Thursday, December 27, 2012

Financial checklist: Don't ignore your paperwork

Financial checklist: Don't ignore your paperwork

Sakina Babwani, ET Bureau Dec 24, 2012, 08.00AM IST
(ET Wealth has listed some…)

As you ready to usher in the new year, you couldn't be blamed for forgetting all worries and making merry. However, we at ET Wealth, have decided to play the party pooper. During a week chocka-block with festivities, we shall be the scrooge, who always has your money matters and financial well-being on mind. So, between the partying and shopping this holiday season, we urge you to squeeze out time to finish some important chores that may have piled up over the months.

ET Wealth has listed some financial tasks you must complete so that the coming year is worry-free for you. Many of these tasks relate to your finances and putting them off can lead to losses. For instance, did you transfer your provident fund (PF) account to your new employer the last time you changed your job? Two years ago, the EPFO found that more than half of the 5.87 crore accounts it managed had received no fresh contributions for three years or more. So, the government changed the rules. Now, if a PF account does not receive any contribution for three consecutive years, the balance will stop earning interest.

If you have even a modest Rs 2 lakh lying in your previous account, you stand to lose more than Rs 1,400 in interest every month. Submit an application to transfer the balance to your new PF account immediately. We stress on the word 'immediately' because the EPFO can take 6-8 months to process such requests.

Sometimes it is sheer laziness that prevents you from finishing a pending task, but there could also be genuine logistical constraints, such as closing an unused bank account at a faraway branch or transferring the PPF account from another city. To get over this problem, make a list of the most pressing errands and set a time frame. Keep aside 30-45 minutes a day for clearing the backlog. Choose a working day to finish all bank branch-related work. Be realistic while setting a target. It's easy to be disheartened and junk the idea if you can't finish everything on the list. If you handle financial tasks as they surface, you won't have to deal with all of them at one go. Let this be one of your new year resolutions, one that will smoothen your financial life forever.

Mutual Funds

Mutual fund investors received a jolt when Sebi laid down a fresh KYC demand, asking for additional information. If you were an early bird and had got your KYC registration done before 1 January 2012, you will have to furnish more personal details, such as your father's or spouse's name, your marital status, nationality, and gross annual income/net worth. You will also have to submit personal verification (see Have you updated your KYC status?).

This new requirement, which has come into effect from 1 December, is something you can't afford to ignore. Though you will be allowed to invest in your existing schemes, you won't be able to open fresh accounts. Complete nomination formalities It is now mandatory to assign a nominee for your mutual fund investments. This is a very useful facility since it saves the nominee a lot of trouble. If something untoward happens to the investor, the nominee can get the funds by simply submitting proof of identity.
If you have not completed the nomination till now, it's time to get cracking. Fill up a nomination form and submit it to the mutual fund office right away. Who knows, tomorrow may be too late. Consolidate your holdings You invested in a fund a long time ago, then added another scheme from the same fund house a few years later. If you have made several investments under different folio numbers, you should consolidate them under one folio. Fund houses encourage consolidation because it reduces their backoffice work. Even you stand to gain when you bring your scattered investments under one folio. You don't even need to fill a form; a letter on a plain paper will do. Just mention the folio numbers that need to be merged and the fund house will happily do it for you. However, this will not be possible if an investment is held jointly or has been made through different brokers or investment channels.
Sign up with portfolio tracker While you are at it, it may be a good idea to sign up with an online portfolio tracker. There are paid wealth management portals, but even some free ones are fairly decent. The portfolio tracker offered by Value Research is a sophisticated, yet easy to use, tool. By listing all your investments at one place, you will get an overview of how your investments are doing, individually as well as collectively. It will also explain your asset allocation, allowing you to take corrective action, if any. Apply for online facility Signing cheques for your mutual fund investments is passe. Online investing is the way to go, with almost all mutual funds allowing this. Register yourself for the facility and you will discover how easy and convenient the process has become. You will have to fill up a form and might have to physically submit it to your mutual fund. Some fund houses, such as Franklin Templeton, allow investors to start online transactions by simply stating their folio numbers.


The deadline for the new cheque books, which need to meet the cheque truncation system (CTS) norms, has been extended to 31 March. While millions will heave a sigh of relief for this extension, don't put this task on the back burner. The cheques that are not CTS compliant will not be valid after 31 March 2013. Just drop in at your bank branch and apply for a new cheque book or punch in a request online. Also, if you have issued post-dated cheques that are not CTS compliant, recall and replace them with the new ones to avoid hassles.

