Module 1 BASIC CONCEPTS

Expenses
It costs money to live. You need to pay for food, clothing,
Income, Expenses and Budgeting housing, transportation, communication, and a dozen
Are you sometimes short of cash at the end of the month? other necessary expenses. Then there are things like
Don't seem to be able to save for the things you really want? vacations, entertainment, gifts for relatives and so on. If
you want to reach your goals, there are two things you
You can learn to balance your income with your expenses –
and even have some money left over for savings and extras. must do with your expenses:
Let us show you how to manage your incoming and outgoing
1. Know what your expenses are
finances.
2. Reduce unnecessary spending.

Setting priorities: Needs and Wants The first step in controlling your spending is to get in the
It is very important to know the difference between your habit of tracking your daily expenses so that you know
needs and your wants. This will help you in setting your how much you spend and what are the details of your
priorities so that you know where to spend your money. expenses.

1. Need: A necessity, something that is required, something

that is essential for life Keep every Record every
receipt. expense daily
2. Want: A desire, something that is wished for, something
that is non-essential

Using these definitions, "a roof over my head" is a need. So Total your
are clothing, food and medications. "Watching movies in expense at the Do this for
theatre" is a want, and so are buying an expensive saree, end of the three months
jewellery, etc. month

You will be surprised to know how much you spent and

what you spent it on.

Income
Most of us have a source of income through our job,
business, farming, pension, etc. Many may also be
receiving interest income from their investments.

Whatever be the sources of income, you need to know how

to keep track of it and manage it to cover your expenses
and save for future.

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Budgeting Begin your financial planning by answering 3 questions:
Now that you know your income and expenses, you need Where am I now?
to put them together and that is called a budget. There's Where do I want to go?
nothing difficult about a budget. It is simply a comparison How do I get from here to there?
of income and expenses.
Is the difference between your total income and total
expenses a positive or a negative figure?

If it is positive, you have a surplus.

Congratulations! With the extra money you
must pay off any debt or loan if you have.
Otherwise you can increase your monthly
savings amount or invest for future.

If it is negative, you have a deficit. You need

to increase your income to balance your
budget. Reduce your expenses by focusing
on what are your needs rather than wants.

Budgeting isn’t a one-time thing. To make it work, you need

to do it regularly. At first, do this weekly and once you are
comfortable you can do it monthly.

What is power of Compounding? A Financial plan can help you to:

Saving
Saving is a key step to make sure your future is financially  Balance today’s needs with your goals for the future
With simple interest, you earn interest only on the principal  Make the best use of your financial resources
secure. Start early to give your savings as much time as
(i.e., the amount you initially invested); while with  Adapt change in your circumstances and needs.
possible to grow.
compounding, you earn interest on the principal as well as,  Save money you need to achieve your goals
previously earned interest.
 Prepare for unexpected emergencies
A sum of Rs.100/- invested for 10 years, at 10% rate of  Protect what is most important to you
interest, amounts to Rs. 200/- with simple interest, and Rs.
 Prepare for retirement
260/- (approx.) with compound interest, at maturity.
 Leave something for your family
Rule of 72:  Manage your taxes
 Live your life with a sense of direction and security
Rule of 72 is a quick, useful formula that is popularly used
to estimate the number of years required to double the Financial Goal Setting
invested money at a given annual rate of return
The most important step in Financial Planning is Goal
Years
How to tosave?
double = 72 / Interest rate setting. It is essential to set short, medium and long-term
Now that you've decided you want to save, how do you
An amount of Rs.1000/-, invested at 9 % rate of interest, financial goals.
go about
will it?in 72/9 = 8 years
double
Financial Planning
Financial decisions form the basis of much of what we do
in our lives. A poorly thought out personal financial SHORT Plan for buying a Motorbike
decisions may lead to indebtedness, whereas well thought- TERM
out sound financial decisions can lead to financial well-
being. That is why financial planning is vital for financial Plan for buying a Home
MEDIUM TERM
well-being.
Many of us think that financial planning is only about
investing for retirement/old age. It is – but it’s also so much Plan for Retirement
more. Whether you are a college graduate, a young LONG TERM
person, a house wife or a senior person, financial planning
is how you think ahead to make sure you achieve your
goals.

