Category All About Money

What is MRP?

MRP or maximum retail price is the price beyond which a packaged product cannot be sold to a consumer. The maximum price of any commodity in the packaged form includes all taxes local or otherwise, transport charges, and any other costs incurred by the manufacturer or seller.

The Centre regulates MRP to prevent retailers from overcharging customers. The Price Monitoring Division in the Department of Consumer Affairs is responsible for monitoring the prices of 22 essential commodities. It monitors the retail and wholesale prices of essential products on a daily basis.

Why was MRP launched?

The MRP was introduced in 1990 by the Department of Legal Metrology, Ministry of Civil Supplies by making an amendment to the Standards of Weights and Measures Act (Packaged Commodities Rules), 1976. It was meant to prevent tax evasion and protect consumers from profiteering by retailers.

Earlier, manufacturers had the freedom to print either the maximum retail price (inclusive of all taxes) or the retail price (local taxes extra). The latter method allowed the retailers to often charge more than the locally applicable taxes. The amendment mandated the compulsory printing of MRP on all packaged commodities.

Filing a complaint

If a shopkeeper charges more than the printed MRP, consumers can file a complaint with the Legal Metrology Department in the State where the shop is located. Besides, they can also file complaints at the Consumer Forum in their respective districts.

Selling a packaged product at a price higher than the printed MRP can attract a fine of Rs 25,000 or a jail term. India is the only country in the world to have a system wherein it is punishable by law to charge a price higher than the printed MRP.

However, hotels and restaurants are allowed to charge higher than the MRP of packaged food items. According to a Supreme Court ruling, restaurant and hotels are allowed to sell a packaged product at a higher cost as they provide extra services for their customers such as the ambience and cutlery, etc.

Meanwhile, the retailer is free to fluctuate the selling price as long as it is below or equal to the MRP.

Why are products at airports expensive?

The products at airports are expensive primarily because running a store at the airport is an expensive affair. Here, the retailers have to pay a high rent which is then added to the final price of the product. Another reason is that as airports are high-security zones, the workforce have to undergo daily background checks and training in security measures. This leads to a product price surge.

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Is IFSC More than just a code?

In case someone enters an incorrect IFSC while making an online transfer, the funds are credited back to the sender’s bank account.

If you have a bank account, you must have seen an IFSC reference on the passbook. The unique code forms an essential part of the Indian banking infrastructure. Let us find out more about this unique code.

What is IFSC?

The Indian Financial System Code (IFSC) is an 11-character alphanumerical code that is used by banks to identify the branches where people have their bank accounts. Every bank branch has a unique IFSC and no two branches (even of the same bank) will ever have the same code. In an IFSC, the first four digits tell the name of the bank and the last six characters are numbers representing the branch. The fifth character is zero. The IFSC is assigned by the Reserve Bank of India (RBI).

Purpose of IFSC

The IFSC is used by electronic payment system applications such as Unified Payment Interfaces (UPI). It is used only to transfer or send funds within India. It is mandatory when transferring money from one bank account to another. Without the IFSC, you cannot make online transfers. The IFSC ensures that the money being transferred reaches the right destination bank without any mishap during the transaction process. It also helps the RBI keep track of all digital banking transactions.

Where to find the IFSC?

The IFSC of a bank’s branch can be found in the cheque book. Besides, it can be found on the first page of the passbook. Another simple way to find out the IFSC is to refer to the official website of the RBI or the bank’s website.

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When money becomes worthless ?

Money cannot buy happiness, goes the adage. If you were living in Zimbabwe in the early 2000s, there were a lot more things that money could not buy. In fact, the currency was so worthless at one point that using it to make crafts or as toilet paper was cheaper than using it to buy goods with it. This was the era of hyperinflation in Zimbabwe. Many countries have suffered from hyperinflation in the past, pushing their citizens to the brink of starvation. What caused the hyperinflation in Zimbabwe?

Excess money can be a bad thing!

Governments decide how much money they can print based on complex calculations. One of the important factors they consider during this process is the Gross Domestic Product (GDP). In simple terms. GDP means the monetary value of all finished goods and services within a country. When a country is producing more. Its GDP goes up and vice versa.

Zimbabwe was under the control of an authoritarian leader called Robert Mugabe between 1980 and 2017. In the early 2000s, the country was spending more than it was earning as revenue Mugabe’s money managers came up with the not-so-brilliant idea of printing more currency to overcome the money shortage. This backfired.

