Summer Internship Project Report

on

Creating and Managing the Portfolios of Wealth Clients in

IndusInd Bank

Submitted to:

IndusInd Bank Birla Institute of Management TechnologyA.S. Raja Complex, Care Hospital, Knowledge Park II, Waltair Main Road, Greater Noida,Vishakhapatnam – 530 002 Uttar Pradesh – 201306

Submitted by:

V.Sreelaksmi

PGDM (11-13)

11DM156

INDEX

Page No.

Index i

List of Tables iii

List of Figures iii

List of Graphs iii

Summer Internship Certificate – Industry Mentor iv

Summer Internship Certificate – Faculty Mentor v

Letter of Authorization vi

Acknowledgement vii

Letter of Transmittal viii

Executive Summary ix

1. INTRODUCTION

1.1 Company Background 1

1.2 Product Background

1.2.1 Introduction to the concept of wealth 6

1.2.2 Introduction to the concept of wealth management 7

2. LITERATURE REVIEW

2.1 Economic times 04-04-2012 12

2.2 Markowitz Portfolio Theory 12

2.3 SUMMIT Ascendant Methodologies 13

2.4 Texas A&M University 20

3. TASK DEFINITION

3.1 Introduction to the Research 22

3.2 Banking Sector in Wealth Management 22

3.3 Current State of Wealth Management in India 22

3.4 IndusInd Bank in Wealth Management Sector 24

2 | P a g e

4. RESEARCH METHODOLOGY

4.1 Creation of portfolio 46

4.2 Selecting the right investments 46

4.3 Updating the portfolio 47

5. COMPETITOR ANALYSIS 48

6. FINDINGS AND RESULTS 49

7. CONCLUSION 50

8. LIMITATIONS AND CAVEATS 51

9. SUGGESTIONS AND RECOMMENDATIONS 51

REFERENCES 52

APPENDIX

A1: Customer Profiler 53

A2: Educational Cost Calculator 54

A3: Retirement Planner 55

A4: HLV Calculator 56

A5: Tax Calculator 57

A6: Rishtey Form 58

A7: Comparative Statement of Gold rates as on Akshayatritiya 2012 59

A8: Comparative Statement of Term Plans 60

A9: Comparative Statement of Traditional Plans 61

3 | P a g e

LIST OF TABLES

Table 1: Financial Ratios of the bank for the year 2011-12 05

Table 2: Financial Status of the bank for the year 2011-12 05

LIST OF FIGURES

Figure 1: Process of Wealth Management 09

Figure 2: Efficient Frontier 13

Figure 3: Resource allocation and utilization process in Asset Management 21

Figure 4: Process of Mutual Funds 26

Figure 5: Screen shot of the Rishtey form 51

LIST OF GRAPHS

Graph 1: Financial Status of the bank for the year 2011-12 06

4 | P a g e

Executive Summary

In India, the concept of saving the liquid assets smartly is not very famous yet. People are yet

saving their savings in Fixed Deposits or Gold etc which are the traditional style of doing so.

she concept of wealth management is not familiar among the people yet. They find it

unsuitable due to lack of trust and inconsistent knowledge about the financial market.

The banks are helping the people overcome this fear by providing the same services.

IndusInd Bank being a bank of new generation is highly attracting people. Even though the

bank is not selling any of its own products, the relationship with the customers is appreciable

and thus making the company profitable.

The wealth management products have been selected by the bank carefully and so to learn the

techniques of interacting with the customers and convincing them, making them buy your

product and fulfilling their demands is a difficult task.

This is what the project has covered. The wealth managers at IndusInd bank: how they work ,

how they manage the different portfolios with different requirements etc has been studied

under the project.

5 | P a g e

Chapter 1: INTRODUCTION

1.1 Company Background-

Company Profile: “Using Technology Delighting Customers”

BSE: 532187 | NSE: INDUSINDBK | ISIN: INE095A01012 Market Cap: [Rs.Cr.] 15,204 | Face Value: [Rs.] 10Industry: Banks - Private Sector

IndusInd Bank derives its name and inspiration from the Indus Valley civilisation -a culture described by National Geographic as 'one of the greatest of the ancient world' combining a spirit of innovation with sound business and trade practices.

Mr. Srichand P. Hinduja, a leading Non-Resident Indian businessman and head of the Hinduja Group, conceived the vision of IndusInd Bank -the first of the new-generation private banks in India -and through collective contributions from the NRI community towards India's economic and social development, brought our Bank into being.

The Bank, formally inaugurated in April 1994 by Dr. Manmohan Singh, Honourable Prime Minister of India who was then the country’s Finance Minister, started with a capital base of Rs.1,000 million (USD 32 million at the prevailing exchange rate), of which Rs.600 million was raised through private placement from Indian Residents while the balance Rs.400 million (USD 13 million) was contributed by Non-Resident Indians.

IndusInd Bank Limited is a Mumbai based India new generation bank, established in 1994. The bank offers commercial, transactional and electronic banking products and services. The Bank's business lines include corporate banking, retail banking, treasury and foreign exchange, investment banking, capital markets, non-resident Indian/high-net-worth individual banking, and information technology. The Bank business divisions include Retail/ Consumer Banking, Consumer Finance, Global Markets Group, Corporate & Commercial Banking, Transaction

6 | P a g e

Banking Group and Investment Banking. The Bank provides multi-channel facilities, which includes automated teller machines (ATMs), net banking, mobile banking, phone banking, multi-city banking and international debit cards.

The Bank has multi-lateral tie-ups with other banks providing access to more than 18000 ATMs for their customers. They enjoy clearing bank status for both major stock exchanges - BSE and NSE - and three major commodity exchanges in the country - MCX, NCDEX, and NMCE. They also offer DP facilities for stock and commodity segments.

IndusInd Bank Ltd was incorporated in the year 1994 and was promoted by Mr Srichand P Hinduja, a leading Non-Resident Indian businessman and head of the Hinduja Group. The Bank started their operations with a capital amount of Rs. 1,000 million among which Rs. 600 million was donated by the Indian Residents and Rs. 400 million was raised by the Non-Resident Indians.

The company is a pioneer in launching internet Banking. They are rated as one of the Top Performing Banks in various survey reports. During the year 2001-02, the Bank increased their network from 36 to 77. During the year 2002-03, the Bank entered into electronic money transfer arrangements with MoneyGram International Ltd, USA and Zoha Inc USA for attracting beneficiaries of small value remittance from overseas. Thus, they became the first to implement the RBI-Electronic Funds Transfer scheme. Also, they entered into bullion trading activities and financial services to Indian entities setting up joint ventures and wholly-owned subsidiaries abroad. IndusInd Enterprises & Finance Ltd, a Non-Banking Finance company and one of the promoters of the Bank amalgamated with the Bank with effect from July 11, 2003. As a result, IndusInd Information Technology Ltd became a subsidiary of the Bank.

During the year, the bank increased their network to 127 from 77 outlets. During the year 2003-04, the Bank opened their representative office in Dubai. They launched their debit card with the name International Power Card.. Also, a total of 31 new ATMs were installed, which includes 15 on-site ATMs and 16 off-site ATMs. Ashok Leyland Finance Ltd, a leading Non-Banking Finance company merged with the Bank with effect from June 11, 2004. During the year 2004-05, the Bank signed an agreement with NCDEX as clearing banker. They launched various innovative products and services, which includes International Mahila Card, Mobile Top-ups, Utility Bill Payment etc. They opened their second representative office in London. Also, the Bank entered bilateral tie-up with Corporation Bank and with UTI Bank, in which the Bank's customer can utilize their ATMs across the country.

During the year 2006-07, the Bank added a number of new business and product lines which includes the launch of Indus Gold and Indus Gift Card and E-Remittance facility. They made a tie-up with Religare Securities for extending Portfolio Management services. They also made a tie up with Aviva Life Insurance for bancassurance. The Bank opened 33 branches and set up 41 offsite ATMs during the year. During the year 2007-08, the Bank signed an agreement with National Multi Commodity Exchange Ltd (NMCE) to become their clearing bank. They made a strategic tie-up with Religare Securities for offering a value-added 3-in-1 savings accounts-linked package to customers - comprising a savings bank account, a depository account, and an Internet trading account. Also, they made a strategic partnership with Cholamandalam MS for bancassurance.

During the year 2007-08, the Bank was awarded the highest A1+ rating for their Certificates of Deposit by ICRA and the highest P1+ rating for their Fixed Deposits and Certificates of Deposit by CRISIL. They also received recognition by BSE and NASSCOM Foundation for the Best Corporate Social Responsibility Practice Category. In

7 | P a g e

July 2008, the Bank was awarded The Smart Workplace Award by Economic Times in association with Acer and Intel for enhancing the productivity of the employees through optimum use of resources as well as technology.

During the year 2008-09, the Bank launched various new products and services which were targeted at building wealth management capabilities as well as enhancing the existing banking channels. The Bank launched the Gold and Investment verticals, which contributed in excess of Rs5 crore of revenue in the first year of operations. They also launched two new channels - Wealth Relationship Managers and the Central Acquisition Team (CAT). The Bank commenced the process of opening 'new look branches' to enhance the banking experience of customers and to provide personal attention to their needs. They already opened five branches with the new look at Bandra, Kolkata, Ludhiana, Vadodara and Lucknow.

In August 2008, the Bank acquired the micro-finance portfolio from SKS Mircofinance. In October 2008, they signed a co-partner agreement with World Gold Council for joint promotion of packaged and certified gold coins and ingots in India. In November 2008, the Bank entered into an agreement with TVS Motor Company where the

Bank will provide structured inventory funding to TVS Motors' dealers. In January 2009, they entered into a MoU with CRISIL to rate the Bank's clients.

During the year 2009-10, the Bank opened 30 new branches and 141 ATMs as a part of the strategy of expanding banking network to different locations in the country. The Bank re-launched the Non-Resident (NR) business, which acquired 12,000 new NR clients within a short span and also mobilized significant FCNR book and savings account book. The bank has presence in 28 States and Union Territories. In addition, the bank also has Representative Offices in London and Dubai.

In October 2011, the Bank entered into an arrangement with Moscow-based commercial bank JCB Unistream for India bound remittances. In February 2011, they signed an MoU with Mahindra & Mahindra Ltd in which the Bank will be one of the preferred financiers for the entire range of vehicles sold by Mahindra & Mahindra Ltd and also extend passenger and commercial vehicle finance to their customers. In June 2011, the Bank signed an agreement with Atos Worldline India (Venture Infotek) for point of sale (POS) acquiring solutions.

A New Era

IndusInd Bank, which commenced its operations in 1994, caters to the needs of both consumer and corporate customers. It has a robust technology platform supporting multi-channel delivery capabilities. IndusInd Bank has 365 branches, and 674 ATMs spread across 254 geographic locations of the country as on December 31, 2011.The Bank also has 2 Representative offices, one each in London and Dubai.

The Bank believes in driving its business through technology. It has multi-lateral tie-ups with other banks providing access to their ATMs for its customers. It enjoys clearing bank status for both major stock exchanges - BSE and NSE - and three major commodity exchanges in the country - MCX, NCDEX, and NMCE. It also offers DP facilities for stock and commodity segments. The Bank has been bestowed with the mandate of being a Settlement Banker for six tea auction centres.

RATINGS:

8 | P a g e

‘ICRA AA’ for Lower Tier II subordinate debt program and ‘ICRA AA-‘ for Upper Tier II bond program by ICRA. ‘CRISIL A1+’ for certificate of deposit program by CRISIL. ‘CARE AA’ for Lower Tier II subordinate debt program by CARE. ‘Fitch AA-‘ for Long Term Debt Instruments and ‘Fitch A1+’ for Short Term Debt Instruments by Fitch Ratings.

Makes you feel richer:

IndusInd Bank has been aggressive in its brand building program since last year. As a part of the brand building exercise, the bank has taken many initiatives which have helped the brand connect up with the customers & enhance the visibility quotient. IndusInd Bank had launched its first ever mass media campaign in May-June 2009 along with its punchline “Makes you feel richer” and since then, the bank has been consistent in communication through Television, Radio, and Outdoor & print advertising.

