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Stress tests being conducted in the European Union will show that all the major European banks have sufficiently capital, International Monetary Fund chief Dominique Strauss-Kahn told a French television station.
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--TOKYO (Reuters) - Japanese consumer electronics giant Panasonic Corp will slash 40,000 jobs over the next two years in a bid to pare costs and keep up with ever-harsher competition from Asian rivals, a source said on Thursday.
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Prepayment implies closing the loan earlier than planned. Most banks impose a
penalty on prepayment. The prepayment can be charged in two cases. One, when
you prepay with your own sources. In this case, you issue a cheque from your
account. Second, you refinance the loan from another bank.
Impact of prepayment
The prepayment penalty for public sector banks is about 1% or less while it can
be anywhere between 1% and 3% in private banks. In many cases, banks do not
charge any prepayment penalty if you prepay using your own sources.
The penalty is calculated on principal. Hence if you have 20 lakhs of loan
outstanding, the penalty could be from 0 to Rs 60,000 depending on banks.
Now, when it comes to figuring your outstanding loan amount do not assume that
for instance if you have taken a 40L loan for a 20 year tenure, you would have
paid 20L in 10 years. Here is why. During the initial years of repayment the
interest component repaid is higher and during the latter years the principal
component is higher. So in your repayment so far you would have only repaid the
interest component for the most part.
To determine how exactly the repayment happens throughout the tenure you can
visit this link – here and try out the EMI calculator, which will provide you
with the entire repayment schedule otherwise known as the amortization table.
Banks do this to retrieve their interest cost or fee for the loan upfront
before obtaining the actual loan amount (principal) borrowed.
However, do note that when you prepay it directly reduces the principal amount
borrowed. So if you were to prepay in small amounts throughout the loan tenure
chances are you will close your loan much earlier. Most banks allow you to
partially prepay upto a certain limit without any penalty but when you prepay
in full you are likely to incur the highest prepayment charge. However, it
maybe worth it if you actually save a significant amount in interest by
refinancing the loan.
Banks and Borrowers – some points to keep in mind
From the banks' point of view, they charge prepayment penalty as it impacts
the future income of the bank. To ensure you get clarity on prepayment, you
must discuss the clauses at the time of borrowing. Insist on getting a written
note on all the clauses.
At the same time, discuss with the bank the specific prepayment penalty levied
at different stages of the tenure of the loan as banks have different charges
for prepayment at different timelines. For example, banks may charge 2% if you
prepay before 5 years, 1% between 5 to 10 years, none beyond 10 years.
You should also discuss with the banks the difference in charges on prepayment
from your own sources and on refinancing from other banks.
Last and most important as mentioned earlier, you should also see if you can
prepay partially. Most of the banks do allow partial prepayment up to a certain
limit. For example, you can pay 3-5 extra EMIs in a year.
RBI and its position on prepayment penalty
The RBI has shown its displeasure in past on prepayment charges and has been
advising the banks against it. The larger discussion is still on.
However, there is another body, owned by RBI, called National Housing Bank
(NHB) directed the banks in Oct, 2010, with immediate effect, not to charge
prepayment penalty when the borrowers pay with their own sources. Violation
will lead to action under the National Housing Bank Act, 1987. You can take a
look at the one page directive here.
This directive, however, doesn't say anything about refinancing. The banks are
opposing it tooth and nail. It looks likely that there could be a middle path
between banks and the RBI where the prepayment penalty on refinancing will stay
but with the reduced rate. The jury is still out.
Copyright 2011 BankBazaar.com. All rights reserved.
This tool/content is provided by BankBazaar.com and not by Reuters. The content
may not be copied, broadcast, downloaded and stored (in any medium),
transmitted, adapted or changed in any way whatsoever without the prior written
permission of BankBazaar.com.
BankBazaar.com is an online marketplace where you can instantly get the lowest
loan rates, compare and apply online for your personal loan (click here), home
loan (click here), car loan (click here), credit card (click here) from
India's leading banks and NBFCs.
