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

BONAFIDE CERTIFICATE

Certified that this project report titled A COMPREHENSIVE STUDY OF

FINANCIAL ASSESSMENT THROUGH FINANCIAL PRODUCTS. is the bonafide
work of SNEHASISH BISWAS (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 GADI
Area manager
BAJAJ CAPITAL LTD.

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

TABLE OF CONTENTS
CHAPTER

CHAPTER NAME

NO.
1

PAGE
NO.

INTRODUCTION

CONCEPT OF LIFE
INSURANCE

CONCEPT OF GENERAL
INSURANCE

FUND

DEPOSITS

CONCEPT OF MUTUAL
CONCEPT OF FIXED
ORIGIN OF

INSURANCE

ORIGIN OF MUTUAL FUNDS

INSURANCE IN INDIA
MUTUAL FUNDS IN
INDIA

12
15

16

STATEMENT OF THE PROBLEM

19

COMPANY PROFILE

20

OBJECTIVE OF THE STUDY

30

FINANCIAL PLANNING

31

THE PLANNING
PROCESS

OBJECTIVES OF
4

32
33

REMARKS

FINANCIAL PLANNING

IMPORTANCE OF

33

CASE STUDY 1

35

CASE STUDY 3

47

FINANCIAL PLANNING

CASE STUDY 2
6

RESULTS & FINDINGS

53

CONCLUSION

69

QUESTIONNAIRE

70

REFERENCES

42

75

CHAPTER 1
INTRODUCTION
1. CONCEPT OF LIFE INSURANCE :Life insurance (or commonly final expense insurance or life assurance,
especially in the Commonwealth) is a contract between an insured (insurance
policy holder) and an insurer or assurer, where the insurer promises to pay a
designated beneficiary a sum of money (the "benefits") in exchange for a
premium, upon the death of the insured person. Depending on the contract,

other events such as terminal illness or critical illness can also trigger
payment. The policy holder typically pays a premium, either regularly or as
one lump sum. Other expenses (such as funeral expenses) can also be included
in the benefits.

Life policies are legal contracts and the terms of the contract describe the

limitations of the insured events. Specific exclusions are often written into the
contract to limit the liability of the insurer; common examples are claims
relating to suicide, fraud, war, riot, and civil commotion.

Life-based contracts tend to fall into two major categories:

Protection policies designed to provide a benefit, typically a lump sum

payment, in the event of specified event. A common form of a protection
policy design is term insurance.

Investment policies where the main objective is to facilitate the growth

of capital by regular or single premiums. Common forms (in the U.S.)

are whole life, universal life, and variable life policies.

2. CONCEPT OF GENERAL INSURANCE:General insurance or non-life insurance policies, including automobile and
homeowners 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 be life insurance. It is called property 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 and London 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, through reinsurance.

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
7

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 Deposits or 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
8

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 interest
earned 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 for fixed 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 in India.

Private or state-owned institutions that can accept fixed deposits, from the

public 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 Hammurabi

granted 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
9

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 compound

interest. 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.

10

In 1759, the Presbyterian Synod of Philadelphia sponsored the first life

insurance corporation in America for the benefit of ministers and their
dependents.

However, it was after 1840 that life insurance really took off in a big way. The
trigger: reducing opposition from religious groups.

The growing years...

The 19th century saw huge developments in the field of insurance, with newer

products being devised to meet the growing needs of urbanization and

industrialization.

In 1835, the infamous New York fire drew people's attention to the need to
provide for sudden and large losses. Two years later, Massachusetts became the
first state to require companies by law to maintain such reserves. The great

Chicago fire of 1871 further emphasized how fires can cause huge losses in
densely populated modern cities. The practice of reinsurance, wherein the

risks are spread among several companies, was devised specifically for such
situations.

There were more offshoots of the process of industrialization. In 1897, the

British government passed the Workmen's Compensation Act, which made it
mandatory for a company to insure its employees against industrial accidents.

With the advent of the automobile, public liability insurance, which first made
its appearance in the 1880s, gained importance and acceptance. In the 19th

century, many societies were founded to insure the life and health of their
members, while fraternal orders provided low-cost, members-only insurance.