How money works

The real wealth of a nation is not the money they print but the goods they produce and the services they offer- aka the GDP. Money is only an indicator of that wealth. So, when a country prints more money and distributes it to people, it drives up purchasing power-or the demand- while the amount of goods produced- or the supply-remains the same. Ergo, the cost of goods goes up, leading to massive price rise.

People in Zimbabwe, therefore, had a lot of money which could not buy them what they wanted. The government responded by injecting more money into the country. The consequence was so drastic that the prices were doubling every 24 hours. The rate of inflation reached an astronomical level- to 89.7 sextillion per cent per month! The government had still not leamt its lesson. It kept issuing higher denominator bank notes.

In July 2008, inflation hit its crescendo when the government issued a one hundred trillion dollar note (Zimbabwean Dollar). Its value. however, was just equal to 0.40 US dollars. In fact, the only time it fetched more was when it was sold as a novelty item on the internet. When inflation hit 230,000,000% in 2009, the country’s reserve bank declared the U.S. dollar as its official currency.

Savings vaporised

Hyperinflation had devastating consequences for the people of Zimbabwe. Life became a daily struggle. as prices of essentials such food, medicine, and fuel became higher than the bills being printed. Within weeks and months, the cost of a loaf of bread went from hundreds of Zimbabwean dollars (2$) to millions At one point, it touched Z$550,000,000 in the regular market and Z$10 billion in the black market. With people being unable to afford consumption. businesses started failing. Unemployment soared. The money that people had saved in their bank accounts vaporised due to devaluation and in buying essentials.

The bubble bust

Unable to contain the inflation. Zimbabwe decided to abandon its own currency and began using foreign currencies for everyday transactions, including the US dollar, the South African rand, and the Indian rupee. This, along with government reforms. helped the country stabilise its economy to a large extent. The inflation came down to 0%, but it did not last long.

In 2019, the Central Bank of Zimbabwe abolished the multiple-currency system and replaced it with the new Zimbabwe dollar, restarting the old problem once again. Earlier this year, inflation spiked to 175% before coming down to 77% in August. Zimbabwe’s real problems are not just with the currency, but with its low economic output, social indicators, and constant conflict in the region. The African nation’s experience is a good example to understand why printing more money is not the answer.

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Why has the RBI withdrawn Rs. 2000 notes?

The Reserve Bank of India recently announced its decision to withdraw the Rs. 2000 notes from circulation. The public has been advised to deposit and/or exchange these banknotes on or before September 30. These notes were introduced in November 2016 as part of demonetisation. Let us know more about demonetisation.

Demonetisation

On November 8, 2016, Prime Minister Narendra Modi announced the demonetisation of Rs. 500 and Rs. 1000. The move was made to prevent the accumulation and circulation of black money in the country.

The sudden decision to ban these notes caused anxiety and panic among the public. Banks and ATMS witnessed huge queues with people waiting for several hours to exchange / get their cash.

The case of Rs. 2000 notes

The Rs. 2000 notes were introduced in 2016 to meet the currency requirement after Rs. 500 and Rs. 1000 notes were withdrawn. The printing of Rs. 2000 notes was stopped in 2018-2019 once there were enough notes of other denominations. Recently, the RBI announced that in pursuance of the Clean Note Policy, the Rs. 2000 notes will be withdrawn from circulation.

There is a difference between demonetisation and withdrawal of currency. While demonetisation is the process of removing a monetary unit’s legally accepted status, withdrawing a currency from circulation does not affect their legal tender status. This means that while Rs. 2000 will be valid for use in business and exchange transactions, the notes will be set aside when they arrive at banks to be deposited in the RBI and will no longer be distributed to the general public.

Clean Note Policy

The Clean Note Policy, first announced in 1999, seeks to provide citizens high-quality currency notes and coins with better security features, while removing worn-out notes from circulation. For instance, on Rs. 2000 notes, the security features include readable and windowed security thread alternately visible on the obverse with the inscriptions ‘Bharat (in Hindi), ‘2000’, and ‘RBI’.

In 2018, a new Clean Note Policy was announced to make digital payments more secure.

In 2005, the RBI withdrew all banknotes issued before 2005 from circulation, as they had fewer security features than banknotes printed after 2005. The notes issued before 2005 do not have on them the year of printing on the reverse side.

In 2002, the RBI inaugurated Currency Verification and Processing (CVPS) Machines for checking numerical accuracy and genuineness of the currency notes.

