HDFC Bank is targeting non-resident Indians (NRIs) with a fixed income product, exposing them to foreign currency fluctuations. If a customer loses money, he has to be blamed, of course, for falling for this hard-sell from his 'trusted' banker
Rupeemax is a product that HDFC Bank is targeting at non-resident Indians (NRIs) with the tagline “Earn better returns on your NRE Deposits: 12%.” A breathless email message, seeking appointments with well-heeled NRIs, draws attention “to a very interesting opportunity in the NR FD space.” The marketing pitch says: NRE FDs have earned 8.75% compounding quarterly over a 5-year period giving a tax free, repatriable interest of 10.83% over that period. For that same period, HDFC Banks claims, “we can enhance the rate from 8.75% to 9.5%, which with the compounding effect can deliver an annual yield of 11.9% to12.10% as against 10.83%.” The ‘key concern’ is a 5-year lock-in to maturity. The official goes on: “I believe this is an excellent opportunity and is short lived as this enhanced yield is a function of cross currency movements, which currently are in favor.!!!!!!!!!!!!! Also the interest rates are expected to head downwards in the near future wherein this makes a lot of sense.”
Dr KC Chakrabarty, deputy governor RBI, tells customers to be wary of higher returns offered by banks. The global consultant who received this was certainly sceptical and checked with a fund manager who, in turn, sent it to Moneylife with this comment: “Is this real or is HDFC Bank pulling a 3-card trick?” A simple reading of the email suggests it is pitching a fixed deposit with a 5-year lock-in. We asked the Bank if the email was genuine.
A response from HDFC Bank’s NRI team underscores the dangerous toxicity of the product. It says the product is built on the fact that RBI guidelines allow NRIs to “hedge their FCNR and NRE deposits.” It assumes that “NRIs are normally sophisticated investors with knowledge of cross currency risk. They compare the interest rates offered on FCNR and NRE deposits and other similar investments available across different geographies. Depending on the interest rates available on these deposits and forward premia prevailing at the time, NRIs tend to invest in FCNR deposits and sell foreign currency in the forward leg (with the maturity proceeds) thereby earning a better rate than on NRE deposit. Conversely, NRIs may tend to invest in NRE deposits and buy foreign currency in the forward leg (using the maturity proceeds) thereby earning a better rate than on FCNR deposit. These are, of course, permissible transactions in accordance with the above quoted provisions of law.”
Really? Most of our NRI friends and relatives, even in the finance industry don’t have a fraction of the base sophistication that HDFC Bank is assuming. Worse, it is pitched at people whose money is safely in tax-free NRE fixed deposits. HDFC Bank goes on to explain that “the rate of 12% quoted in the mail was indeed the maximum rate that a client could have earned by investing in this product yesterday. This yield was available by booking a 5-year Japanese Yen FCNR deposit and selling the Yen maturity proceeds in the forward leg. The risk factors and other aspects that need to be known by clients are shown in the emailer.” Is the vague line about the yield being a “function of cross currency movements” which are “currently in our favour” an indicator of product risk? In fact, the only risk flagged by the email is the 5-year lock-in, which skilfully suggests that the higher return is the reward for locking in his money for five years. There is no indication that a 12% return is not guaranteed. If a customer loses money, he has to be blamed, of course, for falling for this hard-sell from his trusted banker. Will RBI put in place any mechanism to check such blatant mis-selling of even fixed-income products? Globally, regulators are moving away from the principle of caveat emptor, which had left savers to the mercy of snake-oil salesmen in bankers’ garb. When will RBI start thinking along these lines and put in place a mechanism to report such products?
BluFin's Consumer Confidence Index (CCI) rose to 41.4 points in May, an increase of 3.4 points since the beginning of the year, due to improved spending behaviour coupled with easing inflation
Indian consumers' confidence level rose in the month of May on the back of to improved spending behaviour coupled with easing inflation, a study by financial services provider BluFin revealed.
BluFin's Consumer Confidence Index (CCI) rose to 41.4 points in May, an increase of 3.4 points since the beginning of the year.
The index is a key ‘aggregate’ indicator that assesses the pulse of urban Indian consumers with regard to the economy, spending behaviour and employment. The index reflects pessimism at below 50 score and optimism above that.
The two key components of the CCI indicated improvement in the consumer sentiment.
A sub index, which rates inflation sentiment, rose from 23.9 points in January to 26.8 points in May, while the spending sentiment improved from 28.3 points to 30.5 points in the same period.
However, pessimistic views on employment continue to be a small drag on the consumer confidence index. The employment sentiment declined to 50.2 points in May from 51.4 points at the beginning of the year.
Nonetheless, the score itself is encouraging as it is above the benchmark level of 50.
Another sub-index, which measures future expectations, was at 40 points, indicating consumers were still pessimistic about the economy's prospects. However, consumers were more comfortable about their present situation with a score of 46.
In terms of region, consumer confidence in North India registered a rise of about two points to 39 points in May, after a steady decline since January 2013.
“North Indian consumers, who have been the most sensitive to economic vagaries in the recent past, have been showing increased propensity to spend. This makes the North India numbers a lead indicator of an impending turnaround in overall consumer sentiment in India,” BluFin CEO Rashid Bilimoria said.