11

ORIGIN OF MUTUAL FUNDS

Mutual funds really captured the public's attention in the 1980s and '90s

when mutual fund investment hit record highs and investors saw incredible
returns. However, the idea of pooling assets for investment purposes has been

around for a long time. Here we look at the evolution of this investment
vehicle, from its beginnings in the Netherlands in the 18th century to its

present status as a growing, international industry with fund holdings

accounting for trillions of dollars in the United States alone.

IN THE BEGINING

Historians are uncertain of the origins of investment funds; some cite the
closed-end investment companies launched in the Netherlands in 1822 by

King William I as the first mutual funds, while others point to a Dutch

merchant named Adriaan van Ketwich whose investment trust created in

1774 may have given the king the idea. Ketwich probably theorized that
diversification would increase the appeal of investments to smaller investors

with minimal capital. The name of Ketwich's fund, Eendragt Maakt Magt,
translates to "unity creates strength". The next wave of near-mutual funds
included an investment trust launched in Switzerland in 1849, followed by
similar vehicles created in Scotland in the 1880s.

The idea of pooling resources and spreading risk using closed-end investments
soon took root in Great Britain and France, making its way to the United States

in the 1890s. The Boston Personal Property Trust, formed in 1893, was the first
closed-end fund in the U.S. The creation of the Alexander Fund in Philadelphia
in 1907 was an important step in the evolution toward what we know as the

12

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 first no-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 19 open-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 openend 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

13

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 bear

market 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, the
mutual 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
14

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 and
management 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 in

India. The Life Insurance Corporation of India was set up in 1956 to take over
around 250 life companies.

15

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

historic constitutional 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
16

high savings rate, close to 40% of those who live in metros and Tier I cities
considered such investments to be very risky, whereas 33% of those in Tier II
cities said they did not know how or where to invest in such assets.

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 by Investment

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
1
HDFC Mutual Fund
2
Reliance Mutual Fund
3
ICICI Prudential Mutual Fund
4
Birla Sun Life Mutual Fund
5
UTI Mutual Fund
6
SBI Mutual Fund
7
Franklin Templeton Mutual Fund
8
IDFC Mutual Fund
9
Kotak Mahindra Mutual Fund
10
DSP BlackRock Mutual Fund
11
Tata Mutual Fund
12
Deutsche Mutual Fund
17

Average AUM %
1,034.42
12.70%
952.28
11.69%
853.03
10.48%
773.44
9.50%
700.57
8.60%
595.58
7.31%
448.12
5.50%
396.65
4.87%
352.99
4.34%
304.86
3.74%
179.66
2.21%
170.59
2.10%

Sr No
Mutual Fund Name
13
L&T Mutual Fund
14
Sundaram Mutual Fund
15
JPMorgan Mutual Fund
16
Religare Invesco Mutual Fund
17
Axis Mutual Fund
18
LIC NOMURA Mutual Fund
19
Canara Robeco Mutual Fund
20
HSBC Mutual Fund
21
JM Financial Mutual Fund
22
Baroda Pioneer Mutual Fund
23
IDBI Mutual Fund
24
PRINCIPAL Mutual Fund
25
Goldman Sachs Mutual Fund
26
BNP Paribas Mutual Fund
27
Morgan Stanley Mutual Fund
28
Peerless Mutual Fund
29
Taurus Mutual Fund
30
Pramerica Mutual Fund
31
Union KBC Mutual Fund
32
Indiabulls Mutual Fund
33
ING Mutual Fund
34
PineBridge Mutual Fund
35
BOI AXA Mutual Fund
36
Mirae Asset Mutual Fund
37
Motilal Oswal Mutual Fund
38
Quantum Mutual Fund
39
PPFAS Mutual Fund
40
Escorts Mutual Fund
41
Sahara Mutual Fund
42
IIFL Mutual Fund
43
Edelweiss Mutual Fund
44
Daiwa Mutual Fund
45
IL&FS Mutual Fund (IDF)
46
Shriram Mutual Fund
47
SREI Mutual Fund (IDF)
Grand Total