IndusInd Bank understands its customers’ money is not just money. It is the vehicle to realise their dreams! Hence, the bank aims to ensure that the customers’ experience with the bank is pleasant and enriching. That they get value for their money, enabling them to lead a richer, fuller, content life... For this, the bank:

Offers a new level of banking – better services, better understanding of unique needs and better management of finances

Demystifies the banking process and makes it more accessible

Apart from fulfilling traditional banking responsibilities, advises customers on how and where to use their money to get the best out of it

Projects an image of being a young, energetic, modern bank with values of dynamism, confidence and progression

Further, as a banking partner, the bank also aims to help its customers discover how they can do more things with their money.

In the recent advertising campaign, the Bank reinforces its focus on Innovative banking based on the philosophy of Responsive Innovation. The bank is taking ‘responsiveness’ theme to customers and reinforces its commitment to give best-of-class services in the industry.

Mission & Vision

Mission

9 | P a g e

The bank’s mission is to consistently add value to all its stakeholders and emerge as the Best in class in the chosen parameters amongst the comity of banks, by doubling our profits, clients and branches within the next three years.

Vision

IndusInd Bank will be:

A relevant business and banking partner to its clients

Customer Responsive, striving at all times to collaborate with clients in providing solutions for their Banking needs

A forerunner in the market place in terms of profitability, productivity and efficiency

Engaged with all our stakeholders and will deliver sustainable and compliant returns.

Financial Performance:

Particulars (in %) Q4 Q4FY12 FY11

Return on Assets (RoA) 1.60 1.55Return on Equity (RoE) 20.00 18.13Capital Adequacy Ratio (CAR) 13.85 15.89Capital Adequacy Ratio - Tier I 11.37 12.29Net NPA 0.27 0.28Provision Coverage Ratio 72.72 72.61Net Interest Margin 3.29 3.50

Table 1: Financial ratios of the bank for the year 2011 and 2012

2011-12 2010-11Net worth (in crores) 4522.37 3825Net Profit(in crores) 802.61 577.32Net Interest(in crores) 1704.25 1376.49Core fee income(in crores) 913.24 629.43Capital Adequacy Ratio (Base III) 13.85% 15.89%Return on Assets (RoA) 1.57% 1.55%Net NPA 0.27% 0.28%

10 | P a g e

Provisioning Coverage Ratio against NPAs 72.72% 72.61%

EPS 17.20 13.16Dividend Declared 22% 20%

Table 2: Financial status of the bank for the year 2011 and 2012

Graph 1: Financial status of the bank for the year 2011 and 2012

11 | P a g e

1.2 Product Background

1.2.1: Introduction to the concept of Wealth:

Wealth is a measure of the value of all the assets owned by a person, community, company or country. It’s calculated by taking total market value of all the physical and intangible assets of the entity and subtracting the debts. One can also say that wealth is an accumulation of valuable resources. It is expressed in many ways. For e.g.: for individuals’ net wealth is commonly expressed in terms of net worth while countries measure by Gross Domestic Product (GDP) etc.

Concepts of wealth vary among societies. Anthropology characterizes societies, in part, based on a society's concept of wealth, and the institutional structures and power used to protect this wealth.

Adam Smith saw wealth creation as the combination of materials, labour, land, andtechnology in such a way as to capture a profit. The theories of David Ricardo, John Locke, John Stuart Mill, and later, Karl Marx, in the 18th century and 19th century built on these views of wealth that we now call classical economics and Marxist economics. Michel Foucault commented that the concept of man as an aggregate did not exist before the 18th century. The shift from the analysis of an individual's wealth to the concept of an aggregation of all men is implied in the concepts of political economy and then economics. This transition took place as a result of a cultural bias inherent in the enlightenment. Wealth was seen as an objective fact of living as a human being in a society. Some people believe wealth is a zero-sum game, where there is a limited amount of wealth and some must lose in order for others to gain. As a result they are concerned primarily with issues of wealth distribution rather than wealth creation. Others believe that wealth can be readily created. They feel that wealth is not a fixed amount to be distributed. To most of these people, organizing a society so as to optimize the growth of wealth is more important than distribution issues.

Sources of wealth

Wealth is created through several means.

Natural resources can be harvested and sold to those who want them. Material can be changed into something more valuable through proper application of labour and equipment. Better methods also create wealth by allowing faster creation of wealth. Ideas create wealth by allowing it to be created faster or with new methods.

1.2.2: Introduction to the concept of Wealth Management:

12 | P a g e

Wealth management is an investment advisory discipline that incorporates financial planning, investment portfolio management and a number of aggregated financial services. High Net worth Individuals (HNWIs), small business owners and families who desire the assistance of a credentialed financial advisory specialist call upon wealth managers to coordinate retail banking, estate planning, legal resources, tax professionals and investment management. Wealth managers can be an independent Certified Financial Planner, MBAs, Chartered Strategic

Wealth Professional, CFA Charter holders or any credentialed professional money manager who works to enhance as a high-level form of private banking for the especially affluent.

It is a highly customized and sophisticated investment management and financial planning services delivered to high net worth investors. Generally, this includes advice on the use of trusts and other estate planning, vehicles, business succession or stock option planning, and the use of hedging derivatives for large blocks of stock.

Traditionally, the wealthiest retail clients of investment firms demanded a greater level of service, product offering and sales personnel than were received by the average clients. With an increase in the number of affluent investors in recent years, there has been an increasing demand for sophisticated financial solutions and expertise throughout the world.

Wealth Management is also known as Portfolio Management and Asset Management. Till date, wealth management services in India included investment in equity-linked portfolio management services, structured products, insurance and mutual funds. But companies have started broadening the scope to include tax planning & assessment, real estate, art advisory and estate planning, within its ambit. Wealth management service providers have segmented the Indian market into four categories: the mass market (investible surplus USD5,000 to 25,000); the mass affluent (USD25,000 to 1 million); the high-net-worth (USD1 million to 30 million) and the ultra-high net worth (greater than USD30 million).

Objectives of Wealth Management:

a) Capital Preservation - Capital preservation is the need to maintain capital. To accomplish this objective, the return objective should, at a minimum, be equal to the inflation rate. In other words, nominal rate of return would equal the inflation rate. With this objective, an investor simply wants to preserve his existing capital.

b)Capital Appreciation -Capital appreciation is the need to grow, rather than simply preserve, capital. To accomplish this objective, the return objective should be equal to a return that exceeds the expected inflation. With this objective, an investor's intention is to grow his existing capital base.

c) Current Income -Current income is the need to create income from the investor's capital base. With this objective, an investor needs to generate income from his investments. This is frequently seen with retired investors who no longer have income from work and need to generate income off of their investments to meet living expenses and other spending needs.

d)Total Return - Total return is the need to grow the capital base through both capital appreciation and reinvestment of that appreciation.

13 | P a g e

Process of Wealth Management:

Wealth Management is the art and science of making decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance.

Wealth management is all about strengths, weaknesses, opportunities and threats in the choice of debt vs. equity, domestic vs. international, growth vs. safety, and many other tradeoffs encountered in the attempt to maximize return at a given appetite for risk.

Wealth management = investment consulting + advanced planning + relationship management

Figure 1: Process of Wealth Management

14 | P a g e

The wealth management process is the process an investor takes to aid him in meeting his investment goals.

The procedure is as follows:

a) Create a Policy Statement -A policy statement is the statement that contains the investor's goals and constraints as it relates to his investments.

b)Develop an Investment Strategy - This entails creating a strategy that combines the investor's goals and objectives with current financial market and economic conditions.

c) Implement the Plan Created -This entails putting the investment strategy to work, investing in a portfolio that meets the client's goals and constraint requirements.

d)Monitor and Update the Plan -Both markets and investors' needs change as time changes. As such, it is important to monitor for these changes as they occur and to update the plan toadjust for the changes that have occurred.

Policy Statement

A policy statement is the statement that contains the investor's goals and constraints as it relates to his investments. This could be considered to be the most important of all the steps in the portfolio management process. The statement requires the investor to consider his true financial needs, both in the short run and the long run. It helps to guide the investment portfolio manager in meeting the investor's needs. When there is market uncertainty or the investor's needs change, the policy statement will help to guide the investor in making the necessary adjustments the portfolio in a disciplined manner.

Developing Investment Strategy

Expressing Investment Objectives in Terms of Risk and Return

Return objectives are important to determine. They help to focus an investor on meeting his financial goals and objectives. However, risk must be considered as well. An investor may require a high rate of return. A high rate of return is typically accompanied by a higher risk. Despite the need for a high return, an investor may be uncomfortable with the risk that is attached to that higher return portfolio. As such, it is important to consider not only return, but the risk of the investor in a policy statement.

Factors Affecting Risk Tolerance

An investor's risk tolerance can be affected by many factors:

Age- investor may have lower risk tolerance as they get older and financial constraints are more prevalent.

15 | P a g e

Family situation - an investor may have higher income needs if they are supporting a child in college or an elderly relative.

Wealth and income - an investor may have a greater ability to invest in a portfolio if he or she has existing wealth or high income.

Psychological - an investor may simply have a lower tolerance for risk based on his personality.

Constraints in investing as per the Portfolio created:

Liquidity Constraints - Liquidity constraints identify an investor's need for liquidity, or cash. For example, within the next year, an investor needs $50,000 for the purchase of a new home. The $50,000 would be considered a liquidity constraint because it needs to be set aside (be liquid) for the investor.

Time Horizon - A time horizon constraint develops a timeline of an investor's various financial needs. The time horizon also affects an investor's ability to accept risk. If an investor has a long time horizon, the investor may have a greater ability to accept risk because he would have a longer time period to recoup any losses. This is unlike an investor with a shorter time horizon whose ability to accept risk may be lower because he would not have the ability to recoup any losses.

Tax Concerns - After-tax returns are the returns investors are focused on when creating an investment portfolio. If an investor is currently in a high tax bracket as a result of his income, it may be important to focus on investments that would not make the investor's situation worse, like investing more heavily in tax-deferred investments.

Legal and Regulatory - Legal and regulatory factors can act as an investment constraint and must be considered. An example of this would occur in a trust. A trust could require that no more than 10% of the trust be distributed each year. Legal and regulatory constraints such as this one often can't be changed and must not be overlooked.

Unique Circumstances - Any special needs or constraints not recognized in any of the constraints listed above would fall in this category. An example of a unique circumstance would be the constraint an investor might place on investing in any company that is not socially responsible, such as a tobacco company.

16 | P a g e

Chapter 2: LITERATURE REVIEW

2.1 Markowitz Portfolio Theory -

Harry Markowitz developed the portfolio model. This model includes not only expected return, but also includes the level of risk for a particular return. Markowitz assumed the following about an individual's investment behaviour:

Given the same level of expected return, an investor will choose the investment with the lowest amount of risk.

Investors measure risk in terms of an investment's variance or standard deviation.

For each investment, the investor can quantify the investment's expected return and the probability of those returns over a specified time horizon.

Investors seek to maximize their utility.

17 | P a g e

Investors make decision based on an investment's risk and return, therefore, an investor's utility curve is based on risk and return.

The Efficient Frontier

Markowitz' work on an individual's investment behaviour is important not only when looking at individual investment, but also in the context of a portfolio. The risk of a portfolio takes into account each investment's risk and return as well as the investment's correlation with the other investments in the portfolio.

A portfolio is considered efficient if it gives the investor a higher expected return with the same or lower level of risk as compared to another investment. The efficient frontier is simply a plot of those efficient portfolios, as illustrated below:

Figure 2: Efficient Frontier

While an efficient frontier illustrates each of the efficient portfolios relative to risk and return levels, each of the efficient portfolios may not be appropriate for every investor. Recall that when creating an investment policy, return and risk were the key objectives. An investor's risk profile is illustrated with indifference curves. The optimal portfolio, then, is the point on the efficient frontier that is tangential to the investor's highest indifference curve. See

18 | P a g e

our article: A Guide to Portfolio Construction, for some essential steps when taking a systematic approach to constructing a portfolio.

