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Artificial Intelligence : Providing Guidance to Indians to Effectively Manage their Wealth

Shalmoli Sarkar — Fri, 11 Feb 2022 12:35:11 +0000

In the past few years, Indian banks have grown fond of adopting artificial intelligence (AI) in their processes to provide a swifter and better banking experience to their customers. Today’s digitally-savvy customers have less patience and are firm believers of technology who expect fast, personalised, and meaningful interactions with banks and have less tolerance for the long trail of paperwork and queues. That said, AI adoption in banks has helped to boost revenues and retain customers by offering personalised services, quick and improved customer care through chatbots, risk monitoring, reduced errors rates, and better resource utilisation. In addition to this, AI has been aiding banks to entrust belief in customers as a safe place to keep money by detecting frauds, mitigating uncertain risks, and managing regulatory compliance.

Besides, bringing in operational excellence in banks, there exists a need to guide Indians about financial planning and investment that is yet to be unlocked through artificial intelligence.

But why do Indians need guidance in investment and wealth planning? Some statistics will tell you.

A dearth of knowledge in wealth management

The statistical figures shown in a survey by Scripbox, an online mutual funds platform showed the dearth of knowledge existing in Indians about financial planning. The survey found that around 72 percent of Indians of the 26-45 years age bracket are unaware of the amount of money to be invested or to be saved. 76 percent believe that there is a need for more education in the financial planning space. 56 percent lack the knowledge to handle personal finances effectively, resulting in difficulty in clearing loans. This mismanagement of personal finance is arising majorly among millennials as they lack the knowledge and initiative to earmark a portion of their income towards savings and not to forget their increasing lifestyle expenses. Another survey from Groww finds 30.7 percent of millennials lack investment awareness.

The prejudice about finance not being a women’s domain has also pushed them behind in financial planning, as only one in five women exhibit confidence in their knowledge of financial planning and are not aware how much to put aside to achieve financial freedom. This is where AI can step in to guide people about handling their finances. But how?

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A survey from Groww finds that 30.7 percent of millennials lack investment awareness.

Artificial intelligence ( AI ) for financial planning

There are multiple ways through which an average person can make money transactions. The modes of payment include cash, wallet, UPI, Credit Card, Debit Card, Gift Card, Net Banking, etc. In investment, they can invest money in Fixed Deposits, Recurring Deposits, Stock Trading, Crypto Currency, Mutual Funds, etc. With the trail of transactions being done artificial intelligence can understand the consumer behaviour specific to an individual based on the transactions made. It provides detailed information to the consumer regarding his/her expenditure depending on which one can chart out an investment strategy.

Artificial intelligence analyses the following data points to help consumers with financial planning:

Analyse the spending pattern
Determine income/debt ratio
on the above two data points, individuals can work on their credit score
Plan your investment by decreasing expenses based on the data.

Artificial intelligence for financial guidance – a gamechanger

Artificial intelligence for wealth management offered by banks to help consumers understand their savings and expenses can be a gamechanger that can improve their financial literacy. The same data can be utilised by banks to develop customised products that will help in retaining as well as gathering new customers.

Offering artificial intelligence by banks to analyse their spending, will not only help to save money but also offer guidance in investing at the right places and be creditworthy to seek home loans, car loans, and personal loans from banks and other financial institutions.

The post Artificial Intelligence : Providing Guidance to Indians to Effectively Manage their Wealth appeared first on Dutch Uncles.

5 Government Loan Schemes for Small Businesses

Anju Nambiar — Mon, 19 Jul 2021 03:35:09 +0000

SME (Small and Medium Enterprises) and small businesses have been worst affected by the pandemic. To revive the sector, the government is working hard to ensure access to a number of schemes under which small business owners can avail loans with minimum collateral and paperwork. The small business sector is a 40% contributor to the Indian GDP (Gross Domestic Product). It’s important for small businesses to take full advantage of the available government schemes to help revive the economy and subsequently scale up their operations.

