Word’s worth — Murli Deora, petroleum minister, on the proposal to hike petrol and diesel prices “It’s [money invested in US 64 bonds] dream money for any asset management firm as the typical investor used to invest and forget” — Dhirendra Kumar, CEO, Value Research India “Credit offtake is not matching liquidity inflows.To me that is a key signal of whether rates will go up or not” — KV Kamath, managing director and CEO, ICICI Bank “Investments of over $1,400 billion are being made by REITs globally and we expect these investors to start looking at Indian realty” — Jayesh Kariya, partner, Deloitte Hakins & Sells Source: Telegraph, Financial Express and Indian Express |
Telling figuresSome figures that have immediate or long-term personal finance implications rupees was Mukesh Ambani’s salary for 2007-8. There are six companies in BSE 500 with a turnover less than this for the same period Per second he makes Rs 13.96, or over Rs 12 lakh a day 8,000 cr rupees is the amount due to the 1.2 million investors in UTI’s US 64 Bond, which comes up for maturity by the end of May 5% is the increase in direct investment in mutual funds since Sebi scrapped the entry load for direct investors in January this year, going up from 2% to about 7% |
When it comes to money, the two key roles we all have to play at some point or the other is that of a customer and an investor. Most of us have a dual thought process, clearly demarcated along these roles. As a consumer, we are very concerned with our rights. However, when it comes to our role as an investor, we let our guard down. But the truth is that even an investor is a consumer because he is “buying” something, be it stocks, insurance or even a loan. And a spate of recent rulings by courts and regulatory bodies proves this point.
Last quarter was particularly exceptional when it comes to rights of financial consumers. The most significant ruling came from the Supreme Court on the matter of recovery agents hired by banks and the strong-arm tactics adopted by them. “We deem it appropriate to remind the banks and other financial institutions that we live in a civilised country,” the court said, dismissing a petition of ICICI Bank.
The Supreme Court also took on insurance companies that try to deny claims on technical grounds by dismissing an appeal filed by the National Insurance Company (NIC) against a consumer forum ruling that ordered it to pay 75% of the insured amount to the insured. NIC had sought to repudiate the claim on the grounds that the vehicle was insured as a private vehicle but used as taxi. This ruling states that “…breach of condition is not germane”.
The Monopolies and Restrictive Trade Practices Commission (MRTPC) too has been coming down strongly on unfair practices. Delhi-based real estate firm Ansal Housing & Construction has come under the scanner for its residential project in Karnal because advertisements promoting the scheme withhold the true cost of plots while favouring a single company (HDFC). The advertisements invited bookings in the township for just Rs 1.25 lakh. But buyers would then have to pay Rs 1 lakh within 30 days from booking plus Rs 15,000 a month for 15 months and the “balance” at the time of possession.
The MRTPC has also ordered an investigation against FMCG firms that are cutting quantity while maintaining the price without adequately informing consumers. So you think you have bought the usual 100 ml shampoo bottle for Rs 50 but actually you’ve bought 80 ml. The companies on their part have said that they are well within legal limits by printing the new weights on the products, but do we ever check the net weight? These rulings are important to every consumer, and not just to those involved in the cases. But the biggest lesson is that even as an investor, you are a consumer—with all the rights and privileges.
Landmark rulings
• SC slams banks for deploying musclemen for recovery of loans
• SC dictates that insurance claims for vehicle theft cannot be denied on technical grounds
• Ansals under MRTPC scanner for promoting scheme without giving true cost of plots
• Investigation against FMCG firms for misleading consumers by reducing quantity for the same price
• Vodafone fined for its contest asking customers to make calls longer than 20 minutes
Loan recovery norms
• Clients to be contacted at their place of choice
• Interaction in a civil manner
• Clients to be ordinarily contacted between 7 am and 7 pm
• Request by client to avoid calls at particular time or place to be honoured
• Time and number of calls to be documented
— Rakesh Rai
How often have we heard the phrase “insurance is a subject matter of solicitation”? Simply put, it means that insurance has to be requested, not sold. In practice, however, this clause is blatantly flaunted. A visit to your bank alone means you will, more often than not, be offered a policy. This was the outcome of the Insurance Regulatory and Development Authority (Irda) allowing banks to act as distribution agents for insurance firms. But the Govardhan Committee has recently ruled that banks should not partner more than one life insurance firm.
Considering the effort that insurance agents should make to sell a policy, one would expect them to be able to sell more than one company’s policies. After all, an informed agent is a better advisor than one pushing products of only one company, making him a mere salesman. This is something the committee did not look into. For now, investors will have to go from agent to agent if they want to know the range of policies available.
—Narayan Krishnamurthy
After a lull, initial public issues (IPOs) are now all set to storm the markets. As many as 125 companies have filed their draft offer documents with the Securities and Exchange Board of India (Sebi). These issues may raise around Rs 22,000 crore. Says Prithvi Haldea, chairman and managing director, Prime Database, “Primary market issues depend on secondary market sentiment. And with the secondary markets seemingly stable, IPOs are natural to be out.”
