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Indian Institute Of Management BangalorePGP 2017-2019Interview ExperienceI am a Chartered Accountant with no work experience. A CGPA of 6.5/7 in B.Com; 91.08% in 10th and 87.67% in 12th. My CAT score was 99.37%ile with ~98%ile in each of the 3 sections.I had an all-female interview panel comprising of 2 professors (P1: CA, CS and a professor of Finance at IIM B; P2: NSRCEL at IIM B) and an Alumna(A) of IIM B.(I knew this as soon as I saw my panel. I had done my homework.)The WAT topic was on the future of driverless cars in India and the time given was more than enough w.r.t. the space provided.I was in the Morning slot at Vivanta by Taj in Mumbai on the 4th of March 2017. I was the last candidate in my panel of 7 and after waiting for what seemed like an eternity the moment I had waited almost 8 years for had arrived! My interview started at around 12:40p.m.Went in and greeted the panel.P1:I am not able to tally the marks you have mentioned with your mark sheets. (I was prepared for this as there was a lot of confusion surrounding CGPA To Marks conversion for Mumbai University Students. So I explained it convincingly.)So what is your backup plan?Me:In case I do not make it to any of the top institutes this year, I will work for a year as a CA and then reapply next year. I also have a GMAT score of 740 so I will also be applying to foreign universities next year. I will go through this process again and be back here next time.P1:So you are sure about doing an MBA. Not interested in this CA, Finance etc.?Me:(Surprised) No Ma’am. Finance is my passion!P1:Then why MBA?Me:Ma’am owing to my CA I already have substantial knowledge in the field of Finance. I wish to build on it and also acquire knowledge in the other functional areas of a business such as marketing, operations, HR, etc. and gain a holistic understanding of business processes in order to effectively lead businesses someday.P1:So for that you can also do a CFA and then work in corporate finance. You can become a CFO, talk to the people in your organisation and then acquire all the knowledge you need to lead a business!Me:Yes Ma’am you are right. An MBA isn’t the only way to get to where I want to be. But it is the fastest way. I will reach where I want to be irrespective of an MBA. It is just about how fast I get there. And I believe that this will be the fastest route.P1:But then you said finance is your passion. You didn’t say you want to be a CEO. So I said CFO.Me:No Ma’am. I want to be a CEO someday.(Finally convinced. It was a relaxed conversation. No Grilling as such)A:So tell me about GST. You have to critique the GST. Pros, Cons and Challenges.Me:Sure Ma’am. I believe that GST is a very positive reform. It will lead to a unified tax regime and will eliminate the multiplicity of taxes. Right now the biggest problem with the current indirect tax regime is the lack of availability of input tax credit. For example, if I am providing a service on which Service Tax(Centre Level Tax) is levied; I am buying some goods for providing that service and paying VAT on them( State Level Tax) then I cannot set-off the VAT against the ST liability. Through the introduction of CGST, IGST and SGST, this cascading effect of taxes will be abolished and the prices of the goods and services will fall in the long run.A:But it is being said that the prices of services are going to rise and so is the inflation…Me:To an extent yes. Services are currently taxed at 15% whereas under GST they might be taxed at 18%. However, due to the availability of the input credit, the cost of services pre-tax will reduce eventually as the benefit will be passed on to the consumers in order to stay competitive. Hence, in the long run the prices will fall and so will the inflation.In terms of cons, one of the problems is that if the second stage dealer has paid the full amount including GST to the first stage dealer, but the first stage dealer has not deposited the GST amount with the Government, then the second stage dealer will be denied credit of the GST paid by him. And with the huge no. of small dealers in our country, it will be impossible for the dealers to follow up on this and will hamper their business.(Co-incidentally, I had read this in The Economic Times while waiting outside for my interview. A slice of Luck! Or perhaps a reward for working hard till the minute I am called in for my interview. A bit of both I would say.)Also, although GST is a good reform, in my opinion there was a much better reform available. It is called as the Banking Transaction Tax(BTT) and it is proposed by the institution who is considered as the think-tank behind demonetisation.