Mutual Funds
Bond scheme investors get a jolt

Those looking for safety and smooth returns from bond schemes like their fixed deposits, would be disappointed again

On 16th July, the Reserve Bank of India (RBI) tightened domestic liquidity to stem the rupee depreciation. As a result, banks started redeeming their surplus investments from liquid and gilt schemes of mutual funds. Mutual funds were net sellers of Rs12,546 crore, whereas FIIs were net sellers of Rs263 crore in the debt market. On account of the huge redemptions, bond yields shot up by 54 basis points from 7.56% to 8.01%, the biggest single-day gain since January 2009. The average net asset value (NAV) of bond schemes (having an asset above Rs100 crore) declined by 2.07% in a single day. Over the past two months, bond yields have gone up to 8.1% as on 16 July 2013 from a low of 7.09% as on 24 May 2013. During this period bond scheme have delivered a return of -3.09%.
 

While regular bond schemes declined by 2.94%, the much-touted dynamic bond schemes declined by 3.46%. This would have come as a rude shock to bond fund investors. They look for safety and smooth returns when they invest in bond schemes; an alternative to bank fixed deposits.
 

Over a one-year period ended 16th July, bond schemes delivered an average return of just 5.43% post tax – no better than bank FD. The top 10 bond schemes delivered an average post-tax return of 7.10% while the bottom 10 bond schemes delivered an average post-tax return of 3.74%. Dynamic bond schemes fared no better delivering an average return of 5.47% over the year. “Dynamic” is a marketing gimmick. Bond fund managers are incapable of timing the market since Central Bank can change the rules of the game overnight.
 


Considering that since April 2012, the RBI has cut interest rates by 125 basis points to 7.25% from 8.50%, this is not the kind of returns bond fund investors would be expecting. However, the massive sell off by foreign investors over the past month has led to a loss for bond fund holders. We are sure no Indian bond fund investors, bond fund managers or mutual fund companies had reckoned with this new factor – volatility in returns caused by FIIs entering and exiting the bond market. From the beginning of June to 15th July, FIIs have registered a net outflow of over Rs40,000 crore due to a changed outlook of interest rates in the US and the strength of dollar.

User

COMMENTS

Ramesh Poapt

3 years ago

Leading MF was boasing of 'Bond 007'yeild before few days.!!

Sudheer M

3 years ago

Not just the Bond funds suffered, but also the liquid funds who invested in bond funds. If I am not wrong, this is the first time in last 5 years, I am seeing the Liquid Funds going down in their NAV.

Safe investment has become a distant dream now. My sympathies with all those Senior Citizens who cannot afford to take risks, but looking for relatively "safe funds".

How can a common man cope up with inflation through his investments? Economy is in a wild swing now. Coming out unscathed should be the objective of the investment now.

Nilesh KAMERKAR

3 years ago

It would a far bigger jolt for the AMCs. Month end AUM shall tell the true story.

The direct option may not be low cost after all - Time has come now for AMCs to start feeling the heat.

REPLY

Srikanth Shankar Matrubai

In Reply to Nilesh KAMERKAR 3 years ago

What's Direct Option got to do with the fall in Nav??

Nilesh KAMERKAR

In Reply to Srikanth Shankar Matrubai 3 years ago

In jolts like these, investors tend to panic and book losses. Wont be surprised if the redemption data reveals that the bulk of redemptions are from direct plans.

An advsior's most important function is to protect clients from committing costly mistakes.
But the direct option does away with this much needed line of defence.

RBI ask banks to collect counterfeit notes and give credit to customers

The Reserve Bank guidelines on counterfeit notes to banks indicates that banks will have to streamline their system in a manner that they have to bear the risk of receiving counterfeits rather than the common man who suffers a loss by unknowingly comes into possession of such notes

The Reserve Bank of India (RBI) has directed banks to collect counterfeit notes from depositors, mark them appropriately and also give credit to the customer for value of notes submitted.