2.2 Michael F. Hanford, Chief Methodologist, SUMMIT Ascendant Methodologies-

A good way to begin understanding what portfolio management is (and is not) may be to define the term portfolio. In a business context, we can look to the mutual fund industry to explain the term's origins. Morgan Stanley's Dictionary of Financial Terms offers the following explanation:

If you own more than one security, you have an investment portfolio. You build the portfolio by buying additional stocks, bonds, mutual funds, or other investments. Your goal is to increase the portfolio's value by selecting investments that you believe will go up in price. 

According to modern portfolio theory, you can reduce your investment risk by creating a diversified portfolio that includes enough different types, or classes, of securities so that at least some of them may produce strong returns in any economic climate.

Note that this explanation contains a number of important ideas:

A portfolio contains many investment vehicles.

Owning a portfolio involves making choices -- that is, deciding what additional stocks, bonds, or other financial instruments to buy; when to buy; what and when to sell; and so forth. Making such decisions is a form of management.

The management of a portfolio is goal-driven. For an investment portfolio, the specific goal is to increase the value.

Managing a portfolio involves inherent risks.

Over time, other industry sectors have adapted and applied these ideas to other types of "investments," including the following:

Application portfolio management: This refers to the practice of managing an entire group or major subset of software applications within a portfolio. Organizations regard these applications as investments because they require development (or acquisition) costs and incur continuing maintenance costs. Also, organizations must

19 | P a g e

constantly make financial decisions about new and existing software applications, including whether to invest in modifying them, whether to buy additional applications, and when to "sell" -- that is, retire -- an obsolete software application.

Product portfolio management: Businesses group major products that they develop and sell into (logical) portfolios, organized by major line-of-business or business segment. Such portfolios require ongoing management decisions about what new products to develop (to diversify investments and investment risk) and what existing products to transform or retire (i.e., spin off or divest).

Project or initiative portfolio management: An initiative, in the simplest sense, is a body of work with:

A specific (and limited) collection of needed results or work products.

A group of people who are responsible for executing the initiative and use resources, such as funding.

A defined beginning and end.

Managers can group a number of initiatives into a portfolio that supports a business segment, product, or product line. These efforts are goal-driven; that is, they support major goals and/or components of the enterprise's business strategy. Managers must continually choose among competing initiatives (i.e., manage the organization's investments), selecting those that best support and enable diverse business goals (i.e., they diversify investment risk). They must also manage their investments by providing continuing oversight and decision-making about which initiatives to undertake, which to continue, and which to reject or discontinue.

The article focuses primarily on initiative portfolio management. Let's begin by looking at how most businesses decide what initiatives to fund and pursue.

Enterprise business strategy: The starting point

For many years, businesses have defined and used processes to create and qualify goals they must achieve in order to prosper within a specific time period. These goals might include provisions to:

Improve revenue overall or within a specific business segment.

Create, refine, or retire products.

Improve the current cost structure or mix.

Gain additional market share.

Definitions of business goals may also specify achievement metrics, such as: "improve overall revenue by five percent within the next two years" or "improve the cost structure via a five percent reduction in labor costs within the next year."

20 | P a g e

Managers typically record these goals and metrics, along with their evolving understanding of them, in an enterprise business strategy document. This document also spells out results the business must achieve in order to prosper.

As an enterprise constructs, discusses, and refines a business strategy, its focus shifts from answering the question: "What goals and related specifics must we achieve?" to answering the follow-on question: "What mechanisms will we create and implement to reach these goals?"

One such mechanism is an initiative. As we noted above, an initiative is a mechanism businesses use to both frame and drive efforts toward achieving stated goals (or goal components) in the enterprise business strategy -- which should always serve as a starting point and continuing source of reference.

Along the path to business success

So far, we have defined a logical, simple progression of efforts to achieve success as a business entity:

Identify business goals.

Qualify and quantify the business goals.

Define initiatives to enable and achieve the business goals.

Choosing among competing initiatives

Initiatives may arise from various sources within an organization or enterprise, including businesses or business segments that intend to contribute directly to the enterprise business strategy. The stimulus for an initiative may be either internal or external; it might be a client request to change an existing product or a new regulation imposed by

an industry body. In addition, initiatives may be responses to changing conditions or needs within the organization, such as the introduction of new technologies or the re-organization of a business unit.

Enterprises need a process to help them make sense of these competing demands, relate them to enterprise business strategy goals and goal components, and match them with the finite resources -- of all types -- that are available.

In one organization I know of, the CIO learned that a competing organization's IT group was on a path to improve software delivery capability. That organization's CIO was implementing process improvement by means of the (then current) Software CMM model (SWCMM), and had set a twenty-four-=month (typical industry performance) deadline for achieving the next level.

Determined not to be beaten, the first CIO called in his direct reports and issued a mandate:  His IT organization would achieve Level 2 capability in twelve months. To achieve this goal, managers would have to either defer or slow down high-priority software projects. This did represent a choice among competing priorities, but the options were based solely upon the CIO's perception of importance and worked poorly for the organization. The organization's major software projects -- which were aligned with important components of the enterprise business

21 | P a g e

strategy -- lost resources, had to perform additional work, and were subject to many additional capability reviews. In the end, although the IT organization did achieve the next capability maturity level in twelve months, it lost credibility with internal customers because it failed to carry out urgently needed projects on schedule, and as planned.

Assessing initiatives

To understand which new initiatives to pursue -- and which existing initiatives to continue pursuing -- enterprises must conduct systematic assessments, using the set of goals, goal components, and achievement metrics in the enterprise business strategy as major reference points.

From a basic (and vastly overly simplistic) perspective, initiatives that contribute to a specific goal, goal component, or achievement metric are "good"; all others are "less than good." Of course, in practice, making the judgment is typically not that simple.

To review both potential new initiatives and (periodically) each existing initiative effectively, the enterprise needs to compare the initiative against an agreed-upon set of measures that quantify, in multiple dimensions, its "value" contribution. In other words, this composite metric measures the initiative's potential support for a goal or goal component in the enterprise business strategy.

Checking for links to the business strategy

An enterprise business strategy addresses several business areas and their associated goals. So the strategy is really a collection of related items, each supported or enabled by goals, goal components, mechanisms, proposed changes and transformations, and multiple initiatives. Given this complexity, it can be challenging for the organization to devise an effective review process to continuously assess and confirm that both proposed and existing initiatives are firmly attached to specific (and evolving) enterprise business strategy goals or goal components.

For example, one organization I know of was required (as a matter of business practice) to modify its core set of application software systems each year to accommodate its customers' new and changing business requirements. Achieving this goal was crucial to the company's continuing business success. Some of its competitors were already doing the same thing, more successfully. Accordingly, the organization began giving initiatives linked to this goal top priority in terms of funding and resources -- in other words, classifying them as "good" initiatives. Not surprisingly, soon more than half of all approved initiatives appeared to be linked to this business goal. However, upon close scrutiny, many of them were actually aimed at filling other needs. Those who proposed these initiatives

simply realized that linking them to the annual customer change requirements process was (almost) a blank check for approval, funding, and resources. Even worse, some initiatives the company actually needed to support customer changes were denied because their proposals did not sufficiently emphasize the link.

22 | P a g e

Apportioning resources

Although an organization should do everything in its power to create and execute an effective enterprise business strategy, it must also recognize that its resources -- staff, outside consultants and contractors, infrastructure, capital, and human expertise -- are finite. Competing needs within the business will reduce the share of resources available to achieve strategic goals; so it is important to quantify their relative importance and define benchmarks for apportioning these resources.

In addition, organizations need a dynamic measurement mechanism to provide -- at multiple intervals and points -- a snapshot of the resources each initiative is consuming. To be fair, these measures should consider the initiatives' linkages to various goals and goals components, which in turn should be ranked by priority.

Providing control and oversight

Suppose an organization could identify a single group of enabling mechanisms and initiatives at the time it refines and completes its enterprise business strategy. And further suppose the organization then proceeded to execute that group of mechanisms and initiatives successfully, without any changes. In such a case, the organization could use a simple progress checklist to exercise control over the mechanisms and initiatives.

Unfortunately, things do not work this way in real organizations. As we noted above, at any point in time, some initiatives are in progress, proposals for new initiatives are being considered, and the business environment is subject to constant changes, which have varying degrees of impact upon the organization and its initiatives. In this complex, fluid environment, providing an appropriate measure of oversight and control can be a major challenge.

One organization I know of fully embraced the idea of oversight and control -- perhaps too enthusiastically. Every proposed new initiative required approval by multiple organizational entities, and the process involved multiple review-and-approval "events." Eventually, the activity of preparing business cases and justification models became an end in itself for the teams proposing these initiatives; they devoted weeks of effort to it, and their presentations consumed hours of managers' time. Unfortunately, that left little time for the managers (and teams) to investigate

what the proposed initiative was really about, and approval was typically granted to initiatives with the most creative, colorful presentations and financial models. Later, as the discovery process uncovered the unexpected, this led to a disruptive, expensive churn of contents and direction.

Basic concepts and components for portfolio management

The portfolio

First, we can now introduce a definition of portfolio that relates more directly to the context of our preceding discussion. In the IBM view, a portfolio is: one of a number of mechanisms, constructed to actualize significant elements in the Enterprise Business Strategy. 

It contains a selected, approved, and continuously evolving, collection of Initiatives which are aligned with the

23 | P a g e

organizing element of the Portfolio, and, which contribute to the achievement of goals or goal components identified in the Enterprise Business Strategy.

The basis for constructing a portfolio should reflect the enterprise's particular needs. For example, you might choose to build a portfolio around initiatives for a specific product, business segment, or separate business unit within a multinational organization.

The portfolio structure

As we noted earlier, a portfolio structure identifies and contains a number of portfolios. This structure, like the portfolios within it, should align with significant planning and results boundaries, and with business components. If you have a product-oriented portfolio structure, for example, then you would have a separate portfolio for each major product or product group. Each portfolio would contain all the initiatives that help that particular product or product group contribute to the success of the enterprise business strategy.

The portfolio manager

This is a new role for organizations that embrace a portfolio management approach. A portfolio manager is responsible for continuing oversight of the contents within a portfolio. If you have several portfolios within your portfolio structure, then you will likely need a portfolio manager for each one. The exact range of responsibilities (and authority) will vary from one organization to another, but the basics are as follows:

One portfolio manager oversees one portfolio.

The portfolio manager provides day-to-day oversight.

The portfolio manager periodically reviews the performance of, and conformance to expectations for, initiatives within the portfolio.

The portfolio manager ensures that data is collected and analyzed about each of the initiatives in the portfolio.

The portfolio manager enables periodic decision making about the future direction of individual initiatives.

Portfolio reviews and decision making

As initiatives are executed, the organization should conduct periodic reviews of actual (versus planned) performance and conformance to original expectations.

Typically, organization managers specify the frequency and contents for these periodic reviews, and individual portfolio managers oversee their planning and execution. The reviews should be multi-dimensional, including both

24 | P a g e

tactical elements (e.g., adherence to plan, budget, and resource allocation) and strategic elements (e.g., support for business strategy goals and delivery of expected organizational benefits).

A significant aspect of oversight is setting multiple decision points for each initiative, so that managers can periodically evaluate data and decide whether to continue the work. These "continue/change/discontinue" decisions should be driven by an understanding (developed via the periodic reviews) of a given initiative's continuing value, expected benefits, and strategic contribution. Making these decisions at multiple points in the initiative's lifecycle helps to ensure that managers will continually examine and assess changing internal and external circumstances, needs, and performance.

Governance

Implementing portfolio management practices in an organization is a transformation effort that typically involves developing new capabilities to address new work efforts, defining (and filling) new roles to identify portfolios (collections of work to be done), and delineating boundaries among work efforts and collections.

