Canara Bank sanctioned education loan of Rs15 lakh and after the borrower completed his course, told him that it can sanction only Rs10 lakh. The borrower was made to pay interest on Rs5 lakh as the Bank termed it as overdraft
A general perception is that a public sector unit (PSU) bank would work by the book and would be less aggressive in penalising its good, regular customer. However Canara Bank in Mumbai has done just the opposite by blatantly charging clean overdraft rate of interest on an education loan. All this due to the mistake of the sanctioning authority.
On 9 April 2009, Canara Bank sanctioned an Education loan of Rs15 lakh to Parag Punjwani for pursuing post-graduate (PG) programme in management at International School of Business (ISB), Hyderabad. Full disbursal of the loan was done and Parag completed the course in April 2010.
Suddenly in June 2010, the Bank informed him that a loan of Rs15 lakh was not possible as the ceiling for education loan to study in India is only Rs10 lakh. The Bank then applied an interest rate of 9.75% for Rs10 lakh as education loan and 14.75% (applicable to over-draft facility) for the remaining Rs5 lakh of the sanctioned loan amount.
Over the next three years endless letters, requests, pleas and follow-ups with the bank by Parag continued, without any success.
This looks like a clear case of error on part of the Bank official/s that sanctioned the education loan or Rs15 lakh without knowing if there could be any ceiling limit.
If Parag was told of this limit at the outset, he would have arranged for the shortfall from other sources. But as a result of this mistake, he was being penalised and forced to pay excess interest at the rate of 5% on outstanding amount of over Rs10 lakh. All this while, he was paying regularly his equated monthly instalments (EMIs) without any delays or disruption.
Finally, in April 2013, out of frustration on the issue being dragged on for so long, Parag filed a formal complaint before the Bank's Complaint redressal cell and later to the Banking Ombudsman.
Thereafter, the Bank agreed to refund all excess interest. Parag received this message over a telephone call from the Bank's Head Office (HO). Nothing in writing was issued either by the HO or by the Bank. The branch (from where Parag borrowed the money) said that it would refund Rs31,960 which was due as per their calculations. However the actual refunds were in excess of Rs80,000.
In the last week of July 2013, Parag was asked (by the Bank) to submit detailed calculations of the refund amount. He informed the bank that the excess amount deducted was Rs80,696. In August 2013, the amount of Rs80,696 was refunded into the loan account of Parag. It was a huge relief to the customer who felt harassed and victimised for no fault of his. Only his conviction saw him through this trauma and he was able to take on the might and muscle power of a large PSU bank.
There are a few issues, which can be highlighted and learnt from this incident:
1) Customers should read all communication from the bank carefully. Do not tear away/ destroy communications before reading through. It could be levy of extra charges or hike in interest rates.
2) Do not believe that the Bank deals with numbers and is fully automated, so will be always correct. Empower yourself with the knowledge of basic banking rules, interest calculation methods, look for extra debits of charges in the account statement and do not hesitate to ask for explanation from your Banker.
3) While taking up a controversial issue with your Banker, do not continue talking to them on phone or meeting them. Create a trail by way of letters and emails, which will come in handy at a later date. Even after a meeting, drop them an email mentioning the face-to-face discussions held.
4) The last resort help is by way of Consumer Redressal Forums and Banking Ombudsman. They have certain processes and time frames, which need to be followed. It would be helpful to know such details and abide by them, when writing to such authorities.
5) Give wide publicity to such incidents so that more people are aware of how Banks and Financial Institutions fleece innocent customers - sometimes to line their own pockets and sometimes to save their own skin.
Nifty has gone above the first of three short-term indicators we track. It has to close above today’s high for the upmove to continue
Today the indices opened in the positive and edged higher each time after a minor dip – until a selloff in the end. The market was expected to be volatile on account of the expiry of the futures and options contract. The National Stock Exchange (NSE) recorded a volume of 87.05 crore shares, among the highest on an expiry day.
The Sensex and the Nifty opened with a gap up at 18,074 and 5,317 respectively. Soon they hit their respective lows. The Sensex hit a higher low of 18,071 while the Nifty hit a higher low of 5,303. Towards the end of the session the indices sold off sharply. The Sensex hit a high of 18,456 and closed at 18,401 (up 405 points or 2.25%) while the Nifty hit a high of 5,429 and closed at 5,409 (up 124 points or 2.35%).
Except for PSU Bank (down 0.46%) all the other indices closed in the positive. The top gainers were Infra (3.01%); Energy (2.97%); Finance (2.74%); Metal (2.71%) and Media (2.55%).