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Yesterday, I ran a small survey: How long until you're out of debt? Yes, it's a self-selected audience I've long suspected that most people in debt don't even know how much they owe. I'm trying to dig up data on this, but from talking to tons of…
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For most of the world's companies, growth appears to have regained its place at
the top of strategic agenda, displacing the cost-control mentality that has
dominated boardrooms and executive suites for the past three years. That's good
news, but are companies prepared for the economic recovery? Do they have the
talent they need to grow?
According to the most recent Accenture High Performance Workforce Study, which
is based on a survey of 674 C-level executives around the world, the answer for
many companies is not hopeful.
The study, conducted between January and May 2010, found that president
challenges in improving enterprise skill levels, workforce performance, HR
organization productivity and effectiveness can substantially impede a
company's ability to capitalize on emerging growth opportunities as economic
prospects brighten in most parts of the world.
Workforce Actions During the Downturn
There's no doubt the recession had an impact on workforces around the globe,
and that impact has been most visible in job eliminations: 62 percent of
executives in the survey reported their organization had reduced the number of
full-time employees during the downturn. Layoffs were much more prevalent in
developed markets than in emerging economies.
When determining which employees to let go, 52 percent of companies claimed to
eliminate employees in the lowest tier of performance. Future competitiveness
also played a role in the decisions of many companies, with approximately four
in 10 executives saying eliminated employees either had skills that were not
critical to the organization's future business or were in workforces that were
not deemed important to the organization's focus areas going forward.
But at the same time companies were laying off employees, about eight in 10
also were adding staff, mostly for strategic reasons such as strengthening
workforces critical to the success of the business or addressing specific
people needs related to a launch of a new product or business.
The study also revealed that the use of analytics is not pervasive. Only about
one in 10 respondents strongly agreed they have a formal analytics capability
that can help them make fact-based decisions about the skills needed to drive
growth and the changes necessary to improve HR and training performance and
effectiveness.
The net result of companies' workforce actions during the downturn was a
smaller workforce for 47 percent of organizations, a larger workforce for 34
percent and workforce of about the same size for 19 percent.
Workforce Skills and Performance
Such workforce actions notwithstanding, Accenture's research revealed many
companies will likely encounter major skills challenges that could make it
difficult for them to achieve their growth objectives.
For instance, although sales and customer support and service were cited as the
two most important functions by survey participants in the previous three
editions of the study, many executives expressed concern about the performance
of these workforces.
Just 21 percent of executives who named sales as a top-three workforce
described that workforce as high performing, down from 25 percent in the
previous edition of this study. Only 30 percent of respondents said the same
about the customer service and support organization, an increase of 5 percent
from the previous edition. There's a similar pattern across all other
functions.
A major reason for this lack of high performance is that most organizations
don't have the skills necessary for these functions to excel. A majority of
executives who cited sales as their company's most important function said they
either lack the needed skills in the sales function (29 percent) or significant
proportions of the skills they do have in sales are out of date (24 percent).
The study found the same situation regarding customer service and support,
although in this function, executives mentioned the additional challenge of
having a difficult time attracting skills because their companies cannot afford
to pay what the market demands. Overall, only 16 percent of respondents
considered the current skill level of their entire workforce as industry
leading. Worse, 30 percent said it would take a year or longer for their
organization's workforce skills to return to the appropriate level.
Workforce Ability to Handle Change
In addition to facing skills challenges, executives said their workforces lack
the ability to deal with change, a critical trait in today's business climate.
In other words, many companies lack organizational agility, the adaptability
and speed that enable them to execute innovations faster and move their
organizations forward more nimbly.
For example, 8 percent of participating executives said their workforce is
extremely well prepared to adapt to and manage change through periods of
economic uncertainty. Only 23 percent strongly agreed they have the leadership
necessary to help the enterprise navigate periods of economic uncertainty and
the leadership development programs to prepare the organization's future
leaders.