Implementing portfolio management also requires creating a structure to provide planning, continuing direction, and oversight and control for all portfolios and the initiatives they encompass. That is where the notion of governance comes into play. The IBM view of governance is:

An abstract, collective term that defines and contains a framework for organization, exercise of control and oversight, and decision-making authority, and within which actions and activities are legitimately and properly executed; together with the definition of the functions, the roles, and the responsibilities of those who exercise this oversight and decision-making.

Portfolio management governance involves multiple dimensions, including:

Defining and maintaining an enterprise business strategy.

Defining and maintaining a portfolio structure containing all of the organization's initiatives (programs, projects, etc.).

Reviewing and approving business cases that propose the creation of new initiatives.

Providing oversight, control, and decision-making for all ongoing initiatives.

Ownership of portfolios and their contents.

Each of these dimensions requires an owner -- either an individual or a collective -- to develop and approve plans, continuously adjust direction, and exercise control through periodic assessment and review of conformance to expectations.

A good governance structure decomposes both the types of work and the authority to plan and oversee work. It defines individual and collective roles, and links them to an authority scheme. Policies that are collectively developed and agreed upon provide a framework for the exercise of governance.

25 | P a g e

The complexities of governance structures extend well beyond the scope of this article. Many organizations turn to experts for help in this area because it is so critical to the success of any business transformation effort that encompasses portfolio management. For now, suffice it to say that it is worth investing time and effort to create a sound and flexible governance structure before you attempt to implement portfolio management practices.

Portfolio management essentials

Every practical discipline is based on a collection of fundamental concepts that people have identified and proven (and sometimes refined or discarded) through continuous application. These concepts are useful until they become obsolete, supplanted by newer and more effective ideas.

For example, in Roman times, engineers discovered that if the upstream supports of a bridge were shaped to offer little resistance to the current of a stream or river, they would last longer. They applied this principle all across the Roman Empire. Then, in the Middle Ages, engineers discovered that such supports would last even longer if their downstream side was also shaped to offer little resistance to the current. So that became the new standard for bridge construction.

Portfolio management, like bridge-building, is a discipline, and a number of authors and practitioners have documented fundamental ideas about its exercise. Recently, based on our experiences with clients who have implemented portfolio management practices and on our research into the discipline, we have started to shape an IBM view of fundamental ideas around portfolio management. We are beginning to express this view as a collection of "essentials" that are, in turn, grouped around a small collection of portfolio management themes.

For example, one of these themes is initiative value contribution. It suggests that the value of an initiative (i.e., a program or project) should be estimated and approved in order to start work, and then assessed periodically on the basis of the initiative's contribution to the goals and goal components in the enterprise business strategy. These assessments determine (in part) whether the initiative warrants continued support.

This theme encompasses the notion that initiative value changes over time. When an initiative is in the proposal stage, it is possible to quantify an anticipated value contribution. On this basis (in part) the proposed initiative becomes an approved initiative. But what about an initiative that is a large program effort, with a two-year duration? It is highly unlikely that the program's expected value will remain static during the entire two-year period, so continuous value monitoring is necessary. From this, we can derive an essential statement:

“Initiative value changes and requires continuous monitoring over the life of the initiative”.

2.3 Paul E. Krugler, Carlos M. Chang-Albitres, Kirby W. Pickett, Roger E. Smith, Illya V. Hicks, Richard M.Feldman, Sergiy Butenko, Dong Hun Kang, and Seth D. Guikema from The Texas A&M University System-

26 | P a g e

Asset management concepts:

Asset management is an emerging effort to integrate finance, planning, engineering, personnel, and information management to assist agencies in managing assets cost-effectively. In its broadest sense, asset management is defined as “a systematic process of maintaining, upgrading, and operating assets, combining engineering principles with sound business practice and economic rationale, and providing tools to facilitate a more organized and flexible approach to making the decisions necessary to achieve the public’s expectations” . The main objective of asset management is to improve decision-making processes for allocating funds among an agency’s assets so that the best

return on investment is obtained. To achieve this objective, asset management embraces all of the processes, tools, and data required to manage assets effectively. For this reason asset management is also defined as “a process of resource allocation and utilization”. The framework needed to carry out this process effectively encompasses an agency’s policy goals and objectives, performance measurements, planning and programming, program delivery, and system monitoring and performance results.

Figure 3: Resource Allocation and Utilization Process in Asset Management

27 | P a g e

Asset management decisions are based on policy goals and objectives. The agency establishes policy goals and objectives to reflect the desired system condition and target level of service. Performance measures are selected to express the desired system condition and target level of service in an objective manner, and to allow tracking of progress toward desired goals. Planning and programming are complex processes since the agency manages several types of physical infrastructure facilities. A structured asset management system should provide information about the effects of investing different levels of funding in each of these various types of facilities and the effects of investing more in one type while investing less in another.

2.4 Anita Bhoir and MC Govardhana Rangan, The Economic Times (April 4, 2012)

When Romesh Sobti signed up to lead Hindujas' IndusInd Bank in 2008, not a single stock analyst thought it worth covering. Four years hence, more than 150 do. Goldman Sachs Group and JP Morgan have top ratings on it. Templeton, Vanguard and Blackstone are among stake owners.

It was not just investors who had a dim view of the bank run by a family embroiled in the Bofors arms procurement scandal of the 80s, but even the regulator had given up hope terming it an 'outlier'.

Chapter 3: TASK DEFINITION

3.1 Introduction to the research:

“To come up with creating the best possible portfolio of the bank client in accordance with all the factors and constraints”

IndusInd bank being a new era bank has a lot of HNW customers. Each one of them has a different need, priority, liability and constraint. Also in India, the concept of wealth management is not that famous/ understood. Moreover, people don’t even understand the concept of mutual funds, insurance etc. So it’s a difficult task to make them understand and agree to the concept and process of wealth management. Also, the banca managers, use different calculators to calculate various components like Human live value, appropriate amount of premiums/ taxes payable, insurance coverage requirements etc. But the bank doesn’t have its own single calculator for this purpose. It usually uses the calculators provided by its tie-up companies. So the clients often have inhibitions to take wealth management decisions from the bank. So if the wealth managers are provided with a calculator though for their internal purpose only, they can easily get the confidence of the client.

28 | P a g e

3.2 Banking Sector in Wealth Management:

Earlier, banking only meant depositing and withdrawing of cash, taking loans, trading etc, in short it was considered to be one’s own piggy bank but of a bigger size. But with the changing trends and customer expectations, the banks are not only dealing with the aforesaid duties but are also assisting the clients to manage their assets in a better approach. The banks are now dealing with those duties which earlier were performed by only the asset managing companies, insurance companies, mutual fund companies etc.

Now, with the banks dealing with both the perspective, the customers have more options to choose and they easily go with the banks as they have more trust in it.

3.3 Current state of Wealth Management in India:

Wealth management is just emerging in India. The growth of the economy has already been widely showcased. Wealth management services have been getting more attention over the last two years. A booming economy, rising stock prices and an increase in salaries and spending power have turned the spotlight on this sector. The wealth management space was earlier the preserve of some foreign banks which offered these "exclusive services" to a select few. This was not a service you could apply for. The unsaid tagline was "Don't call us. We'll call you (if you are that wealthy!)." Today, a number of private banks offer this service. Also entering this arena and carving a niche for themselves are standalone entities that offer the full range of services — investment advice, portfolio management, taxation advice et al. A new report from independent market analyst Data monitor (DTM.L) reveals the Indian wealth market is offering competitors enormous opportunities. In the last five years, affluent wealth in

India has grown at a rate of 17.6% with affluent individuals totalling 618,000 at the end of 2007. India’s large skilled population and robust domestic stock market will ensure that this wealth continues to grow to almost one million individuals, with a collective wealth of over US $ 200bn by 2012. "India has its own merits as one of the developing BRIC economies (Brazil, Russia, India and China). Competitors are realising this fact and are beginning to bring their propositions to the table. Today, India is attracting both foreign wealth managers and domestic banks to set up wealth management businesses. Going forward this is a trend that is likely to continue," says Alan Shields, Data monitor financial services analyst and author of the study. The number of mass affluent individuals in India has more than doubled since 1998. India is becoming an increasingly attractive market in many industries, and wealth management is no exception. Driving the attractiveness of the market has been the country’s exceptional economic performance over the last decade. The economy has grown at an average of 7.6% since 1994, due to the continued development of the service industry and strong growth in the technology sector. The opportunities that have been created by a booming economy have in turn driven individual wealth growth. The wealth of India’s residents has grown fromUS$79bn in 1998 to US$177bn at the end of 2008. This amounts to an increase of 123% in just five years. Of India’s 1.1 billion populations, wealth is concentrated among a 618,000 individuals. Of the total individual wealth in India, more than 65%or US $ 116bn is owned by both mass affluent and high net worth individuals. Combined, this amount of wealth in the hands of just 618000 individuals. Those with more than US$3m in liquid wealth represented the most valuable sub-segment of the wealth market in India at year-end 2003, owning USD17bn. The band accounted for over 9% of total savings and investments despite only accounting for only a tiny percentage of the adult population.

29 | P a g e

MAJOR WEALTH MANAGEMENT AGENCIES IN INDIA:

Association of Mutual Funds in India. ABN-AMRO Bank, Lotus India Asset Management. Reliance Capital Asset Management. Axis Asset Management Company Ltd. SBI Funds Management Max New York Insurance Kotak Mahindra Group Centurion Bank of Punjab ICICI Bank Birla Sun Life Insurance Standard Chartered Asset Management Prudential ICICI Asset Management ICICI Prudential Life Insurance HDFC Asset Management Co. Ltd. ICICI Prudential Asset Management Co. Ltd. Franklin Templeton Asset Management (India) Pvt. Ltd.  Birla Sun Life Asset Management Co. Ltd.  Sundaram BNP Paribas Asset Management Co. Ltd.  Tata Asset Management Ltd.  DSP BlackRock Investment Managers Pvt. Ltd. 

Religare Macquarie Private Wealth Credit Suisse Karvy Private Wealth Centrum Capital Royal Bank of Scotland Barclays Wealth

3.4 IndusInd bank in Wealth Management Sector-

The bank has many wealth management products for the clients. But the products are not of its own. The bank uses the products of other banks/companies to provide these services. The bank has tie-ups with many companies like Aviva Life Insurance, HDFC Mutual Funds and Chola Mandalam Group to provide these products and services.

The major financial instruments it deals with are:

1. Investments 2. Insurance

30 | P a g e

INVESTMENTS

IndusInd Bank offers you personalised investment options to help achieve your financial objectives. Solutions are tailor-made to suit each individual's requirements. It offers a host of financial instruments that includes:

a) E-Trading:

IndusInd Bank offers customers a unique 3-in-1 proposition for e-trading in Indian capital markets. This proposition allows the customer to leverage his IndusInd savings & de-mat account for trading purposes. The bank facilitates the opening of trading account with their broking partner Kotak Securities who has a cutting edge on trading solutions/ services at best pricing in the industry.  

How it works:

The bank offers 3-in-1 platform which seamlessly integrates the clients Savings, De-mat & Trading accounts. As a part of 3-in-1 offering the client is provided trading functionality & access to world class advisory/research by their broking partner(s).The savings and trading accounts will be

automatically integrated with the trading account and enable the client to trade hassle free.

 How to get a 3-in-1 account:

If the client is new and needs to open a fresh 3-in-1 account, the service executives present in the bank would do that after doing the formalities required and if the customer already has an account then the existing account can be used.

b) Bonds:The bank offers two types of bonds: GOI savings bonds and Capital Gain Bonds.

GOI Savings Bonds: 

GOI Savings Bonds are instruments that are issued by the RBI and currently has one option. These are among the safest instruments available for investment, and is assured to get back the full amount of the investment. The interest is 8% rate per annum, which is taxable. The maturity period of the 8% (taxable) bond is six years.The minimum investment is Rs 1,000. One can apply in multiples of Rs 1,000 thereafter. There is no prescribed upper limit to invest in this instrument.

