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How Open Banking could be used in The Pensions Industry

Open Banking is one of the modern methods adopted by the banking industry wherein third-party services providers are involved in payment and financial services. These service providers can offer their services by accessing data from banks and FIs using APIs or application programming interfaces. This form of banking is gaining popularity as it facilitates faster and more secure transactions, is remotely available, and can be accessed from across the world.  

Open Banking has been a part of the disruptive technology culture that has hit the financial service industry. As it puts the entire control in the hands of the consumer, it is more powerful than intended. The fact that open banking helps create value add-ons, for example understanding consumer buying habits and their financial situation to empower customers to make better decisions and budget optimally 

This article will talk of how open banking can help the pensions industry. It is imperative to say that the technology can be used by the industry but the responsibility of using it is completely on the players of the industry.

What is Pension?  

Before we explore how open banking is and can make a difference to the pensions industry, let us understand what a pension fund is. It is a fund where capital is accumulated so that it can be paid out to employees on retirement at the end of their careers as a pension.  

Here are the ways that Open Banking can be used in the pensions industry:  

  1. Open Banking is helping the pension industry go paperless.

    Open banking is a technology that helps makes the countless back-office processes related to opening pension accounts a hassle-free affair. Part of it is because customers can use their phones to open their pension accounts without the need to involve papers and documents. Take the case of Bank of India which has recently joined hands with the Provident Fund Regulatory and Development Authority (PFRDA), the pension fund regulator in India that enable customers to use their phones to open their National Pension System or NPS accounts. With the help of the third-party app, customers can scan a QR code that will take them directly to the homepage of NPS. All they need to fill in is their Aadhaar details and their photos and other details will automatically be updated from Digi Locker.  

  1. Open banking makes payments and contributions a simple process.

    Customers who need to have their payments initiated can take the help of the pension management app without leaving the app, they can select the concerned bank from the list. The app then directs the customer to the banking service provider’s app. The need for manual presence or transaction is completely removed which makes it all very convenient. Customers also are spared from queuing up at banks for depositing money in their pension accounts. Customers can also choose to automate their savings. Open Banking analyses the balance in the bank account of the customer every month and if there is any money left, it is automatically transferred to the pensions account. It works like auto-enrolment with the objective that all concerned benefit from pension schemes.   

  1. Account Information Services  

    Open Banking helps customers have a better view of their financial standing. It helps them get valuable insights with all the consolidated information in one place. This is done through AIS or Account Information Services. AIS simply integrates banking apps and other financial services apps so that customers get a holistic view of their financial condition in one go. This means that they can see the balance in their pension account live and in real-time.   

  1. Keeping a track of old pensions  

    When customers change jobs, they can very well lose track of their old pension funds and accounts. But with the help of this new technology, it is possible to consolidate all the pension funds and stay informed. This means that users are in control as they have information not just about the pensions in their existing workplace but also all the old pension accounts. They can initiate the transfer of all the old pensions to a single account – that of the present employer.   

Users no longer need to remember the pension policy numbers or the old employer/provider’s name and other details. The entire information is available in the apps thanks to open technology. The transfer of pension funds also becomes faster for all the stakeholders including pension providers. It also facilitates quicker processing time for providers as customers no longer need to engage with the customer service department to source information about their pension account and other details. This leaves them more time to focus on processing pension transfers and disbursements.   

Conclusion  

Open Banking has evolved pretty fast in the last couple of years. In India, 2021 can rightly be called the ‘Year of Open Banking.’ Even as Banking-as-a-Service gained momentum in the country, most financial institutions including banks and pension providers are gradually adopting this new-age technology to optimize their services.   

 

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Why is foreign Private capital still betting on India?

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Impact of IT on Banking System  

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8 things you should know about Fintech

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Will Metaverse Change Our Life? Is that the Future Of Technology?

‘Metaverse’ has suddenly become a buzzword. What is this new technological regime that has the likes of Mark Zuckerberg and Satya Nadella promoting and propagating it at public events? How different is this 3D universe going to be from the cyberspace that we are so accustomed to? And, why is it being heralded as the technology of the future?

This article will answer a few of these questions giving clarity on what Metaverse is capable of.

What is Metaverse?

The metaverse is an alternate virtual reality universe having shared 3D spaces where people can attend virtual events and interact with one another. In the metaverse, people can build great architectural structures, host events, and get a good income as well. The metaverse is the future place for social engagements, and business meetings, giving users the freedom to create anything they want.

