

could have a surplus of around Rs 25,000 on a monthly basis.

He had the following assets as depicted in the table below.

Assets

SR No. Type of Assets Amount (Rs)

1 Equity Shares 125,000

2 EPF (Self) 200,000

3 EPF (Spouse) 90,000

4 PPF (Self) 500,000

5 PPF (Spouse) 300,000

6 Residential Flat 3,000,000

7 Physical Gold 1,000,000

8 Cash in Bank (Self) 200,000

9 Cash in Bank (Spouse) 100,000

Total 5,515,000

Assets...

So, you can see that Mr. & Mrs. Raj had total assets worth Rs 55 lakhs, of which

Residential Flat comprises of more than 50% of his total assets. They were

staying in the residential flat so it was not available for planning purpose. Theyhad small amount of investment in equity via Shares and physical gold which

was mostly in the form of gold ornaments of Mrs. Raj. They also had their

individual EPF, PPF and Cash in Bank accounts. The Cash in Bank was mainly

kept for contingency purpose.


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However Mr. & Mrs. Raj did not have any liabilities.

And here was Mr. & Mrs. Raj's Financial Objectives!

They were very concerned about their Son's future. So they wanted to plan for

his graduation at the age of 18 years' worth Rs 8 lakhs, post-graduation at the

age of 21 years' worth Rs 20 lakhs and marriage at the age of 25 years' worth

Rs 15 lakhs. (All costs are current values)

Financial

Goal

Current Cost

(Rs)

Time to Goal

(Years)Future Cost (Rs)

Required Per

Month

Investment (Rs)

Graduation 800,000 15 3,341,799 6,623

Post-

Graduation2,000,000 18 11,119,835 14,527

Marriage 1,500,000 22 12,210,412 9,422

Total 30,573

(Note: Inflation considered at 10% per annum and investment return considered at 12% perannum)

Mr. & Mrs. Raj needed to make a total investment of Rs 30,573 per month to

achieve just these 3 goals, while they had a surplus of Rs 25,000 per month.

They wanted to know how they can plan for their child's goals.

recommended them the following:

1. Graduation Goal:Since Graduation is the highest priority goal, we advised

them to a start a SIP of Rs 6,623 per month. SIP was advised across Equity,Debt & Gold in the allocation of 80%, 10% and 10% respectively for 15

years.

2. Post-Graduation Goal:Post-Graduation is the next priority goal, but the

amount required for this goal was very high. If they were to start a SIP of


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such a high amount, they would have sacrificed on all other financial goals.

So, we advised them to start a SIP of Rs 10,000 per month and increase it by

25% after every 3 years. They could easily do so as their salaries would

increase in future and they can easily increase their investment amount forthis goal as well. SIP was advised across Equity, Debt & Gold in the

allocation of 80%, 10% and 10% respectively for 18 years.

3. Marriage Goal:Marriage was the least priority goal among these 3 goals

and it was difficult for them to start a SIP for this goal immediately. So we

advised them to start a SIP of Rs. 18,500 per month after 7 years and

increase it by 20% after every 3 years. SIP was advised across Equity, Debt

& Gold in the allocation of 80%, 10% and 10% respectively for 15 years.

4.Other Financial Goals:

After planning for the child goals, their total

investment is just Rs 16,623 per month while they had surplus of Rs

25,000 per month. So they can still invest Rs 8,377 (Rs 25,000 - Rs 16,623)

for other financial goals such as retirement, vehicle, vacation or any other

financial goal they might have.

We did not utilize any of their current assets as cash in bank was kept forcontingency purpose, physical gold was mostly gold ornaments and EPF & PPF

account can be dedicated to other financial goals such as retirement.

Even though Mr. & Mrs. Raj thought their surplus amount is insufficient to

fund for their child goals leaving aside all other goals, but proper planning

helped them not only to plan for their child goals but also plan for other

financial goals.

Key learning's from this case study:

1. You should prioritize your goals and plan for them accordingly.


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2. You should factor in the expected rise in future income while planning for

your financial goals.

3. You don't need to plan for all goals immediately; some of them can be

deferred till the time your income increases.

4. If your goals are not achievable even after projecting future increase in

income, then you should review and decrease the amount of your least

priority goals.


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CASE STUDY:How to Restructure Your Liabilities Wisely?

All of us go for loans at some point of time or other in the span of our lifetime.

Some of these loans such as home loan are considered good, because it leads to

creation of an appreciating asset and you also enjoy tax benefit on it. While

other loans such as car loan, credit card loan etc. are considered bad, as they

lead to buying a depreciating asset and may be bad for your personal finances.

In the era of consumerism, even mobile phones, TV, Refrigerator, laptops,

tablets and home theatres, amongst host of other such items are all available

on easy credit - either through EMI facility on credit cards or such teaser

scheme floated by NBFCs. All such luring easy finance options have promoted

consumerism and no wonder malls and electronic shops are seeing good

footfalls.