“Detection of counterfeit notes, at banks, should be at the back office or currency chest only,” the RBI said in a circular issued on 27 June 2013 . “Banknotes when tendered over the counters may be checked for arithmetical accuracy and other deficiencies like whether there are mutilated notes, and appropriate credit passed on to the depositor or account or value in exchange given,” it added.
 

The RBI has further said that banks, which detect and deposit such counterfeit currency, would be compensated to a small extent. In the circular the central bank said, “It has been decided to compensate the banks 25% of the loss incurred in respect of counterfeit notes of Rs100 and above detected by them and reported to RBI and Police authorities.” This means that banks will not be absolved of the duty to check for counterfeits, but would not be the losers when a small number of fakes get past them.  
 

The problem of counterfeit notes has been escalating over the years. Recently, fake Indian currency, worth Rs37 lakh from a Chinese source was detected at a Delhi restaurant. In another recent case, the National Investigation Agency (NIA) has revealed clear link between Pakistan and Jammu and Kashmir-based terror outfits pooling their resources to circulate fake Indian currency and using it to fund jihadi activities in India, says a report from India Today.
 

According to RBI, reporting and detection of counterfeit notes has not improved on its expected lines. RBI said although 90% of the currency chests are with the public sector banks, they account for reporting of a mere 10% of counterfeit notes, while private sector banks with less than 10% of currency chests are reporting 90% of such cases.
 

The central bank also warned that it would penalize banks that do not report counterfeit notes in its branch or currency chest. Banks would be penalized if found holding counterfeit notes in its branch or currency chest without reporting it to RBI or Police, during an inspection by the RBI. “It will be construed as willful involvement of the bank concerned in circulating counterfeit notes, and appropriate penalty strict regulatory measures against the bank including stringent disciplinary action will be imposed by RBI,” the circular said.
 

Here are the RBI’s guidelines for detection of counterfeit notes to banks…
 

1)     The process of detection of counterfeit notes should be carried out at back office or currency chest only. Banks can check arithmetical accuracy and other deficiencies like mutilated notes at counters and passed on appropriate credit to the depositor/account or value in exchange given.
 

2)      Thereafter the notes should be passed over to the back office or currency chest, as the case may be, for detailed verification and authentication through machines.
 

3)      The notes categorized as suspect during machine processing should be subjected to manual verification for checking their authenticity.
 

4)     The notes identified as counterfeit should be kept separately with proper impounding stamp in the prescribed format. Details of each impounded note should be recorded under authentication in a separate register.
 

5)     There will not be any requirement to issue acknowledgement to the tenderer. 
 

6)     In the cases of detection of up to four pieces of counterfeit notes, in a single transaction, consolidated monthly statement should be sent to the Nodal Police Station through the Nodal Officer of the bank. In case of detection of five or more pieces, FIR in the prescribed format should be lodged.
 

7)     Banks should monitor the patterns or trends of such detection and suspicious trends or patterns should be brought to the notice of RBI or Police authorities immediately. 
 

8)     The reporting procedure to the Regional Offices of RBI in the prescribed format will remain unchanged.
 

It also observed that despite the measures and after rationalizing the procedure of filing first information reports (FIRs), the detection and subsequent reporting of counterfeit notes by banks continue to be inadequate. This has serious repercussions in that the Reserve Bank is not in a position to assess the number of counterfeit notes in circulation and its ramifications for the economy.
 

In past we saw many cases of counterfeiting of currencies, but in India it’s not as big which affects the economy as a whole. Involvement of Pakistan ISI and Counterfeit Currency boosted from Bangladesh borders may spread many Counterfeit Currency across the country but RBI also take initiatives to protect it, RBI launched website to explain detection of fake currency. As Prevention is always better than cure to prevent yourself be aware and alert! Still if you stuck with few counterfeit notes, make sure that you deposit it in your bank!
 