Mudra

The MUDRA organisation is a Bank backed by the government aimed at providing financial support for the entrepreneurial landscape of India. It comes under the purview of the Pradhan Mantri MUDRA Yojana (PMMY) scheme for small and micro enterprises in India. MUDRA is a refinancing institution that will facilitate loans up to INR 10 Lakh to small businesses via their partner institutions including Commercial Banks, RRBs (Regional Rural Banks), Small Finance Banks, MFIs (Monetary Financial Institutions) and NBFCs (Non-Banking Financial Institutions.

National Small Industries Corporation Subsidy

The National Small Industries Corporation is an enterprise by the Government of India for providing support to Indian small businesses and SMEs. Their loan scheme subsidy provides finance, market, and technology services for small businesses. Categories under the NSIC Subsidy:

The NSIC subsidy is divided into two categories namely, the Marketing Support Scheme, and the Credit Support Scheme. Under the Marketing Assistance Scheme, NSIC helps SMEs organise and participate in Domestic and International Exhibitions and Trade Fairs. They also facilitate buyer-seller meets and conduct Intensive Campaigns and Marketing Promotion Events for small businesses.

Under the Credit Support Scheme, NSIC facilitates credit from a list of partner banks. NSIC does handholding for small businesses to avail credit from these banks by assisting with the application process and doing follow ups.

Credit Link Capital

The Credit Linked Capital Subsidy Scheme provides technology upgradation assistance for Micro and Small Enterprises in India. It provides an upfront capital subsidy of 15% for upgradation of their technology. The scheme is being implemented through nodal banks and agencies including SIDBI (Small Industries Development Bank of India), NABARD (National Bank for Agriculture and Rural Development), SBI (State Bank of India), PNB (Punjab National Bank), BoB (Bank of Baroda), Canara Bank and Corporation Bank, Indian Bank, Bank of India, and TIICL (Tamil Nadu Industrial Investment Corporation Limited).

Credit Guarantee Trust Fund for Micro and Small Enterprises (CGT SME)

The Credit Guarantee Trust Fund for Micro and Small Enterprises is a government loan scheme for small businesses under the Ministry of Micro, Small and Medium Enterprises. The corpus of this trust fund is a joint effort by the Government of India and SIDBI. Under this scheme, small businesses can avail a loan up to INR 200 Lakh. Established small businesses and upcoming firms are both eligible to apply for this business loan.

Stand Up India

Stand Up India is a government run scheme exclusively for small businesses run by Scheduled Caste and Tribe members especially women. The unique aspect of this scheme is that it is also operated by Schedule Caste and Tribe members. Small businesses belonging mainly to the trading and manufacturing sectors can avail a business loan between INR 10 Lakh – 1 Cr. The loans are being facilitated by SIDBI. This scheme is aimed at empowering and fostering entrepreneurship among the marginalised SC/ST communities, especially women from these communities.

Other small business loans under government schemes

A few other notable government backed small business loans include Udyogini for rural women entrepreneurs, and the Subsidy Scheme for Technology Upgradation.

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Small businesses belonging mainly to the trading and manufacturing sectors can avail a business loan between INR 10 Lakh - 1 Cr.

What’s in it for me?

To avail loans for your small business under the schemes, you need to be ready with your GST (Goods and Services Tax) and Income Tax documentations. You will also be required to furnish your bank statements for a specific period before the date of application (at least 3-6 months prior). Also, you need to be transparent about the company ownership and KYC (Know Your Customer) details of the owners.

Most of the small business loans can be availed by directly approaching partner banks of the relevant scheme. For instance, to avail MUDRA loan, you can approach almost all branches of recognised banks to apply. Depending on the loan amount and requirements, you will be categorised under the schemes. Read up on the eligibility criteria and industry sectors on the concerned government websites and online portals before applying. Also go through the Rate of Interest, and Repayment Tenures for the respective schemes during your application process.

The post 5 Government Loan Schemes for Small Businesses appeared first on Dutch Uncles.

How to Get a Home Loan as an Entrepreneur?

