Finally, SEBI seems to have woken up to possible thousands of crores invested by consumers in gold savings schemes of jewellers. In these cases, there is no recourse, if the jeweller happens to shut shop. It is time these schemes are regulated to prevent any future scam
Many jewellers offer gold savings scheme wherein you pay specific number of instalments to get bonus added by the jeweller at the end of the period. Gold investment schemes by jewellers have been completely unregulated so far. Even the Income Tax or the Reserve Bank does not bother about these deposit schemes through which investors are earning a fixed income. What will happen if the company or jeweller goes into liquidation or simply vanishes after shutting shop? Securities and Exchange Board of India (SEBI) has come across several such gold savings schemes which have seem sharp increase in recent times. Recent public interest litigation (PIL) questioned the legality of these very gold investment schemes.
According to a media report, both SEBI and Reserve Bank of India (RBI) have replied to a Right to Information (RTI) application stating that such schemes are not regulated by them at all. If you risk a small jewellery shop to take your instalments, you risk a huge loss, if you find that the jeweller shut the shop. Moreover, what is the guarantee that the well-known jeweller will be a safe option? Clearly, a Gold Savings Scheme is for those who want to make gold jewellery in the near future and not for investors. It is not for putting a large chunk of your savings.
The SEBI Act, 1992 gives the market regulator power to regulate the working of schemes which are in effect Collective Investment Scheme (CIS) and have the following characteristics:
The same is taken as a CIS and such schemes have to be necessarily registered with SEBI. It is estimated that there are at least 100 such schemes across the country that could have raised amounts much higher than Rs100 crore -- the threshold limit for any money pooling activity to possibly become a CIS if contributions made by investors are pooled and managed on their behalf to earn profits.
SEBI may have to refer to most of the gold savings scheme money pooling cases to RBI, which is entrusted with the regulation of 'Gold Deposit Schemes' (GDS) offered by banks like SBI and registered Non Banking Finance Companies (NBFC). GDS from jewellers is unregulated. Many jewellers offer GDS wherein you give your gold to get higher quantity at the end of one year or get monthly payment as well as return of your gold at end of the term. The interest rate for SBI GDS three-year deposit is 0.75%, for four and five years it is 1%. It’s not great, but it is calculated in gold terms. Jewellers offer a high rate of interest of 7.5%, but there is absolutely no safety.
A Gold savings scheme is the opposite of GDS. Jewellers offer schemes like Tanishq (Titan Industries) Golden Harvest Jewellery savings scheme, wherein you pay in instalments for fixed duration (11 months) and the jeweller will pay the last instalment. With this amount you can buy gold anywhere in India from any Tanishq showroom at the end of the year. The payment of last instalment works out to be over 15% return on your scaled investment in the golden harvest scheme. There is no tax deducted and no regulatory hassles like Know Your Customer (KYC) norms. Jewellers like PC Jewellers, Tribhovandas Bhimji Zaveri, Gitanjali group, Gitanjali Jewels, Tanishq (Titan Industries), GRT jewellers, etc have their own such gold saving schemes with varying benefits.
Gold Deposit Scheme: What you need to know
State Bank of India’s net profit fall to Rs2,234 crore mainly on higher provisions for bad loans and increased staff expenses
State Bank of India (SBI), the country's largest lender, reported a 34% fall in its third quarter net profit mainly on higher provisions for bad loans and increase in staff expenses.
For the quarter to end-December, the state-run lender, said its net profit fell to Rs2,234 crore from Rs3,396 crore. SBI's net interest income (NII), the difference between interest earned and expended, increased 13% to Rs12,641 crore from Rs11,176 crore while other income rose 16% to Rs4,190 crore from Rs3,627 crore, same period last year.
SBI said during the quarter its bad loan provisions grew 24% to Rs3,429 crore from Rs2,766 crore, while gross non-performing assets (NPAs) increased 5.73% from 5.3%, a year ago period. Its net NPA also rose to 3.24% as against 2.59% recorded during third quarter FY2013.
The lender's staff expenses in the December quarter, including payment and contribution to employees increased 34.8% to Rs5,867 crore from Rs4,351 crore, a year ago period.
Here are the details of profit and loss account of SBI...
SBI closed Friday 1.6% down at Rs1475 on the BSE, while the 30-share Sensex ended the day marginally up at 20,326.
