Citizens' Issues
ASCI receives maximum complaints against personal care ads

More and more corporates are using the fast track court system of ASCI to resolve their issues with advertisements from competitors

The Advertising Standard Council of India (ASCI), the self-regulatory industry body and its Fast Track Complaints Council (FTCC) receives maximum number of complaints against advertisements relating to detergents and shampoos- from the personal care segment.

Alan Collaco, secretary of ASCI, said, “So far eight complaints have been dealt by the FTCC. Four complaints have been upheld by the Council. These advertisements are of detergents, shampoos and sanitary napkins – mainly belonging to the personal sector.”

Moneylife learn that FTCC had upheld a complaint it had received against the television commercial of Pantene Pro-V Shampoo, a product of Procter and Gamble (P&G). According to the complaint, the claim, “Hair fall ka chakkar…shuru hone ka no chance,” is misleading as it conveys that using this shampoo from Pantene will completely stop the hair fall cycle. The complainant said that the claim is false, misleading and needs to be backed with substantial independent data.

FTCC after reviewing the advertisement concluded that the claim, “Hair fall ka chakkar …. Shuru hone ka no chance”, was an absolute one and was inadequately substantiated. It also contravened with ASCI’s code and hence it was upheld.

Even Ahemdabad-based, Consumer Education and Research Centre (CERC), in its draft advertising code says that advertisement should substantiate all the claims made in it. “Advertisers shall be under obligation to substantiate all claims made by them, whether direct or implied, with documentary evidence of independent research and test findings that are capable of objective assessment. Relevant evidence should be sent without delay if requested by the Authority and should be adequate to support both detailed claims and the overall impression created by the advertisement,” it says.

“If there is a significant division of informed opinion about any claim made in an advertisement it should not be portrayed as universally accepted,” CERC adds.

Experts say that the FTCC is an easy platform from ASCI for the corporates, instead of choosing lengthy and expensive legal battles over competitor’s advertisements.
In September, ACSCI started the FTCC for 'fast-track redressal' of complaints originating within the industry. Accordingly, such complaints are resolved by the FTCC within seven working days, from the earlier time of around five weeks taken to resolve complaints.
A member of ASCI’s Consumer Complaint Council (CCC) who wished not be named explains that the FTCC has been successful in resolving the cases quickly. The complainant needs to check if the decision given by ASCI is complied or not, since ASCI does not have any mechanism for it. However, since most of the companies are member of the council, they abide by the decision.

ASCI is planning speedy disposal of the consumers complaints it receives against errant and misleading advertisements. “For quick disposal of consumers, ASCI’s CCC now meets twice a month. Earlier the CCC used to meet only once in a month. Now, complaint can be resolved within a month instead of 40-42 days,” says Mr Collaco.
Experts from advertising industry say that it is easier for the companies to resolve their advertising dispute with ASCI instead of approaching courts, where decision might be taken after several years. Moneylife had reported that how ASCI have become a battle ground for companies who find it easier to have the advertisements of their rivals pulled out by approaching the ASCI. (

ASCI has been seeking statutory powers from the union government to make its decision binding on advertisers.


Muthoot Finance NCDs—should you go for it?

Muthoot Finance’s business model is based on the premise of gold and gold prices. However, the stability and level of gold prices after five years is anybody’s guess. This very fact that the company is dependent on one variable, makes us very uncomfortable in addition to its already high debt

Muthoot Finance is the largest gold financing company in India in terms of loan portfolio. It’s loan portfolio as of 30 September 2011 comprised about 5.5 million loan accounts, gold loans outstanding of Rs20,766.62 crore, of which the gold loan business contributed to 99.01% of its total revenue.

The company is issuing a non convertible debenture (NCD) to raise as much as Rs600 crore. This issue is rated ‘AA- with stable outlook by CRISIL as well as by ICRA. The issue opened on 22nd December and closes on 7 January 2012. Muthoot Finance hopes to utilise the money for lending and investments, to repay existing liabilities or loans and towards business operations including capital expenditure and working capital requirements.