The metaverse is a concept of a persistent, online, 3D universe combining various virtual spaces. It can be imagined as a future iteration of the internet. With metaverse, people can work, meet, play, and socialize together in these 3D spaces.

Now the metaverse is changing our lives in a much greater and more impactful way. In this blog, we will discuss how Metaverse will affect business, communication, education, entertainment, gaming, and travel, among many other industries. Below is a list of some of the ways the metaverse will affect our lives, and what the future of the metaverse looks like in each industry.

Business

Advanced technologies like video calling, remote conferencing, and online team collaboration tools have made it possible for people to work together in real-time regardless without connecting physically. Metaverse has the power to take all of this to another level notches higher than how things work in the present day. For example:

  • Remote working, as we know it today, will be jolted with mixed reality as VR and AR are stretched into the metaverse realm to offer physical-world experiences. For example, you can meet colleagues, peers, and clients, shake hands with them, and feel the grip of the handshake as if you are in the real world, even when you are miles away from each other.
  • Develop stronger bonds and team environments even if you are connected remotely.
  • Working in the same virtual shared space with one another when the location does not matter.
  • Helps increase overall productivity.
  • Lowers or eliminates business-related travel expenses
  • The metaverse holds the promise of offering a unique way for sellers and buyers to connect. For example, Instagram shopping can become an even more immersive experience as buyers can pick products in the physical world or virtual world simultaneously. It means improved business opportunities for sellers.

Moreover, metaverse lets you work in any kind of setting. For instance, suppose you want to work from some hill station, the metaverse will change the setting on demand. Then, once you are done with a big project, you can instantly teleport back to showcase your work to others.

Banking

Metaverse is all poised to add a touch of emotions to the banking industry. Typically, banks are thought to be pretty disconnected. But, this new 3D space is going to change that. It will bring in an element of humanity to FIs strengthening customer relationships. Banks can target the young tech-savvy generation with their virtual branches that can be visited by customers in the Metaverse space.

Not just that, Metaverse will facilitate the creation of new service points. For example, virtual ATMs from where customers can withdraw money. They can touch base and speak with the avatars of their financial advisors, take loans against cryptocurrencies, and more. The new world has a lot of untapped factors that the industry can dive into.

Communication

The metaverse is bringing significant changes in transforming the world of communication by:

  • Letting you interact with anyone from all over the world.
  • You can experience others’ facial expressions and body language
  • You can create an online identity for yourself through our own avatar
  • You can enjoy events together with others irrespective of whether the group is in the real or virtual world. 

Education

In the future, virtual worlds will be the cornerstone of the metaverse. The metaverse will revamp the entire education system by:

  • Allowing the learner to be present in a class or learning ecosystem in a mixed reality model where you have a real-life experience of the things you are studying. Just imagine if you are learning about the dinosaurs, and how you would feel if you could actually be present in the same environment as the dinosaurs.
  • Giving students practical experience
  • Letting them learn from anywhere
  • Lowering the overall cost and entrance fees
  •  

What is the Future of Metaverse?

There are three possible outcomes of the metaverse in the future. 

The first possibility talks about the metaverse specializing in things it is good at but never really reaching the status of a general-purpose platform. In this case, metaverse exists as a fragmented marketplace but never as an integrated solution in the user’s life.

The second scenario is that there could be multiple metaverses with only a few big names dominating the scene. And the third scenario could be where the metaverse becomes a part of our daily life with the physical and the virtual world seamlessly integrated.
it is in its nascent stage at the moment and it is difficult to predict which way metaverse will actually go. But a lot of it will depend on the following factors:

  • The level of integration and standardization.
  • The kind of market leaders that come up or the level of competition in this gamut.
  • How intuitive and user-friendly is the user interface?
  • What role does the government play in regulating the content and conduct of the players?
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New Fintech Cybersecurity To keep BFSI Sector Safe

In the world of digitization, everything is just a few clicks away from us. But at the same time, it has become a cause of concern for businesses as they have to deal with increased cyber-attacks. Among various industries getting targeted by cyber-attacks, BFSI (Banking, Financial Service, and Insurance) is no exception to it.