18

Average AUM %
150.79
1.85%
139.47
1.71%
132.57
1.63%
125.12
1.54%
123.18
1.51%
79.76
0.98%
76.16
0.94%
67.18
0.83%
62.44
0.77%
52.63
0.65%
47.71
0.59%
43.00
0.53%
41.49
0.51%
35.38
0.43%
32.90
0.40%
28.35
0.35%
27.32
0.34%
21.66
0.27%
19.80
0.24%
16.06
0.20%
11.05
0.14%
11.03
0.14%
10.82
0.13%
5.08
0.06%
4.37
0.05%
3.15
0.04%
2.67
0.03%
2.52
0.03%
2.33
0.03%
2.07
0.03%
1.94
0.02%
0.51
0.01%
0.00%
0.00%
0.00%
100.0%
8,142.68

CHAPTER 2
STATEMENT OF THE PROBLEM
The project lays emphasis on the need for financial planning while considering
an investment or wealth creation. The study also focuses on the factors that
attract customers toward financial planning before investing.

To get a deep insight into the research area, the customers comfort level with
regard to the some other factors associated with the financial planning was
also looked at.

19

CHAPTER 3
COMPANY PROFILE
(BAJAJ CAPITAL)
Introduction to Bajaj Capital
Bajaj Capital Limited ("Bajaj Capital") is India's premier "Investment Services"
Company, with nearly 50 years of experience in helping people protect and
grow their wealth. We've helped to create more millionaires than any other

firm in India. But it's our deep personal relationships with clients that truly sets
us apart.

No other firm can match the depth of our experience and our dedication to

personal service. The markets may fluctuate, but our dependability never does.
Bajaj Capital has been granted the Certificate of Registration (CoR) by the
Securities and Exchange Board of India (SEBI) to carry on the business of

Merchant Bankers (Cat-I) [INM000010544]; Underwriter [INU000001132];

Stock Broker, as Trading Member of BSE Ltd (Cash Segment) [INZ000007732];

Depository Participant of NSDL [IN-DP-NSDL-267-2006]. Further, Bajaj
Capital has been granted the CoR by AMFI [ARN 0010], to carry on the

business of distribution of mutual funds and has also been granted the CoR

[Regn.No.03310 (currently under renewal) to act as Point of Presence (PoP)

by the Pension Fund Regulatory Authority for the NPS Schemes.
Our bouquet of services includes:
Personalized Investment Services: requires creating a customized 'snapshot'

using our proprietary 360 degree financial assessment tool, at no extra charge.

20

360 Degree Financial Assessment Tool

Our proprietary 360 Financial 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.
iii) Efficient Execution:

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.

Incredible Range of Financial Products:

As distributors of financial products, we are truly unbiased in scheme selection

and help you in efficient execution of your transactions.
Hassle-free administration:

Timely updates, regular portfolio reviews and 24x7 online call centre support
to keep your investments on track.

21

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.
22

 Our Group Company(ies) include, Bajaj Capital Insurance Broking

Limited, is an IRDA-licensed Composite Insurance Broker; Just Trade
Securities Limited, member of NSE and BSE; Bajaj Capital Investment
Centre Limited, which facilitates realty solutions.

Serving over 10 lakh clients.

Bajaj Capital Group Journey so far

Bajaj Capital is among the pioneers in investment services industry in India.
For nearly five decades now, Bajaj Capital has been serving Indian investors

realizing their aspirations by helping them create wealth and giving shape to
the vision of its founder-chairman, Mr. K.K. Bajaj.

Bajaj Capital has contributed to the growth of the Indian Capital Market at
every step. In 1965, we were the first to innovate the Companies Fixed Deposit.
Today, we are playing an active role in the growth of the Indian Mutual Fund
industry.

Here is a glimpse of our journey through the years.