The CVPS system is capable of processing 50,000 – 60,000 soiled notes per hour. The system, along with the Shredding and Briquetting System for destruction of soiled notes, helps faster withdrawal of soiled and mutilated notes from the market. These machines are installed at both regional and zonal RBI offices.

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Understand discount before your next buy

Calculating discounts is a critical skill required to help save money. You can avail discounts during sale or even while ordering food.  

It is a bright Sunday morning and Aman recently passed his exams with flying colours. To celebrate his achievements, his parents decide to take him out to buy a gift.

In the toy store, Aman spots two of his favourite action figures (A & B), each priced at 1000. However, both seemed to be tagged with two different discounted boards. Figure A highlighted 30% plus an additional 10% discount after that whereas figure B was at flat 40% off.

Aman’s parents asked him to pick one toy wisely. His mathematical brain decides to get into action to identify how the discounts differ from each other.

Upon calculating, Aman stands there wondering how putting discounts differently on the same price can result in two different selling prices. Excitedly, he shares this discovery with his mom. Impressed with his mental maths skills, she ends up gifting both of his favourite action figures.

Turns out that impressing your mother by calculating discounts quickly can help gain brownie points and even an extra toy!

Let’s dive into the concept of discount to understand how

What is the marked price?

The price of the product decided by the seller is the marked price. Marked price is also called listed price.

What is the selling price?

Selling price is the price at which an article is sold after a small amount of reduction or discount in the listed or marked price.

What is a discount?

The difference between the marked price and the selling price is known as a discount.

Formulas to calculate discounts:

Discount = Marked Price – Selling Price

Selling Price= Marked Price-Discount

Marked Price= Selling Price + Discount

If a discount is expressed as a percentage….

Discount = Marked Price x Discount Rate

Rate of Discount= Discount % = (Discount/Listed Price) x 100

In effect…

Discount = Listed price-Selling price

Discount % = (Listed price-Selling price)/Listed price x 100

We hope all the basics are clear. Now, let us level up a little and learn how to calculate discounts.

Step 1: Identify the values of the marked price and the final selling price of an item.

Step 2: Find the value of the discount amount by subtracting the selling price from the list price.

Step 3: If you wish to calculate the discount percentage, find the ratio of the discount and the list price and then multiply it by 100.

Let us go with an example to make things a little bit easy.

If the list price of a shirt is 100 rupees and it’s selling price is 90 rupees, then we can calculate its discount amount by subtracting the selling price from the list price i.e.

discount amount = marked price-selling price

Hence, discount amount=100-90 discount amount = 10

Now to calculate the discount percentage on the shirt, we need to find the ratio of the discount amount and the list price, which is

Discount %= (List price – Selling price)/ list price x 100

= 10/100 x 100

Discount % 10%

Therefore, there is a discount of 10% on the shirt.

Now, it is time for you to test these skills by finding out the final price at which Aman’s mother bought figure A and B respectively.

Solution: Marked price for toy A & B = 1000 Discount on toy A =30\%+10\% 1st Discount = 30/100 x 1000 = 300

Selling price = Marked price – Discount

Selling price after subtracting first discount = 1000-300 = 700

Additional 10% discount on resultant price = 10/100 x 700 =70

Final selling price = 700-70 = 630

Discount on toy B =40\%

40/100 × 1000 = 400

Selling price = Marked price – Discount 1000-400 600

Therefore, if Aman had to choose one of the toys and save some money,

choosing toy B is the wise decision as it offers a better discount.

Let’s dive into some practice questions with answers

Example 1

Using the formula for calculating discounts. find the discount received by Maria on a pack of biscuits, if the selling price is Rs 17 and the listed price is Rs 25.

Solution

The listed price = Rs 25

The selling price = Rs 17

Using the calculating discount formula,

Discount = Listed Price – Selling Price

Discount Rs 25-Rs 17 = Rs 8

Therefore, the discount received is of Rs 8.

Example 2

Razia purchased a fruit on a sale for Rs 13. while the marked price was Rs 17. Calculate the discount rate using the discount formula.

Solution:

Listed price = Rs 17

Selling price = Rs 13

Using the formula for calculating discounts.

Discount = Listed Price – Selling Price

Discount = Rs 17 – Rs 13 = Rs 4

Discount rate = Discount / Listed Price x 100

Discount rate = 4/17 x 100 = 23.53%

Hence, the discount rate is 23.53%.

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