“A key driver for this improvement is declining pessimism about inflation among consumers leading to a rising expectation of a rate cut,” he added.
The survey has shown consumers in the eastern region of India to be the most pessimistic while those in the southern states to be the most optimistic, with cities such as Bangalore generally scoring above the benchmark level of 50.
The index is based on nation-wide monthly surveys of 4,000 respondents across 18 cities conducted by custom market research company TNS.
The recent leaks have shed light on one of the darkest corners of the U.S. government -- but when it comes to mass surveillance practices, clarity remains elusive
Last week saw revelations that the FBI and the National Security Agency have been collecting Americans’ phone records en masse and that the agencies have access to data from nine tech companies.
But secrecy around the programs has meant even basic questions are still unanswered. Here’s what we still don’t know:
Has the NSA been collecting all Americans’ phone records, and for how long?
It’s not entirely clear.
The Guardian published a court order that directed a Verizon subsidiary to turn over phone metadata -- the time and duration of calls, as well as phone numbers and location data -- to the NSA “on an ongoing daily basis” for a three-month period. Citing unnamed sources, the Wall Street Journal reported the program also covers AT&T and Sprint and that it covers the majority of Americans. And Director of National Intelligence James Clapper himself acknowledged that the “collection” is “broad in scope.”
How long has the dragnet has existed? At least seven years, and maybe going back to 2001.
Senate Intelligence Committee chair Dianne Feinstein, D-Calif., and vice chair Saxby Chambliss, R-Ga., said last week that the NSA has been collecting the records going back to 2006. That’s the same year that USA Today revealed a similar-sounding mass collection of metadata, which the paper said had been taking place since 2001. The relationship between the program we got a glimpse of in the Verizon order and the one revealed by USA Today in 2006 is still not clear: USA Today described a program not authorized by warrants. The program detailed last week does have court approval.
What surveillance powers does the government believe it has under the Patriot Act?
The Verizon court order relies on Section 215 of the Patriot Act. That provision allows the FBI to ask the Foreign Intelligence Surveillance Court for a secret order requiring companies, like Verizon, to produce records – “any tangible things” – as part of a “foreign intelligence” or terrorism investigation. As with any law, exactly what the wording means is a matter for courts to decide. But the Foreign Intelligence Surveillance Court’s interpretation of Section 215 is secret.
As Harvard Law Professor Noah Feldman recently wrote, the details of that interpretation matter a lot: “Read narrowly, this language might require that information requested be shown to be important or necessary to the investigation. Read widely, it would include essentially anything even slightly relevant — which is to say, everything.”
In the case of the Verizon order -- signed by a judge who sits on the secret court and requiring the company to hand over “all call detail records" -- it appears that the court is allowing a broad interpretation of the Patriot Act. But we still don’t know the specifics.
Has the NSA’s massive collection of metadata thwarted any terrorist attacks?
It depends which senator you ask. And evidence that would help settle the matter is, yes, classified.
Sen. Mark Udall, D-Colo., told CNN on Sunday, “It's unclear to me that we've developed any intelligence through the metadata program that's led to the disruption of plots that we could [not] have developed through other data and other intelligence.”
He said he could not elaborate on his case “without further declassification.”
Sen. Feinstein told ABC that the collection of phone records described in the Verizon order had been “used” in the case of would-be New York subway bomber Najibullah Zazi. Later in the interview, Feinstein said she couldn’t disclose more because the information is classified. (It’s worth noting that there’s also evidence that old-fashioned police work helped solve the Zazi case — and that other reports suggest the Prism program, not the phone records, helped solve the case.)
How much information, and from whom, is the government sweeping up through Prism?
It’s not clear.
Intelligence director Clapper said in his declassified description that the government can’t get information using Prism unless there is an “appropriate, and documented, foreign intelligence purpose for the acquisition (such as for the prevention of terrorism, hostile cyber activities, or nuclear proliferation) and the foreign target is reasonably believed to be outside the United States.”
One thing we don’t know is how the government determines who is a “foreign target.” The Washington Post reported that NSA analysts use “search terms” to try to achieve “51 percent confidence” in a target’s “foreignness.” How do they do that? Unclear.
We’ve also never seen a court order related to Prism -- they are secret -- so we don’t know how broad they are. The Post reported that the court orders can be sweeping, and apply for up to a year. Though Google has maintained it has not "received blanket orders of the kind being discussed in the media."
So, how does Prism work?
In his statement Saturday, Clapper described Prism as a computer system that allows the government to collect “foreign intelligence information from electronic communication service providers under court supervision.”
That much seems clear. But the exact role of the tech companies is still murky.
Relying on a leaked PowerPoint presentation, the Washington Post originally described Prism as an FBI and NSA program to tap “directly into the central servers” of nine tech companies including Google and Facebook. Some of the companies denied giving the government “direct access” to their servers. In a later story, published Saturday, the newspaper cited unnamed intelligence sources saying that the description from the PowerPoint was technically inaccurate.
The Post quotes a classified NSA report saying that Prism allows “collection managers [to send] content tasking instructions directly to equipment installed at company-controlled locations,” not the company servers themselves. So what does any of that mean? We don't know.
For more on mass surveillance in America, read our timeline of loosening laws and practices.