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 Setting SMART Goals How to Save?
If you want to go somewhere, you need to know the road. Now that you’ve decided you want to save, how do you go
It's the same with your money. To manage your money about it? Keep these tips in mind:
well, you need to know where you want to go. It's important
to set short, medium and long-term financial goals.
Make a plan for your saving and spending. Reduce
unnecessary expenses and put your savings into a
separate account. Spend for things you need, but
wisely.

It’s usually best to clear up any high-interest debts

before starting your savings, because they usually
cost more than you can earn with a savings plan.
Pay these debts first and then regularly put the
money into a savings account.

Pay yourself first. Set aside money from your

income before you spend on anything else. Use
what’s left after saving to spend on things. Also, if
your income goes up, put some of the increase
(most of it, if you can) into your savings. It will be
easier to do this before you get used to spending
For an example, “saving for a motorbike” is a vague and
the extra money.
hard to measure. How will you know if you are making
progress or have achieved it? On the other hand, “saving
50000 rupees for a 100 CC motorbike within 10 months” is Make a regular contribution towards your savings.
SMART. It’s specific – you know exactly what you are To make it easy, set up an automatic monthly
saving for. It’s measurable – you know how much you will transfer to your savings account
need. Its achievable and realistic – you can break the
total amount needed into smaller steps (saving 5000
Make use of tax benefit schemes to maximize your
rupees a month) that will be easier to do. And its time
savings. Schemes like, EPF, PPF, NSC, ELSS,
bound you’ve set a deadline of 10 months. SSY, NPS etc are a good way to reduce the taxes
you pay on your savings.
Saving:
Saving is a key step to make sure your future is financially
secure. It will help you to meet your financial goals and Where to save?
provide for your own future. You know you can save at least a little every month.
What is Saving? What should you do with your savings to keep them
safe? There are many options. It can be as simple as a
It would be a good approach to view Saving as follows:
savings account at a bank. It can be recurring or fixed
deposits, or post office savings schemes.
Saving = Income – Expenditure

Expenditure = Income – Saving Points to be kept in mind when Saving :

You should set aside a portion of your income BEFORE  Make sure that your savings are invested in
you spend anything. diversified instruments (refer Module on
Investments).
Why Save?  Some portions should be in liquid asset so that you
Without savings, when you want to purchase something,
can withdraw money when needed.
you have to borrow money. Borrowing is expensive,
because not only you have to pay it back; you also have  Do not put your money in instruments that are very
to pay interest, often at a high monthly rate. Saving lets Risky / Unregulated, you may loose all of it !!!
you avoid the interest you have to pay while borrowing
money.