1964
Bajaj Capital sets up its first Investment Centre in New Delhi to guide
individual investors on where, when and how to invest.
23

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 instrument the 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
24

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 ranks
of 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

25

The first private sector Mutual Fund Kothari Pioneer is 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 Openended 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'
26

including structuring, management and marketing of Capital issues. Bajaj

Capital reinvents 'Financial Planning' in its international sense and upgrades
its entire team of Investment Experts into Financial Planners
2002
The Company focuses on creating investor awareness for proper Financial
Planning and need-based investing. To achieve this goal, the International
College of Financial Planning, was set up to impart education in Financial

Planning. The graduates of this institute become Certified Financial Planners

(CFPs), a coveted professional qualification.

2004
Bajaj Capital obtains the All India Insurance Broking License. Simultaneously, a
series of wealth creation seminars are launched all over the country, making
Bajaj Capital a household name.

2005
Bajaj Capital launches its software-based programme aimed at encouraging
scientific and holistic investing.

2007
Bajaj Capital launches Stock Broking and Depository (Demat) Services (in one
of its group company).

2008
27

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 their
life 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.

28

To create value for all stake holders by ensuring profitable growth.

To build an amicable environment that accords respect to every

individual and permits their personal growth.

To utilize the power of teamwork to function as a family and build a

seamless organization.

Vision Statement
Our vision is to be the most preferred Investment Services Company in India

by providing clients with informed choices of lasting value, protect and grow
wealth for them, to make their tomorrow better than today.

29

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
.

30

CHAPTER 5
FINANCIAL PLANNING:In general usage, a financial plan is 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 a budget which organizes an individual's finances and sometimes

includes a series of steps or specific goals for spending and saving in the future
. This plan allocates future income to various types of expenses, 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 an investment 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 factors

such as what product you are looking for, how complicated your finances and
personal circumstances are and your short and long-term goals.

31

THE FINANCIAL PLANNING PROCESS

The financial planning process consists of 6 steps:

32

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

Objectives of Financial Planning

Financial Planning has got many objectives to look forward to:
a. Determining capital requirements- This will depend upon factors like

cost of current and fixed assets, promotional expenses and long- range
planning. Capital requirements have to be looked with both aspects:
short- term and long- term requirements.

b. Determining capital structure- The capital structure is the composition

of capital, i.e., the relative kind and proportion of capital required in the
business. This includes decisions of debt- equity ratio- both short-term
and long- term.

c. Framing financial policies with regards to cash control, lending,

borrowings, etc.

d. A finance manager ensures that the scarce financial resources are

maximally utilized in the best possible manner at least cost in order to

get maximum returns on investment.

Importance of Financial Planning

Financial Planning is process of framing objectives, policies, procedures,
programmes and budgets regarding the financial activities of a concern. This
ensures effective and adequate financial and investment policies. The
importance can be outlined as-

1. Adequate funds have to be ensured.

2. Financial Planning helps in ensuring a reasonable balance between

outflow and inflow of funds so that stability is maintained.

33

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.

34

Case study: How Mr Rams Dream 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.

35

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

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.

36

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

Assets
S.No.

Type of Assets

Amount (Rs.)

Equity Mutual Funds

1,500,000

Equity Shares

550,000

Debt Mutual Funds

700,000

EPF

650,000

PPF

800,000

FD

300,000

Car

475,000

Residential Flat (Delhi)

Physical Gold

900,000

10

Cash in Bank

450,000

6,500,000

Total

12,825,000

Assets...

So, you can see that Mr. Ram had total assets worth Rs 1.28 crore, of which
Residential Flat in Delhi comprises 50% of his total assets. His residential flat in

Delhi was vacant and since it was inherited by him from his father he did not
want to sell it. He had some investments in Equity via Equity Mutual Funds and

Equity Shares which he had accumulated over the years. His investment in

debt comprised of Debt Mutual Funds, EPF, PPF and FD. EPF was started when
he started earning at the age of 25 years and PPF was started 10 years ago. He

also had a car which he used for commuting and some investment in physical
gold, which were mostly gold ornaments of his wife. He was also maintaining
some

37

amount

in

cash

for

his

contingency

purpose.

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 suit
his 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

38

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

39

2,500,000

B) EMI of Rs 72,377 was funded from following sources:

1. Existing Rent: Buying a new house saved him Rs 25,000, which he was

currently paying for a rented house. This amount was asked to be utilized
for partially paying EMI on his new home loan.