Since the BFSI sector has the most crucial data, so they always remain the most obvious target among the hackers and that is why security must be prioritize. Over the last few years, there has been a significant surge in cybercrimes due to the establishment of more online businesses and due to shifting to the cloud platform.

Thus, it becomes more important for BFSI organizations to adopt a comprehensive security strategy to deal with ongoing cybercrimes. Staying updated about the latest cybersecurity trends for BSFI would surely help a lot. But before talking about the latest trends, let’s understand the kind of threats faced by the Fintech sector.

Cybersecurity concerns- The main concern in FinTech Sector

Data security in FinTech is the major concern among the majority of the businesses. As per the reports, capital market firms and banks spend almost millions of amount each year to improve the cybersecurity of their business.

Cyber hackers can exploit system weaknesses and access crucial data and use the same for financial fraud and data theft. And the worst part is that most companies come to know about the attacks when it’s too late. So, it is important to reach out before something big happens and destroys the years of reputation of your business in just a single day.

Proactive cybersecurity solutions facilitate Fintech businesses to lower the overall risk linked to their online business.

Kinds of threats in the Fintech sector

With cybersecurity being quite a challenging task, the chances of mistakes are higher high, creating ample opportunities for criminals. Some of the common cybersecurity threats for BFSI sector include:

·       Malware

·       False identity phishing

·       Application data leaks

·       Money laundering

·       Identity theft

Let’s discuss some of the Banking, Financial Service, and Insurance (BFSI) Cybersecurity Trends that will help keep the BFSI sector safe.

Some effective Cybersecurity Solutions in Fintech

There are several effective practices that can be used to build a good Fintech cybersecurity solution:

Data encryption

Encryption ensures better protection for digital information. It is conducted with the help of various algorithms like 3DES or RSA, and data can be protected by establishing token vaults and tokenization of data.

Limited access to information

Access to information must be strictly regulated and must be given to a few users only who can access sensitive information. Furthermore, a solution must be used to track all the interactions with information databases.

Better and more advanced authentication methods

Every Fintech business must use strong passwords. But along with that, it is important to ensure the top level of security by using some advanced authentication technologies, like one-time passwords, short sessions, etc.

Deploy AI Technology within your Business

Another way is to use hi-tech AI (Artificial Intelligence) and ML (Machine Learning) technologies to predict and take accurate measures to prevent financial fraud in the beginning. With the revolution of more technologies, AI can prove beneficial in improving overall security by analyzing vast volumes of data faster and by detecting unauthorized usage.

Deploying an effective and robust cloud security strategy ensures that best is done to keeps your company and customers safe. Securing the cloud improves the protection of your business against all sorts of ongoing and emerging threats.

Use SASE Solutions

SASE or Secure Access Service Edge network architecture is quite similar to multi-cloud storage technology. The SASE network architecture uses the combination of several systems together and connects security solutions to give the desired results. More FinTech’s use SASE solutions to keep their vital essential assets safe and secured from functionality.

Conclusion

In this article, we have discussed the most common cybersecurity threats for BFSI sector, the latest cybersecurity solutions for BSFI, and some practices that help enhance a company’s levels of security. The financial sector is one of the key industry verticals that has witnessed a steep rise in cyber-attacks. Since financial organizations have to store and process consumer data, particularly the ones offering financial services to retail and commercial consumers, so they have become the obvious target of hackers.

Thus, it becomes crucial to deploy a strong cybersecurity strategy involving more than just safeguarding sensitive data and systems from harmful external attacks but also ensuring greater data privacy, and effective vulnerability management.

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Is Sovereign Gold Bond worth investing in for Financial Distributors?

In-country like India gold is considered one of the safest investment options in the long run, as in case of any financial crisis it may abet a family to overcome the crisis as it’s easier to liquidate gold. Having said that, in this technology-driven fast-moving society there are a plethora of ways to own gold as an asset without bearing any making charges. One such best-fitted alternative is SGB alias sovereign gold bonds, an indubitable investment option by the government of India for individual investors. Sovereign gold bonds are like investing in mutual funds via Gold saving funds and Gold ETFs.

Furthermore, gold in certificate form with minimal risk, high-quality, and exceptional alternative to purchasing gold and inheriting the risk associated such as theft!

Let’s break down everything about sovereign gold bonds!

What Do You Mean By Sovereign Gold Bonds?