Complete nomination formalities We have repeatedly advised readers to assign nominees for their investments because it helps avoid legal problems if the person suddenly passes away or is rendered incapable of transacting on his own. This is almost as important as writing down your will. You will have to fill up a nomination form and submit it at your bank branch. This should not take more than 25-30 minutes, but it will save your dependants several weeks, even months, of legal paperwork to access your bank accounts and deposits. Operate the bank locker When was the last time you operated your bank locker? According to the RBI guidelines issued two years ago, if a locker is not operated for a year, the bank can terminate the account and ask you to state the reasons for not doing so. To avoid this, take out 30-40 minutes from your schedule this week and operate the locker.

It works even better if you can combine it with other branch-related pending tasks. Close down unused accounts A bank account is a very useful facility, but if you have too many of them, it can be a drain on your resources. You may have to sacrifice Rs 5,000-10,000 to maintain the minimum balance or face a penalty. The reason there are so many inoperative bank accounts is that in some cases opening a new bank account is easier than closing an existing one. This is perhaps why there is an estimated Rs 2,482 crore lying in dormant bank accounts in India.

If you have an inoperative account, close it for good this week. Apply for Net banking Can't find the time to visit your bank branch? Apply for online banking facilities and your financial life will become far more organised. All banks offer Net banking because it cuts down their wage bill. You will have to apply on the prescribed form and submit it to your bank. It barely takes 30-40 minutes, but will save you a lot of trouble. With Net banking, you can carry out scores of transactions, including checking your account statement, paying utility and credit card bills, transferring funds, buying mutual funds, investing in bank deposits, paying life insurance premiums, requesting cheque books, getting bank drafts made and applying for loans. It's a pity you cannot operate your bank locker through Net banking as well.
A home loan is not something you can take and forget. Besides the monthly EMI, you need to keep an eye on the rate of interest you are being charged.

If your lender is not giving you a good rate, it may be time to shift to a more accommodative bank. Even a 2% lower rate can translate into substantial savings in interest costs. The thought must have crossed the minds of many borrowers, but very few actually follow it up with action. Break free of the ennui and make a serious bid to refinance your home loan.

Increase your home loan EMI You took a home loan a few years ago when your income was modest, but even though your salary has gone up, the EMI remains the same.

If you have surplus money, make a prepayment, otherwise, have your EMI increased since this will bring down your home loan tenure and save you interest. However, your bank may charge a fee for rejigging its ammortisation calculations. You will also have to end the ECS mandate and set up a new one. If you have given post-dated cheques, you will have to replace them with new ones. Get your credit score Your credit score is a certificate of your credit worthiness. It can help expedite loan applications and give you access to capital. It also tells you where you stand when it comes to borrowing.
You can get your credit report from any of the authorised agencies, including Cibil, Experian, Equifax and Highmark. The charges range from Rs 100 for a simple report, to Rs 500 for a more detailed one.

All this can be done online and the report is e-mailed to you within 2-3 days. Remove car hypothecation Many car owners drive vehicles hypothecated to banks even though the loan ended several years ago. Banks send a no-objection certificate to the car owner when the loan ends.

It is to be used to remove the bank's name from the car's registration certificate. Since this requires a visit to the transport authority and a bit of paperwork, some people sleep over it. If your car loan is over, get the hypothecation removed. It will help you when you are selling the vehicle.


You have to nominate a beneficiary when you buy a life insurance policy. The nominee receives the insurance amount in case something happens to you. If you married after buying the policy, you need to change the nomination and include your spouse's name. This can be done by filling up a prescribed form and submitting it to the insurance company. The full name of the nominee, address, age, and the relationship with you must be mentioned in the form. Complete ECS formalities If you forget to pay a bill on time, there's usually a Rs 50-100 penalty for the delay.
However, if you miss paying your life insurance premium, you could lose a lot more. Most insurers give a 30-day grace period, after which the policy lapses. To avoid this, you can give an ECS mandate to your bank so that even if you forget, the premium is paid from your bank account when it is due. It's even better to set up such a mandate with your credit card just in case there is not enough balance in your account when the ECS is triggered. A one-page form and a few signatures is all it will take, but your policy will become secure. Sign up for online facility Tired of dropping premium cheques and switching orders in the dropbox at the office of the insurance company? Opt for the online transaction facility. Not only will you be able to track your premiums, but will also have the policy details before you. Submit an application for the online transaction facility right away.