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 Banking in India
Module 2 BANKING Traditional Commercial Banks
Public Sector Banks: Government hold majority stakes
in public sector banks. In India, the nationalized banks
A bank is a financial institution that and the regional rural banks come under these
accepts deposits from public and categories. Example: SBI, BOB, PNB etc.
creates credits. In India the Banking Private Sector Banks: Private shareholders hold majority
Sector is regulated by The Reserve stakes in private sector banks. Reserve Bank of India lays
Bank of India (RBI). down all the rules and regulations. Example: HDFC Bank,
ICICI Bank. Axis Bank etc.
Let’s understand the various types of Bank Deposits in
brief:- Regional Rural Banks: These banks were established
mainly to support the weaker section of the society like
Savings account (Demand deposit)
marginal farmers, laborers, small enterprises, etc. They
Savings accounts are handy for short-term savings. You
mainly operate at regional levels at different states.
can deposit money into a savings account at any bank.
This will keep your savings safe and pay a little interest. Co-operative Banks
You can take your money whenever you need it.
Recurring deposits (Time Deposit) Co-operative Banks: The rural co-operative credit
Recurring deposits popularly known as RD are best if you system in India is primarily mandated to ensure flow of
wish to create a fund by periodically saving for any credit to the agriculture sector. It operates with three-tier
special occasions such as buying a car. These are system Primary Agricultural Credit Societies at the village
suitable for people who do not have large amount of level, Central Cooperative Banks, at the district level and
savings, but are ready to save a small amount every State Cooperative Banks at the State level.
month. No withdrawals are allowed. Urban Cooperative Banks (UCBs) cater to the financial
needs of customers in urban and semi-urban areas.
Fixed deposits (Time Deposit)
Commonly known as FD this is where you can deposit a New Banking Models
sum for a fixed period. The depositor is given a fixed
deposit receipt, which depositor has to produce at the Payment Banks: These banks can accept a restricted
time of maturity. Withdrawals are not allowed, however, deposit, which is currently limited to ₹100,000 per
in case of need, the depositor can ask for closing the customer and may be increased further. Payments banks
fixed deposit account by paying a penalty. can issue services like ATM cards, debit cards, net-
banking and mobile-banking. Example: Indian Post
Deposit insurance Payment Bank (IPPB)
The Deposit Insurance and Credit Guarantee Corporation Small Finance Banks: Provide basic banking service of
(DICGC) insures all deposits such as savings, fixed, acceptance of deposits and basic lending. The aim
current, recurring, etc. Each depositor in a bank is insured behind these is to provide financial inclusion to sections
upto a maximum of Rs. 5,00,000 for both principal and of the economy not being served by other banks, such as
interest amount held by the depositor. small business units, small and marginal farmers, micro
"Pradhan Mantri Jan-DhanYojana (PMJDY)" under the and small industries and unorganized sector entities.
National Mission for Financial Inclusion was launched
initially for a period of 4 years (in two phases) on 28th August
2014. It envisages universal access to banking facilities with Development Finance Institutions (DFI)
at least one basic banking account for every household,
financial literacy, access to credit, insurance and pension. A development finance institution (DFI), also known as a
development bank is a financial institution that provides
The Government has decided to extend the comprehensive
risk capital for economic development projects on non-
PMJDY program beyond 28.8.2018 with the change in focus
commercial basis. Example: Small Industries
on opening accounts from “every household” to “every
Development Bank of India (SIDBI), National Bank for
adult”, with following modification:
Agricultural and Rural Development (NABARD), National
(i) Existing Over Draft (OD) limit of Rs. 5,000 revised to Housing Bank (NHB), etc.
Rs. 10,000.
(ii)No conditions attached for active PMJDY accounts Micro Finance Institution (MFI)
availing OD uptoRs. 2,000.
Those institutions which have microfinance as their main
(iii) Age limit for availing OD facility revised from 18-60
operations are known as microfinance institutions. These
years to 18-65 years.
institutions not only offer micro credit but they also
(iv)The accidental insurance cover for new RuPay card facilitate provision of other financial services like
holders raised from existing Rs.1lakh to Rs. 2 lakhs to insurance, remittance and non-financial services like
new PMJDY accounts opened after 28.8.2018. individual counseling, training and support to start micro-
For more information visit : https://pmjdy.gov.in/ businesses.

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Non-Banking Financial Company (NBFC): A non-
Short term Medium/Long
banking institutions a company registered under

CREDIT
Companies Act 1956/2013 regulated by RBI. NBFC Credit term Credit
engaged in the business of loans and advances, Ex: Working Ex: Housing
acquisition of securities, leasing business, hire-purchase, capital, Credit loan, industrial
insurance business, chit business etc. They are different card loan
from banks, as normally they can’t accept demand
deposits, and cannot become part of payment and
Kisan Credit Card (KCC)
settlement system
 Reserve Bank of India and NABARD together
initiated KCC’s conception in-order to assist
Business Correspondent (BC): Banks have been agriculturalists to have easily accessible cash
allowed to appoint local individual persons and others as credit facilities.
BC to work as agents of the banks. The BC uses  The farmers may use KCC to readily purchase
Information and Communication Technology (ICT) based agricultural inputs such as seeds, fertilizers and
devices such as handheld machines, smartcard based
pesticides etc. KCC helps in short term and timely
devices, mobile phones, etc. BC is a mode of providing
banking service at our doorstep as bank branch is far off credit requirements for cultivation of crops.
from our area. Cheque
A Cheque is a document that orders a payment
of money from a Bank account.
Credit and Debt Management
Many people need to borrow money for buying a house,
car or children’s education. This is called credit. Financial
experts often distinguish between good debt and bad
debt. Good debt is an investment in something that
creates value or produces more wealth in the long run.
Bad debt is debt taken to buy something that immediately
goes down in value.
Debit Card Vs Credit Card

