NPS Vs Old Pension Scheme
Even as several states recently reintroduced the old pension scheme (OPS) and several others contemplating it, the RBI on Monday said the decision of some states to revert to OPS poses significant fiscal risks for states, apart from dampening India's medium-term macroeconomic outlook.
Recently, five states reintroduced OPS, including Rajasthan, Chhattisgarh, Jharkhand, Punjab and Himachal Pradesh. Apart from these, Haryana has also witnessed a series of employee union protests in February to reintroduce OPS.
Rajasthan was the first state to reintroduce the old pension scheme in April 2022, followed by Chhattisgarh (notifying OPS in December 2022), Jharkhand and Punjab (October 2022), and Himachal Pradesh (April 2023).
The central government introduced the National Pension System (NPS) in 2004, which is a defined contribution (DC) scheme. It replaced the Old Pension Scheme (OPS), which was a defined benefit plan.
“While pension reforms which took place across the states during the first decade of this century were much needed to assist fiscal consolidation and
enhance fiscal flexibility (viz., reallocation of their budget towards growth enhancing expenditures), the recent decisions and announcements by some of the States to revert to the OPS (with a few others contemplating the same), pose significant fiscal risks for the states which could have distortionary effects on the labour market, savings and investments as well as capital market development and dampen the country's medium-term macroeconomic outlook," the RBI said in its Bulletin September 2023.
The pension plans of the governments are generally classified into defined benefit, defined contribution and hybrid pension arrangements. In a DB plan, benefits are defined in advance based on the employee's final or average salary and those benefits are guaranteed by the government as the
In contrast, DC plans do not have a guarantee component. The pension benefits depend upon the market performance of the pension fund and the government's cost is limited to a prespecified rate of contribution.
Hybrid pension arrangements offer a minimum return or benefit guarantee and may also offer a variable (DClike) benefit over and above the minimum return or benefit guarantee.
“Recently, a few States like Rajasthan, Chhattisgarh, Jharkhand, Punjab and Himachal Pradesh have announced reversal to the OPS from NPS. The immediate gain is that they will not have to spend on NPS contribution of the current employees. In future, however, the unfunded OPS is likely to exert severe pressures on their finances, especially with increasing longevity," the RBI said.
Six large states viz., Uttar Pradesh, Rajasthan, Madhya Pradesh, Maharashtra, Chhattisgarh, and Karnataka account for around half of all the subscribers to NPS. Uttar Pradesh and Rajasthan are the only two states, which have more than five lakh subscribers (as on November 30, 2022).
NPS Vs OPS
The National Pension Scheme requires employees to contribute 10 per cent of their basic salary and the government 14 per cent. The eventual payout depends on the market returns on that corpus, which is mostly invested in debt.
In contrast, the old pension system guarantees a fixed pension of 50 per cent of an employee's last-drawn salary, without requiring them to contribute anything during their working life.
The old pension scheme, referred to as the Defined Benefit Pension System (DBPS), is based on the last pay drawn by the employee. The NPS is referred as the Defined Contribution Pension System (DCPS), in which the employer and employee contribute to build a pension wealth payable at the time of retirement by way of annuity/lumpsum withdrawal as per norms.
Under the OPS, the employee could withdraw 50 per cent of the last-drawn salary as pension after the retirement.
Under the NPS, a person is allowed to withdraw 60 per cent of the accumulated corpus contributed during his/ her working years at the time of retirement, which is tax-free. The remaining 40 per cent is converted into an annuatised product, which could currently provide the person with a pension of 35 per cent of his/ her last-drawn pay.
The NPS is applicable to all employees joining services of the central government, including central autonomous bodies (except Armed Forces) on or after January 1, 2004. Many state governments have also adopted NPS architecture and implemented NPS mandatorily for their employees joining on or after a cut-off date.
Demand Falls In Bengaluru
Gross leasing of office space rose 2 per cent across six major cities to 13.2 million square feet during the July-September period driven by sharp increase in demand in Hyderabad, according to Colliers India.