Sovereign gold bonds, simply put SGB, are the bonds offered by the Government of India in November 2015 to investors as an alternative to buying physical gold. To add, in the last few decades there has been a tremendous decline in the physical gold purchase. While SGB is considered safe as they are offered by the government as well as it keeps an eye on the export-import value of gold.

Moreover, since its launch there has been marginal amplification in investors and its value is labeled in terms of grams of gold, 999 purity. Maximum gold one can invest in 4 Kgs whilst minimum investment is 1 gram per financial year. SGBs are hassle-free along with easily manageable in contrast to physical gold. The term for SGBs is 8 years with the option of exiting after 5 years. The interest rate offered to investors half-yearly is 2.5% per annum.

Furthermore, SGBs are issued in varied tranches by the RBI during the financial year. Plus if you are choosing the safest investment option, purchase SGB from SEBI authorities’ broker or agent, online platforms and banks. To add, for an investor purchasing the bond via an online platform an additional INR 50 per gram discount is granted. There are three forms in which SGBs can be procured: physical, dematerialized, and digitally. Besides this, the prerequisite for SGBs is a PAN card. If investors don’t have PAN cards the investment is not permitted.

What Are The Some Key Features Of SmartSGB?

SmartSGB is one of the leading curated platforms designed for technology-driven new-age banks. With SmartSGB financial distributors can easily manage multiple clients’ investments in SGB. So, create wealth, value, and relationship partners with SmartSGB Sovereign Gold Bonds Financial Distribution.

Get complete access to the platform along with handling myriad activities such as investor ID mapping, Sovereign gold bond mapping and file import, one-click option to view and download certificate, transaction file import, and SMS & Email alerts with SGB certificate.

SmartSGB is the technology-driven support system for financial distributors to various activities on the go such as core banking system (customer data propagation, fund transfers, Lien marking/unmarking, and Bank account details), RBI E-kuber integration (Transaction export, certificate import, and transaction response import) and system integrations (Net banking and mobile app). Not to mention, SmartSGB will act as a central repository to save and store crucial Sovereign Gold Bond information, helping financial distributors reduce cost, increase accuracy, larger clientele, and most importantly enhance productivity.

What Are The Top Advantages For Banks Investing In Sovereign Gold Bonds With SmartSGB?

  • One-Stop-Solution

  • With SmartSGB end-to-end investment is easy including the purchase and redemptions of bonds.

  • End To End Security

  • SmartSGB is the only integrated platform that offers financial safety to its financial distributors.

  • Cutting-Edge Technology

  • SmartSGB offers the best technology with core banking and 3rd party systems. Along with a comprehensive RBI report, RBI e-kuber, order details report, and SMS alert with SGB Certificate.

  • Scalable Information

  • From mid-2013 to mid-2017 interest rate has witnessed a decline. Additionally, the new monetary policy framework has been closely associated with inflation levels. The dwindling GDP growth trend must have boosted confidence among banks for continued low-interest rates. SmartSGB offers a scalable solution to financial distributions.

  • Robust Updates

  • With SmartSGB, you get the latest alerts and price notifications along with the increasing opportunity for revenue generation.

Conclusion

If you are scouting the web for the safest, secure, and hassle-free way to invest in Sovereign gold bonds digitally, you are in the right spot. Enjoy asset diversification; multiply your happiness by investing in SGBs with SmartSGB from Winsoft technologies.

We proffer multiple investments (Netbanking, Mobile App, and branch) along with a dedicated dashboard to track your investment growth. From purchasing to the redemption of SGBs everything is in a single click with SmartSGB. Winsoft Technologies is a name trusted by India’s leading financial distributor, we offer a hassle-free online investment experience.

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Digital Banking To Neo-Banks: Technology Transforming The Financial Services

Digitization is now all ubiquitous. It has touched almost all industrial gamut, including banking and financial services. In India, the financial ecosystem has witnessed multiple financial inclusions. For example, the introduction of the biometric Aadhar Card to the Unified Payments Interface (UPI) has steered unprecedented digital disruption in the traditional Indian banking scenario. The introduction of Direct Benefit Transfer or DBT by the GoI through apps like PM-SVANIDHI and PM-KISAN and the development of the AA or the Account Aggregator regulatory framework by the RBI has further catalyzed the credit industry in the country.