(I had done a lot of research on BTT and wanted to bring it to the table. I saw an opportunity and I took it! After all leading an interview is the best way of acing it.Explained in detail about BTT including the structure, its benefits, how it should have been implemented before demonetisation, etc. with statistics and facts.)A:Then why do you think the Government didn’t do it?Me:Political will Ma’am. I think the political will of taking such a drastic step was lacking and the Government wasn’t willing to test the depth of the river with both feet. So they ended up taking a half-hearted measure with demonetisation which turned out to be an economic failure. However, coming back to the challenges that the Government faces with GST, IT Infrastructure is the major challenge.(This was my way of ensuring that the discussion stays on track now that I have finished talking about my area of strength. Also the panel shouldn’t feel that I am straying away from what was asked.)A:Do you think the current IT infrastructure is sufficient?Me:Mr. Jaitley says so. And from my articleship experience I feel we are at about 80% of where we need to be in terms of IT Infrastructure. The kind of information that the Income Tax department is getting these days from the state departments for issuing notices suggests that the IT Infrastructure is quite efficient. And with a centralized information system it will only get better. This is another benefit of GST. It will lead to an increased compliance and widening of the tax base.A:But we already have an efficient Income Tax information system. So why will the tax compliance increase?Me:It (Income Tax Information System) is only at a central level. Not at a state level.A:What do you think will be the effect on inflation?Me:Since the prices will fall in the long run, so will the inflation. And anyways right now the inflation is well under control at 4.5%.A:What is this figure?Me:Ma’am CPI. F.Y. 2015-16.A:That is a very old figure. What is the latest reported inflation of the last month?Me:Ma’am I am not sure about it but I can give you a range. 4.5-5%.A:Are you sure?Me:Yes Ma’am.(First Mistake. I just couldn’t remember it and took a guess. Of course I was caught and I was kicking myself for the days to come.)A:(Laughs) You should check up on that!P2:So in your SOP you have mentioned that you were cast in the role of a leader during your articleship for a 2 month period. Can you tell us what this 2 month period was about and what was your experience?Me:Yes Ma’am. It was during September and October 2015. Since we were a compact sized firm, we had a manpower crunch as most of my colleagues and seniors were on leave for their CA Exams. So it was just the four of us including 2 juniors. We had to upload Tax Audit returns of more than 60 clients within this time failing which heavy penalties would be due. So I started by organising and planning. I had to estimate which clients would take how much time to respond, which clients would need more work, which were the ones which could be dealt with at a later stage, etc. We assigned one person to ensure that the clients submitted their data on time. I also had to make sure who was the right man for each client. It was necessary to know the expertise of each of my teammates and match them with client requirements. We planned it to precision and finished the task with a couple of days to spare.P2:But all this is what a manager would do. What was the leadership part in this?Me:I had to motivate my teammates from time to time. We were up against it throughout and we had long working hours. It was easy to get demotivated or disinterested and to just give up. Also given that we all were preparing for CA exams we needed time to study and there was a tendency to compromise on work in order to ensure we get time to study. So I would tell my teammates that it is not just the books that can teach us. This is our study. What we are learning here is worth much more than what we would otherwise learn. This is not just our work. This is also our school. This is where we learn what will matter the most in the long run!P2:What according to you is the difference between a leader and a manger?(I paused for a few seconds. She was waiting for me to answer so I said I am just trying to put it very succinctly.)Me:When a manager tells someone to do something, they do it because they are told to do it. When a leader tells someone to do something, they do it because they want to do it.