The gross absorption of office space stood at 12.9 million square feet in the year-ago period. Gross absorption does not include lease renewals, pre-commitments and deals where only a letter of intent has been signed.
Real estate consultant Colliers India on Friday released the data of key office markets for the third quarter of 2023 calendar year, showing that the demand increased in four cities — Mumbai, Pune, Hyderabad and Chennai — but decreased in Bengaluru and Delhi-NCR.
As per the data, the gross office space leasing in Bengaluru declined to 3.4 million square feet during July-September from 4.4 million square feet in the year-ago period.
Delhi-NCR market too saw a fall in leasing to 3.2 million square feet from 4.3 million square feet.
On the positive side, the leasing of office space in Hyderabad jumped 2.5-fold to 2.5 million square feet from 1 million square feet.
In Mumbai, the absorption of office rose marginally to 1.7 million square feet from 1.6 million square feet.
The gross leasing of office space in Chennai grew to 1.4 million square feet from 1 million square feet.
In Pune, the absorption of office space increased to 1 million square feet from 0.6 million square feet.
“Contrary to earlier belief, India office demand for the first three quarters of 2023, has followed an overall trajectory almost similar to 2022. With strong domestic macro-economic indicators backing the demand for office space, the momentum is likely to continue in the last quarter of the year,” Peush Jain, Managing Director, Office Services, India at Colliers, said.
It would be interesting to see if 2023 could breach the historic high leasing activity of 2022, he added.
Arpit Mehrotra, Managing Director, Office Services, South & Head of Flex at Colliers India, said, ”Although Bengaluru will continue to dominate India leasing activity in 2023, Chennai and Hyderabad are likely to see greater demand acceleration in the last quarter of the year.”
No More WFH! TCS Announces Full Office Return Starting October 1 Updated 58 minutes ago
Tata Consultancy Services (TCS) is reportedly planning to discontinue hybrid work starting October 1, 2023. In an internal communication, the company has instructed its employees to be present in the office for five days each week.
According to a Moneycontrol report, the current directive for this transition still maintains a three-day-a-week schedule. However, managers across different divisions have been encouraging employees to attend the office on all five working days. The company will provide flexibility and hybrid policies, making exceptions as needed.
As of quarter ended June 30, TCS had around 615,318 employees.
This move indicates a notable change in the work-from-home policies within the IT services sector, which employs more than five million individuals in India.
An internal email accessed by CNBC-TV18, said, “As communicated by CEO and chief human resources officer (CHRO) in various townhalls, it is mandatory for all associates to attend office on all the working days (5 days per week if there are no holidays) starting 1 October 2023.”
This represents a noticeable departure from TCS' earlier position, which, from September 2022 onwards, mandated that employees follow a schedule and be present in the office for three days each week. The company had additionally cautioned employees about potential consequences if they failed to comply with this schedule.
Meanwhile, the email has not gone out to all teams, and is being staggered, according to sources.
The company has previously also received flak, after Chief Human Resources Officer Milind Lakkad said in a Q&A in the company's annual report that attrition of women was higher when compared to men in FY23.
“Historically, women's attrition at TCS has been similar or lower than men's attrition, so this is unusual. There might be other reasons but intuitively, I would think working from home during the pandemic reset the domestic arrangements for some women, keeping them from returning to office even after everything normalised,” Lakkad said.
Sensex, Nifty Open Higher
The BSE Sensex on Friday, September 29, opened 235.61 points higher at 65,743.93, while the NSE Nifty also advanced 76.7 points to 19,600.25.
Out of the 30 shares on the Sensex, 18 shares were in green during the morning trade. NTPC, Larsen & Toubro, Tata Motors, JSW Steel and SBI were the top gainers rising up to 2.57 per cent. However, among the top losers were Infosys, Wipro, TCS, HCL Tech, and Asian Paints decling up to 1.49 per cent.