Reported by Vishrut Patel

 

User

COMMENTS

SksMachiens

5 months ago

There is no procedure like this

Vaidya Dattatraya Vasudeo

12 months ago

It seems that our administration is full with lot of idiots. No sooner this process starts functioning, there will be lot of customers who will come to bank with some percent of fake notes. Do not be surprised if they are backed by Politicians. Pakistan and China are going to be very happy when this happens.

Amit Kamle

12 months ago

R/S SIR WHO WAS POST THIS PLASE HELP ME FOR THE SAME MY 3 NOTES OF 500 IS IMPOUNDED BY ICICI BANK,AMBAD BRANCH NASHIK. AND NOT GIVEN MY MONEY RETURN AGAINST THEASE 3 NOTES.SO HELP ME PLASE.
MY CONTACT:
AMIT S KAMLE
NASHIK.
MOBILE:9960005004

chin

1 year ago

This process is being only tested by Rbi.this process is not at all feasible. Why would bank take up loss of crores for no fault of their own? Even when they are detected fake note then also they are being asked to take 75% of the loss. Why would they do so?? And from where the money will come?? If RBI is bring such non rationale rule then it shud bear all the losses by itself. Banks are not charitable institution and it is not charity it is foolishness....which trickster will come to know of it they will open small accounts in huge numbers and start giving people commissions to get fake note deposited in banks. This will end up helping fake note industry

chin

1 year ago

This process is being only tested by Rbi.this process is not at all feasible. Why would bank take up loss of crores for no fault of their own? Even when they are detected fake note then also they are being asked to take 75% of the loss. Why would they do so?? And from where the money will come?? If RBI is bring such non rationale rule then it shud bear all the losses by itself. Banks are not charitable institution and it is not charity it is foolishness....which trickster will come to know of it they will open small accounts in huge numbers and start giving people commissions to get fake note deposited in banks

Gaurav Goel

2 years ago

Sorry to say but private banks like ICICI Bank is not following properly the master circular issued by RBI. ICICI bank is doing only forfeiting the counterfeit note but not passing the credit to the tenderer or depositor who has no fault. No body (banker) ready to accept in that bank that how a common man can verify the bank note prior to take that note at cash counter at bank. After reaching at bank, Bank staff treat with him or her like he is only absolute defaulter in that case & rather to help they misguide him or her by fraudulent statement that holder will bear the loss only. Whereas holding the fake note is not the mistake of him or her only but this is the mistake of whole banking system when such fake note is received from ATM of bank. Can any body told me what is solution available with that person on whose such loss is imposed by that bank.

REPLY

Amit Kamle

In Reply to Gaurav Goel 12 months ago

absolutely right mr.gaurav goel,i am also face this problem and i lossed 1500/-rs in icici bank.

Godson

In Reply to Amit Kamle 10 months ago

Same for me. i lost 1000 rupees in ICICI. They don't give credit also. The worst part is i got that note from HDFC bank

gaurav

2 years ago

icici bank stil issuing acknowledgement slip to the tenderer
whhere i can lodge my complain

Vipin Goel

3 years ago

If bank not give credit to depositor then please advise for next step... Need help in this ... today i deposit 3 lakh Rs in bank and 2 of 1000 Notes are getting fake but bank not gives me credit for this..

DEEPAK DANG

3 years ago

In case RBI has issued directives "The process of detection of counterfeit notes should be carried out at back office or currency chest only. Banks can check arithmetical accuracy and other deficiencies like mutilated notes at counters and passed on appropriate credit to the depositor/account or value in exchange given...."
So, any bank attached to chest can deposit cash, along with counterfeit notes & Bank having chest will bear the loss. It is a Law & Order problem, hence 100% loss must be borne by GOVT.