The fact is that in this new-age era of digital transformation, digital banking and the growth of Neo-banks are coming up as stiff competitors to traditional financial institutions that are still working with legacy systems. Neo-banks or digital-only banks are fast becoming a force to reckon with their innovative services as they have already started to garner impressive market share in the industry.

It’s not surprising that almost 205 million Indians have an account in a digital-only bank. By 2027, the number is expected to rise to 397 million.

Changing the face of Fintech, Neo-banks offer an efficient and cheaper alternative to customers vis-a-vis traditional banks. With the help of new-age technologies, they take personalization to a different level. The technological revolution has heralded a completely new era. Here, banks cease to exist in the real world or let’s say that banks no longer have physical branches. Everything is in the online space. Neo-banks are digital banks offering almost all the functionalities of a traditional bank except that they do not have a physical presence. While the trend picked up during the pandemic and the subsequent lockdown, it is now a post-pandemic reality. These digital banking units offer services from instant loans to fixed deposits, savings and current accounts, fixed deposits, and more. All of these are offered via an app and in partnership with a registered bank.

They leverage technology and artificial intelligence to provide personalized services to customers while minimizing operating costs. Since traditional banks use legacy systems, they are not as agile to meet the needs of a tech-savvy generation as they should be. Neobanks, on the other hand, are empowered as their services are based on innovation, making them quicker. Not just that, neo-banks in India are working with the MSME sector and retail customers – two niches that are typically not on top priority for conventional banks. Considering the convenience factor, this one is a big hit with end customers and is expected to grow further from here.

Let’s see how different technologies are transforming the financial sector in India:

API-led banking

The Reserve Bank of India launched the RTGS and NEFT almost ten years back, after which came the decade of IMPS launched by the National Payments Corporation of India. Post this. The Indian financial industry has witnessed the emergence of API-led banking, where an API or Application Programming Interface works as the middleman to ensure that the communication between digital banks and third parties is seamless. With APIs, banks and third parties offer safe services to customers in real-time. There are innumerable examples of this technological functioning – money transfers using mobile wallets, checking credit scores, viewing account balances, applying for loans, etc.

Self-Service is the new way of delighting customers.

The age of queuing up in front of bank counters to deposit or withdraw money, fill forms, etc., is long over. Today, technology has empowered new-age banks to offer enhanced self-service choices to their customers. These services are not merely limited to basic tasks. Still, they enable customers to perform numerous advanced banking-related tasks like applying for loans, buying insurance, opening new accounts, and more in this new era. As a result, customers today are in the driver’s seat where managing their financial position is concerned and better informed to make crucial personal financial decisions.

Robotic Process Automation

 

RPA helps bankers interpret huge volumes of unstructured data related to transaction and behavioral data. Robotic Process Automation is leading the way in innovating customer experiences. This is because RPA offers quality data at a better speed and scale. With the help of bots, repetitive tasks are no longer dependent on humans. Thus, the banking staff can reduce errors and can focus on handling intricate customer queries. As a result, customer services are now at one of the best levels of satisfaction in the industry.

Use of voice commands through Voice Bots. We all know of chatbots as more and more banks now rely on them to help address customer queries and resolve them faster. However, as the progression continues and technology advances, voice assistants will come to the scene, replace chatbots and enable customers to use direct voice commands to carry out multiple banking-related tasks. A typical example is when the voice bots ask the customer to change his pin or open a new account, all facilitated through voice commands without typing. All of this is possible with voice recognition technology that syncs with AI and NP. Some of the other technology-bound processes in line are thumb impressions, face and iris recognition, biometric authentication, and more.

Data Analytics

Data is at the core of enhancing customer experiences, and the banking sector is adopting technical tools and methods to get better insights. Today, financial services use real-time actionable data analytics to offer competitively-edged services to customers with better decision-making powers. The data also helps bankers upsell, cross-sell, plan upcoming products and offerings, and more. Another advantage is how the analytics help banks offer personalized services to their customers.

Pros of Neo-Banks

  • Neo-banks have fewer regulatory and credit risk issues
  • They offer premium services at low costs
  • The convenience factor of Neo-banks is also way higher than traditional banks as all operations happen via an app
  • As banks work using digital means, the service speed is also faster

Cons of Neo-Banks

  • Neo-banks have regulatory issues as the RBI is yet to recognize them fully
  • In the absence of a physical branch, some customers feel that these banks are impersonal

Conclusion

Technology is bringing about revolutionary changes in the financial sector. The sector, thankfully, has been very adaptive in adopting these technology gamuts. The focus is on the customer, and digital banking and automation are the keys to personalizing the entire banking process.