But then the question is, are these easy finance options (which lure you), good

for your personal finances? Well, to answer that, in most cases no! They end

up damaging your financial health, as very often many get into debt-trap veryquickly, leading to a financial mess.

Same is the case with one of my cousin brother who had almost all the type of

loans and didn't know how to settle these in order to get out of the financial

mess he was in.

Let's take his case as eye-opener for thousands .


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1. Creating at least 3 months of Contingency Reserve.

2. Accumulate and then pay off interest-free hand loan from brother.

3.

Investment for future financial goals.

7.Building a Contingency Reserve:

He had around Rs 55,000 in cash in bank

after paying Rs 15,000 towards Credit Card Loan 1 from Rs 70,000 in cash

in bank initially. Additionally, he already holds Rs 30,000 in FD. So

effectively his total contingency reserve was placed at Rs 85,000 (Rs 55,000

+ Rs 30,000) but we recommended him to increase it to at least 3 months of

expenses (3 months of contingency was advised since he had very limited

surplus otherwise minimum of 6 months of contingency is recommended).You see, since his total expenses including EMIs was Rs 59,860, he was

asked to create a total contingency reserve of Rs 1,80,000. Deficit of Rs

95,000 was to be funded from Rs 5,000 p.m. surplus starting 12thmonth

for next 19 months i.e. till 30 month

8.Payment of Hand Loan from Brother:

Starting from 12thmonth, he was

asked to start a SIP of Rs 3,740 in a liquid fund for 25 months so that he

will have Rs 1 lakh after 3 years from now to pay off interest free hand loan

from brother. (Interest assumed in a Liquid Fund at 6.50% p.a.)

9. Planning for other long term financial goals:The balance surplus of Rs

6,400 from 12th- 30thmonth and Rs 11,400 from 31st- 36thmonth was

recommended to be invested across equity, debt & gold (through the mutual

funds) for other long term financial goals.

His financial planner did not advised him to increase his EMI on home loan as

he was enjoying tax benefit on both - principal as well as interest payment.

Even increase in car loan EMI was not advised because he had very limited

surplus, which if he were to increase his EMI would not have a left any surplus

for him to invest and create wealth to meet his other financial goals.


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2. Does your financial adviser follow a six stage financial planning process?

Yes

No

Unsure

No. of respondents=10

Inference :-

50% of the respondents advisers follow six stage planning process.

33% of the respondents advisers doesnt follow six stage planning process.

17% of the respondents are unsure about it..

3. How often do you meet your financial planner?

Monthly

Quarterly

Question 2

Yes

No

Unsure


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Inference:-

20% of the respondents gross income is in between Rs150000-249999



12. What is your net-worth? (Everything you own, less any debts)

Less than Rs50,000

Rs50,000-Rs249,999

Rs250,000-Rs499,999

Rs500,000-Rs999,999

Rs1,000,000-Rs2,499,999

Rs2,500,000-Rs5,000,000

More than Rs5,000,000

gross annaul income

Rs1-Rs24500

Rs24,501-Rs49,999

Rs50,000-Rs74,999

Rs75,000-Rs99,999

Rs100,000-Rs149,999

Rs150,000-Rs249,999

Rs250000-Rs400000

Rs400001-RS1000000


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Inference:-

10% of the respondents net worth is in between Rs50000-249999

20% of the respondents net worth is in betweenRs250000-499999




13. Are you aware of the following investment options

Tick mark your answer

Investment options Yes No

Savings/FD

Government Schemes(Nsc,Post office, etc)

Shares

InsuranceMutual Funds

Real estate

Others

Net Worth

Less than Rs50,000

Rs50,000-Rs249,999

Rs250,000-Rs499,999

Rs500,000-Rs999,999

Rs1,000,000-Rs2,499,999

Rs2,500,000-Rs5,000,000

More than Rs5,000,000


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SBI Life

Others

16. Are you aware of Unit Linked(Market linked) Insurance Plans (ULIP)

Yes No

0

1

2

3

4

5

6

78

9

Column1

Column2

Column3

ULIP AWARENESS

YES

NO


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CHAPTER 7

CONCLUSION

life insurance is an important form of insurance and essential for every

individual. Life insurance penetration in india is very low as compare to

developed nation where almost all the lives are covered and stage of saturation

has been reached. Customers are the real pillar of the success of life insurance

business and thus its important for insurers to keep their policyholders

satisfied and retained as long as possible and also get new business out of it by

offering need based innovative products. There are many factors which affectcustomers investment decision in life insurance and from the study it has been

concluded that demographic factors of the people play a major and pivotal

role in deciding the purchase of life insurance policies.


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comprehensive study of financial assessment through

Documents