2. Residential Flat (Delhi): Residential flat in Delhi was lying vacant, so we

asked him to put it on rent. He did that and it fetched him Rs 15,000 per
month as rental income.

3. Second Source of Income: His wife had left job few years back but was ready
to work in case of requirement. So we asked her to start working for next
few years till the time Mr. Ram salary was sufficient to fund EMI. This
second source of income contributed Rs 22,377 per month.

4. Surplus: He had surplus of Rs 20,000 per month but all of it could not be

utilized for payment of EMI as he had to invest for other financial goals as
well. So we advised him to divert Rs 10,000 from the surplus for the
payment of EMI.

EMI funding (Rs)

Rent

25,000

Rent from Residential Flat in Delhi

15,000

Wife

22,377

Surplus

10,000
Total

72,377

So the dream home which looked impossible for Mr. Ram to achieve with a
surplus of just Rs 20,000 became reality with prudently planning and some
quality advice given to him.

40

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% every
year.

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.

41

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 neighbors Mr. & 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
Mr. Vivek Raj's
Salary

Age
35
years

Income
Rs 40,000 per
month

Mrs. Soniya Raj's

Salary

30
years

Rs 30,000 per
month

Son

3 years N.A.

Expenses

Rs 45,000 per
month

Surplus

Rs 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
42

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)

Equity Shares

125,000

EPF (Self)

200,000

EPF (Spouse)

PPF (Self)

500,000

PPF (Spouse)

300,000

Residential Flat

3,000,000

Physical Gold

1,000,000

Cash in Bank (Self)

200,000

Cash in Bank (Spouse)

100,000

Total

90,000

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. They
had 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.
43

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
Post2,000,000
18
11,119,835
14,527
Graduation
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% per
annum)

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

44

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 for
this 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 for

contingency 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.
45

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.

46

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 very
quickly, 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 .

47

Name
Age
Marital Status
Income
Expenses (other than
EMIs)

Personal Details
Raghu Kumar Roy
32 years
Married
Rs 75,000 per month.
Rs 40,000 per month.

Personal Details

Mr. Raghu a 32 year old married individual was earning Rs 75,000 p.m. while
his expenses were Rs 40,000 p.m. Please note that his expenses did not include
EMI for his various loans. So he had surplus of Rs 35,000 p.m. out of which he
had to service his EMIs and invest for his future financial goals.

He had the following assets and liabilities as depicted in the table below.
Assets

Liabilities
Outstanding Interest
Amount
No. Type of Assets
Type of Loan Amount
Rate
(Rs)
(Rs)
(%)
Equity Mutual
Funds
2 EPF
3 PPF
1

75,000 Home Loan

100,000 Car Loan

18,000 Personal Loan
Credit Card
4 FD
30,000
Loan 1
Credit Card
5 Residential Flat 2,500,000
Loan 2
Hand Loan
6 Cash in Bank
70,000
(Brother)
Total
2,793,000

48

Pending
EMIs
(Months)

EMI
(Rs)

1,200,000 10.50%

180

13,265

200,000 11.50%
150,000 14.00%

36
18

6,595
9,287

40,000 30.00%

12

3,899

50,000 36.00%

6,422

100,000
1,740,000

0.00%

39,468

Assets...

So, you can see that Mr. Raghu had very few assets totaling to Rs 27.93 lakhs
out of which Residential Flat comprises 90% of his total assets. Since he is

staying in this flat, it could not be sold. His investments in EPF and PPF could
not be liquidated and he is maintaining some amount of cash and Fixed
Deposits (FDs) for contingency purpose.
Liabilities...

As far as liabilities are concerned, Mr. Raghu had several of them, of which
Home Loan was taken for his residential flat (which he is currently self-

occupying). He had also taken a personal loan for furnishing this very house
and the rate of interest which he was paying on this loan is at 14% p.a. He
bought a small car on loan for which he was paying interest at the rate of

11.50% p.a. His credit card loans led by his impulsive buying were carrying a

worryingly high interest rate of 30.00% p.a. and 36.00% p.a. He had also taken
an interest-free hand loan from his brother for the down payment of his flat
which can be repaid anytime within next 3 years
And here was Raghu's Concern!

