Citizens' Issues
FIPB to discuss issues concerning multi-level marketing, FDIs

FIPB in its meeting on 24th August will deliberate on the perils of allowing FDI from companies in multi-level marketing, under which a person is required to enrol members to sell products and services

New Delhi: An inter-ministerial group will discuss issues related to foreign investment by companies in multi-level marketing, a methodology which was allegedly used by firms like Speak Asia to cheat investors of crores of rupees, reports PTI.

 

The Foreign Investment Promotion Board (FIPB), according to sources, will deliberate on the perils of allowing foreign direct investment (FDI) from companies in multi-level marketing, under which a person is required to enrol members to sell products and services.

 

The issue is listed in the agenda of the 24th August meeting of FIPB, which is headed by Economic Affairs Secretary Arvind Mayaram and comprises representatives of concerned ministries. FIPB is responsible for approving proposals of foreign investment in sensitive sectors.

 

Recently a study by the Ministry of Corporate Affairs (MCA) has cautioned people against joining multi-level product marketing schemes saying such programmes are primarily meant to con individuals to the benefit of a few sitting at the top of pyramid.

 

According to the study, the pyramid or multi-level marketing schemes are "over-priced" to pay huge commissions to people sitting at the top of pyramid and earn exorbitant profits for the company.

 

Most recently, multi-level marketing company Speak Asia Online and chit fund company Gold Quest International have come under the radar of investigation agencies.

 

The Singapore-based Speak Asia was accused of duping investors to the tune of Rs1,300 crore.

 

Besides multi-level marketing issue, the FIPB is also likely to decided on as many as 48 applications of FDI.

 

About 10 FDI applications of pharmaceutical and healthcare companies too will come up for scrutiny.

 

Applications of Unitech Wireless (Tamil Nadu), Sterlite Networks Ltd, (Dadar and Nagar Haveli), DB Corp, Wall Street Journal India Publishing, Tara Aerospace Systems and City Union Bank, are other items on the agenda.

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COMMENTS

MOHAN

5 years ago

'Reverent Am' (The "Father" of all money-chain companies !!) and the "Madam" sitting in Singapore may immediately depute their obedient journos to intervene otherwise they will lament in their pros-speak Asia blogs "India will soon lose its sheen of being the destination for entrepreneurship and growth" !!

Beni Prasad Verma goofs-up on rising prices and farmers!

The steel minister ought to be sent to meet the farmers so that he can gain knowledge about the miserable conditions actually prevalent there. May we please request the prime minister to remove such jokers from the Cabinet?

All attention has been focused on the out-of-turn allotments of coal blocks, ultra mega power projects (UMPPs) and the measly rent for the Delhi international airport from the contractor—following the Comptroller and Auditor General of India (CAG) report. However, the weather conditions continued to cause worry and the drought got pushed to the background unceremoniously as a result.

 

We almost forgot the monsoon failure until the ludicrous attempt by steel minister Beni Prasad Verma’s gaff on how the price rise and inflation are actually ‘good’ for the farmers.

 

Instead of looking into the economic situation of the steel industry, such as the falling price of iron ore and China not showing keen interest to import or how some of the top steel makers are  affected by the lack of coal or power supply Mr Verma  has chosen to talk about inflation.

 

Being a steel minister, he obviously does not know that the vast difference in the retail price in the city and the actual net realization by the farmer for his produce is eaten by a horde of middlemen. And, of course, Mr Verma does not realise that a paddy grower does not eat just rice alone but there are other things that go with it, and for which he has to pay much higher prices, thanks to ‘inflation’.

 

It is time prime minister Dr Manmohan Singh relieves Beni Prasad Verma of his steel ministerial post and appoint him as “minister on special duty” and send him on a “bus-yatra”, or preferably, a “pada-yatra” to the rain-affected areas to meet the farmers, so that he can gain knowledge about the miserable conditions actually prevalent there.  After hearing the farmers’ woes, Mr Verma can explain to them how ‘inflation’ is beneficial to them.

 

May we please request the prime minister to remove such jokers from the Cabinet?

 

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US. He can be contacted at [email protected].)

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Banks to be affected by RBI move on group exposure: Moody's

Moody's said the proposed rules by RBI would hurt companies that depend on parent banks for capital and brand support

New Delhi: State Bank of India (SBI) and ICICI Bank are among those that would be affected if Reserve Bank of India (RBI) implements its proposed guidelines on banks' exposure to their group entities, credit rating agency Moody's said, reports PTI.

 

Last week, the RBI released draft guidelines to limit banks' exposure to their own group non-financial and financial entities.

 

As per Moody's, the proposed rules would hurt companies that depend on parent banks for capital and brand support, particularly those with large international operations, or those that operate insurance, securities or asset management businesses that need capital and liquidity support to meet their business needs.

 

"If the RBI adopts them, the new guidelines would be credit positive for India's banks, but credit negative for group companies that rely on parent banks for capital and brand support," Moody's Investors Service said in a report.

 

It said the "affected banks" include ICICI Bank, State Bank of India, Bank of India, Bank of Baroda and Kotak Mahindra Bank.

 

"The guidelines would lead these banks to re-examine the financial support they provide to group businesses as anything exceeding the stipulated limits would be detrimental to their standalone capital calculations and thus their business growth," Moody's said.

 

The rules, it said, would benefit India's banks because they would reduce their concentration and contagion risks from group activities.

 

The guidelines, if implemented, would limit to 5% of paid-up capital and reserves a bank's exposure to a single group non-financial entity, while the maximum exposure to regulated financial services companies would be 10%.

 

However, Moody's said that for the time being, these draft guidelines do not help the banks in any way cope with their immediate asset quality challenges owing to the difficult environment.

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