With several banks deciding to go by the new RBI cap on ATM transactions that curtails the number of free ATM transactions per month, using ATMs for withdrawing cash has become costlier. Banks will reduce the number of free ATM transactions to five per month for its savings account-holders; thereafter the charge will be Rs20 per usage. However, for savings account-holders of other banks, or cross-bank transactions, the number of free transactions has been reduced to three from five previously. This decision comes in the wake of the new RBI guidelines passed in August 2014 and circulated on 1st November for six metro cities, namely, Delhi, Mumbai, Chennai, Kolkata, Hyderabad and Bengaluru.
The Tata group’s jewellery brand Tanishq has revived its ‘gold harvest’ scheme which was discontinued a few months ago due to the new Companies Act regarding such schemes as public-deposit schemes. “We have started the gold harvest scheme again last week. We had to come up with a new scheme to comply with the new law. The return now is around 12% and the rate of return cannot exceed 12%, which our previous scheme exceeded. We are planning a national launch soon,” Titan chief executive for jewellery division CK Venkataraman said.
The old golden harvest scheme was popular with customers as they had to deposit equated sums for 11 months; the company paid the last instalment. The customer could then buy gold worth 12 months of deposits.
This is with regard to “Pain of a Financial Consumer” in Moneylife (11 December 2014). I am a retired banker. The scope and meaning of banking has undergone several changes in the past four decades. Service orientation was pushed to the backseat (economy class) and profitability is now occupying the executive class.
During my childhood, I was taught one sloka: Aswam naiva, gajam naiva. It means both the horse and the elephant are spared for their utility purpose. Vyaghram naivacha naivacha which means that the tiger is also left out for its ferociousness. Ajaputram balim tadhyat which means that the goat is sacrificed. Devo durbala ghatukah which means that God also desires that the weak be sacrificed.
When N Vittal was the central vigilance commissioner, he, in his address to senior bankers, gave a wonderful explanation of this sloka. He compared the horse and elephant to the general managers, executive directors and chairman & managing director (CMD) of banks. In any scam or irregularity, they are untouched. Next, he had compared politicians with tigers; they cannot be touched out of fear. Then, who is left? Scale-I and scale-II officers are the only ones left; they are not spared. They are the weakest in the organisation and, hence, are punished. Bankers cannot enforce any control on their borrowers as they are tigers. Additional interest or charges, if not paid, make the entire asset into an NPA. This warrants provision and non-recognition of income. No charges can be levied on term deposit-holders, as they are not operative accounts. These accounts contribute more than 60% of the funds.
Then, who is the weakest in the link? No doubt, savings account-holders. The majority are from typical Indian middle-class moving to upper middle-class level. They are crazy about technology. Many of them do not keep a track of the debits in their account. Real small savers have to suffer. They are paid only 4%. When we look into the balance sheets, we find that the average rate works out to hardly 3%. Recently, this was made payable on daily balances.
My banker had debited me Rs100/- as annual fee for my ATM card. I had to fight by sending a letter to their CMD and then to the governor of the Reserve Bank of India (RBI).
Finally, they refunded me the amount.
Then, there is a reference to Kingfisher Airlines. As an ordinary citizen, I find no difference between taxies that ply on road and aircrafts that fly in the air. What is the difficulty in running them on profitable lines? All air travellers are affluent and can afford to pay. Are the costs not known? Can’t they include them in the fares? Why do they offer concessional fares? If the airline thinks that it can operate by recovering full running costs and part of fixed costs, it is wrong. This is a temporary theory but cannot hold forever. Knowing the position fully well, one bank has thrown Rs1,000 crore. Many banks have lost more than Rs1,000 crore in East West Airlines.
Satyanarayanamurthy Ravipati, by email
We wish to thank you for the extremely prompt action you have taken on the complaint that some shares were not appearing in the monthly account statements of our ICICI Securities demat account. With Prashant Prachand, vice president NSDL, also talking to us twice and sending us an email showing the shares are with NSDL, our minds are at peace. Further, Mr Prachand has also said that we should contact him for help when required.