He had a surplus of just Rs 35,000 p.m. while he had total EMIs of Rs 39,468.

So how does he manage his cash flows to pay-off liabilities and which liability
need to be settled first.

recommended him to do the following:

1. Credit Card Trap: Do not make any further impulsive buying on credit
cards or otherwise.
2. Avoidable Expenses: Avoid unnecessary expenses such as dinning out and
movies at least till the time he gets out of this financial mess.

49

3. View on Equity Mutual Funds: Equity Mutual Funds worth Rs 75,000 which
had been invested in thematic and sectorial funds were asked to be

redeemed. He was also asked not to further invest in such funds as these are
high risk investment proposition and such funds perform only when their
underlying respective sectors are doing well.

4. Payment of Credit Card Loan 2: First pay-off Credit Card Loan 2 of Rs

50,000 as this had the highest rate of interest of 36% p.a. out of redemption
proceeds of Equity Mutual Funds.

5. Payment of Credit Card Loan 1: Secondly pay-off Credit Card Loan 1 of Rs

40,000 as this had the next highest rate of interest of 30% p.a. This needed
to be paid out of balance of Rs 25,000 (Rs 75,000 total redemption value -

Rs 50,000 paid for credit card loan 1) from redemption proceeds of Equity
Mutual Funds and Rs 15,000 from Cash in Bank.

6. Payment of Personal Loan: Bear a higher EMI of Rs. 15,000 p.m. on Personal
Loan carrying the rate of interest of 14% p.a. Increasing the EMI ensured
that personal loan will be paid off within next 11 months rather than

keeping it pending for 18 months (as per his earlier liability structure). By
doing so, he was able to save interest for 7 months at least.
And what did we achieve...
In next 11 months all his high interest rate liabilities were paid-off and his

total EMIs came down from Rs 39,468 to Rs 19,860, leaving a surplus of Rs

15,140 p.m. (Rs. 35,000 total Surplus after all expenses but before EMIs Rs. 19860 total EMIs) in his hands after paying all his expenses including
the EMIs.

The surplus of Rs 15,140 p.m. was asked to be utilized for the following:
50

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 12th month
for next 19 months i.e. till 30 month

8. Payment of Hand Loan from Brother: Starting from 12th month, 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 - 30th month and Rs 11,400 from 31st - 36th month 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.
51

Learning's from this case study and 5 Points to Remember while taking loans:
1. Avoid taking loans for depreciating assets.
2. Your total EMIs should never be more than 40% of your monthly salary.

This is because in case of increase in interest rates your EMIs will be further
increased which will negatively affect your cash flows.

3. Never go for credit card loans as the rate of interest charged on it, is the
highest.

4. Avoid getting lured to easy finance options available through credit card
EMIs or teaser schemes floated by NBFCs, as this might lead to impulsive
buying.

5. Rate of interest charged on personal loan is high, so try to avoid it until and
unless it is inevitable.

52

CHAPTER 6
RESULTS AND FINDINGS
1. Do you currently have a financial adviser/financial planner?
Yes
No
No. of respondents=10

Question 1

Yes
No

Inference :60% of the respondents have financial planner

40% of the respondents doesnt have financial planner..

53

2. Does your financial adviser follow a six stage financial planning process?
Yes
No
Unsure
No. of respondents=10

Question 2

Yes
No
Unsure

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
54

Every 6 months
Annually
Less frequently
No. of respondents=10

Question 3

Monthly
Quarterly
Every 6 months
Annaully
less frequently

Inference :0% respondents visit there financial planner monthly

17% respondents visit there financial planner quarterly
33% respondents visit there financial planner every six months
17% respondents visit there financial planner annually
33% respondents visit there financial planner less frequently

55

4.The six stages of a financial planning process are listed below. Please state how useful
each of these stages are to you.
A. Establish your short, medium and long term goals in life

