Financial Cocktail Samosas: Bitesized money morsels for YOU, 26/08/2020

Financial Cocktail Samosas_ Bitesized money morsels for YOU, 26_08_2020

The name is bond, Perpetual Bond…

After bank Fixed Deposits (FDs), bonds are the next most preferred investment avenue by many Indians. Normally, a bond is for a fixed tenure, after which the bond can be redeemed by the bond holder. Till the tenure comes to an end, the bond gives a fixed return, which is the interest paid by the bond-issuing entity. It could be a company, bank or a government issued bond.

There are, however, a different type of bonds that are lesser known. These are called ‘Perpetual Bonds’ (or ‘perps’). As the name suggests, unlike regular bonds, the tenure of these bonds is not fixed and can go on for perpetuity technically. The major difference is that the bond holders have no option to redeem these bonds on their own, unless the issuer wishes to call the bonds back. For agreeing to this uncertainty of maturity, the investors are rewarded with a much higher rate of interest.

These bonds can appear to be very attractive in a scenario like now when interest rates are falling. In India, perps by PSU banks like Bank of Baroda are currently yielding approximately 8% or more rate of interest and going by the past trend, mature in 5-7 years from the date of issue, though not guaranteed.

Daughters have an equal right in a HUF

Hindu Succession (Amendment) Act, 2005 was a landmark act which made daughters an equal partner in ancestral wealth along with the sons. This was, very rightly, hailed as the start of a gender-equal era in the traditional Indian society. However, many ambiguities still remained in succession laws in India.

Recently in a landmark judgment, the apex court has clarified a long pending vagueness related to right of a daughter in a Hindu Undivided Family (HUF). The Supreme Court has clarified that daughters have equal rights in a HUF just like sons since the day they are born, irrespective of whether the father was alive when the 2005 Act was passed – the right of a daughter is exactly in the same manner as that of the son, including in a retrospective manner. This retrospective effect would give daughters, who were alive in 2005, an equal right over their share in the HUF.

Do you know the third party in your car insurance policy?

Typically, in case of insurance policies, be it health, life or others, there are only two parties, one is the insurance company (insurer) and the other one is the insured (policy holder). But in case of vehicle insurance like a two-wheeler or a car, there is a third party as well.

In fact, having third party insurance is a must before you hit the road and start driving your vehicle. If you don’t have third party insurance, you are not supposed to drive your car on the road, as per the Motor Vehicles Act, 1988. If you get caught driving a car without a third-party insurance policy by the traffic police, be ready to get a challan after a nice pow-pow with the traffic inspector.

And who is this Third Party? Actually, the third party can be anyone (a person or other vehicle) who becomes the victim of an accident or injury caused by you while driving your vehicle. If you have the Third Party insurance, any liability arising on you (the insured) by the third party is paid by the insurance company.

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