V K Vijayakumar, chief investment strategist at Geojit Financial Services, said, “The ‘sell on rally' market construct is likely to change in October. October is usually a favourable month, both for US and Indian markets. There are indications that this historical trend may play out this October too. The ‘triple whammy' of up-trending dollar, US bond yields and Brent crude is showing signs of easing. If this trend continues it will facilitate a recovery in markets. Stability in the US market yesterday also can be a supportive factor.”
He added that sustained FII selling may continue to weigh on markets. FII selling of Rs 25,000 crore this month has pulled down the banking stocks making their valuations attractive. The Q2 results of the banking segment will be good and the market can respond positively to this. This is a safe bet now.
“The US PCE inflation data expected tonight is significant since it can indicate the trajectory of US inflation and interest rates,” Vijayakumar said.
Credit Growth May Moderate To 13-13
The credit growth is likely to moderate to 13-13.5 per cent this fiscal but will improve slightly to 13.5-14 per cent next financial year as the economic pace picks up, according to a report.
The biggest factor driving the moderation is low demand in wholesale credit, which constitutes as much as 60 per cent of the overall credit. Wholesale credit is seen slowing to 11-11.5 per cent this fiscal from a decadal high of 15 per cent in 2022-23, Crisil Ratings said in a report on Thursday.
A key monitorable, which will determine credit growth going forward, is the extent to which deposit growth picks up for banks, Crisil Ratings said.
The retail credit demand will continue to go up in this fiscal but corporate credit demand is lagging, which is likely to pick up in the next fiscal on capex revival, the report noted.
In absolute terms, overall bank credit stood at Rs 148 lakh crore in FY23, clipping at 15.9 per cent year-on-year, and this is likely to grow to Rs 168 lakh crore or 13-13.5 per cent this fiscal and further grow to Rs 191 lakh crore or 13.5-14 per cent in the next, it added.
According to the agency, the credit demand moderation this fiscal will be because of the following four key reasons — gross domestic product growth is expected to fall to 6 per cent this fiscal from 7.2 per cent last fiscal, which will impact the overall credit growth.
Secondly, the easing of inflation with some softening in commodity prices. A significant part of the growth in wholesale credit (comprising corporates and micro, small and medium enterprises) last fiscal was driven by higher working capital demand in a high-inflation environment. Going forward, inflation levels are expected to be lower than the last fiscal.
Thirdly, robust bond issuances in the first half of this fiscal with the changes in interest rates have seen a substitution of bank credit with debt capital, which also supported wholesale credit growth last year, especially in the first half. But this is not seen to the same extent this year.
Finally, given the strong growth in fiscal 2023, especially in the second half, the high-base effect will also be a factor, said the agency.
The retail credit, which is 28 per cent of overall credit, is expected to continue to grow at a healthy rate of 19-20 per cent, similar to last fiscal.
According to Krishnan Sitaraman, a senior director and chief ratings officer at the agency, the next fiscal should see a turnaround in overall credit growth and start inching up on the back of an expected improvement in GDP growth to 6.9 per cent. Within this, wholesale credit is likely to see a modest increase to 11.5-12 per cent, while retail should continue to remain the key growth driver, expanding steadily at 19-20 per cent. Agriculture credit growth should remain range-bound at 9-10 per cent.
Corporate credit, which is 45 per cent of overall bank credit, is likely to pick up next fiscal from the current fiscal level, driven by a more than expected revival in private industrial capex on the back of more capex announcements next fiscal.
On the services side, demand from non-banks should continue to support corporate credit growth on the back of their decent growth tailwinds.
In the MSME segment, which is 15 per cent of overall credit, the credit demand should be steady hereon, given their role in the overall economy and the flow-through impact of the productivity-linked incentive scheme. Further, with the steady push for the formalisation of the sector, including improving digital public infrastructure, the addressable base for banks should increase over the medium term, Sitaraman said.
Retail credit growth, which should remain robust at 19-20 per cent next fiscal — similar to the previous two fiscals, will be driven by steady demand for home loans, the largest sub-segment of retail credit.
Unsecured loans (personal loans and credit cards) are expected to grow faster, driven by greater digitisation, a shift to organised credit, and increasing comfort with borrowing for discretionary spending.