31 | P a g e

Capital Gain Bonds:They also distribute other bonds like National Housing Bank (NHB) and Rural Electrical Corporation Ltd. (REC).

c) Mutual Funds

In a mutual fund many investors contribute to form a common pool of money. A mutual fund uses this money that is collected from investors, to buy those assets which are specifically permitted by its stated investment objective. For example, a growth fund will buy mainly equity assets- ordinary shares, preference share, warrants etc. An income fund would mainly buy debt instruments like debentures and bonds. The fund’s assets are owned by the investors in the same proportion as their contributions bears to the total contributions of all investors put together. In India, a mutual fund is constituted as a trust and the investor subscribes to the units of the scheme launched by the fund. 

Figure 4: Process of Mutual Funds

Features/Benefits:

32 | P a g e

The mutual funds offered by IndusInd bank are emerging as the favourite investment vehicle because of the many advantages it enjoys over other forms and avenues of investing. Following are the most important ones among others:

Portfolio DiversificationThe bank invests in Mutual funds which are well diversified portfolio of funds. This enables the client to hold a diversified investment portfolio even with a small amount of investment, which would otherwise require a big capital.

Professional Management SkillsMutual fund managers’ team in the bank is an excellent research team. They help the clients’ by monitoring and selecting stocks more efficiently. Mutual funds can afford to hire full-time, high-level investment analysts and have real-time access to crucial market information. Thus, they are able to execute trades on the largest and most cost-effective scale.

Economies of ScaleIf invested directly, the investor may have to bear all the costs of investing such as brokerage or custody of securities which may be very high. The wealth manger in the bank so invest in mutual fund as they achieve economies of scale and pay lesser cost of brokerage because of larger volumes which allows the client to reduce costs significantly.

Liquidity, Convenience and FlexibilityDue to lack of in-depth knowledge, investors often hold shares or bonds that they cannot easily sell. Wealth Manager in the bank so invests in such mutual funds which are more liquid, convenient and flexible and offer many investor services like switching or transfer from one fund to another, sale or redemptions.

AffordabilityThe wealth manger would invest in a portfolio of assets, i.e. bonds, shares, etc. depending upon the investment objective of the client and the affordability of the client.

Tax BenefitThe wealth manager invests in such specific schemes of mutual funds (Equity Linked Savings Schemes) which give investors the benefit of deduction of the amount invested, from their taxable income. Further, he also makes it sure that the dividend that the investor receives from the scheme, is tax‐free.

d) Suvarna MudraAt IndusInd bank, the bank offers gold coins of 3 different sizes: 5gms, 10gms and ingots of 50 gms. The features and benefits of these coins are:

They are magnificently designed and presented in Tamperproof Assay Certified Certicard

33 | P a g e

They have the highest purity of 99.99%

They are available at all the 165 branches across the country

They can be purchased by cash (upto Rs. 50,000), debit to account (IndusInd customers) or against Payorder /Demand Draft.

Non-customers can also purchase the coins.

The bank gives discounts for bulk purchases.

e) Alternate Investment Products

At Indusind, a broad range of Alternate investment products are also offered to diversify the traditional portfolio of the client.

Alternate Investment Products comprise of three main products- structured Products, Private Equity and Portfolio Management Services. These products are specially designed to cater to a niche segment of customers having different risk reward appetite.

Portfolio Management Services

Portfolio Management Services are products offered by various Fund houses that invest in stocks, fixed incomes, debt, cash and other financial instruments. These are managed by professional portfolio managers of the bank to meet specific individual objectives. Unlike a mutual fund where the investor holds units, in a PMS product, the investor holds individual securities.

Structured Products

Structured products are investment platforms that give exposure to equity markets, interest rates, bonds, currency, commodity and derivatives to give the upside in returns while protecting your downside. A Structured Product is created by combining the economics of a long call option on equity with a long discount bond position. The investment structure generally provides 100% principal protection. The coupon or final payment at maturity is determined by the appreciation of the underlying equity.

Private Equity

Private Equity Products invest in opportunities in companies that are not publicly traded on a stock exchange. Private Equity has emerged as an attractive asset class. However, lacking the expertise or

34 | P a g e

the time or resources to structure and monitor the Private Equity investment, you can invest indirectly through a private equity fund.

f) Currency Derivatives:

As per RBI and SEBI notifications, members of recognized stock exchanges only can offer these products to their customers. RBI, SEBI and Exchanges guidelines govern the Banks participating in the currency futures segment.

IndusInd Bank Ltd. is the clearing cum trading member with exchanges - NSE and MCX-SX. As of now, the bank allows trading in currency futures on the NSE platform. 

How it worksThis is a margin based product. The bank collects the margin money as collateral in advance/up-front from all the customers eligible for trading in currency futures with the exchanges.  Collection of client margin is mandatory and daily reporting is required to be done to the Exchanges by the trading member. Mark-to-market (MTM) loss or gain is debited or credited to the customers Current Account/Savings Account (CASA account) on daily basis.

The client can keep initial margin in the form of Cash and/or Fixed Deposit as collaterals towards margin for trading or taking exposures in the currency futures segment. Fixed Deposit has to be made with IndusInd Bank sourcing branch only. The MTM margin has to be always maintained in cash as it is settled with the respective exchanges on daily basis in cash. For Individual Clients the amount proposed is Rs.100000 and for the corporate clients the amount proposed is Rs.500000. The limit provided for trading is 80% of the available collaterals.

For trading, the customers have the option to choose Online and offline mode. Online Trading is arranged through Trading Platform provided by Respective Exchanges.

Offline Trading, clients can do call and trade with IBL Dealing Room. As this is the order driven market, price being determined by the underlying spot market it is advisable to do on line trading only. The clients will have to convincingly establish the customer identity to the dealers.

Business Rules:

Guidelines issued by Reserve Bank of India and SEBI on Know Your Customer (KYC) and In Person Verification requires intensive due diligence at the time of establishing relationship.

Exchange & Clearing Corporation rules and guidelines on Membership Compliances, Margin, MTM Settlement, Collateral Management and internal audit.

NISM Certification is a MUST for following Staff at Branches and at Corporate Offices.

Sale Representative at Branches.

35 | P a g e

CDS – Operational Staff.

Dealers – Executing Trades on behalf of the clients.

The broad product features are as per the following:

Resident Indians can trade in the currency pairs of USD-INR, EUR-INR, GBP-INR and JPY-INR

It is a margin based product and the initial margin requirement is Rs.100000/- for individuals and Rs.500000/- for non-individuals.

All contracts are of month-end maturity (1 month, 2months up to 12 months), the contract is known by its expiry date with a lot size of 1000/unit can be traded. In case of JPY/INR the lot size is 100000 units and quote is per 100 Yen.

All open contracts are Marked to Market (MTM) at settlement price by the exchanges at end of day.

MTM profit/loss will be settled with customer on a daily basis

Currency Futures as an asset class is considered as a moderate risk and high yielding portfolio given the two way volatility

No requirement of underlying documents for trading in this product

Fully regulated and transparent market place

Counter party default risk eliminated due to participation of clearing corporation of the respective exchanges

Narrow Bid-Ask spread on regular basis

The product is best suited for:

1. Those who do not have access to OTC Markets and to individuals who wish to add currency futures into their asset portfolio

2. Investors

3. Hedgers

4. Arbitrageurs

36 | P a g e

How to get Currency Derivative Account?

Any IndusInd Bank branch’s service executives will help to open a currency derivative account. It is advised to have a CASA account with us as daily MTM settlements happens with the Exchanges and collaterals are monitored.

Policy for treatment of In-active Account in the currency derivative segment:

If the client has not traded via that account for more than six months, then the account would be suspended for trading. And the credit available in the Client's margin account (if any) with the Bank, is refunded at the client's request. If the client is desirous of reactivating his account post the suspension, then it can be done by sending a written request for the same.

INSURANCE

General information about insurance:

Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the insurance; the insured, or policyholder, is the person or entity buying the insurance policy. The amount to be charged for a certain amount of insurance coverage is called the premium. The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (indemnify) the

insured in the case of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated.

Insurance terminology:

Bound: Once the insurance has been accepted and is in place, it is called "bound". The process of being bound is called the binding process.

Insurer: A person or company that accepts the risk of loss and compensates the insured in the event of loss in exchange for a premium or payment. This is usually an insurance company.

37 | P a g e

Insured: The person or company transferring the risk of loss to a third party through a contractual agreement (insurance policy). This is the person or entity that will be compensated for loss by an insurer under the terms of the insurance contract.

Insurance Rider/Endorsement: An attachment to an insurance policy that alters the policy's coverage or terms. (To learn more, read Let Life Insurance Riders Drive Your Coverage.)

Insurance Umbrella Policy: When insurance coverage is insufficient, an umbrella policy may be purchased to cover losses above the limit of an underlying policy or policies, such as homeowners and auto insurance. While it applies to losses over the dollar amount in the underlying policies, terms of coverage are sometimes broader than those of underlying policies.

Insurable Interest: In order to insure something or someone, the insured must provide proof that the loss will have a genuine economic impact in the event the loss occurs. Without an insurable interest, insurers will not cover the loss. It is worth noting that for property insurance policies, an insurable interest must exist during the underwriting process and at the time of loss. However, unlike with property insurance, with life insurance, an insurable interest must exist at the time of purchase only.

At IndusInd bank:

The bank offers customized solutions that include Accident, Health, Liability, Marine, Motor, Property, Travel & Rural Insurance for individuals as well as corporate customers in association with Cholamandalam MS General Insurance Company Ltd.

So the types of insurance available are:

Health Insurance

Motor Insurance

Home Insurance

Travel Insurance

Life Insurance

Chola AcciCare

1. Health Insurance:

Health related emergencies are an undesirable part of our lives. In today’s age, lifestyle diseases are also increasing. At times, they can also lead to hospitalization and a prolonged recuperation. During such times, if you are not adequately covered, it can leave your finances in disarray. Health Insurance is the answer to the financial difficulties arising out of such unexpected emergencies.

38 | P a g e

The bank offers a single policy that covers the health insurance needs for your entire family. The floating sum insured gives you the flexibility of extending the benefit across all family members. It is simple to buy and offers more comprehensive coverage, more convenience and more care. This product is designed by Cholamandalam MS General Insurance Co. Ltd.

Benefits:

i. {MORE} Comprehensive Coverage

Hospitalization, day care and outpatient needs (dental care, eye care etc.)

Maternity hospitalization

Ayurvedic Treatments also covered

141 day care procedures that require less than 24 hours hospitalization

60 days pre-hospitalization and 90 days post-hospitalization expenses

ii. {MORE} Convenient

Network of over 2,600 partner hospitals across the country for cashless hospitalization

Direct claims settlement through Chola MS HELP – 24x7

Cashless authorization within 2 hours of intimation

iii. {MORE} Caring

Free Health Check-up & eye examination every 2 claim free years

Claim free bonus upto 50% of Sum Insured – to help fight medical inflation

Chola Wellness Health Alert Service on your Mobile phone

Features:

Feature Eligibility

Floater Sum Insured Rs.4/6/10 Lakh

Claim Free Bonus - upto 50% of SI

5% of SI for every claim free year

Room, Boarding & Nursing SI Rs.4 lakh - AC Single Room upto Rs.3,000/- per day

39 | P a g e

Expenses SI Rs.6 & 10 Lakh – AC Single Room upto 1% of SI per day

Home Hospitalization Up to 25% SI, max of Rs.1 lakh

Daily Cash for choosing shared accommodation

Rs.500/- per day for max 14 days (1 day deductible)

General Health Check-up & Eye Examination

1.0% of SI once after every two continuous claim free renewals per family

Emergency Ambulance Rs.3,000/- per insured per policy year

Maternity expenses (5 yr.waiting period)

Rs.25,000/- (normal) & Rs.40,000/- (Caesarean)

Ayurvedic Therapy Treatments

Upto 7.5 % of SI. 