Joseph Varughese — Mon, 26 Apr 2021 09:35:05 +0000

Indians across generations and geographies whether salaried or self-employed, young or old, rich or poor share a dream of owning a home. Ownership of a home remains a part and parcel of our national identity, social standing, personal achievement and security. It is, arguably, the single topmost dream of an average adult in India. At the same time, we cannot overlook the new fad of the new generation considering ownership of a house as an unwanted and avoidable burden and instead opting to live in a rented house.

Home, an average Indian’s topmost dream!

Till a few years back, say before 1990, people used to plan to own a house only post retirement using their savings, provident fund, gratuity, and other retirement benefits and corpus. Those were the days when home loans were unheard of in India. The financial market and banking products have undergone a lot of changes particularly post the economic liberalisation of the ‘90s.

Home loans have become easily available at low-interest rates, and in easy instalments and people have started opting for EMI in place of rent thereby owning houses at their early age. Almost all the commercial banks, both public and private sector, NFBCs and financial institutions like LIC have exclusive home loan arms or subsidiary companies under them.

The dream for houses and home loans have become an integral part of most of India’s adult population. However, home loans do not come that easily. Banks do proper due diligence before approving loans to ensure that their loans do not become NPAs and unrecoverable. The basic criteria that home loan companies evaluate are whether the applicant has recurring disposable income and will be able to pay EMI without default.

From the applicant’s perspective, factors such as interest rates and the loan amount will influence your choice between different loan products in the market. At the same time, multiple factors determine your eligibility for the loan. The importance of paying attention to these factors cannot be stressed enough, for they determine whether your loan application will be approved, how fast your loan application will be processed, and the amount, terms and tenure of the loan.

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Home loans have become easily available at low-interest rates, and in easy instalments and people have started opting for EMI in place of rent thereby owning houses at their early age.

How to plan a home loan?

Here’s looking at some of the top things that you must keep in mind when applying for a home loan to get the best deal and its smooth processing.

Type of employment

You can avail of a loan of up to 80 per cent of home value with most home loan companies. If you are a salaried individual, lender institutions review your net salary to evaluate your loan application for its eligibility, tenure and loan amount. A good rule of thumb that can give an indicator is to compare your EMI-to-net income ratio. If your salary falls under the INR 25,000-40,000 per month bracket, your EMI should not cross 50 per cent of your income. If it is more than INR 40,000, then the EMI should not exceed 65% of your income.

Housing finance companies calculate your loan repayment capacity by relying on your salary slip for the last six months. They also take into account your credit history, details of existing debt and EMIs, and your bank statements. The evaluation also factors in your Form 16 filing ( for the authenticity of income) for the last two years and 26AS (as a counter check from TDS) statement for two years. The number of family members who are dependent on you is also considered during the evaluation of your eligibility for the loan.

If you are self-employed, it would get a bit tougher for you. The risk perception regarding self-employed professionals is greater because lenders usually look for financial stability, the repaying capacity of the borrower irrespective of which profession is being done or carried out by you before approving the loan. Being an entrepreneur, particularly of an early-stage startup, your ability to generate income is a crucial factor in becoming eligible for a home loan. However, there are a host of options available today when it comes to availing loans, especially with the rise of new-age financial institutions that are keen to tap into this underserved market.

Now, with the technology available to evaluate loan applicants’ profile, things are improving for the self-employed. Lenders are looking to tap an under-served market like that of self-employed. The demand for home loans from the self-employed segment is growing across cities. So, now we have several housing finance companies offering home loans specifically designed for the self-employed. The loan tenure is also enhanced for those with their own business.

A good credit score is crucial

The importance and need of good credit score history cannot be overstated for anyone applying for a loan, whether salaried and self-employed professionals. Financial companies evaluate your entire credit report to establish your creditworthiness, which determines the loan amount, duration and interest rate. Your credit score, also known as the CIBIL score helps the lender to review aspects such as your previous loan repayment behaviour and history of credit card dues or delay or defaults in payment, etc. Your CIBIL score gets better if you clear your dues (such as postpaid telephone bills and existing EMIs) in time. A credit score of 750 or above is mostly a prerequisite to avail of a home loan.