According to Subha Sri Narayanan, a director with the agency, overall, while demand drivers for credit are expected to sustain a 13-14 per cent growth in the next two fiscals, it will also be important from a funding perspective that deposit growth does not lag too far behind.
He expects the differential between credit growth and deposit growth to narrow to 200 bps from the 500 bps seen in fiscal 2023 as deposit rates continue to inch up.
Nithin Kamath Clears Air Around Zerodha's Valuation
Days after online stock broking platform Zerodha reported a 39 per cent jump in profit after tax to Rs 2,907 crore for the financial year ended March 31, 2023, co-founder and CEO Nithin Kamath today said that there is a lot of speculation around platform's valuation and it's far from reality.
“Every time our financials are out, there is a lot of speculation about @zerodhaonline's valuation. It might sound counterintuitive for me to say it, but most assumptions, I think, are way higher than reality,” Kamath said on social media platform X.
He added that all of us on the core team have never thought of notional valuations right from the start because they can go up and down with market conditions.
Focussing on ever changing valuations is a distraction. The focus has always been on building a resilient business, which means never having to rely on external capital, he added.
Here's what he posted on X;
“We keep discussing internally that we could see a 50% dip in activity and revenue if markets fall in no time. None of it is really under our control. And yeah, one circular is also enough to bring down our revenue by more than 50%.”
“We are trying to diversify with everything we are doing in Rainmatter, our public holdings, and with large investments in the AMC business ( @ZerodhaAMC ), insurance advisory (@joinditto), and loan against securities (@zerodhacapital). Today, the revenues from these businesses are not significant, but hopefully, they will go up and help us maintain long-term growth.”
“Why only 10 to 15%? As I mentioned in our post recently, the problem with trying to grow fast is that it is very hard given some of our core philosophies at Zerodha, like no spam, no revenue or sales targets, no tracking customer data to push people to do more, no spending on acquiring customers, etc. I think our moat is the philosophy, and without it, we could lose out in the long run.”
“So if 10 to 15% is the long-term growth, we value ourselves in the range of 10 to 15 times our earnings (PAT). At the lower end when near bull market highs. This is how we have been valuing ourselves for all buybacks (founders and team) for a while now. So ~Rs 30,000 crores and not the Rs 1 lakh to Rs 2 lakh crores some folks online were guesstimating.”
Moreover, in comparison, the brokerage house had posted a Profit After Tax (PAT) of Rs 2,094 crore in the financial year 2022-23.
Also, the company's revenues surged by 38.5 per cent to Rs 6,875 crore in FY23 from Rs 4,964 crore a year ago.
”We continued to see phenomenal growth even in FY 22/23. That said, the business has plateaued in terms of revenue and profitability this financial year until now,” Kamath wrote in a blog post on Tuesday.
He attributed the primary reason for the increase in revenue and profitability over the last three years to huge interest in the markets, especially in the futures and options (F&O) segment.
Bengaluru-based Zerodha manages about Rs 3 lakh crore worth of customer assets.
As of August, the firm is reported to have an active client base of 6.3 million.
Yatra Online Makes Market Debut With 10% Discount
Yatra Online IPO Listing: Yatra Online Ltd, whose IPO was open for public subscription between September 15 and September 20, on Thursday made a market debut at a discount of over 10 per cent. The shares of the travel company listed at Rs 127.5 apiece on the NSE, the negative listing as compared with the issue price of Rs 142.
Shivani Nyati, head (wealth) at Swastika Investmart Ltd, said, “Yatra Online Limited (YOL) made its debut on the stock markets today at Rs 127.5 per share, a discount of more than 10 per cent from its IPO price of Rs 142.The YOL's shares witnessed a negative listing. This is likely due to the company's high P/E valuation, its reliance on the airline ticketing business, and the competitive nature of the travel industry. Overall, YOL is a risky investment, and investors who receive an allotment of this IPO should consider exiting their position.”