Examples of Government Credit Schemes

Educational Loans through Vidyalakshmi Portal
 Easy and effective system of getting educational
loans so that no student leaves his/her education
mid-way due to lack of funds
 Common education loan application form is
available for students. Visit: www.vidyalakshmi.co.in
Pradhan MantriAwasYojana (PMAY)
 Credit Linked Subsidy Scheme for Lower Income
Group/ Economically Weaker section and middle
income group.
 Individuals are eligible to avail subsidy when they are
purchasing their first house or it is a new construction
Visit:https://pmaymis.gov.in
Pradhan Mantri Mudra Yojana (PMMY)
 Government Scheme that offers business loans to
proprietors or entrepreneurs of small & medium
enterprises
 Loans offered: SHISHU, KISHOR and TARUN
depending up on the amount of loan availed
 Key documents required: proof of identity, quotation
of items purchased and category certificates
Visit: https://www.mudra.org.in

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 Banking Cards Bank Prepaid cards

Module 3
DIGITAL PAYMENTS

Digital payments are those Internet Banking Point of sale

payments in which the payer
and the payee both use
electronic modes to send
and receive money.
Mobile Banking Unstructured
Advantages of Digital Payments Supplementary Service
Data (USSD)
 Fast, Easy and Convenient.
 Economical and less transaction fee.
 Provides a digital record of transactions that
customers can track.
 Gives a one stop solution for any type of payments. Micro ATMs Aadhaar Enabled Payment
System (AEPS)
Do’s and Don’ts of Digital Payment
Do’s Don’ts
Never save your mobile Mobile Wallets Unified Payment Interface
Use password for your
banking login and password (UPI)
Mobile and Computer so
on the phone. Either
that no one else can
memorize it or write it down
access your systems.
somewhere else.
Internet Banking
Always visit your bank’s Never Leave your handset
Internet banking, also known as online banking, e-banking or
secured internet Banking unattended and logged into
virtual banking, is an electronic payment system that enables
site regularly a mobile banking app.
customers of a bank or other financial institution to conduct
Log out of your internet Never leave your phone un- a range of financial transactions through the financial
banking immediately after attended while carrying out
institution's website. Type of transactions are:
you have completed your financial transactions
transaction through mobile National Electronic Fund Transfer (NEFT)
Transfer of funds from one Bank account to a different
account of another Bank using Beneficiary’s account
If you suspect
Never download apps from number and IFSC(Indian Financial System Code).
unauthorized transactions Minimum Limit: No limit Maximum Limit: No limit
untrustworthy and dubious
in your account, report it to
sources Real Time Gross Settlement (RTGS)
your bank immediately
Transfer of funds from one Bank account to a different
account of another Bank on a real time basis facilitating
high value transactions using Beneficiary’s account
number and IFSC code.
Digital Payment Methods
Minimum Limit: 2 Lakh Maximum Limit: No limit
As part of promoting cashless transactions and converting
India into less-cash society, various modes of digital Immediate Payment Service (IMPS)
payments are available. Transfer of funds from one Bank account to another
facilitating instant Fund Transfer.
For fund transfer through Mobile, Mobile Money Identifier
(Source: www.cashlessindia.gov.in) (MMID) issued by the bank is required. Transaction can
also be done using Beneficiary’s account number and
IFSC code.