L Rajagopal, the chairman of Lanco group and Congress MP sprayed pepper spray while the Telangana bill was being placed in Lok Sabha. Lanco, which is in the debt restructuring process, has also been frequently involved in a number of controversies
Lagadapati or L Rajagopal is in the eye of storm for using pepper spray in the Lok Sabha for stopping the Telangana bill from being submitted. The Member of Parliament (MP) from the Vijaywada constituency is a known opponent of bifurcation of Andhra Pradesh. Although, this time, the Congress MP seems to have gone too far. Following the pepper spray incident, he, along with 17 other MPs, is suspended from the Lok Sabha for rest of the session. Earlier too Rajagopal has crossed swords with Lok Sabha Speaker Meira Kumar.
While speaking with Rajdeep Sardesai of CNN-IBN, the MP accused Congress leadership, including Sonia Gandhi, for influencing the Speaker to suspend him along with 17 other MPs. “More than 100 MPs were in the well on Thursday, the Speaker singled out some MPs, action must be taken against all MPs. Ministers were in the well too. The government and the Congress leadership influenced the Speaker to act in this manner. The procedure of introduction of the Bill was incorrect, she didn't read our names. We will be sending letters of how all procedures were violated to the Speaker and various political parties," Rajagopal told the channel.
Defending his stand over using pepper spray in the Lok Sabha, the expelled Congress MP said he used the spray only in self-defence as he was attacked by a mob. "I have a right to defend myself. Pepper spray is a legally allowed weapon of self-defence. What would I have done if the 'mob' attacked me. I used the pepper spray to disperse the crowd that had gathered at the well of the house," Rajagopal told CNN-IBN in an interview.
There is another side of Rajagopal, a corporate or business side that is also equally controversial. He is founder chairman of the Rs15,000 crore Lanco group that has interests in engineering, procurement and construction (EPC), power, solar, natural resources and infrastructure.
In 1985, Rajagopal joined Lanco, which at that time was a small company.
According to Wikipedia, Lanco grew at a tremendous pace since the early 1990s, after Rajagopal married the daughter of veteran Congress leader Parvathaneni Upendra, and joined politics himself. Initial growth was driven by large contracts primarily in construction. Later, other infrastructure areas such as power generation, transportation etc. were also added.
"(Lanco's) key businesses have been frequently involved in a number of controversies. In 2007, (its) managing director GV Babu was caught at an airport with a suitcase containing Rs34 lakh in unaccounted cash. Repeatedly tarnished by charges of corrupt practices and contract irregularities, Lanco Infratech Ltd ran into financial trouble and has filed for Corporate Debt restructuring (CDR) in July 2013," Wikipedia says.
In December 2006, the company won a large contract citing a collaboration with Singapore firm Globeleq. However, two months later, Lanco (along with Jindal) acquired Globeleq Singapore, and other competing bidders alleged foul play, resulting in the bid being cancelled.
Wikipedia says, "In several situations, Lanco would obtain substantial reappraisals after winning a contract. In 2007, after winning the bid for the 1000MW Anpara-C power plant, Lanco requested that the power output be re-negotiated. Some competing firms protested since the re-negotiation process made the initial bidding meaningless. However, Lanco managed to retain the Anpara project."
In a similar bid for power plants in Uttar Pradesh, Lanco's bid was initially accepted, but after they asked for an increase in the power selling rate, fresh bids were sought and Reliance Energy went on to bag the contract.
"In 2007, it was revealed that the company had also been the beneficiary of a number of multi-crore insurance 're-appraisals', which are required by many contracts. The scam involved government owned insurance companies," Wikipedia says.
There were also charges of forgery against Lanco, when New India Assurance claimed that the policy number 610200/44/08/03/60000027 of Rs1.89 crore, submitted to the housing ministry, had not been issued by it.
By July 2013, the company had filed for corporate debt restructuring (CDR), citing a business slowdown. Nomura had kept its rating and valuation (target price) on Lanco 'suspended' as it says the company is in the process of restructuring the debt on its standalone balance sheet, by way of reference to the CDR Cell.
"Group net debt-to-equity, including working capital loans of power SPVs and Griffin Coal acquisition debt, stood at12.7x as of December 2013 compared with 10.7x as of September 2013. Receivables from state discoms stood at Rs2,770 crore as of December 2013 compared with Rs2,940 crore as on September 2013, as impasse on tariff-related issues continued; the decline in receivables was largely on the back of recovery of Rs160 crore from Uttar Pradesh," Nomura said.
Coming back to Rajagopal, he has been most vocal opponent of Telangana. Last year, he even resigned from the Lok Sabha. However, Lok Sabha speaker Meira Kumar rejected the resignation of Rajagopal and 12 other MPs in October 2013. Rajagopal then approached the Delhi High Court seeking direction for the Lok Sabha speaker to accept his resignation.