20% for co-payment for specific treatments

OPD Dental (3 yr. waiting period)

1% of SI (max of Rs.5,000/- with 30% co-payment)

External Aids (Specs , Contact Lens, Hearing aids) waiting period 3 years

1% of SI max Rs.5000/- once in a block of 2 years with 30% co-payment by insured

Reduction of Claim Free bonus in case of a  claim

5%

Sub Limits against Diseases No Sub Limits

Main Exclusions

Benefits will not be available for pre-existing conditions until 24 months of continuous coverage from first policy start date

Expenses during first 30 days of commencement of policy except in the case of accidents. Not applicable for renewals

Cataract, Benign Prostatic Hypertrophy, Hysterectomy for Menorrhagia or Fibromyoma, Hernia, Hydrocele, Fistula, Piles, Sinusitis and related disorders, Gall stones covered after a waiting period of one year

40 | P a g e

Spondylitis, Spondilosis, Knee / Hip joint replacement, Heart disease, Internal congenital diseases, any type of Carcinoma / Sarcoma / Blood Cancer, Osteoarthritis of joint, Calculus diseases of Gall bladder, and Urogenital, Gastric and Duodenal Ulcers, Internal tumors, cysts, nodules, polyps including breast lumps (each of any kind, unless malignant), Gout and Rheumatism, ENT disorders and Surgery, Surgery of Genitourinary system, Surgery for prolapsed Inter vertebral disk, Surgery of Varicose veins and Varicose Ulcers, Surgery on covered after a waiting period of two years.

2. Motor Insurance:

Chola Protect 360° is a one-of-its-kind all-inclusive Private Car Insurance Package Policy, which not only covers your financial loss to the maximum, but also makes sure that every situation is under control.

Key Features:

Total financial coverage e.g., Reinstatement value / Nil depreciation

Car emergency assistance e.g., Fuel delivery / battery jump start

Car breakdown assistance e.g., Flat tyre / on-site repair e.g., fuel delivery / battery top up

Post accident assistance e.g., Daily allowance / Towing service

Benefits

CARE for Road Emergencies

This plan assists you at every point, whether it is car emergency assistance like fuel delivery/ battery top up or car breakdown assistance like flat tyre/on-site repair, CARE will be with you always.

Depreciation Waiver on Vehicle Parts

Waiver will depend on the age of the vehicle as per the plan opted.

41 | P a g e

Reinstatement Value to ensure maximum claim benefit- Full Car Investment Security

The car is insured on “Reinstatement Value Basis”, i.e. the original invoice value. In case of total loss / construction total loss (75% damage to the car) of car, insured will be compensated on the basis of vehicle invoice value. The depreciation on replaced parts in case of accident / partial loss will be zero.

Daily Allowance

Fixed allowance of Rs.500-/ or Rs.1000-/ to meet the cost of hiring a car (maximum of 5 days per policy period) while your insured car is under repair at the garage due to accident.

Cover for Personal Luggage Loss

We will reimburse market value of personal luggage for the loss or damage caused by fire or accident provided the luggage were inside the locked car during the mishap.

Cover for Car Key loss

A fixed amount will be reimbursed towards duplicate ignition key replacement, if the original is lost.

Cover for Driving License Loss

You will get a fixed amount to obtain a duplicate license, if your original driving license is lost.

Chola Advantage:

Dedicated call centre for receiving your claim intimation.

Cashless claim settlement at over 400 Chola preferred garages.

Less paperwork.

Smooth and hassle-free claim process.

Own Damage (OD) Cover:

Cover against loss and damage to you vehicle due to any of the following perils: Fire, explosion, self-ignition or lighting. Burglary, housebreaking or theft, riot and strike, earthquake (fire and shock damage), flood, typhoon, hurricane, storm and tempest, inundation, cyclone, hailstorm, frost, malicious act, terrorist activity, land slide, rock slide. Whilst in transit by road, rail, inland waterway, lift, elevator or air. Accidental external means third Party Personal Liability Cover as per court awards as your liability to the third party due to accidental death or injuries caused by

42 | P a g e

your vehicle will be met by us third Party Property Damage Compensation up to Rs.7,50,000 in case of Private Cars.

Personal Accident Cover

The owner - driver (compulsory): Cover of Rs.200000. Unnamed passengers including spouse, children, parents, etc., Rs.10000 to a maximum of Rs.200000.

Discounts available under basic comprehensive coverage. Discount for Anti Theft Devices fitted in vehicle, approved from Automobile Research

Association of India (ARAI).

Automobile Association Membership Discount.

Voluntary Claim Excess / Deductible Discount: If you opt for higher deductable for each claim over and above the compulsory deductable an OD premium discount will be given, depending on the option exercised.

No Claim Bonus (NCB): If you do not lodge any claim in the full policy period of one year then you are eligible for NCB on policy renewal.

Exclusions

Accidental loss or damage suffered while driving under the influence of intoxicating liquor or drug.

Accidental loss or damage caused due to wilful negligence.

Loss or liability while the vehicle is used outside the scope of limitations of use and/ or being driven by a person not duly licensed.

Consequential loss, depreciation, wears & tears, mechanical & electrical breakdown/ failure of breakages.

Loss due to radioactivity or nuclear weapons.

Loss due to war and related activities.

3. Home Insurance:

43 | P a g e

Our home is our haven, away from the pressures of work and today’s fast paced lifestyle. Any loss to it or its contents can create an emotional impact on us and our family. So why leave our emotions to chance?

Chola Total Home Protect offers triple benefits - a one-of-a-kind revolutionary home insurance plan that gives you three-fold protection from any such unfortunate circumstances.

Benefits

Comprehensive coverage - Cover for the house structure, contents and family against unforeseen unfortunate events.

Easy purchase process - No documents or valuation certificate required while purchasing the policy

Convenient claims processing & quick settlement.

Wide range of sum insured.

Features

1. Cover for Building Structure & Contents

This covers the building & contents against loss / damage arising from:

Fire, lightning, explosions, implosions, riots, strike or malicious acts.

Earthquakes, shock, subsidence, landslide.

Flood, inundation, storm, tempest, typhoon, hurricane, tornado, cyclone.

Missile testing operations.

Terrorism.

2. Additional Covers

Cover for Domestic Electrical Appliances against electrical breakdown.

Cover for Jewellery and valuables against burglary, chain snatching, damage by fire, earthquake and floods.

Cover for Plate Glass against external damage.

44 | P a g e

Cover for Loss of Baggage while travelling in India.

Purchase Protection Cover for new domestic appliances over and above the Contents Cover.

3. Cover for People

Additional Rent for Alternate Accommodation for house owners.

Family Floater Accident Hospitalization Cover.

Personal Accident Cover for self, spouse and two children

Cover for Legal Liability.

Cover for Workmen's Compensation towards domestic help.

Plans:

  Platinum

Building structure cover Only if own house

Contents – Fire, burglary, earthquake, terrorism

Y

Household appliances – electrical & mechanical breakdown

Y

Jewellery & valuables Y

Family floater accidental hospitalization

Y

Additional rent for alternate accommodation

Only if own house

Personal Accident Y

Public Liability Y

45 | P a g e

Baggage loss Y

Plate Glass insurance Y

Workmen’s Compensation Y

Purchase protection Y

Exclusions:

Loss, destruction or damage to bullion or unset precious stones, any curios or works of art exceeding Rs. 10,000, manuscripts, plans, drawings, securities, documents of any kind, stamps, coins or paper money, cheques, business books, computer systems records, explosives.

Loss / damage to livestock, motor vehicles & cycles.

Loss / damage to articles of consumable nature.

Damage for which manufacturer or supplier of property is responsible under Maintenance Agreement.

Gradually developing flaws, defects, cracks or partial fractures in any part not necessitating immediate stoppage, although at some future time repair or replacement of the parts affected may be necessary.

Deterioration of or wearing away or wear out of any item caused by or naturally resulting from normal use or exposure.

Damage caused by or arising out of willful act or willful gross negligence of Insured or his employee.

Damage due to faults existing at the time of commencement of this Insurance and not known to the Insured, regardless of whether such faults or defects were known to the Company or not.

Loss or damage whilst being conveyed by any carrier under contract of affreightment.

Embossed, silvered, lettered, ornamental, curved or any glass whatsoever, other than plain and of ordinary glazing quality.

46 | P a g e

4. Travel Insurance:

Chola MS Short Term Travel Policy is a great companion on your holidays or business trips abroad. Cover unexpected incidents like baggage loss/delay, flight delays, medical expenses, loss of travel documents/funds etc with the Chola MS Travel policy.

Benefits:

3 months onwards.

Door-to-door Cover.

Adventure Sports Cover.

Pay only for what you use.

Cover for all your family members, including senior citizens.

Express Claims Processing.

3 Plans with Sum Insured ranging from $50,000 to $250,000.

No medical checkup required upto 65 years.

Features

Compensation for Total Loss of Checked-in Baggage.

Compensation for delay of Checked-in Baggage.

Reimbursement in case of Trip Cancellation or Curtailment.

Reimbursement for meals and lodgings due to trip delay.

Hijack Relief.

Cover for Loss of Passport & International Driving License.

Overseas & Domestic Coverage for death and or permanent total disability.

Compensation towards any legal liability.

47 | P a g e

Compensation towards funds lost if insured.

Hospital Daily Cash.

Home Burglary Cover.

Exclusions

Any treatment if that is the sole reason or one of the reasons for the travel overseas.

Any treatment which could in the opinion of the Overseas Administrator and attending Doctor be or have been delayed until the Insured's return to India.

War (whether declared or not), civil war, invasion, act of foreign enemies, rebellion, revolution, insurrection, mutiny, military or usurped power, seizure, capture, arrest, restraint or detainment, confiscation or nationalization or requisition of or damage by or under the order of any government or public local authority or terrorism or terrorist acts. However, for the scope of the Hijack Relief only, terrorism exclusion shall stand excluded from the General Exclusions category.

Any intentional, reckless or criminal act, suicide, or attempted suicide, or the use or abuse of any drugs, alcohol and the like.

Participation in naval, military or air force operations whether in the form of military exercises or war games or actual engagement with the enemy whether foreign or domestic.

Any loss of which a contributing causes was the Insured's actual or attempted commission of, or wilful participation in, an illegal act or any violation or attempted violation of the law or resistance to arrest.

HIV, AIDS and all related medical conditions.

5. Life Insurance:

IndusInd Bank offers customized insurance solutions which offer comprehensive product portfolio meeting all customer life cycle needs of Child planning, Savings, Retirement Planning and Protection in association with Aviva Life Insurance. Aviva Life Insurance India is a joint venture between one of the country’s oldest and largest groups, Dabur, and Aviva plc, the worlds

48 | P a g e

fifth largest and the UK's largest insurance group, whose association with India dates back to 1834.

Features & Benefits

With a strong sales force of over 30,000 Financial Planning Advisers (FPAs), Aviva has initiated and pioneered many innovative sales approaches, including the concept of Bancassurance and Financial Health Check services.

A seasoned team of fund managers make our fund management are one of the key differentiators with Aviva. Keeping with Aviva’s commitment of social responsibility, Aviva has been successful in reaching out to the underprivileged strata through their Microinsurance initiatives.

Aviva brings to the clients, not just a robust product portfolio meeting all your lifecycle needs related to – Savings, Retirement, Investments and Protection but right investment strategies that will help you plan for a secured future.

Types

Child Plans: A comprehensive plan to help realize your child’s dreams.

Savings: A simple plan to take care of 100% of your protection and saving needs.

Retirement Plans: A plan that ensures that you don't wait till 60 to follow your heart.

Protection Plan: A pure risk coverage plan that provides Financial protection against unforeseen risks.

6. Chola AcciCare:

It is a unique insurance policy that more than just pays for accidental emergencies. This policy offers you a cash benefit in case of critical illness as well as regular hospitalization.

