The RBI has continued its upward interest rate revision policy of the past one year by yet again hiking the interest rates by 50 Basis points. The new REPO rates are 8% and the corresponding reverse repo rate (1% lesser than repo rates) is 7%. This in effect will mean that things are going to be costlier on the borrowing front. Let us look at review document and understand what is in store for the common man due the new changes:

The announcements:

* Repo rate hiked to 8.0%
* Reverse Repo rate effectively raises to 7.0%
* Marginal Standing Facility gets automatically adjusted to 9.0 %
* Bank rate and CRR rate maintained at 6.0% each

Why has the RBI hiked the prices?

In the words of the Central Bank, the hike has been forced due to 2 major reasons

1. A continued rise in the prices of non-food manufactured products and the rising Crude oil prices
2. There is also considerable indication that business growth is moderating. Meaning that higher growth rates a not seen in the coming few months.

Thus, the RBI has deemed it necessary to continue its anti-inflation policy and continue with raising interest rates.

Over the last one and a half year, the RBI has raised the Cash Reserve Ratio (CRR) by over 100 basis points and the Policy rate by over 275 basis points. This in effect means that banks have to face a net effect pressure of around 425 basis points.

This policy stance of the RBI in the past one year has meant that on an average, all banks/lenders have raised their deposit and Lending rates by over 225 basis points (2.25%). This means that loans have become costlier for you. Your housing loan, Car loan, Personal loan etc have all borne the blunt of this upward rise. Although it must also be seen that deposit rates have gone higher too, the extra income that you get will be compensated by the extra you have to shell out for gas, oil, soap, food and everything!

What it signals for us in the following months?

It is clear that the RBI is not keen on supporting growth without getting the necessary infrastructure in place. It is clear from all its recent past communications that a major reason for inflation is the supply side inefficiency and it will do all that it can do on the monetary side to fight inflation tooth and nail and also manage/minimize the resulting negative effect on business growth.

The RBI is also committed to ensuring that not all these policies result in a very negative effect on the liquidity situation. How will this pan out in the coming days?

Loans will be costlier:

A direct impact that can be felt in the coming few days is an inevitable rise in Interest rates charged by banks for their lending products including home loans and car loans.

Prices will mostly stagnate in the medium term: in the immediate short term, we may not see any major price changes in the day-to-day products we buy; in the medium-term, there will be a stagnation of prices due to the anti-inflation measures that have been implemented in the last 20 months.

Cars and Homes may be costlier:

Already faced with many pressures due to external factors, these two industries will take a direct hit of the current hikes. On one hand, their borrowings will get costlier leading to pressure on margins, and on the other hand since banks will charge more for loans, they could see a hit on the sales side too.

Source: Bankbazaar.com
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Step One - Identify your Investment needs

Your financial goals will vary, based on your age, lifestyle, financial independence, family commitments, and level of income and expenses among many other factors. Therefore, the first step is to assess your needs. You can begin by defining your investment objectives and needs which could be regular income, buying a home or

finance a wedding or educate your children or a combination of all these needs, the quantum of risk you are willing to take and your cash flow requirements.


Step Two - Choose the right Mutual Fund

The important thing is to choose the right mutual fund scheme which suits your requirements. The offer document of the scheme tells you its objectives and provides supplementary details like the track record of other schemes managed by the same Fund Manager. Some factors to evaluate before choosing a particular Mutual Fund are the track record of the performance of the fund over the last few years in relation to the appropriate yardstick and similar funds in the same category. Other factors could be the portfolio allocation, the dividend yield and the degree of transparency as reflected in the frequency and quality of their communications. For selecting the right scheme as per your specific requirements.


Step Three - Select the ideal mix of Schemes

Investing in just one Mutual Fund scheme may not meet all your investment needs. You may consider investing in a combination of schemes to achieve your specific goals.


Step Four - Invest regularly

The best approach is to invest a fixed amount at specific intervals, say every month. By investing a fixed sum each month, you buy fewer units when the price is higher and more units when the price is low, thus bringing down your average cost per unit. This is called rupee cost averaging and is a disciplined investment strategy followed by investors all over the world. You can also avail the systematic investment plan facility offered by many open end funds.


Step Five- Start early

It is desirable to start investing early and stick to a regular investment plan. If you start now, you will make more than if you wait and invest later. The power of compounding lets you earn income on income and your money multiplies at a compounded rate of return.


Step Six - The final step

You may reap the rewards in the years to come. Mutual Funds are suitable for every kind of investor - whether starting a career or retiring, conservative or risk taking, growth oriented or income seeking
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  Why Exercise?