All this has happened only because of your tackling the problem head on. We hope ICICI Securities will now set their systems right so that we do not face a similar problem again. We are keen to know whether the system/ human being failed. We are glad to know that we, as members of Moneylife Foundation, have such terrific advantages.
Coover Sethna, by email
This is with regard to “Don’t Give Me Charity, Give Me a Chance, says Crisys” by N Madhavan. Give a hungry man a fish and you feed him for today. Teach him to fish and you feed him for a lifetime.
Bapoo M Malcolm, online comment
Will Buy the Book!
This is with regard to “Sahara: The Untold Story - Book Review” by Yogesh Sapkale. Subrata Roy must be credited for his tremendous PR (public relations) abilities. He created a few things. He went wrong in underestimating the ‘system’. Taking on the judiciary in a most audacious way was the beginning of his downfall. Are these knee-jerk reactions? What is illegal is subject to today’s law. Money laundering? Difficult to believe as no politician worth his/her salt will deposit his money with a third person. I will buy the book.
Dip, online comment
Rolling over of FMPs
This is with regard to “Which Fixed-income Options, Now?” by Jason Monteiro. Rolling over of FMPs (fixed maturity plans) is to keep the Ponzi rolling. FMPs’ portfolio is full of NBFCs, housing finance companies, etc, which cannot repay unless new debt is raised. These FMPs have created a monster that will have to keep growing. No risk management tools will work. And these companies are extremely hazardous, if we look at three-year time periods.
R Balakrishnan, online comment
Lower Tax Bracket
This is with regard to “Safe & Higher Returns: Look beyond Bank FDs” by Raj Pradhan. Mutual Funds never assure any fixed return, whereas bank FDs (fixed deposits) clearly indicate the rate of return. Most of the articles speak about investors who are in the tax bracket of 30% for whom post-tax interest rate on bank FDs works out to 6.3%. In reality, many bank FD investors are not tax assessees or are in the lower bracket of 10%. Again, the returns on mutual fund schemes are explained with indexation which many small investors are not fully aware.
RS Murthy, online comment
Raj Pradhan replies:
The article clearly states that if you are in the tax bracket up to 10% then you should stick with FDs and not explore these mutual fund options. There are readers in 20%-30% tax bracket who will benefit from these options. While mutual funds never assure fixed returns, the article gives rolling quarterly returns over a period of five years. It's not true that bank FD investors are only from the lower tax bracket of 10%. I am not sure how you can make such claim.
Returns on mutual funds are explained with indexation, to make investors fully aware of how to get the tax benefit. That is the point of the Cover Story. Should small investors remain unaware of these benefits?
This is with regard to “PIL Accuses PNB of Corruption in Selling Insurance” by Sucheta Dalal. Excellent. This is the way forward to bring these big bullies who have torn into the vitals of ordinary borrowers.
AV Bagur, online comment
This is with regard to “Amending Prize Chits Act” by Sucheta Dalal. The law must have NO EXCEPTIONS. If it has, the seed of corruption is just waiting to grow into a huge jungle of corruption, as it is now in India. We must, once and for all, decide what kind of society and business environment we want. It should be either an honest and straight system or dishonest and corrupt crony capitalism which we are trying to get rid of now.
Researching a Company
This is with regard to “How To Select Shares” by R Balakrishnan. A thought which readers may consider... In the US, they have investor clubs. A single person working alone cannot possibly keep an eye on the whole market.Try to find a couple of like-minded people in your city or town. You may meet them at a Moneylife Foundation seminar!
Assign the responsibility of researching a company to one club member. That member would, inter-alia (a) search through investment websites and other media (b) speak to users of the company’s products or, if possible, try out the products (c) visit the establishment and see for himself/ herself as to how the company functions.
He/she would prepare a report and present to the club, debate and decide.