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New Guidelines for NPS Fund Managers and What Impact It Will Have on Your Returns

Over time, the National Pension System (NPS) has undergone modifications. It has gone through many versions, ranging from withdrawal policies to taxes and from selecting fund managers to asset allocation. Recently, new investing standards were established, providing pension fund managers with a more expansive canvas on which to work.

The new investment criteria would allow pension fund managers to make investments in (FPOs) (IPOs) and offers for the sale of enterprises. Apart from that, the option for investing in pension funds will be expanded, and fund managers will be permitted to make investments in firms listed on the BSE 200 and the NSE 200 indexes.

Basket Widened

The Pension Fund Regulatory and Development Authority (PFRDA) has changed the investing guidelines for its pension fund managers, which may be seen here. Before today, pension fund managers could invest in any companies that were members of the futures and options (F&O) basket and had a market capitalisation of at least Rs 5,000 crore, as long as they met the capitalisation criterion. This essentially limited the investing universe to a little more than 100 equities, the vast majority of which were large-capitalisation companies.

This basket has now been expanded to include the top 200 equities in market capitalisation. NPS fund managers will now have the freedom to diversify their portfolios outside large-cap stocks.

More Investible Concepts

As the fund’s size begins to rise, fund managers may have to go farther into the mid-cap sector in quest of more investible opportunities. As a result, investors may anticipate fund managers to capture a sizable chunk of the mid-retirement cap pie for themselves.

Faster Development In Midcap Companies

Mid-cap firms have a larger runway for rapid expansion than large-cap enterprises. According to traditional knowledge, Mid-cap equities tend to outperform large-cap companies over the long term. Subscribers will benefit from the increased possibility of return. NPS stock plans have failed to beat the market over several years, mostly because they have been confined to the large-cap group.

According to industry experts, the launch of mid-cap stocks should not cause concern among investors. It should be beneficial to NPS subscribers over a longer period. The introduction of mid-cap stocks will almost certainly result in a greater disparity between various pension fund managers.

Because of the emphasis on large-cap stocks, equity strategies among fund managers are becoming more similar. However, if they begin to diversify into mid-cap stocks in varying degrees, the fund profiles will take on various forms. This may necessitate subscribers to keep a closer check on the overall portfolio structure.

Long-Term Savings With

NPS is regarded as a long-term savings tool by industry experts. According to them, investors with a time horizon of more than seven years will be able to ride out the whole market cycle, which will be sufficient to reduce the risks associated with mid-cap stocks. In addition, there are some high-quality companies within the midcaps. Lengthy-term investors with a time horizon of 10, 20, or more years might profit from increased capital accumulation over such long periods.

A large public awareness campaign to adequately explain the guarantee and its long-term cost may also be necessary to avoid the creation of unexpected and inaccurate public expectations—especially given that the NPS is a government-sponsored scheme—to prevent this from occurring.

Investing in IPOs Is An Option

Pension fund managers have also been granted the authority to invest in initial public offerings (IPOs) that reach a specified market capitalisation requirement. The NPS will accept investments from companies whose full-float market capitalisation (based on the lower band of the IPO issue price) is greater than the market capitalisation of the 200th firm.

NPS fund managers will be authorised to target initial public offerings (IPOs) with a market capitalisation of more than Rs 21,200 crore at current market values. This provides pension fund managers with an additional option for selecting high-growth investment opportunities.

Effects of the FDI Limit

The foreign direct investment (FDI) limit has also been raised from 49 per cent to 74 per cent as a result of amendments to the Pension Fund Regulatory and Development Act. As a result, the existing seven pension fund managers will be able to sell their stakes to foreign partners, and the foreign direct investment limit will be 74 per cent for new fund managers coming through the On Tap Licence.

Following the rise in the foreign direct investment limit, foreign investors’ preference for pension funds will grow, resulting in long-term profits.

Conclusion

A little underperformance in your NPS fund every year might accumulate overtime to produce a significant underperformance in the long run.

Because of the influence of long-term compounding, the ultimate corpus might change greatly from the initial corpus due to these return discrepancies. As a result, you should assess all long-term investments once a year, like NPS portfolios, just as you would with mutual fund schemes.