B. Work out what assets and liabilities you have

C. Analyze & evaluate your financial status

D. Develop your plan

E. Implement your plan

Monitor your plan and make necessary adjustments by reviews

No. of respondents=10
6
5
4

NO USE
SLIGHTLY USEFUL

USEFUL
2

MORE USEFUL
VERY USEFUL

1
0
Category Category Category Category Category Category
A
B
C
D
E
F

56

5.How much would you be prepared to pay for the preparation of a financial plan?
nil
Rs1-Rs499
Rs500-Rs999
Rs1, 000-Rs1, 999
Rs2, 000-Rs2, 999
Rs3, 000-Rs5, 000
More than Rs5, 000
No.of respondents=10

Question 5

nil
1-499
500-999
1000-1999
2000-2999
3000-5000
more than 5000

Inference:10% respondents wants to pay between Rs 1-499

57

40% respondents wants to pay between Rs 500-999

20% respondents wants to pay between Rs 1000-1999
20% respondents wants to pay between Rs 2000-2999
0% respondents wants to pay between Rs 3000-5000
10% respondents wants to pay more than Rs 5000
6.What is your gender?
Male
Female
No. of respondents=10

gender

Male
Female

Inference:80% respondents are male

20% respondents are female
7. What is your age?
20-25
25-35
58

36-45
46-55
56-65
Over 65

Age
20-25
25-35
36-45
46-55
56-65
65 above

Inference:20% of the respondents are between 20-25 years

20% of the respondents are between 25-35 years
10% of the respondents are between 36-45 years
40% of the respondents are between 46-55 years
10% of the respondents are between 56-65 years
8.What is your marital status?
Single
Married/civil partnership

59

Living with partner

Divorced
Widowed

Maritalstatus
Single
Married
Living with partner
Divorced
Widowed

Inference:20% of the respondents are single

80% of the respondents are married
9. Do you have children?
Yes
No

having children
Yes
No

60

Inference:70% of the respondents have children

30% of the respondents doesnt have children

10. What is your highest level of qualifications attained?

None
O levels/GCSE
A level
Undergraduate degree
Postgraduate degree
Technical/professional qualifications

Level of qualification

O level/GSCE
A level
Undergraduate
postgraduate
professional qualification

Inference:-

61

30% of the respondents are undergraduate

50% of the respondents are postgraduate
20% of the respondents have professional Qualification
11.What is the level of your gross annual income?
Rs1-Rs24,500
Rs24,501-Rs49,999
Rs50,000-Rs74,999
Rs75,000-Rs99,999
Rs100,000-Rs149,999
Rs150,000-Rs249,999
Rs250000-Rs400000
Rs400001-RS1000000

62

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

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

60% of the respondents gross income is in between Rs250000-400000
20% of the respondents gross income is in between Rs400001-1000000
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

63

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

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

20% of the respondents net worth is in betweenRs250000-499999
40% of the respondents net worth is in betweenRs500000-999999
20% of the respondents net worth is in betweenRs1000000-2499999
10% of the respondents net worth is in betweenRs2500000-5000000
13. Are you aware of the following investment options
Investment options
Savings/FD
Government Schemes(Nsc,Post office, etc)
Shares
Insurance
Mutual Funds
Real estate
Others

64

Tick mark your answer

Yes
No

10
9
8
7
6
5
4
3
2
1
0

yes
no

No. of respondents=10

14. Have you invested in any of the following investment schemes

Investment options
Savings/FD
Government Schemes(Nsc,Post office, etc)
Shares
Insurance
Mutual Funds
Real estate
Others

65

Tick mark

12
10
8
6

Series 1

Column1

Column2

15. When you think of Life Insurance, which company comes to your mind
LIC

ICICI Prudential

HDFC Standard

Birla Sunlife

Aviva

TATA AIG

ING Vysya Life AMP Sanmar

Max New York Life

Allianz Bajaj

Met life

SBI life

Others, if any______________

Life Insurance Company No. of respondents

LIC

ICICI Prudential

HDFC Standard
Birla Sunlife
Aviva
TATA AIG
ING Vysya Life
AMP Sanmar
Allianz Bajaj
Max New York Life
Met Life
66