The minimum investment is Rs5,000. That means you have to purchase minimum five units at Rs1,000 per unit. The interest rate offered is 13% for two years, and 13.25% for remaining options which are three, five and five-and-half years. The face value or per unit cost of NCD is Rs1,000. According to the company’s website, the NCD claims to double your investment in 5.5 years.

Is it worth the investment? We find out for you.

Muthoot Finance’s capital adequacy ratio stood at 18.24%, with Tier I capital comprising 13.48%, as of September 2011, 324 basis points above the Reserve Bank of India’s (RBI) minimum required of 15%. In order to maintain a safe ratio in the next five years, it would require sufficient capital infusion, or strong cash-flows, to cushion in case of default.

The company currently faces as much as Rs17,256.70 crore of liabilities, of which Rs2,401.50 crore, or roughly 14% of its total liabilities, is due for repayment by 31 March 2012, which would probably be refinanced. It also had contingent liabilities, not provided for, amounting to Rs322.90 crore. The long-term debt equity of the company stood at a whopping 6.71 times!

Muthoot Finance’s gross non-performing assets (NPAs) grew to Rs123.32 crore from Rs46.01 crore, a staggering rate of 168%, between 31 March to 30 September 2011. However, as a percentage of its loan portfolio the gross NPA stood at 0.59%, which is reasonable, but by no means safe if you consider economic slowdown which is already happening.

Its income has declined over the last six months by 12.5%, while its profit margins stood at a healthy 20.17% (down from 21.5% over six months). However, its cash flows have remained flat during the same period. Cash flow against interest revenue is a major component towards paying off debt, especially paying the interests on NCDs.

The NCD remains very attractive from the instrument’s point of view—at 13.25% over a period of 5+ years—virtually doubling your initial investment. However, we are not wholly comfortable with the fundamentals of the company. If the company does not manage to increase cash flow and generate business over the next five years, it will face a difficulty in paying you the promised 13.25% interest rate for five years.

Their already high debt-equity ratio shows an over-leveraged balance sheet, which would further be jacked up with this NCD issue. With the economy slowing down, the company might have difficulties in meeting its short-medium term obligations.

The company business model is based on the premise of gold and gold prices. The higher the price of gold, the higher loan quantum the company would give you, by pawning off your physical gold possessions. We are in the middle of one of the most unprecedented gold price rises. However, the stability and level of gold prices after five years is anybody’s guess. This very fact that the company is dependent on one variable makes us very uncomfortable, in addition to its already high debt.



Krishnaraj Rao

5 years ago

Isn't Muthoot Finance what they used to call a loan shark a couple of decades ago -- encouraging indebtedness, and feeding off the people who default on loans?


E Jose

In Reply to Krishnaraj Rao 5 years ago

It depends on what you call a loan shark. Did not people accuse all the New Gen banks of encouraging indebtedness through aggressive marketing of credit cards and car loans?

All banking and financing institutions sell loans. They cannot just keep accepting funds and keep it idle. In the process they fulfill a real need in the market for finance. We all need loans and we have multiple choices in selecting the loans from various providers. We choose what best suits us.

Muthoot is not a bank-it is a licenced Non Banking Financial Company and is in the organised sector and is regulated by RBI.

One must study the finance papers like ET, Hindu Business Line, Financial Express etc. and learn about the whole thing and make informed choices.

That is my opinion.


E Jose

5 years ago

Hi Sundaram,

As I see it, any investment carries risk, or we would not get any return. How the risks are addressed is what we should look at. The risk from the Company’s dependency on gold is mitigated by the fact that their Loan to Value is approx 62 % only. i.e. it would require a 38 % fall in Gold prices to discourage redemption of the loans. Further, there is always some sentimental value attached to the pledged jewels which has not been quantified, but we could say it ranges between 5 to 10 % . This provides an additional margin. Since they give mostly small ticket short term loans of three to six months, frequent corrections are possible to set off the price and interest related risks.