Earlier in the year IPO watchers had predicted a Rs 60,000 crore mopup but the markets tanked in January so a few IPOs were withdrawn and many deferred the offer for a later date. Now there has also been some rationalisation of the issue size, bringing down mega issues to more realistic values. For investors, the revived IPO market is a good way to re-enter the stock market. But the days of huge listing-day gains may be a thing of the past.
—Narayan Krishnamurthy
As if the RBI did not already have enough on its plate, the regulator is reported to be planning to launch a credit card. The central bank may launch ‘IndiaPay’ by the end of next year to promote the use of plastic money. RBI executive director RB Barman has been quoted as saying that the credit card will be designed specially for common people, with low interest rates and lower risks. If that happens, it will be the mother of all credit cards. According to reports, the National Payment Council of India is working on the registration process and will decide whether it will be a credit card or a smart card.
The IndiaPay card is believed to be on the lines of China’s UnionPay credit card, which gives access to over 85,000 ATMs of 14 major and many smaller banks across the world. The UnionPay cards are also affiliated with MasterCard or VISA so they can be used abroad as an international credit card. However, the question that RBI will have to face is whether an organisation should become an active player in the sector it is mandated to regulate.
— Rakesh Rai
Mall policyThe next time you want to buy a home insurance policy, you don’t need to frantically call your agent nor do you need to go out of your way to an insurance company. Now you can buy it at the press of a button from a kiosk at a mall. Mallassurance, launched by the Future Generali group, an insurance joint-venture between Kishore Biyani led Future Group and Italy’s Generali Insurance, aims to provide you standard low premium policies through malls and kiosks.“Initially the products made available will be rather simple,” says Kim Chai Ooi, country manager, Future Generali. Policies like auto, personal accident, travel, health and certain life insurance policies will be made available for premiums as little as Rs 49, Rs 99 and Rs 199, while high value products and products requiring underwriting or medical examination will be available through their outlets. — Tanvi Varma |
Honesty certainly is no virtue when it comes to buying a secondhand house in most Indian metros. Or, at least, it was not so far. Apart from the affordability factor, a bigger concern was the amount of black money demanded as payment. In most property deals in Delhi, for instance, the amount demanded in cash—usually unaccounted—is between 40% and 60% of the property value and that killed the option of taking a bank loan.
Even as a seller, it was a huge challenge to find buyers willing to pay the entire amount in white. That is because most buyers tried to lessen the burden of the stamp duty, which was charged at a rate of 5-12% of the value of transaction depending on the state, by declaring a lower rate for the property.
But now, with the National Capital Region Planning Board planning to hike the minimum circle rates in and around the Capital by 20-30%, things are poised to change for the better. Circle rate is the minimum floor area rate at which the state charges stamp duty on transaction of a property. This move comes hot on the heels of the recent 20-25% hike in circle rates in Noida, over and above the August 2007 hike of 80-120%. Higher circle rates will mean more transparent transactions in addition to making non-builder property more accessible to the common man. So far, the official rate of the property was declared as much lower than the market rate. But by hiking the circle rate, the government will be able to effectively narrow the gap between the declared rate and the market value, which is not likely to go up anytime soon given the escalation over the last couple of years.
While expecting the imbalance to be completely wiped out may be a pipe dream, this move is expected to bring down the amount of black money involved in transactions to about 20-30% of the property value. Which means that buyers will now be able to claim bigger home loans and buy the property of their dreams as well as have a fair idea of property prices. In case you were worried about a hike in your tax liability, immediate or future, don’t panic yet. Because a few states have already cut the stamp duty to 5% and others are likely to follow suit. Any way you look at it, buying—and selling—a house has just gotten simpler.
— Rakesh Rai
Policy at a GlancePolicy tenure: 5-30 years Premium payment: Monthly, quarterly, half-yearly and annually Fund options: Four |
But, what makes the policy worth a second look is the clause on policy lapse. In case the policy is lapsed, it can be revived within a period of two years (called revival period) from the date of the first unpaid premium. If the premiums have been paid for a minimum period of three years, the life cover, accident benefit and critical illness riders will continue during this revival period.
Moreover, a policyholder can opt for continuation of cover even beyond the revival period, without reviving the policy or paying any further premiums. Policyholders just have to exercise this option at least one month prior to the completion of the revival period. The policy cover continues by deduction of relevant charges from the policy fund till the fund value reaches one annualised premium. These two features make a case only if one has bought this policy with the intention of not continuing it for long. In other words, those looking at short-term insurance with investment prospects can consider this plan, else it’s avoidable.
— Narayan Krishnamurthy
Do you know why you’ve invested and what you’re invested in? You can check your financial quotient here.
1. When choosing a broker, your best bet is to choose the one that charges you the least
True/False
2. It makes more sense to buy a larger mutual fund scheme than a small one because returns are commensurate with fund size
True/False
3. Taking a Ulip is the cheapest way of covering a large liability like a home loanT
True/False
4. It’s enough to start saving for retirement 10 years before you retire
True/False
give yourself 1 for every No and 0 for every Yes
0-1: Better luck next time (and do take the time to read this magazine. There’s plenty of information that could prove useful)
2-3: You’ll do—your grasp of your finances seems pretty good, though, of course, it could be better!
4: Obviously a know-it-all. Just make sure to keep reading and keeping your knowledge up-to-date