(I felt like I had hit the ball right out of the park with this one!)P2:(Looked convinced) So what are your other interests apart from academics?Me:Football and Fitness. Football is my passion and I love watching the EPL. I am also a fitness enthusiast.P2:But you have mentioned so many hobbies in your SOP.Me:Those are my interests some of which I still pursue. I used to pursue them in my college fests.P2:So what form of Singing?Me:Bollywood.P2:And dancing?Me:Bollywood again Ma’am.(P1 suddenly joined in the conversation)P1:So I recently read in a Bangalore newspaper that these SAP, Oracle, etc. have their back offices in Bangalore and they have received huge notices from the Income Tax department. Do you know what is it about?Me:No Ma’am. I have not read about it.P1:Take a guess.Me:It could be capital gains. Or perhaps transfer pricing.P1:No no. They don’t generate any revenue. They only carry out operations for their parents and their parent pays for it. So why are these IT people troubling them?(I was just trying to think of another possibility; but in vain!)So you can’t think of any reason?(I don’t know if this qualifies as Mistake No.2 but I did regret not answering it.)Okay so what is Transfer Pricing incidentally?(I had done very little of Transfer Pricing and I knew I was in unchartered territory. So my plan was to revolve the discussion around the basics which I was well versed with.)Me:If an enterprise wants to sell goods to a related party, then it must be at an arms length price. For example, if an Indian parent wants to sell biscuits to its subsidiary in the US, and if they are selling one packet at say Rs.20 in India then it must be sold at an equivalent price to the US subsidiary. If they sell at a lesser price then it would lead to a deflation of revenues and thereby tax avoidance. There are various methods of measuring the Arms Length Price such as the Transactional Net Margin Method(TNMM), Controllable Uncontrolled Price(CUP), etc.(She asked me the reverse situation of my example of buying from the subsidiary and its effect which I explained well.)P1:So if you are the accountant of the Indian Co. and you want to prove that the price at which you are selling is the Arms Length Price. How would you do it?Me:Ma’am I could use PPP(Purchasing Power Parity).(Elaborated on it a little).P1:Okay. Any other Method?(I was again trying to think.)You were mentioning some methods earlier.Me:Yes Ma’am. So the TNMM method can be used only for…P1:(Smiles) Okay. That’s it. Thank You so much.Me:Thank You Ma’am.(For a while I couldn’t believe that the most important interview of my life was over! Then eventually the feeling sunk in.)Verdict:Converted! I am now pursuing my dreams at the Indian Institute Of Management Bangalore. PGP 2017-2019.

Yes indeed. How much home you can buy depends on three things:Your down paymentYour credit scoreYour other debt payments.Lenders make lending decisions based on “debt to income ratio,” or DTI. We calculate it by adding up the total house payment including taxes, insurance and mortgage insurance, if any, plus any monthly debt obligations with ten months or more remaining. This would include car payments, student loans, credit card minimums and alimony/child support. The sum is called “total debt.” That number, divided by your gross monthly income, produces the DTI. Lenders will allow a DTI as high as 50% for conventional loans.Your down payment will obviously affect your payment because of the size of the loan. If your down payment is less than 20%, lenders will require mortgage insurance. This limits their risk in the event a borrower defaults and the property is sold at foreclosure auction. The mortgage insurance, the cost of which is determined by a combination of loan-to-value ratio and credit score, is part of your housing expense in calculating DTI.Your credit score will determine the rate you get. Lenders selling their loans to Fannie Mae or Freddie Mac use “risk-based pricing.” This means that they consult a table containing credit scores on one side, and loan-to-value across the top. Where a borrower’s two numbers interest, the lender will determine how much to adjust the interest rate.The minimum required score for a conventional loan is 620. A borrower with that score can still get approved for a loan, but their rate will be approximately .75% higher than for a borrower with a 740+ score. The same holds for the cost of mortgage insurance. A borrower with a 740 score and a 90% loan will pay .41% for monthly mortgage insurance. A borrower with a 620 score will pay 1.10% for the same kind of loan.Your other debt service will also determine how much you qualify for because the lender (actually, Fannie and Freddie, one of whom will almost certainly buy the loan) will limit your total obligations to 50% of your gross monthly income.Now that all the theory is out of the way, here are some