All big financial companies, Muthoot not excluded, maintain constant watch over their Asset-Liability position for various time buckets to ensure all payments due are covered by inflows. Further, since their loans are short term, (3 to 6 months) they would not have any problem meeting payments due in March 2012 or at any other time.

As regards the long-term debt equity ratio, it is the natural position of any financier, including banks. Banks have the added risk of long term loans which are secured by illiquid assets.

International observers predict that Gold prices would continue to rise in 2012-13.

NPA position of banks presently exceeds 5 % (rise from 3.5 %)according to today’s news. It is a global phenomenon-nothing to panic about.

There is another view posted by the Hindu Businessline available at
This may be of interest to you.
I am a retired banker.
E. Jose


5 years ago

Agreed-over 5 years there are dark clouds over the company.But how about investing @13% for 2 years?The chances of gold prices crashing in the next 2 years seem remote(given the world economic conditions). Request your urgent feedback(since the issue closes on the 7th). Thanks.



In Reply to Sundaram 5 years ago

Well for 2 years it is a good option along with kikback brokers are passing(as high as 1),but then you can also try already listed deb from same co,which are avilable at discount(N4/N6 series).I am not sure abt period of holding in them & yield it gave,after accured int & discount.

Post office savings scheme interest rates not floating: Finance ministry

The government clarified that interest rate for small savings schemes will be declared on 1st April every year and will remain valid till the maturity of the scheme. However, in case of Public Provident Fund, which is a 15-year scheme, interest rates would not remain fixed for the entire period

New Delhi: The government on Wednesday said interest rates on post office savings schemes, except the PPF, will remain fixed throughout the term of the scheme, reports PTI.

It clarified that interest rate for such small savings will be declared on 1st April every year and will remain valid till the maturity of the scheme.

However, in case of Public Provident Fund (PPF), which is a 15-year scheme, interest rates would not remain fixed for the entire period. The annual interest accruals in the PPF account will depend upon the rate for that particular year, the finance ministry said.

“The rate of interest on small savings schemes will be aligned every year with rates of government securities of similar maturity ... the rates are fixed and not floating so far as individual investments except PPF are concerned,” it said, while responding to media reports that interest rates on all small savings schemes are floating.

With effect from 1 December 2011, the government has increased interest rates on PPF to 8.6% from 8% now, and also raised ceiling on annual contributions to the fund to Rs1 lakh from Rs70,000.

Interest rates on savings account in post offices also rose to 4% from 3.5%. Similarly, interest rates on deposits of other maturities too were raised from December.

“The rate prevailing at the time of investments will remain fixed and unchanged till the maturity of the investment. Any revisions in interest rates in subsequent years will only be applicable to the investments made in the relevant period,” it said.

The sale of ‘Kisan Vikas Patras’ (KVP) has also been discontinued from 30 November 2011. There was an apprehension about KVP, which was kind of a bearer instrument, that it was used for money laundering.

In addition, the maturity period of monthly investment schemes (MIS) and national savings certificates has been reduced from six years to five years.

MIS earns an interest of 8.2% but accounts opened on/after 1 December 2011 would not be entitled for bonus.

Besides, loans taken from PPFs would attract an interest of 2% per annum from 1 December 2011.

The government has done away with commission paid to the agents for opening PPF accounts and Senior Citizens Savings Schemes, while the agents’ commission for Mahila Pradhan Kshetriya Bachat Yojana (MPKBY) has been fixed at 4%. Besides, agency commission for all other schemes has been halved to 0.5%.

With bank deposits giving over 9% return, people are now preferring parking funds in banks and hence there has been a net outflow from the small savings schemes, which are administered by the National Small Savings Fund (NSSF).


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