Till the final day of bidding on September 20, the Rs 775-crore IPO was subscribed just 68 per cent, receiving bids for bids for 2,09,06,655 shares as against 3,09,42,356 shares on offer.
The category for retail individual investors (RIIs) was subscribed 1.16 per cent. However, the non-institutional investors category received bids for just 7 per cent of the quota, and the qualified institutional buyers (QIBs) portion was subscribed 82 per cent.
The company's GMP or grey market premium also remained zero, indicating a flat listing.
Yatra Online mobilised Rs 348.75 crore from anchor investors ahead of the IPO.
The initial public offer had a fresh issue of up to Rs 602 crore and an offer for sale of up to 1,21,83,099 equity shares. The price range for the offer was fixed at Rs 135-142 a share.
The proceeds from the fresh issue worth up to Rs 150 crore will be utilised towards strategic investments, acquisitions and inorganic growth and up to Rs 392 crore towards investment in customer acquisition and retention, technology, and other organic growth initiatives.
Yatra Online Ltd is a corporate travel services provider in terms of the number of corporate clients and the third largest online travel company in the country among key online travel players in terms of gross booking revenue and operating revenue. The shares of the company will be listed on the BSE and the NSE.
SBI Capital Markets, DAM Capital Advisors and IIFL Securities are the managers of the offer.
Sebi Extends Mutual Fund Nominee Deadline
Markets regulator Sebi on Wednesday extended the deadline for mutual fund account holders till January 1, to nominate a beneficiary or opt out of it by submitting a declaration form, failing which their folios will be frozen.
Earlier, the deadline for existing mutual fund holders to provide a choice of nomination was on or before September 30.
Also Read: Good News For Demat Account Holders; Sebi Brings Time Relief For Nominee Declaration
The move is aimed at helping investors to secure their assets and pass them on to their legal heirs.
“Based on representations received from the market participants, it has been decided that the provision… about the freezing of folios, shall come into force with effect from January 1, 2024 instead of September 30, 2023,” Sebi said in a circular.
Further, Sebi asked asset management companies (AMCs) and RTAs to encourage the unit holder to fulfill the requirement for nomination/ opting out of the nomination by sending a communication on a fortnightly basis by way of emails and SMS to all such unit holders who is not in compliance with the requirement of nomination.
The Securities and Exchange Board of India (Sebi), in its circular on June 15, 2022, made it mandatory for mutual fund subscribers to submit the nomination details or declaration to opt out of the nomination on or after August 1, 2022.
The deadline was extended several times.
Market experts are of the view that many mutual fund folios in the past have been opened without nominating anyone to whom the assets should be transmitted in case something happens to the account holders.
This means that the rightful heirs had difficulty in getting the assets transmitted to them due to the hassles of different kinds of documentation requirements.
On Tuesday, the regulator extended the deadline by three months to December-end for existing demat account holders to provide a choice of nomination or formally opt out of nomination through a declaration form.
Additionally, the submission of 'choice of nomination' for trading accounts has been made voluntary by Sebi as a move towards ease of doing business.
Green-certified Office Space Stock Up 36% In Top 6 Cities Since 2019
Green-certified office space stock have increased 36 per cent to 342 million square feet across six major cities in the last three and half years, according to a CBRE-CII report.
Real estate consultant CBRE and industry body CII on Wednesday released its report titled, ‘Indian Real Estate: Taking Giant Strides – 2023 Mid-Year Outlook' at CII Realty conference here.
Also Read: Decoding Bengaluru Real Estate's Future: Know Expert Views & Forecasts
According to the report, green-certified office stock stood at 251 million square feet in 2019.
Enhanced focus on global and domestic Environmental, Social and Governance (ESG) regulations are driving occupiers' flight-to-quality wave towards modern, premium and sustainable spaces in the medium to long-term, the report said.
Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE, said, ”As the economy gains momentum and the real estate sector thrives, there is a growing emphasis on ESG and its compliance. We anticipate accelerated demand in modern, tech-enabled, and green-compliant spaces in the upcoming quarter.” Bengaluru, Delhi-NCR and Mumbai have a cumulative share of about 68 per cent in the total green-certified office stock as of June 2023.