examples, all based on a 50% DTI:You have 20% cash to use as a down payment, plus a bit more for closing costs. Your credit score is 740 and you owe $500 in other debt payments. You can expect a rate of about 4.875% and will qualify for a purchase of about $740,000. Your monthly payment will be $4,000 including taxes and insuranceYou have 10% cash available to put down. Other variables are the same. You’ll qualify for $640,000 with a total monthly payment of..surprise—$4,000. The reason for the difference in price is the larger loan amount and $200 a month in mortgage insuranceYou have 5% cash to put down. Now your loan is larger and the cost of mortgage insurance is higher, so your maximum is going to be $600,000.There are those who have said “fugeddaboudit” about buying a home in the Bay Area. While prices in Silicon Valley have gotten, well…stratospheric the last couple of years, there are plenty of other decent areas where prices are within your reach. In Contra Costa County, nearly half the active inventory is priced below $600,000. For Alameda County, it’s about 1/3.There is one other thing that can help you, if you’re a first-time buyer. You qualify for that status if you have not owned your principal residence for at least three years. As a first-time buyer earning less than $125,000 (or $146,000 if your houshold is 3 or more), you qualify for Mortgage Credit Certificates (MCC). This is a little-known program that will allow you to claim 20% of the mortgage interest you pay as a tax credit—it comes off the bottom line of your taxes. Because the credit is a specific amount, we treat it as income, which will further increase the amount a buyer can qualify for. You likely qualify for a higher purchase price than the MCC maximum, but if you stay within the maximum, which is $585,700 for most of the Bay Area counties, it will save you thousands annually. You get the credit every year that you own the property and occupy it as your primary residence. You can get more information at http://dublinmortgageblog.com/mcc-buyers/.I hope this is helpful. Good luck!

Let me talk first about how to price-shop.As a consumer, you should be aware of exactly how lenders price loans. First, there is no single rate for any loan program; there are many rates—in fact, in the mortgage business we rarely talk about “rate;” we talk about “pricing.” When I look at a daily rate sheet for a particular loan program (I’ll use a plain-vanilla 30-year fixed rate loan from Fannie Mae or Freddie Mac from my example), I see a table of rates and “points” (one point is one percent of the loan amount). Each interest rate has associated with it a certain number of points. A higher interest rate means lower points. At some point, the points become negative. This means that the lender pays a rebate to the borrower—negative points, if you will. Here is a representative rate sheet (NOTE: PLEASE DO NOT CONSIDER THIS TO BE IN ANY WAY A RATE QUOTE. THIS IS ONLY FOR ILLUSTRATIVE PURPOSES)In this illustration, you can see that the 3.75% rate is associated with a cost (“points”) of 1.695. This means that a borrower would pay 1.695% of the loan amount at the time the loan funded—if there were no adjustments applied.Moving up to 4.25%, you see a (0.974) value. This means that the lender would pay the borrower .974% of the loan amount at the loan’s closing. This would appear as a credit to the borrower at closing.Pretty simple so far, right? (I’m actually lulling you into a false sense of security—there’s more)Fannie Mae and Freddie Mac both have adjustments called “risk-based pricing.” That means that they apply pricing adjustments according to a combination of FICO score and loan-to-value ratio. These adjustments will be applied to ALL loans that will ultimately be sold to Fannie or Freddie. In other words, most loans in this country. Here’s what risk-based pricing looks like:A borrower with a credit score between 720 and 739 and a loan that is 80% of the property’s value (LTV of 80%) will have an adjustment of .750%. This means that the lender will add .750 to the “points” side of the rate sheet. This means that a borrower with a 720 credit score who wanted a rate of 4% would pay 1.044% of the loan amount for that rate. To find a rate where there are NO points for that borrower, we’d go back to the rate sheet to find a rebate that would come close to offsetting that risk-based adjustment. For this example, we’d use 4.45% as the rate, which has a rebate of .973%. Subtracting the adjustment of .750 leaves a rebate to the borrower of .223%.Clear so far? Good. Now I’ll tell you that there other adjustments that may be applied. Among them are these:Cash out refinance (as little