49 | P a g e

Cholamandalam MS General Insurance Company (Chola MS) is a joint venture between the US$ 3 Billion Murugappa Group & Mitsui Sumitomo Insurance Group Japan. Murugappa Group is a pioneer and market leader in various fields and has strong presence in fertilizers, Sugar, Abrasives, Cycles, bathroom accessories and Consumer finance. Mitsui Sumitomo is the second largest insurance Group of Japan with a net written premium of US$ 12.39 Billion in General Insurance. Chola MS is headquartered in Chennai and has 113 offices spread across India.

Benefits:

Accident:An accident policy that covers death, permanent partial disability, permanent total disability and additional benefit for accidents due to terrorism.

Hospital Cash:If you are hospitalized for any illness or injury, we will pay you per day allowance for the number of days in the hospital. In case of ICU hospitalization, we will pay you double the benefit per day. In case of hospitalization for more than 20 continuous days, we will pay a lump sum amount.

Critical Illness:

If you are diagnosed with any one of the 10 critical illnesses mentioned below, the plan will pay you a lump sum amount. Once a claim is registered, this benefit ceases.

Cancer of specified severity.

Stroke resulting in permanent symptoms.

First heart attack of specified severity.

Open chest CABG.

Kidney failure requiring regular dialysis.

Multiple sclerosis with persisting symptoms.

Major organ/bone marrow transplant.

Permanent paralysis of limbs.

Surgery of aorta.

Primary pulmonary hypertension.

50 | P a g e

Features:

i. Entry Age:

18 – 55 years with no medical checkups

Lifetime renewal facility

ii. Plan Options:

Personal Accident

Death / permanent total disability / permanent partial disability due to an accident

Rs. 8 lakh

Death / permanent total disability / permanent partial disability due to an accident due to terrorism

Rs. 12 lakh

Hospital Daily Cash

Hospitalization up to 20 days

Rs. 1,000/- per day

Rs. 2,000/- per day for ICU Hospitalization

Convalescence (lump sum) benefit on continuous hospitalization of more than 20 days

Rs.10,000/-

51 | P a g e

Critical IllnessLump sum payout on confirmed diagnosis of one of the 10 critical illnesses

Rs. 1 lakh

*The company from time to time and subject to IRDA approval, will revise the premium rates/ terms and conditions based on experience.

*The premium rates, terms and conditions at the time of renewal shall apply.

Claim Procedure:

Personal Accident

Completed claim form with proof of death / disability. We will pay you a lump sum amount as per the policy limits.

Hospital Cash

All you need to give us is the completed claim form with discharge summary and diagnosis reports. We will pay you as per the policy limits.

Critical Illness

All you need to give us is the completed claim form with diagnosis reports for the critical illness. We will pay you a lump sum amount after the survival period.

CHAPTER 4: RESEARCH METHODOLOGY

52 | P a g e

4.1 Assisting the Wealth Managers at IndusInd Bank to create the portfolio:

The HNW clients have to provide with details of their assets, liabilities, priorities, a little bit information about their personal life etc. Based on such information, the wealth manager creates the appropriate portfolio.

The information is taken on a questionnaire/form which is prepared by the bank for all the customers. It includes all the details. This form is known as the Customer Profiler.

A specimen is given in the Appendix.

4.2 After creating the portfolio, selecting the best possible investment products:

The wealth manager, based on the portfolio created, looks into all the various investment options available for the customer.

The difficult part is to convince the customer that the options selected by the wealth manager are in accordance with the portfolio and do not guarantee the returns. They can’t be rich/poor in a single shot.

To select the investment options accurately, the wealth manager uses different calculators like:

a) Educational Cost Calculatorb) HLV Calculatorc) Retirement Calculatord) Tax Calculator

a) Educational Cost Calculator

This calculator tells the client that how much would be the value of maturity fee at the end of the term.

It includes factors like the age of the client, his/her child, desired profession and estimated fee, age of the child when the amount would be required and inflation rate.

A specimen is given in the Appendix.

b) HLV Calculator

The concept of Human Life Value is quite new in India. It is the expected life time earnings of a person. This concept is important because the customer when takes any insurance policy keeps in mind that the amount received at maturity should be able to maintain the existing life style. So in order to calculate that person’s value in monetary terms this calculator is used.

It includes the current age, expected retirement age, annual gross income, personal expenses, taxes, various liquid assets, various short term liabilities and expected value of dreams in monetary terms.

A specimen is given in the Appendix.

53 | P a g e

c) Retirement Calculator

This calculator is used to estimate the value of savings (monthly) that the customer has to do to be used after retirement. Basically it is the retirement planner.

It includes the current age, expected retirement age, monthly expenses as of now, expected inflation rate, expected rate of return, annuity rate, monthly income post-retirement and target corpus required.

A specimen is given in the Appendix.

d) Tax Calculator

This calculator helps in estimating the amount of tax payable by the client.

It includes the gross income, perks, deductions under section 10 and 80 etc.

A specimen is given in the Appendix.

4.3 Studying how the manager updates the existing portfolios of the clients:

Regular market studies and analysis of the actions taken by the competitors helps in making decisions regarding where to invest and how to convince the client.

As IndusInd bank doesn’t have own product, it needs to keep a constant check that which competitor’s product is doing better and why.

The reason why the bank doesn’t have its own product is: in words of Romesh Sobti, MD and CEO, IndusInd bank, the bank is a new one in the market and is not fully established yet. The bank is on the developing stage yet. Making its own products and selling them would be costlier for the bank. It would bring instability in the bank’s financial position if those products don’t sell in the market which the bank is not completely ready to face.

So, it uses other companies’ products and sells them and earns commission on them. This has earned the bank a good amount of time to study the market thoroughly and be on a safer side.

So to keep updating the portfolios of its clients the wealth manager keeps an up to date information of how companies products are performing and convince the client that why their product is still a better choice.

54 | P a g e

CHAPTER 5: COMPETITOR ANALYSIS

In today’s market, there is a huge competition for every single product. The company has to keep a constant and updated record of its competitors’ strategy and act accordingly.

Comparative studies of the various products with its counter products are done.

As an example, comparative study of:

Term plans with return of premium, and

Life Insurance traditional plans – money back policies

has been shown in the Appendix.

These comparisons shows that how better/poor the company’s products are reviewed in the market.

Does any change is required or the company should come up with new plans etc.

55 | P a g e

CHAPTER 6: FINDINGS AND RESULTS

The process of wealth management in the bank is a manual one and requires a lot of hard work and time to be dedicated. It is a hectic process. A lot of paperwork is done to estimate the values and explain.

To make the process a bit simpler, a RISHTEY form has been prepared for the wealth manager which would make the wealth manager more trust worthy and can produce results instantly.

So, along with using the manual questionnaire, the wealth manager can also use the excel sheet form which would produce results instantly. The form covers all the same details in a precise form and would save a lot and time of both the customer and the banker.

This form uses all the required information that the manual form does but in precise manner. It combines the results of the various calculators used individually into one common result.

The form has been attached in the appendix.

Below is the example of the form:

Figure 5: Screenshot of the Rishtey form

56 | P a g e

In the form, as per the values entered in the green colour cells, the minimum amount of investment required is calculated.

CHAPTER 7: CONCLUSION

Studies have shown that people are now more interested in saving their money rather than spending. And instead of just simple saving, they want to save it in such a way that they can earn profits out of it. So they look out for avenues for investing. The market is full of such avenues but the lack of proper and consistent knowledge; they often fail to invest in such a way that fulfils their expectations. Many, on the other hand, are afraid of investing in the market due to lack of trust and confusion.

Earlier, to invest, the customer had to go to different avenues and invest. This takes a lot time and more importantly the amount invested is either above or below the required level. With no efficient consultant, the customer loses a lot of money. This is where the role of wealth managers comes.

Wealth Managers do their best to invest the money of the customer in such a way that earns maximum possible gains. But the problem that the customer faced was:

i. Lack of trustii. Lack of consistent knowledge about the products and market

iii. High fees chargediv. Lack of transparencyv. More of impersonal approach by the wealth managers.

But when the same services were started being provided by the banks, the customers were much positive about saving their money via these avenues.

57 | P a g e

Banks have received such positive review as the customers are already accustomed to the bankers. So the communication and understanding between the two parties is quite well established. This earns trust on the bank’s wealth manager. They can make the customer understand the concepts and processes of any investment product. Also the relation with the bank improves.

Thus, banks providing services other than the core banking services is a profitable venture for both the bank and the customer.

LIMITATIONS and CAVEATS

The constraints faced while doing the project are as follows:

1. The major constraint was that the wealth customers being HNW customers, the bank was not allowed to provide with their details.

2. Making the customer understand the concept of wealth management is a little easier when it comes to convince them to purchase the products that the bank is offering.

SUGGESTIONS/RECOMMENDATIONS

58 | P a g e

With the knowledge I have gained while doing the internship, these are the following recommendations/suggestions I have:

1. The bank mainly caters to the high end customers. It should try focussing on the middle income and low income group also to expand their operations.

2. The bank has kept its operational restrictions little higher. E.g.: the minimum average monthly balance to be maintained in the savings account is Rs. 10000 which is a little higher for many customers. Such boundaries can be eased to get more customers.

3. On the occasion of Akshayatritiya, it was observed that the gold rates in the bank were higher than the market rates and the denomination of the gold coins. Though it cannot be asked to change the rates but atleast the denominations offered could have been more.

4. No education loan is being provided by the bank yet. The bank can look into it too.

REFERENCES

http://www.ibm.com/developerworks/rational/library/oct05/hanford/index.html http://tti.tamu.edu/documents/0-5534-1.pdf http://www.indusind.com/indusind/wcms/en/home/top-links/media-room/press-releases/

q4_pr_11_12.avsFiles/PDF/Final%20Press%20Release-%20%20Q4%20FY12%20results.pdf http://www.moneycontrol.com/pf/guides/InvestmentOption.htm http://www.legalandgeneral.com/life-cover/confused-about-life-cover/articles-and-guides/life-cover-

jargon-buster/ http://www.investmentyogi.com/taxes/tax-saving-options-under-section-80c.aspx# http://www.financeninvestments.com/investment/different-investment-options.html http://businesstoday.intoday.in/story/romesh-sobti-indusind-bank/1/19949.html http://www.mouthshut.com/product-reviews/IndusInd-Bank-reviews-925004498 http://www.investmentbazar.com http://www.bimadeals.com http://www.ijagoinvestor.com http://www.angelbroking.com http://www.myinsuranceclub.com http://www.investopedia.com

59 | P a g e

http://www.mypolicybazar.com

APPENDIX

60 | P a g e

APPENDIX A2: Educational Cost Calculator

EDUCATIONAL COST CALCULATOR - AVIVA YOUNG SCHOLAR

INPUT IN GREEN CELLS ONLY

Age of Parent 35Age of Child 5

Profession EngineerFee for the desired Profession 1000000Age of the Kid when money is required 20Inflation rate 5%

61 | P a g e

Term available for investment 15Value of fee at maturity after inflation 20,78,928

APPENDIX A3: Retirement Planner

62 | P a g e

APPENDIX A4: HLV Calculator                 Plese note:- Cells having the  

colour should not be changed. It affects the calculation

  Only the columns having  

colour need to be entered.  

                 

63 | P a g e

Human Life Value ( HLV Form )      Your Age (Completed Years) 30 (Round Off)Your Retirement Age 60 (Round Off)

     

Annual Gross Income Amount(INR)780000.

