Future Finance Focus #3
FPSB India
Financial Planning Standards Board Ltd. (FPSB Ltd.) delivering CFP certification in India
Finance Spotlight:
RBI’s Guidelines for Voluntary Transition of Small Finance Banks to Universal Banks
The Reserve Bank of India (RBI) (RBI) has released guidelines for Small Finance Banks (SFBs) wishing to become Universal Banks. SFBs must meet strict criteria including a ?1,000 crore minimum net worth, profitability for the past two years, low non-performing assets, and a diversified loan portfolio. The transition process involves a detailed application to the RBI, which evaluates the SFBs based on universal banking guidelines. After transitioning, the banks must adhere to all applicable norms, including maintaining a Non-Operative Financial Holding Company structure. This transition aims to enhance SFBs' capabilities and expand their service range.
Indian economy remains in bright spot: Ministry of Finance
The Indian economy is performing strongly, contrasting with global trends, and showing broad-based growth across sectors. Consumer and investor optimism reflects positively in economic forecasts, with the RBI projecting a 7% GDP growth for 2024-25. The International Monetary Fund forecasts growth of 6.8% in 2024-25 and 6.5% in 2025-26, driven by robust domestic demand and a growing workforce. Meanwhile, inflation has decreased, but food price volatility remains a concern, despite effective governmental management and expectations of a favorable monsoon.
Finance Ministry report reveals THESE 3 factors behind India's economic growth
A recent Finance Ministry report identifies three main factors supporting India's strong economic outlook: resilient growth, price stability, and a steady external sector. Despite some easing in geopolitical tensions, risks persist, impacting global economic activities and India's trade dynamics. Notably, non-petroleum and non-gems and jewellery exports grew by 3% in FY24. The services sector also saw robust growth, particularly in software and business services exports. According to the RBI and IMF, India remains the fastest-growing major economy, with upgraded GDP growth forecasts. Additionally, India's financial resilience is highlighted by an improved current account deficit, robust capital inflows, and record-high foreign exchange reserves.
Expert Insights:?
Expert: Arun Thukral , Chairman- CFP Professional Advisory Committee
Asset allocation is the process of distributing investments across various asset classes to achieve a balance between risk and return. This diversified approach is fundamental to constructing a resilient portfolio that can weather market fluctuations and economic uncertainties.
Asset allocation helps in risk management by diversifying across asset classes, return maximization by balancing high-risk and low-risk investments and aligning the portfolio with long-term financial goals such as retirement or wealth preservation.
Newer asset classes include cryptocurrencies like Bitcoin and Ethereum, as well as investment opportunities through Portfolio Management Services (PMS), Small Cases, and Alternative Investment Funds (AIFs) that target non-traditional assets.
Investors should be mindful of market fluctuations, economic conditions affecting property values, and liquidity constraints associated with these investments. Cryptocurrencies, though promising, are highly speculative and susceptible to rapid price swings.
Crafting a comprehensive multi-asset investment strategy in India requires a deep understanding of the various asset classes and instruments available. As with any investment strategy, there are both opportunities and risks associated with multi-asset investing. Staying informed about market trends, economic developments, and the specific risks associated with each asset class is crucial.
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