N Bhatia

3 years ago

I think RBI has got grossly inconsiderate towards Banks here, if they would only be compensated for 25% of the fakes so caught, which essentially means that 75% of the losses would be borne by Banks themselves. Apparently, private banks, which are doing a good job of detecting such counterfeit currencies at the front end tellers itself, are the ones who would probably be impacted more due to this directive. In my opinion, it amounts to reprimanding of the efficient lot for their good work!!???
Moreover, most of these Private Banks immediately Educate the common person, who may still be unaware, as soon as first such counterfeit is detected in their cash deposits (even the person getting impacted would have vested interest to ensure (s)he doesn't repeats her/his mistakes).
By offering them credits for counterfeits, RBI is absolving merchants/ businesses all across from their responsibility of checking fakes at their end, and /or undertake other diligence measures like seeking ID proof for large cash payments when in doubt.
Only request to RBI is to refrain themselves of passing such directives where contradictory actions could be instigated on the part of Banks.

N Bhatia.
Banker.

Dr Anantha K Ramdas

3 years ago

Replacing a counterfeit note of the customer by the bank is atleast a courtesy that can be extended because aam aadmi does not have either the knowledge or the equipment to verify authencity of the currency he/she gets.

what is shocking to note is why
the RBI is not informing the public as to when the Polymer currency notes will be introduced.

This is urgent and important.




Dr Anantha K Ramdas

3 years ago

Replacing a counterfeit note of the customer by the bank is atleast a courtesy that can be extended because aam aadmi does not have either the knowledge or the equipment to verify authencity of the currency he/she gets.

what is shocking to note is why
the RBI is not informing the public as to when the Polymer currency notes will be introduced.

This is urgent and important.




Vaidya Dattatraya Vasudeo

3 years ago

Thanks for very important information. I could not locate the specific reference in the circular that the Depositor should get the credit for the counterfeit notes. Can you please pinpoint the location. In any case I feel it is not a good idea, particular considering psychology of Indian and particularly Politicians and Crimanal, and not to mention their nexus.

pankaj raheja

3 years ago

I have been holding a 500 note for the past couple of months not knowing what to do with it. The bank has stamped "FORGED" all over it. Not sure if the bank will accept this and give credit.

Siva Rama

3 years ago

Do the Banks follow the above RBI guidelines in true spirit? Now-a-days all Banks are profit oriented and not service oriented. If the RBI compensates only 25% of the value, which Bank comes forward to bear the remaining 75% of the value of impounded notes? With the fear that the concerned Officials/Cashiers/Branches are taken to task, no cashier will accept the counterfeit note across the counter. The common man who gets such notes from ATMs have to suffer,as the cash replenishing in ATMs is outsourced by almost all Banks and there is no quality surprise check by any Bank Officials. This has to be clarified and the concerned staff who accept such cash across the counter should not be penalised.

Death toll in Chhapra mid-day meal tragedy rises to 23

Officials are visiting every house in the vicinity of Dharmasati Gandavan village to find out about any deaths that had not come to the knowledge of the authorities

Death toll in the Chhapra mid-day meal tragedy rose to 23 with the death of one more child. At present 25 others, including 24 children and a cook, are undergoing treatment in the Patna Medical College and Hospital.

 

Seventeen schoolchildren died in the Sadar Hospital in Chhapra. Four were declared brought dead on arrival at PMCH on late Tuesday night and two lost their lives during treatment at PMCH on Wednesday.

 

PMCH Superintendent Amarkant Jha Azad contradicted media reports about some fresh deaths, including that of the cook Manju Devi.

 

Principal of the school Meena Devi was absconding with her husband and the police was conducting raids against them. The Principal, against whom an FIR has been lodged, has already been suspended by the administration.

User

COMMENTS

bhagavan p s

3 years ago

Solution:

1. Establish a scientific kitchen in every district under a reliable NGO on the lines of ISKCON
2.Standardise an Operating procedure for procurement, storage, preparation, packing, transport, distribution wih quality check and quality audit of midday meals.
3. Burocrats and politiians should have very limited but accountable role.


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