Change your health insurer If you are not happy with your health insurer, you can switch to another company without losing the benefits of pre-existing diseases. The new insurer must be approached at least 45 days before the policy expires. So, begin the transfer process now if the policy was bought in March. Fill up the prescribed form for portability and a proposal form with the new company. The company will then approach your existing insurer for details. It shall inform you of its decision to offer you insurance in 15 days. Keep in mind that it can also refuse you the cover or increase the premium. You can go for portability only at the time of renewal, not during the term of the policy.
Revive lapsed policy If your policy has lapsed due to nonpayment, the insurance company may revive it under certain circumstances. Contact the insurer and get it revived by paying the outstanding premium. However, you may have to undergo a fresh medical test in certain cases and your premium could also be increased slightly. Get a duplicate policy If you have misplaced the insurance papers, you can get a duplicate one made. Write an application to the insurance company, giving policy details and stating the circumstances under which the papers were lost. You might have to publish an advertisement in a newspaper besides signing an indemnity bond stating that you will pay for any loss due to misuse or fraudulent use of the original policy documents.

Demat Account

A demat account is necessary if you want to invest in stocks, bonds and gold ETFs. However, it costs about Rs 300-800 a year, and if you have more than one demat account, you pay extra for no additional benefit. Many investors think that more demat accounts can help them submit multiple IPO applications. This is not true because multiple applications are liable to be rejected. Consolidate your holdings into a single account and close down the others. You will have to transfer the shares through an off-market transaction using the delivery slip of the demat account. However, if the ownership pattern of the accounts is different, the holdings will not be consolidated.
Also, if you had opened the additional account for joint ownership of securities with your spouse, child or any other relative, don't close it unless the reason for opening it has changed. Apply for share transposition If you own physical certificates jointly but the names are in a different order, the demat form will follow the same pattern. So you may have to open as many multiple demat accounts as the different name orders. To avoid this, get the order in which the names have been listed changed while applying for dematerialisation.

Changing the order of names in which a security is held is called transposition. Fill in the prescribed transposition form and submit it along with the demat request to the depository participant. Open a demat account The IPO season is here. Over the next few months, almost Rs 42,000 crore worth of shares will enter the market. Not all of them will be worthy buys, but some could turn out to be good investments. If you want a slice of this cake, open a demat account and a share trading account with a brokerage this week. It's best to open a demat account with a reputed bank or firm. You are required to submit the usual identity and address proof and two passport sized photographs with your application. Get shares dematerialised You inherited shares from your parents but they are all in the physical form, and someohow you never found the time to get them dematerialised.

Well, do so this week. Though demat is optional and an investor can hold shares in the physical form, you will face problems when you are selling these securities. Most brokers don't accept physical shares and dealing in these is a cumbersome process. It involves problems of bad deliveries, delay in processing, fraud in transit and so on. The demat form allows quick transfer of ownership without any chances of fraud. You will have to fill up a form and submit the share certificates to your depository. Update nomination details Complete the nomination formalities for your demat account. While it is linked to your bank account, the demat nomination is separate from your bank account details.


As per the new rules, only six LPG cylinders will be available to a household at subsidised rates in a financial year. Consume more and you will have to pay the market price for the cylinder, which is more than double the subsidised price.

To plug the leakages in the distribution system, LPG companies are verifying genuine consumers through KYC documentation. If you are an LPG consumer, get your KYC formalities completed before 31 December, after which your connection may be blocked. The KYC is to be done for households with multiple connections. If more than one family is staying at the same address, contact your distribution company for physical verification. Shift to a new telecom company The licences of several telecom companies have been cancelled and others are due to expire soon. If your telecom service provider is also folding up, switch to a new company right away. You might be able to retain the same phone number if you apply for number portability while your telecom service provider is still functioning. Once the company stops operations, you will be forced to take a new number.

Estate Planning

Last, but not the least, do something that will decide your final asset allocation—write a will. A will is the final word on how your assets will be divided among your legal heirs. Though not many people think it necessary, this document helps avoid ugly legal disputes between heirs after the individual passes away. The registration of a will is not compulsory in India, but it removes any ambiguity about the document being forged or written under coercion. There is no prescribed format for penning a will and it can be handwritten on a plain paper.

However, it is best to get it typed in a clear and legible font to avoid any dispute. The will should be registered in the office of the sub-registrar of the district in which you live. Make changes in your will You can modify your will at any point. If you have acquired more property or assets and want to add these in the will, use a codicil, which is an amendment to a will, or write a new will. A fresh will supercedes the existing one and takes effect from the date on which it is written. The procedure for writing a new will is identical to that for the first one.

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