as .375 adjustment, as much as 3.125%)Condominium with less than 25% down payment (.750%)Not having an impound account for taxes and insurance (.250%)Loan amount over $417,000Length of time that the loan is locked. Longer locks are more costlyThe adjustments can add up, obviously.The reason I point this out is so that you understand that the rate quote you may see on one of the rate-shopping sites will not necessarily take ANY of these into account. They will typically assume a credit score of 740 or higher, a loan to value ratio of 75% or lower and that the borrower will agree to have an impound account.As if all these variables and adjustments weren’t enough of a headache, you should also know that the rates change every single day—sometimes dramatically. We saw this in particular in the wake of the election: the reaction to the surprise results of the election caused rates to increase dramatically over a three day period—and by “dramatically,” I mean rates roughly .875% higher after November 8. Although that rapid spike was highly unusual, a daily fluctuation in rate is normal. This means that as a consumer, the only meaningful comparison of rates from different lenders MUST be done over a very short period of time—ideally comparing lenders’ rates during a three or four hour window.Putting this all together, when you ask a lender for their rate, you must narrow down the variables. Rather than saying, “What’s your rate?” you should ask the question in this way:“I plan to get a loan of $400,000 to buy a $500,000 detached home. My FICO score is over 740. I will agree to an impound account for taxes and insurance. I am willing to lock for a 60-day period. What is your rate today for a loan with no discount points?” Asking the question in this way eliminates any “wiggle room” because you will have eliminated the variables that affect the loan pricing.You should also ask about other fees that the lender charges, namely underwriting, processing and other document-handling fees. You should determine what the “origination charges” are. These are the fees charged by the lender in connection with the loan, as distinguished from third-party fees such as title, escrow, appraisal, notary, etc.Ask each lender for a written “closing cost estimate.” Do not ask for a “good faith estimate.” That document no longer exists. The closing cost estimate will be a worksheet listing the estimated costs associated with doing your loan.That’s how you shop for the lowest price. Now let me explain why that’s probably not the best thing for you to do.Contrary to what many believe, a mortgage is not a commodity. Even though you wind up with a product—the money—it is much more a process, just as buying (or selling) a home with a Realtor is a process. The complexity of today’s world of mortgage finance means that there are no more “slam dunk” loans. It does make a difference whom you engage to take care of that important matter for you.There are a number of heavily advertised companies offering very low rates. We refer to them as “call center mortgage companies.” The person you speak to in connection with your loan is someone sitting in a cubicle with a headset, handling inbound calls. That person has no ability to solve problems or advise a client as to the best type of loan or even provide regular status reports as the loan proceeds. A call center company may offer a rate that’s .125% lower than your local brick-and-mortar mortgage lender (that would be $29.60 per month difference for a $400,000 loan), but if a snag appears mid-way, a borrower’s life will get far more complicated—and endanger the transaction itself.Remember the section about risk-based pricing? Let’s say your credit score is 719 today, but if you were advised by your loan officer that reducing the balance on two credit cards could raise your score to 740. Doing that would improve the cost of your loan by .75%—$3,000 on a $400,000 loan, or close to .25% in rate, solely because of an improved credit score.Here’s the advice I give to people who are shopping (apart from all that numbers stuff that probably bored you silly): be aware that it does make a difference who takes care of your loan; getting a mortgage today is very different from buying a nice steak at the grocery store. Rather than being a single, instantaneous transaction, it is a sort of partnership between you and the loan officer—a partnership where you both have a vested interest in the successful completion of your project and where each of you have your roles to play. Do not discount the value of your subjective feeling about the loan officer you are interviewing as you consider whether to entrust them with your loan.Good luck!