00 (Figure in lacs)

 less personal Expense including taxes*

585000.00 (Figure in lacs)

     Amount used for Family

195000.00 LACS  

     HLV factor as per Age 3900000  Gross Human Life Value    

 Less Liquid Assets** (Figure in lacs)    

  Savings Bank (incl. Cash) 18.00    

  Fixed Deposits 20.00      Post Office Deposits 0.00      Jewellery 13.00    

  Any Others (MFs/Shares) 45.00    

  96.00 (Figure in lacs)     

 Less Existing Life Insurance ( Sum Assured Only) 250.00 (Figure in lacs)

  3899654 (Figure in lacs)     Add Current Liabilities *** (Figure in lacs)      Credit Card Outstanding 0.02      Personal Loan outstanding 0.00      Vehicle Loan Outstanding 0.00      Housing Loan Outstanding 0.00    

 Any others (Loan outstanding) 0.00    

  0.02 (Figure in lacs)     Add Money Value of Dreams for rest of life ****    (Figure in lacs)      Your child's education 25.00      Child's marriage 30.00      Holiday Planning 50.00      Retirement planning 80.00      Owning house 0.00      Owning Car 0.00      185.00 (Figure in lacs)

64 | P a g e

   

Human Life Value 3899839(Figure in lacs)

                 * This is the money you spend on yourself & towards taxation     ** Anything that can be converted into cash in next 7 days can be termed as a liquid asset e.g. Cash, FD, Bank Savings, MFs, Shares etc.     *** This is the amount outstanding against you e.g. housing loan, personal loan, credit card outstanding etc.     **** This would be the cost or value of your dreams & aspirations related to  - Your child's education  - Child's marriage  - Holiday Planning  - Retirement planning  - Asset/ Wealth creation like owning house, car etc.  The calculation is based on the inflation after that particular year.                   

65 | P a g e

APPENDIX A5: Tax Calculator

2011-2012  

 

TAX CALCULATOR  

 

Month Basic

HRA

Sp. Allow.

Convey. Allow.

Others Gross Salary

PF/VPF

I. Tax

P. Tax

Net Salary

 

April 0 0 0 0   0 0 0 0 0  May 0 0 0 0   0 0 0 0 0  June 0 0 0 0   0 0 0 0 0  July 0 0 0 0 0 0 0 0 0 0  August 0 0 0 0 0 0 0 0 0 0  September 0 0 0 0 0 0 0 0 0 0  October 0 0 0 0 0 0 0 0 0 0  November 0 0 0 0 0 0 0 0 0 0  December 0 0 0 0 0 0 0 0 0 0  January 0 0 0 0 0 0 0 0 0 0  February 0 0 0 0 0 0 0 0 0 0  March 0 0 0 0 0 0 0 0 0 0  TOTAL 0 0 0 0 0 0 0 0 0 0  

  

ParticularsAmount  

GROSS SALARY INCOME   0       ADD : PERKS   Perks  

HOUSING 0Co.Leased Accommodation - Start Date

01-Apr-

09 

OTHERS 0 House Lease - Rent per month    

  0 Others 0       LESS : DEDUCTIONS U/S 10

   

HRA REBATE 0

HRA Rebate

 

66 | P a g e

CONVEYANCE 0 City - Metro / Non-metro Metr

o    0 Rent per month 0       LESS : DEDUCTIONS U/S 16

   

PROFESSION TAX 0       LESS : HOUSING LOAN INTEREST 0 Investments for

Tax ReliefAmount  

    Housing Loan - Interest 0  LESS : DEDUCTIONS U/S 80

   

SPECIFIED INVESTMENTS - 80C

0 Mediclaim - 80D 0  

MEDICLAIM - 80D 0 Repayment of Education Loan - Interest 0  

EDUCATION LOAN - 80E 0 Others - 80DD/ 80DDB

etc. 0  OTHERS 0    0 SPECIFIED

INVESTMENTS - 80C  

    Contribution to Provident Fund / VPF 0  

TAXABLE INCOME 0 Life Insurance Premium 0      Premium - Pension Plan 0  TAX ON NET SALARY INCOME 0 PPF 0  ADD : SURCHARGE 0 NSC 0    0 NSC Interest 0      Mutual Fund 0  ADD : EDUCATION CESS @ 3% 0 ULIP 0      Housing Loan - Principal 0  NET TAX PAYABLE 0 Others 0      Infrastructure Bonds 0  LESS : TAX DEDUCTED 0 TOTAL (maxm limited

to Rs, 1,00,000) 0       BAL. TAX PAYABLE / (EXCESS DEDUCTED) 0 Gender - Male / Female Male                                  

Disclaimer : This calculator gives an approximate tax calculation

67 | P a g e

and is subject to submission of actual investment proofs.

APPENDIX A6: Rishtey Form

enter only the cells marked greenRishtey

  Enter DOB 19-Oct-59

     1 Age (in years) 52     2 Annual Gross Income 990000     3 Annual Personal Expense including taxes 100000     4 Annual Amount available for Family ( 2-3) 890000     5 HLV Factor 10     6 Gross Human Life Value 8900000     7 Liquid Assets 150000     8 Existing Life Insurance ( Sum Assured Only ) 5000000     9 Liabilites 19000     

10 Money value of Sapney as on today for rest of life 10000000            Minimum Amount to be invested 13769000

68 | P a g e

Financial Sapney

Financial Sapney

Time to accomplish Mere Sapney( no of years)

Money Value of Mere Sapne as on today

Money Value of Mere Sapne for

Future Priority         

Retirement 8 1000000 2000000 2   

Investment 5 700000 1300000 7   

Savings 10 6   

Health 5   

Term Assurance 4

   Estate Planning 3

   Young children       1

* HLV Factors  

upto 35 22

36- 45 15

46-50 12

51- 60 10

60 and above 7

No of years 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22Inflation Factor 1.2 1.3 1.4 1.5 1.6 1.6 1.7 1.8 1.9 2 2.1 2.2 2.3 2.4 2.5 2.6 2.8 3

No of years 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40Inflation Factor 3.1 3.2 3.4 3.5 3.7 3.9 4.1 4.3 4.5 4.7 5 5.2 5.5 5.7 6 6.3 6.7 7

69 | P a g e

APPENDIX A7: Comparative Statement of Gold rates as on Akshayatritiya 2012

Seller Name 10 gms

Bank of Baroda 30376

IndusInd Bank 32000

Allahabad Bank 30388

SBI 30841

Bank of India 31095

ICICI Bank 33945

Reliance Securities 34263

PNB 32166

Tanishq 33520

HDFC Bank 34220

70 | P a g e

APPENDIX A8: Comparative Statement of Term Plans

Comparitive Study of Term Insurance

Feature/Insurer

Aviva Life Shield

Advantage

SBI Life Smart Shield

ICICI Prudential Life Guard

Metlife Suraksha

Plus

BSLI Term Plan

Bharti AXA Life Protect Plus

Key Features

Rebate on premium for

high sum assured

Rebate on

premium for high

sum assured

If the policy holder

survives till maturity,

the scheme provides extended insurance cover for another 5 years for 50% of

amount of sum

assured

Guaranteed returns of 10% of premium

Rebates offered for

sum assured of Rs.5 lakhs and above

Assured payment of

5.25 times of the base

premium if the insured survies the policy termProtection

against PTD/Critical

illness

low costLow cost, Low risk

plan

Low cost and High

cover

Free Lock period (15 days from receiving

the policy)

Differential premium for

females

Special rewards

for maintain

ing healthy lifestyle

Different premium

paying modes as

per income cycles

Differential premium

for females

Grace period for renewal (30

days)

Entry age 18-55 years18-65 years 18-55 years

18-50 years

18-55 years 8-60 years

Maturity age 65 years 70 years 65 years 65 years 70 years 70 years

Policy term 10-30 years5-30 years 10-30 years

15-20 years

10-20 years 10 years

Premium Paying term

Single or Regular i.e. yearly/half-yearly/quat

erly or monthly

Single or Regular

i.e. yearly/h

alf-yearly/quaterly

or monthly

Single or Regular i.e.

yearly/ half-yearly/ quarterly or

monthly

Single or Limited (3 years) or Regular

i.e. annual or semi-annual

Single or Regular

i.e. annual/se

mi-annual/quarterly or monthly

Annual/semi-annual/

quarterly or monthly

71 | P a g e

Sum assured

2,00,000-50,00,000 (if regular) and no limit (if

single)

25,00,000-no limit

10,00,000-no limit

20,00,000-no limit

2,00,000-no limit

1,80,000-no limit

Minimum Premium 2,400 p.a.

15000 or 5000 p.a.

1,000 approx 3,600

6,000 approx 5600 p.a.

Waiver of premium benefit

N.A. N.A. Available N.A. available N.A.

Riders: Accidental

Death N.A. available Available available available N.A.Critical Illness Available available N.A. available available N.A.

Accidental Disability Available available Available N.A. N.A. N.A.Review It is a term

insurance plan which

offers return of premium on maturity.

The premiums

paid annually are returned if the policy

holder survive the term of the

policy.

It is a term

insurance policy that

offers a high

coverage at an

affordable

premium. It is a

pure term plan with

no maturity benefits

and offers only

death benefit.

it is a basic and pure term plan

It has low and

affordable premiums

for very high

coverage as it gives large sum assured

discount. Thus if the

life insured

dies within the

policy tenure,

the nominee

would get the Sum

Assured. However, if the life insured survives

the entire term,

nothing else is

payable to him on

It is a pure term

insurance policy which

offers high coverage at

low premiums. This policy

is quite affordable

even at lower

coverage.

It is a term plan which is

comprehensive in nature and gives benefits to the family

via riders. It is a good cover at

low cost.

72 | P a g e

maturity.

APPENDIX A9: Comparative Statement of Traditional Plans

Comparative study of Traditional Insurance Plans - Money Back Policies  

AVIVA - Dhan Vriddhi

SBI Life - Smart Money

Back Insurance

ICICI Pru CashBak

HDFC SL New Money Back

PlanBSLI Money

Back Plus PlanUSPs

Guaranteed Additions

@7% of life cover every

year till maturity

Guaranteed fixed cash

inflows

Guaranteed additions @

3.5% interest compunded annually for

first 4 yrs plus vested

bonuses

15-25% for 4 years +

bonuses

Survival benefit rate : 5.57-

5.96% p.a. after 3rd year

Need not pay

premiums for last years of the term

Guaranteed Survival

Benefit of 110% to 125%

of Sum Assured paid till maturity

Extended life cover - 50%

of SA without payment of any further premium

Discount on SA > 5L

Flexible withdrawl

option, Preponement

of policy maturity date

Can opt for 5 riders:

Accidental Death

Benefit (ADB) rider, Aviva

Child Education

rider, Aviva Dread

Disease rider,

Wide range of additional

benefits - SBI Life -

Accidental Death Benefit Rider, SBI Life - Accidental

Total & Permanent Disability

Accident and Disability

Benefit Rider,Accident

Benefit Rider,Critical Illness Benefit Rider

- Increased life cover after

every policy year

Can take loan against the

policy

73 | P a g e

Aviva Health Guard rider, Aviva Term Plus rider

Rider, SBI Life - Preferred Term Rider,

and SBI Life - Criti Care 13 Non Linked

Rider.

Rebate on SA for > 1L

Large Sum Assured discount

Upto 50% additions +

vested bonuses at

maturity -

Accidental Death and

Dismemberment Rider (ADD

rider)

Plan

Details

Entry Age 13-55 yrs 14-58 yrs 16-55 yrs 14-53 yrs 30 days - 60 yrsMaturity Age 23-70 yrs 26-70 yrs 31-70 yrs Max 65 yrs Max 70 yrs

PT 10-20 yrs12/15/20/25

yrs 15/20 yrs12/16/20/24

yrsMin 10 and max 40 yrs

PPT PT-5 Same as PT Same as PT Same as PT Same as PT

Annual Premium Min Rs. 5K Rs. 4,500

Min Rs. 6000Rs 9333 at 30 yrs for Rs. 2L

SA

Rs.20618 for 25 yrs age and

Rs.20778 for 35 yrs age for

Rs. 2L SA

Min Rs. 9600 and multiples

of Rs. 1200

SA Min Rs. 50K

Min Rs. 75000 and multiples

of Rs. 1000 thereafter

Min Rs. 75,000

Depends on premium selected

Depends on premium selected

Premium Frequency

Yearly/Half-yearly/

Quarterly/Monthly

Yearly/Half-yearly/

Quarterly/Monthly

Yearly/Half-yearly/

Monthly

Yearly/Half-yearly/

Quarterly/Monthly

Yearly/Half-yearly/

Quarterly/Monthly

74 | P a g e