Physical activity is necessary for good health, and most people do not get enough in their everyday lives. Besides helping with weight control, exercise strengthens your heart, improves circulation, helps prevent many illnesses, and makes it easier to do
everyday activities. If you are very active in your job, hobbies, household and garden chores, and walk or bike often instead of riding in a car all the time, you may not have to do formal exercise to maintain health, but most people are not that active.


Home Exercises


There are a number of exercises you can do at home. There are body weight exercises like pushups, pull-ups, crunches, squats, and lunges. You can get some dumbbells, or if you don't want to do that, elastic exercise bands are inexpensive and easy to use. They also take up very little space, folding up to the size of a paperback book. For cardio exercise, you can jump rope, or get an exercise video. You can have a good home exercise program with an exercise video and some elastic exercise bands.


Walking or Running to Burn Fat


You can burn fat and calories by either walking or running. In general, how much depends on how far you go, and running the same distance takes less time than walking. Still, if you prefer to walk, do that and just go for a longer time. To get much weight loss, you should walk or run at least three miles most days. You can get better results by combining your exercise with a little calorie reduction. Cutting out some junk food like a soda or doughnut every day works great, and the cardio exercise is especially good for burning fat in the stomach area. You don't have to do your walking all at once. You can do 20 minutes or so twice a day if you want.


Burning Off the Calories You Eat


It is difficult to calculate how much activity it takes to burn off calories from a certain food, for example, how far you would have to walk to burn off a Big Mac. Although you see such calculations frequently, they are approximations. Calories burned in activity depend on the size of the individual as well as the intensity of the activity, and the calories in food depend on how much of it you eat, and sometimes even the preparation. It's better to consider overall calorie consumption and activity level plus exercise. Still, it can be fun to try to figure out the food and exercise caloric relationship.


Weight Loss for Cardiac Health


Obesity puts a strain on your heart. Exercise and fitness improve your heart health and constitute weight loss support, but some dietary adjustment is usually also called for if you want to lose weight. To lose weight, improve cardiovascular health and lower cholesterol, cut back on calories from saturated fat, eat more fiber, and stock up on fruit and veggies.
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  Managing your money is always a tricky prospect. There are too many variables — domestic and sometimes, international as well —which impact the finances. But for a regular investor, certain ground rules remain, and no matter how volatile or stable an economy is at a given time, these should be followed.

The options, in terms of instruments, are many. “In a developing country such as India, mutual funds and equity are the more popular investment avenues. However, globally, there are plenty of opportunities available in the form of products, such as gold and silver exchange traded funds, oil bonds and commodities,” says Shiv Gupta, a Mumbai-based financial consultant. He believes if an investor starts young, and knows his math and the kind of instruments he wants to play with, he can go ahead and plan his financial life.

Understand your money

Money is not just currency and coins. According to dictionary.com, money is ‘any article or substance used as a medium of exchange, measure of wealth, or means of payment’. At the start of your own money management course, you need to ascertain your financial standing at that particular point in time, and then make decisions. An evaluation of one’s income, expenditure and saving sources will give afair idea of the kind of ‘money’ you are dealing with. Accordingly, make an investment decision. For instance, many people continue investing in their monthly systematic investment plans, even by borrowing, because there expenditure is high. It is a sure way of getting into a debt trap.

Say no to ‘plastic’ money

At over 40 per cent rate of interest, it is a sure way of getting into deep trouble. Those who manage their money smartly seldom need to resort to ‘plastic’ money to meet their requirements. Credit cards, or ‘plastic’ money, are considered abane, because people tend to get absorbed by the convenience factor. Although companies sell credit cards aggressively, by claiming the card attracts no fee or charge for life, they do not disclose the underlying conditions that come attached with these. Every credit card attracts a service charge, irrespective of whether or not one uses it. Besides, once enticed by the ‘easy’ working of a card, an individual gets more involved with the relationship, which could turn ‘toxic’ if not kept within limits. While a credit card is a helpful tool during exigencies, when used casually and carelessly, it can have a potentially damaging effect on one’s financial health.

Make financial allies

When investing, a basic rule is risk embedded in the nature of a particular investment tool. By principle, it means higher the risk, greater the return, and vice versa. A midcap or smallcap stock may be a multi-bagger, but it could also lose you money, real fast. Diversifying one’s portfolio, or making different financial allies, will only help one capitalise on all the investment opportunities that come your way.

Long-term relationship

Stay invested is an oft-abused term. But it works. Money invested and managed well will positively yield handsome returns, but only over time. One needs to be consistent and responsible for one’s money and spending habits. Taking money for granted can prove to be detrimental not only in the immediate future, but also in the long term. “Financial planning, if done with systematic precision, makes money work harder for an individual,” advises Ayush Tibrewal, an advanced wealth manager at HSBC.

With inputs from BS
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