Bengaluru has 104.5 million square feet of green-certified office space as of June 2023, followed by Delhi-NCR at 70.2 million square feet, Mumbai at 56.6 million square feet, Hyderabad at 51.9 million square feet, Chennai at 32.6 million square feet and Pune at 26.2 million square feet.
In the report, Amal Mishra, Co-founder, Urban Vault, said there has been a notable surge in demand for environmentally-friendly and energy-efficient office buildings from multinational corporations and domestic companies, reflecting a growing awareness of carbon footprints.
“In fact, investors and tenants are now willing to pay a premium for structures constructed in accordance with green building standards,” Mishra said.
Govt Takes Step For Bedridden Pensioners
The Centre has asked all pension disbursing banks to depute doorstep executives to help bedridden and hospitalised pensioners submit their life certificates.
An order issued by the Department of Pension and Pensioners' Welfare (DoPPW) also asked all banks to create awareness about the convenience of obtaining the life certificate digitally by using the face authentication technology by super senior pensioners (those aged 80 and above).
All pensioners have to give a life certificate (proof that they are alive) annually to continue receiving pension.
There are about 69.76 lakh central government pensioners.
In view of the digital life certificate through face authentication technology, it is now possible for every citizen to submit a digital life certificate (DLC) either from home using an Android smartphone or at the bank branch, said the order dated September 25.
“It is suggested that all banks may utilise the various platforms for creating awareness of the convenience of obtaining a life certificate by using the face authentication technology,” it said.
Banks can facilitate the submission of life certificates by deputing doorstep banking executives, said the order.
They can widely publicise the methodology for submitting DLC by pasting information posters at branches and ATMs, it added.
Banks may send SMS/emails/WhatsApp messages to the pensioner with a link to the Standard Operating Procedure (SOP) for face authentication to empower the super senior pensioner to submit their life certificate through face authentication technology using their Android phone, the order said.
The DoPPW has also asked the banks to circulate the SOP on DLC through face authentication via email among their concerned officials to enable them to get familiar with the usage of this technology.
“Necessary instructions may be issued to all the bank branches to make suitable arrangements for submission of life certificates by the super senior pensioners/family pensioners aged 80 and above from 1st October of every year,” the order said.
The Centre had in 2019 asked banks to allow senior pensioners aged 80 and above to give their life certificates with effect from October 1 every year instead of November.
The remaining pensioners below the age of 80 years have to give their life certificate in November.
Good News For Demat Account Holders
The Securities and Exchange Board of India (SEBI), announced on Tuesday that it has extended the deadline by three months, until the end of December, for existing demat account holders to make a choice regarding nomination or formally opt out of nomination by submitting a declaration form.
Earlier, the deadline for existing eligible trading and demat account holders to provide a choice of nomination was on or before September 30.
Also Read: Sebi Issues Revised Quarterly Reporting Format For AIFs
Additionally, submission of ‘choice of nomination' for trading accounts has been made voluntary by the capital markets regulator as a move towards ease of doing business.
The move is aimed at helping investors to secure their assets and pass them on to their legal heirs.
“Based on the representations received from the exchanges, depositories, brokers' associations and various other stakeholders, submission of choice of nomination for trading accounts has been made voluntary as a step towards ease of doing business.
“With respect to demat accounts, it has been decided to extend the last date for submission of 'choice of nomination' to December 31, 2023,” Sebi said in a circular.
Sebi has given time till December 31, for physical security holders for submission of PAN, nomination, contact details, bank account details and specimen signature for their corresponding folio numbers.
In July 2021, Sebi asked all existing eligible trading and demat account holders to provide a choice of nomination on or before March 31, 2022.
Later, this was extended by one more year till March 31, 2023 and again till September 30, 2023.
According to Sebi regulations, when new investors open trading and demat accounts, they are required to either designate their securities nominee or explicitly decline nomination by submitting a declaration form.