In a credit report, home loan lenders also check if any previous loan is settled with write-offs or settlement by the institution. Write-offs occur when you settle a loan with a lender in case you’re unable to repay a loan. Applicants must do everything they can to improve their credit score before applying for a new loan. And repaying the written-off amount mentioned in the credit report is one such step they can take. Other steps include not defaulting on existing EMIs, avoiding borrowing too much at a time, diversifying your credit among others.

DTI (Debt-to-Income) and FOIR (Fixed Obligations to Income Ratio)

Whether salaried or self-employed, net monthly income is given prime importance by home loan lenders when considering a home loan application. They also ensure that the applicant has good repayment capacity with a low debt-to-income (DTI) ratio. Doing so underlines that you have robust financial health and can take new debt without unduly stressing available capital or income.

A DTI of 40 per cent is typically the threshold limit for sanctioning loans for most lenders. Your loans can get rejected outright if the DTI is higher than 40%, even if the credit score and net income meets the requirements, due to low financial liquidity.

Home loan lenders also use FOIR (Fixed Obligations to Income Ratio), a popular parameter, to determine loan eligibility. All the fixed obligations that a borrower is supposed to meet regularly every month form the FOIR. The fixed obligations do not include statutory deductions from the salary such as Provident Fund, professional tax and deductions for investments such as insurance or a recurring deposit.

As per the home loan bank’s eligibility criteria, the borrowers should restrict all their fixed obligations including the currently applying loan EMI to 50% of their monthly income. Or in other words, considering that 50% of your income is required for your living expenses, the lender would see that all your monthly loan obligations/liabilities should be only 50% of your monthly income.

Age of loan applicant

Age mainly impacts the duration or tenure of the loan, irrespective of whether you are a salaried or self-employed professional. The maximum tenure given by housing finance companies is 30 years for a salaried employee, which affects the EMI amount and the overall interest paid. The maximum age limit is extended by 3-5 years for self-employed applicants than salaried applicants.

Young applicants are often preferred, as they have lesser liabilities and are more likely to earn higher income over time. They also have more time to repay the loan. The risk appetite of most lenders decreases as the age of the borrower goes up since they have relatively lower FOIR and additional liabilities. If you are a home loan applicant between 41 to 60 years, you will need to close outstanding loans and include the income of your spouse before applying for new long-term credit.

Borrowers above 60 years of age are usually offered step-down repayment options and may require a younger, employed individual—typically an offspring or a close relative—to be a co-applicant. These options are generally exercised in cases when one of the co-applicants income is likely to decline after a certain period.

The event of moving into one’s home may be the culmination of a long-held aspiration but the journey typically consists of various steps taken and decisions made along the way. A home loan is one such step. By keeping the aforementioned factors in mind, applicants can ensure that this single step can become a giant leap towards owning their dream home.

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The Self-employed need to establish their business for a minimum of three years with at least two years of ascending profits lately before applying for a home loan.

- Sukanya Kumar, Founder & Director, RetailLending.com

Professionals have an edge

Home loan lenders prefer lending to self-employed professional categories such as doctors, chartered accountants, company secretaries, lawyers, and engineers. This is because they have specialized skills, domain knowledge and, most importantly, a steady income source.

Other categories of self-employed non-professionals find it difficult to get a home loan. Gaurav Gupta, the co-founder and CEO of the online aggregator of financial products and services MyLoanCare.in explains, “Self-employed non-professionals working in cyclical sectors have fluctuating monthly incomes from their professions. The probability of default on loan repayments is high. So, lending institutions reject home loan applications or offer loans at higher interest rates.”

Company stability and financials critical

The lender checks for the stability of the company by examining the financials when you apply for a home loan. Sukanya Kumar, Founder & Director of home loan advisory firm, RetailLending.com says, “The Self-employed need to establish their business for a minimum of three years with at least two years of ascending profits lately before applying for a home loan.” Otherwise, the loan assessor at the financial institution will reject the home loan application at the initial stage itself.

