In another example of cartelisation among bankers, several banks have increased, or started imposing, charges for transaction alerts through SMS as well as for mobile banking. Some banks have hiked the annual fees on debit/credit cards. A few banks have even increased charges for depositing cash in bank accounts. As usual, private lenders have taken the lead which would soon be followed by nationalised banks. The list includes large banks such as ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Bank and Canara Bank.
The private placement market is a place for amazingly high-risk and low-reward products. Sample this. India Infoline (IIFL) is touting a paper that involves placing money with a Delhi-based developer of properties called Pratibha Impex. The company will pay interest at 18%pa (per annum) with quarterly payouts in year 1 and monthly payouts in year 2. The principal is proposed to be repaid in 12 monthly instalments after completion of one year. The marketing document tells you that you get a yield of 19.4%; that is, if you were to reinvest all your receipts at 18%pa, the effective return would be 19.4%. The minimum investment size is Rs35 lakh. Many investors may fall for the high yield without realising the pitfalls.
The total amount proposed to be raised is just Rs19 crore, a fraction of the company’s size. Couldn’t it have sourced the money from somewhere else? There is no credit rating. The debentures are ‘secured’ by a piece of land at Noida. There is a corporate guarantee of the issuer as well as personal guarantees of promoters which would be hard to enforce. Since the debenture is unlisted, there would be tax-deducted at source. Remember that liquidity will be zero, so there is no exit until the end of the tenure. In all such cases, while the yield is high, risks are much higher. Lesson: stick to listed and regulated products.