I frequently subscribe to IPOs mostly bHNI or sometimes sHNI.
I have 7 family savings bank accounts. Which means I have to keep atleast 11L in each account (total around 80L) at very low savings interest rate of 2.5% per annum.
Which is loss of 3 to 4 lakh per year if same was otherwise kept in FD account @7%
I would like to know how people manage this? Such that you get FD interest rates and still be able to get the same blocked via ASBA or UPI.
Also if you have any better idea to do this, then please do share.
You can use savings account in IndusInd Bank with Pioneer or Grande variants (normal variants works as well) to get most out of it. They allow to create FD linked with Savings, using which you can hold money for IPO, FD breaks only if money gets debited (in case IPO successfully gets applied), otherwise shows balance in negative in the meanwhile, been using like this since about a year now.
ICICI bank might also offer similar way, not sure though.
Why donât you try putting the money in Liquid or Arbitrage funds? As we know when the IPO is open to apply/pre apply, the fund can be liquidated before it and the amount can be transferred to the bank to be available for the mandate. Itâs liquid, no lockin and no penalty like FD. Has more moving parts but the money is in the market as well.
Liquid Funds are charged as per income tax slabs which is same as FD or SB interest. Arbitrage Funds have STCG as its treated as equity. As you are already doign IPO, I believe tracking capital gains is not an issue.
Like I said, it has moving parts but if itâs not needed then Bank account-based demats with a relevant bank feature is the only way.
I have my group of friends and we discuss IPOs frequently. Regarding this what few of us have done is we do same as what @milannakum described.
Keep 2.5L in savings and rest amount in Linked FD for better optimization. Incase of IPO allotment in BHNI the allotted amount is 2L only hence keeping 2.5L in savings will always have that liquidity and in case you get allotment, the same 2.5L will again be transferred from FD to savings account.
It sounds a little complicated but it is fairly easy once you get used to it.
And not just indusind, there are few more banks that offer this facility like Kotak, AU, ICICI (only for idirect customer)
Hey @Pradumya As you have already used it, I assume this feature is a sweep in FD. What are the returns that you are getting considering you have atleast 1 IPO every month that you have to apply to?
Maybe, it has different terminologies across banks some call it linked FD, Some call it Activ Money, money multiplier etc.
As i shared technique to use,
This one above. You need to ask branch to form this setup otherwise default will follow.
So this way we get FD return on approx 7.6L for maximum time of the tenure. I havenât really calculated the return. The linked FD is broken only incase of allotment and recreated by EOD for most banks.
In case of Kotak Active Money
After Kotak ActivMoney activation saving account Balance above 25K automatically gets converted to FD in 5k multiple. When balance in the saving account gets below 25k then some amount from FD is transferred back. When you again put balance, FDs will be auto replinished till as much balance you put. 6 months tenure is auto chosen.
Notes -
For getting above benefit on mobile app as well as Netbanking, any stock broker will work. Just link your BO id & DP id thru app.
Activmoney Fb balance is not a part of MAB.
Threshold is 25k. But Hni accounts like Privy increase threshold of Activmoney from 25k to 1L or higher so choose wisely.
No pre closure penalty.
I donât know why i type so much, aadat se majbur
Well âActiveMoneyâ or something else is the same i.e. Sweep In FD and the only con of this mechanism is when the FD breaks because itâs well within the tenure of what the bank does. Also if you have frequent withdrawals then itâs another issue and hence I asked what are the returns that you have observed with it. This is the reason I chose parking in Arbitrage and Liquid funds. The only con with funds is the expense ratio.
I doubt it as almost every bank has a pre-closure penalty when the withdrawals are frequent. The penalty is from how FDs are designed and in case of Activemoney, the 1 year FD is broken and then the amount is disbursed.
How many IPOs are you getting allotted in BHNI every month? Itna frequently nahi milega IPO aur agar mil raha hai to konsi tantra mantra lagaye ho batana
Jokes apart, active money doesnât have pre closure penalty. Read here
Ek seekha hai ki agar paise bank me ho to kahin na kahin to kharch ho hi jaata hai for eg:- Kotak ActiveMoney ke link me hai example cheque clearance ka. Hence, itâs not just IPO but might be used for something else. This is another reason I moved it to the market .
Itâs nice that Kotak doesnât as their tenure is 180 days but there is a condition of 45 days. Will try this to get a practical value of the returns earned.
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