The start-ups with no profits to show will find it difficult to get home loan approval despite funding from investors in the business. Banks don’t consider sources of funding to operate the business while accessing the loan application nor do they consider future profits and cash flow from the business. Your business must show growth in cash profits, revenues and tangible net worth in the past three to five years at the time of applying for a home loan.

Basic requirements

In addition to the standard documents like bank statements of current and savings account for the last 6 months,, PAN, KYC, residential proof, the entrepreneurs must have the following things to get a home loan from any bank.

Your business profile

Proof of business existence

Educational qualification

Income tax returns of last 3 years with computation of income

Last 3 years CA certified/audited balance sheet and profit & loss account

The above documents are important to be submitted for all the entrepreneurs to get a home loan, in addition to meeting various criteria explained above.

A piece of advice

Though it looks to be a bit difficult for entrepreneurs, particularly those in the early stages, to get home loan approved, it is very much achievable if you do your homework properly and efficiently. First of all. you must be realistic about the amount you are looking for as a home loan. Your chances of getting a home loan approved is very high if you are willing to make a higher down payment while purchasing a home, show substantial savings and good business growth prospects, select a good property, and have a good credit score. It is important to build an income profile in a manner that can make you eligible for a home loan. This includes proper statutory compliance including payment and filing of ITR, GST, where applicable, showcasing a stable and adequate income stream, and proof of integrity in business and non-business transactions.

The post How to Get a Home Loan as an Entrepreneur? appeared first on Dutch Uncles.

Essential Steps for Getting a Small Business Loan in India

Aakash Sharma — Tue, 09 Feb 2021 07:11:32 +0000

One of the biggest hurdles that needs to be overcome when starting a new business is capital requirements and business loans are one of the oldest ways in the book to get money to create a new business. There are different types of business loans, and a relevant loan can be researched and requested depending on the needs of your business’s nature.

Some popular business loan options include working capital loans, start-up loans, prepaid loans, etc. The first step is to determine how much money you need and what is it required for. This goes into the business plan, which is evaluated during the loan approval process.

There are many ways to raise capital, of which the most prominent are:

Bank loans (many offer small business loans),

Going to non-bank financial institutions (NBFCs) for funds,

Methods such as crowdfunding, and

Investment by angel investors and venture capital agencies.

Eligibility for Startup Business Loan

A business loan can be applied for with a public or private bank, or non-banking finance company. But there are some basic licensing requirements, most common of which are:

A business should have been around for over six months,

Its minimum turnover should be ₹ 90,000 or more in the last three months,

It should not be blacklisted for raising funds, and

It should not be a trust, NGO or charity.

For a new business idea in the early stages, the best way to raise funds is through a NBFC. Most banks prefer to lend to existing small businesses instead of a new start-up. Banks want to bury the risk, and because of this, officers can complicate the documentation and evaluation process over time. NBFCs, on the other hand, are more open to investing in newer business ideas and support budding businesses than banks.

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You need to state the loan's requirement clearly. Many programmes and offerings which governments and its agencies manage help businesses to grow based on their needs and pitch.

Startup Business Loan Interest Rate

Interest rates are one of the main problems for small business owners who sign up for business loans. Higher interest rates can increase the total amount owed and repaid in each EMI. Because small businesses are generally run with very little or no profits, business debt rates have to be a precautionary measure. So, start-ups need to find a plan, either from private finance or the government.

Steps required in obtaining a business loan

Stating a clear need for the loan

You need to state the loan’s requirement clearly. Many programmes and offerings which governments and its agencies manage help businesses to grow based on their needs and pitch.

Creating a business plan

A good business plan must include corporate goals, previous work details and project information.

Document’s organization

As the most crucial step, your documents should include financial transactions, taxes, licenses and more complex issues for getting funds and loans approved.

Required Important Documents

The following documents and their details need to be presented before the loan sanctioning process is successful:

Company’s joint certificate or joint deed,

Business Account Bank Report,

Financial reports for the last three years,

Profit and loss accounts, audited balance sheets, and audit reports,

Statutory regulatory reports such as income tax refund,

GST refund, VAT refund (for previous business),

PAN Business Card and other essential operations, and

Financial forecasts for the future.

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