IMPS, NEFT and RTGS are available 24 x 7

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Mobile Banking Unstructured supplementary service data
Mobile banking is a service provided by a bank or other (USSD)
financial institution that allows its customers to conduct The innovative payment service *99# works on Unstructured
different types of financial transactions remotely using a Supplementary Service Data (USSD) channel. This service
mobile device such as a mobile phone or tablet. allows mobile banking transactions using basic feature
mobile phone, there is no need to have mobile internet data
Mobile Wallet facility for using USSD based mobile banking. It is envisioned
A mobile wallet is a way to carry cash in digital format. An to provide financial deepening and inclusion of underbanked
individual's account is required to be linked to the digital society in the mainstream banking services.
wallet to load money in it. Most banks have their e-wallets
and some private companies. e.g. Paytm, Freecharge, Unified Payments Interface(UPI)
Mobikwik, Oxigen, Airtel Money, etc. A system that powers multiple bank accounts into a single
mobile application (of any participatingbank), merging
Point of Sale several banking features, seamless fund routing & merchant
A point of sale (PoS) is the place where sales are made. On payments into one place.
a macro level, a PoS may be a mall, a market or a city. On a
micro level, retailers consider a PoS to be the area where a In this system, transactions can be done through any smart
customer completes a transaction, such as a checkout phone using VPA (Virtual Payment Address) facilitating 24 x
counter. It is also known as a point of purchase. 7 transfer on a real time basis. One needs to download UPI-
enabled bank app and login using bank details.
Micro ATMs
Micro ATM meant to be a device that is used by the Business UPI Benefits To End User :
Correspondents (BC) to deliver basic banking services. The  Privacy- Share only Virtual Payment Address and no
platform will enable Business Correspondents (who could be other sensitive information
a local retail shop owner and will act as ‘micro ATM’) to  Multiple Utility – Cash on delivery/ bill split sharing/
conduct instant transactions. merchant payments/ remittances
 One click 2 FA – Authorise transaction by entering only
Aadhaar enabled payment system (AEPS) the PIN
AEPS is a bank led model which allows online interoperable  Work across various interfaces – Payment request
financial transaction at PoS (Point of Sale / Micro ATM) generated on web interface, Authorised on mobile
through the Business Correspondent (BC)/Bank Mitra of any interface(App)
bank using the Aadhaar authentication.  Availability 24 x 7 and customer does the transaction on
his personel device.
For Further Information, See the Link:
https://www.npci.org.in/product-overview/upi-product-
overview

UPI 2.0
This is new version of UPI system,
which enables users to link their
Overdraft accounts to a UPI handle.

Users are also able to pre-authorize

transactions by issuing a mandate
for specific merchant.

UPI 2.0 version included a

feature to view and store the
invoice for the transactions.

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 2. General Insurance
Such products include policies which are not directly
Module 4 INSURANCE related to the life of individuals. Such policies insure the
policy holder against the risk of wealth and health.

No one can plan for an accident or serious illness. The i) Health insurance
chances of these things happening to you may be very
small. So many people put off buying the insurance that
they should buy. But mishaps do happen. It's only when
the event occurs, we realize that we should have taken the
insurance cover for protection. Insurance is a means of
protection from financial loss and issued to shield against
the risk of a contingent or uncertain loss.

In the recent past the cost of treatment has increased many

folds. A simple visit to a doctor now costs anywhere
between 300 to 3000 rupees, depending on where you live.
If your treatment requires you to stay in the hospital for few
days, you will end up with a huge medical bill that can
severely impact your savings. To avoid such financial
shocks, we must insure ourselves. Every insurance
company offers a medical insurance plan that covers basic
medical care covering costs of hospitalization.

Insurance can be broadly classified into two categories: ii) Non-Health Insurance
1. Life Insurance
2. General Insurance
1. Life Insurance
Life insurance provides a financial payment to your
beneficiary upon your death. When you buy a life insurance
policy, you name a beneficiary. It is generally
recommended to purchase an insurance with coverage
worth 7 to 10 times your annual income in order to protect
your family.

Life Insurance Types a) Vehicle/Motor insurance

Term Insurance: This will be Active for a fixed period Vehicle Insurance (also known as Motor Insurance/Car
of time and in the event of your unfortunate event Insurance/ Auto Insurance) is an insurance purchased for
related to life that takes place during the policy term, vehicles plying on the road. Its primary objective is to
your nominees will receive the ‘Sum Assured’. provide protection to the vehicle owners against the risk of
Although there will be no return of premium, but it any legal liability and/or accidental damage to the vehicle.
provides best risk mitigation.
The coverage for vehicle insurance is of two types:
Endowment Insurance: A life insurance contract
Motor Third Party (TP) Liability Insurance: Third Party
designed to pay a lump sum after specific term or on
death. Typical maturities are ten, fifteen or twenty Insurance is a statutory requirement and every vehicle
years up to a certain age limit. plying on the road should mandatorily obtain this
Whole Life: Types of permanent life insurance that insurance. The owner of the vehicle is legally liable for any
stays in effect for as long as you pay the premiums. injury or damage to third party life or property caused by or
Unit Linked Insurance: Combination of insurance and arising out of the use of the vehicle in a public place.
an investment vehicle, a Portion of the premium paid Driving a motor vehicle without insurance in a public place
by policyholder is utilized to provide insurance is a punishable offence. The insurance policy covers
coverage and the remaining portion is invested in damage to someone else’s property or injury or death of
equity and debt instruments other persons resulting from an accident for which the
insured is judged legally liable.