Given the preceding, it's not surprising that only 33 percent of survey
participants strongly agreed they can quickly mobilize their enterprise to
execute new strategies, serve new markets and new customers, and deliver new
products and services, or that just 17 percent strongly agreed their
organization's culture is highly adaptive and responds quickly and positively
to change.
This puts many companies in a precarious competitive position as capturing
growth opportunities requires quick, decisive action in a recovering economy.
Human Resource Function Capabilities
Critical to supporting the increased focus on growth reported by companies is a
strong talent management function that can help build and sustain the workforce
necessary to achieve performance objectives. But most companies said their HR
functions are not fully prepared to answer this challenge. Indeed, the
Accenture study found serious shortcomings continue to impede the ability of
the HR and training functions to drive continuous improvement in the overall
enterprise's operations and performance.
Perception of the HR function is not favorable. As reported in previous
editions of this study, satisfaction with the HR function remains low. Only 8
percent of respondents said the performance of their human resource function in
supporting the larger enterprise's pursuit of its business goals was industry
leading.
Furthermore, just 13 percent of respondents rating HR as a top-three workforce
described the function as high performing; and only 10 percent said their HR
and training organizations are extremely well prepared to adapt to and manage
change through periods of economic uncertainty. Perhaps most troubling of all,
just 19 percent strongly agreed that HR and training are seen by their company
as critical functions and act as true strategic partners in the enterprise's
C-suite.
With a growing focus on talent and human capital as a key component of
companies' growth strategies, HR needs to earn its place at the table. One tool
that could help HR executives in that quest is analytics that enable HR and
talent leaders to gauge how well their function performs. Such analytics can
help identify areas where improvements can be made in cost and performance, to
increase the business value the HR function generates for the larger enterprise
and ultimately build greater credibility for the function and its leader.
The HR function is in need of a skills upgrade. More than half of respondents
who cited HR as their company's most important function said they either lack
the needed skills in the HR function (29 percent) or significant proportions of
the skills they do have in HR are out of date (28 percent).
Some of the skills that should be more prevalent in today's HR function are
financial acumen, including developing strong business cases for HR
initiatives; stakeholder management; program management, ensuring the effective
execution of initiatives; and communications, interacting with and inspiring
stakeholders involved in change efforts.
Key HR and training capabilities in a large majority of companies are lacking
in maturity. Only a small percentage of companies strongly agreed with
statements that would indicate the presence of mature or robust HR and talent
management practices. For example, only 10 percent of companies indicated that
they have formal processes and tools that enable effective learning and
knowledge sharing across the workforce, and only 13 percent claim to have a
formal talent sourcing strategy that includes making use of alternative sources
of talent.
Moving Forward
In the wake of the most severe economic downturn in decades, companies face
myriad challenges, but none more important - or difficult - than creating a
workforce that can implement an enterprise's strategies and respond to new
competitive challenges.
The road back to recovery and growth begins with companies aligning their
business strategy with a human capital strategy that puts in place the right
talent in the right roles performing in the right ways to bring the business
strategy to life and execute it optimally. It also includes a more flexible
business design that can help increase the pace and certainty of successful
organizational change and accommodate the ready use of other sources of talent,
including outsourced talent and contingent labor, as needs dictate.
Most companies experienced some disruption to their workforces because of the
recession, and many face a long road ahead. To spur growth, companies should
leverage new techniques and tools to rapidly re-skill existing employees to
perform new jobs and roles, and take on new hires in a way that gets them to
competent performance levels faster.
What appears to be a monumental challenge also provides rare opportunities for
companies to revisit their human capital strategies and capabilities and ensure
the actions they take now and in the foreseeable future result in a new
workforce that embodies the skills and capabilities needed for the organization
to excel in the post-recession world.
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--Measuring indicators of life chances is an excellent idea (Could do better? Report card to test social mobility, 31 March). But since it is not just life in the womb but the first 1,000 days of life after conception that are crucial to a child, using…
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