SBI Life
Others
9
8
7
6
5
4

Column1

Column2

Column3

1
0

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

No

ULIP AWARENESS

YES
NO

67

17. If yes, how did you come to know about market-linked plans
Newspapers/Magazines
Agents/Advisors

Advertisements

Friends/Relatives

Others_________________

No. of respondents=10
Source
Newspapers/Magazines
Advertisements
Friends/Relatives
Agents/Advisors
Others

No. of respondents
2
2
6

No. of respondents
Newspapers/Magaz
ines
Advertisements
Friends/Relatives
Agents/Advisors

68

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 affect

customers 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.

69

Questionnaire
Name:
Occupation:
Self employed
Retired/pensioner

Salaried

Housewife

Others ______________

Annual Income:
< 1 lac

1 lac 1.5 lacs

2.5 lacs 5 lacs

Above 5 lacs

1.5 lacs 2.5 lacs

1. Are you aware of the following investment options

Investment options

Tick mark your answer

Yes
No

Savings/FD
Government Schemes(Nsc,Post office, etc)
Shares
Insurance
Mutual Funds
Real estate
Others
2. Have you invested in any of the following investment schemes
Investment options
Savings/FD
Government Schemes(Nsc,Post office, etc)
Shares
Insurance
Mutual Funds
Real estate
Others
70

Tick mark

3.When you think of life insurance ,which company comes to your mind..

LIC

ICICI Prudential

HDFC Standard

Birla Sunlife

Aviva

TATA AIG

ING Vysya Life AMP Sanmar

Max New York Life

Allianz Bajaj

Met life

SBI life

Others, if any______________

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

Yes

No

5. If yes, how did you come to know about market-linked plans

Newspapers/Magazines
Agents/Advisors

Advertisements

Friends/Relatives

Others_________________

6. Do you currently have a financial adviser/financial planner?

Yes
No

Does your financial adviser follow a six stage financial planning

7. process?
Yes
No
Unsure

8. How often do you meet your financial planner?

Monthly
Quarterly
Every 6 months

71

9.The six stages of a financial planning process are listed below. Please state how useful each of
these stages are to you.
Of no Slightly Useful
More
Very
use
useful
useful
useful
Establish your short, medium and long term
goals in life
Work out what assets and liabilities you
have
Analyse & evaluate your financial status
Develop your plan
Implement your plan
Monitor your plan and make necessary
adjustments by reviews

10. How much would you be prepared to pay for the preparation of a financial plan?
nil 1-499
500-999
1,000-1,999
2,000-2,999
3,000-5,000
More than 5,000

72

11. How often do you expect to meet your financial planner?

Monthly
Quarterly Every
6 months
Annually
Less frequently
12. What is your gender?
Male
Female
13. What is your age?
20-25
25-35
36-45
46-55
56-65
Over 65
14. What is your marital status?
Single
Married/civil
partnership Living with
partner Divorced
Widowed
15. Do you have children?
Yes
No
16. Are your children financially dependent upon you?
Yes
No
17. What is your highest level of qualifications attained?
None
O levels/GCSE
A levels
Undergraduate degree Postgraduate
degree Technical/professional
qualifications

73

18.What is the level of your gross annual income?

Rs1-Rs24,500
Rs24,501-Rs49,999
Rs50,000-Rs74,999
Rs75,000-Rs99,999
Rs100,000-Rs149,999
Rs150,000-Rs249,999
Rs250000-Rs400000
Rs400001-RS1000000
19. 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

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REFERENCE
Books:

IC 33 Life Insurance from Insurance Institute of India, JUNE 2004

Research Methodology by C R Kothari

The new life insurance investment advisor, Baldwin & Ben G, Probus
Pub. Co

Life Insurance Suitability, Dearborn Financial Publishing

Insurance in India Changing Policies and Emerging Opportunities, P S

Palande, R S Shah & M L Lunawat

Websites:

http://www.banknetindia.com/finance/

http://www.bimaonline.com/

http://www.irdaindia.org/

http://iciciprulife.com

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