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Motor Own Damage (OD) Insurance cover: It covers Examples of Insurance schemes of Government
accidental damage caused to the insured vehicle. of India
There are policies covering either or both of the above
covers. It is important to examine your policy to understand Pradhan Mantri Suraksha BimaYojana (PMSBY)
what is covered.  Provides accidental insurance cover of upto2 Lakh to bank
account holders in the age of 18 to 70 years
b) Property Insurance  A fixed annual premium of Rs.12/- is deducted from the
Property Insurance is a very vast category of General bank account through auto-debit facility
Insurance and the type of cover that you need depends  Person would be eligible to join the scheme through one
upon the type of property you are seeking to cover. The savings bank account only
 Insurance covers permanent and partial disability due to
most popular property insurance is the standard fire
accident (https://financialservices.gov.in/insurance-
insurance policy and provides insurance protection
divisions)
against Fire and allied perils viz. flood, inundation, cyclone,
typhoon etc. The different types of property that could be
covered under a fire insurance policy are dwellings, offices,
shops, hospitals, industrial/manufacturing risks and Pradhan Mantri Jan ArogyaYojana (PMJAY) – Ayushman
Bharat
contents such as machinery, plants, equipment and
 Provides health care facilities targeting poor, deprived rural
accessories; goods including raw material, material in families and identified occupational category of urban
process, storage risks outside the compound of industrial worker’s families
risks; tank farms/gas holders located outside the  There is no restriction on family size, age or gender
compound of industrial risks etc  No money needs to be paid by the family for treatment in
Home/ householders’ Insurance is important as it case of hospitalization (https://www.pmjay.gov.in)
provides a package of wholesome insurance protection for
individual’s house.
Similarly, Shopkeepers’ Package Policy is designed to Pradhan MantriFasalBimaYojana (PMFBY)
insure all the insurable risks of a large number of  Crop insurance scheme aimed at shielding farmers from
shopkeepers. It provides wide coverage against various the crop failure through insurance
accidental happenings like fire, earthquake, lightning,  The scheme insures farmers against a wide range of
flood, burglary etc. The policy gives cover for the building, external risks – droughts, dry spells, floods, inundation,
its contents, money kept in the shop etc. pests and diseases, landslides, natural fire and lightning,
hailstorms, cyclones, typhoons etc.
c) Other Insurances  Scheme covers post-harvest losses up to a period of 14
days (https://pmfby.gov.in)

Travel Insurance
Comprehensive Travel insurance provides: Pradhan MantriJeevanJyotiBimaYojana (PMJJBY)
 Emergency medical cover
 Provides life insurance cover of 2 Lakh to bank account
 Losses incurred due to unforeseen
holders (Savings Bank A/c) in the age of 18 to 50 years.
cancellation or having to cut your trip short
 Death and disability cover  A fixed annual premium of Rs.330/- is deducted from the
 Personnel liability cover bank account through auto-debit facility
 Luggage cover (https://financialservices.gov.in/insurance-divisions)

Group Insurance
Making a claim
It covers a defined group of people, for example the
When a disaster happens, such as your bike is stolen or
members of a society or professional association, or
the employees of a particular employer you have met with an accident, it's time to make a claim.
When you make a claim, you are officially asking the
Crop Insurance
insurance company to pay you for the loss you have
It provides insurance cover to farmers in the event suffered under the terms of your insurance policy.
loss or damage to crops due to drought, flood, other Contact your insurance broker, agent or company as soon
natural disasters and infestation of pests etc
as possible. Because most companies have time limits
within which you must submit your claim. Also remember
to provide all supporting documents needed when
submitting your claim

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