As there is sufficient historical data accessible at this time, it is possible to analyse and compare the performance of your NPS funds with the performance of other investment managers. Based on this comparison, it is simple to determine whether or not you need to replace your NPS fund manager.

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Which is better to invest in, Fixed Deposit or Mutual Funds?

Investments have always been done with a set intention to generally maximize returns and minimize risks. However, there can be other more specific goals. The goals get more specific when one is planning for investing for stable and continuous monthly returns or wealth creation over the long term and so on.

Nowadays, there are multiple investment options in the market, but still investors struggle with the dilemma of choosing one investment option over another. So, as an investor where would you choose to invest between the mutual fund and fixed deposits? Not sure? Well, we have got sorted for you.

Mutual Fund vs Fixed Deposit

Both mutual funds and fixed deposits are equally popular and trustworthy choices among investors. Each of these investment plans is one of a kind and provides investors with promising returns over a period of time.

But before investing in either of these investment plans, it is advisable to make a solid comparison. Thus, we have cumulated all the possible differences between Mutual Funds and Fixed Deposits. This list of differences will make the picture clearer and will help us pick the most attractive form of investment.

  • Returns – Fixed deposits offer investors a definite and decided rate of interest for a predetermined period of time. This assures a fixed deposit will accrue a fixed number of returns for that certain duration. On the other hand, an investment in mutual funds could guarantee much higher returns. Mutual funds have can hold more potential in terms of returns as the investment is based entirely on the market standing of the stocks in the portfolio.
  • Costs – Although mutual funds can promise greater returns but investing in them comes with certain costs. Mutual funds involve a certain fee criterion that has to be paid to fund managers who will take care of your portfolio. Whereas investing in fixed deposits does not require such a fee criterion as it does not involve any intermediaries to handle the process.

  • Risk- The best part about Fixed deposits is that they are essentially zero-risk investments, as investors already know what their returns will look like in over time. The rate of interest is definite in fixed deposits, it is unsusceptible to market changes, therefore investors are guaranteed a fixed return after a fixed period of time. On the other hand, mutual funds are susceptible to the market performance and volatility. But the amount of risk involved is mitigated by the spread of risk over a range of stocks. This further gives a chance to the investor to gain more when the market conditions are favourable. But one has to be careful throughout as there can be a considerably low returns if market is too volatile and does not look like as you would have expected.
  • Premature Withdrawal – Investors who would want to go for a premature withdrawal from their fixed deposits will have to pay a penalty for doing so. Even if the penalties are levied, the investor would also have to forfeit a portion of the returns that would have been expected. On the other hand, mutual funds allow premature withdrawals as long as the minimum holding period is completed. While there is no penalty involved, there will be an exit load charge of around one percent of the fund amount but only if a withdrawal takes place before the holding period gets expired.
  • Taxation – Equity and hybrid funds are regarded as short-term only when the holding period is less than 12 months and long-term if the holding period is more than 12 months. When debt funds are held up for a period less than 36 months then they are short-term, whereas a holding period of 36 months and more are considered long-term funds. Equity mutual and hybrid mutual funds that go beyond Rs.1 lakh are taxed at ten percent and are termed long-term capital gains. While the equity mutual and hybrid mutual funds that are valued at less than Rs.1 lakh are taxed at fifteen percent and are termed as short-term capital gains. The case of fixed deposits is completely different from others as the interest that an investor earns on their investment is taxed according to the tax slab the investor belongs to or comes under.

Now where to invest?

Now you must be wondering which is better, then for that, you will have to ask some questions like what your requirements, goals, and the kind of risk you are ready to take. Once you get answers to such questions, you will be able to use the differentiation between mutual funds and fixed deposits.Most importantly, you as an investor must be clear about your aim of investing. If you are looking for continuous monthly returns, then a fixed deposit would be the right choice as it promises a monthly return option. However, Mutual funds can offer a higher rate of returns on your investment depending on market performance. But you have to prepare for adverse and unfavourable market conditions that will result in negative or lower than the expected returns on your investment.

Conclusion

In conclusion, it can be said that investing is all about finding a balance between mutual funds and fixed deposits. To find the perfect balance you must be determined about your goals and risk appetite and only then you can expect the desired returns. So, are you ready to invest in mutual funds or fixed deposits?