Of the 50 stocks on the Nifty, 38 ended in the green. The major gainers were Sesa Goa (12.83%); Hindalco (5.78%); HDFC (5.73%); Lupin (5.10%) and Kotak Mahindra Bank (4.92%). The major losers were Punjab National Bank (2.05%); UltraTech Cement (1.96%); Coal India (1.54%); Infosys (1.36%) and State Bank of India (1.06%).
The latest measure of Reserve Bank of India (RBI) to control the volatility in the currency market was taken on late Wednesday when the RBI decided to provide a special window with immediate effect under which the RBI will undertake sell/buy USD-INR forex swaps for fixed tenor with the oil marketing companies through a designated bank.
The partially convertible rupee was hovering at 67.655 against the dollar, sharply higher than its record close of 68.80/81 on Wednesday, 28 August 2013.
Prime Minister Manmohan Singh told parliament he was likely to make a statement on the economy on Friday when asked by MPs what steps were being considered on the rupee.
Global rating agency Moody's Investors Service today said that the Indian government's plan to provide cheap grains to the poor is credit negative and will bring more pressure on the government's weak finances. The measure is credit negative for the Indian government because it will raise government spending on food subsidies to about 1.2% of GDP per year from an estimated 0.8% currently, exacerbating the government's weak finances, Moody's said.
The land acquisition bill, which provides extra protection for landowners whose property is bought for industrial development, was introduced in Lok Sabha today, 29 August 2013. The bill proposes to establish new rules for compensation for land acquired for infrastructure projects and industry, a move seen as raising costs but potentially reducing protests that have plagued India's industrialization drive. The bill calls for taking the consent of 80% of land owners for acquiring land for private projects and of 70% landowners for public-private projects.
Except for Shanghai Composite (down 0.19%) all the other Asian indices ended in the green. Jakarta Composite was to top gainer (up 1.92%). Speculation that geopolitical tensions arising from a possible US-led military strike against Syria may also lead the Fed to hold off the reduction in stimulus aided gains in Asian stocks.
Market now looks ahead for the US economic data that will reinforce the case for the Federal Reserve to slow stimulus. Data awaited is of US gross domestic product for the second quarter and that of US initial jobless claims.
Brazil's central bank on Wednesday raised its key lending rate by a half percentage point, reinforcing a commitment to curb worrisome inflation despite parallel concerns over the pace of economic growth. US indices ended in the positive on Wednesday and opened positive today. European indices were trading in the positive.
Global funds that put your money in other countries don’t necessarily offer much diversification
Axis Mutual Fund plans to launch another foreign fund of fund scheme— Axis Global Equity Alpha Fund. This scheme, like that of Axis Asian Opportunities Fund (Read: Axis Asian Opportunities Fund: Another global fund) would invest in a scheme of Schroders Plc. Schroders is a global investment company that manages around 580 funds globally with a total corpus of $388 billion. The scheme would invest 95%-100% of its assets in units of Schroder International Selection Fund Global Equity Alpha. The remaining part of the assets would be invested in debt or money market instruments. The target scheme was launched in July 2005 is one of the funds under the Schroder International Selection Fund. Under this scheme, at least two-thirds of the fund (excluding cash) will be invested in a concentrated range of shares of companies worldwide.
Schroder Alpha funds have a strategy to invest “in companies in which they have a high conviction that the current share price does not reflect the future prospects for that business. The fund will typically hold between 50 and 60 companies and has no bias to any particular industry or size of the company.”
As on 28th June 2013, over 50% of the assets have been invested in companies listed in America and around 20% is invested in companies listed in Europe. In terms of performance, the scheme has performed relatively well compared to its benchmark since inception and over the one-year and five-year periods. The top 10 holdings of the scheme includes: Microsoft, Roche Holding, Coco-Cola, Diageo and Occidental Petroleum. Idea Cellular is also one of the top 10 picks.
Long-term capital gains are tax-free for domestic equity mutual fund schemes. Investing in global funds will attract long-term capital gains which will be taxed at 20% with indexation and 10% without indexation.
Equities should be used to create long-term wealth. If an investor is looking to invest for the really long term, then, with the tax benefits included, investing in Indian equity schemes may be a better option than investing in global schemes. These schemes have made money recently because of rupee devaluation. Such gains may not last.
Sudhanshu Asthana, who has an experience of over 10 years, would be the fund manager of the scheme. The performance of the scheme would be benchmarked to MSCI AC Asia ex Japan Net TR index.
Read our earlier articles on global funds:
Other details of the scheme
Minimum Application Amount Rs5,000 and in multiples of Re. 1/- thereafter
Minimum Additional Purchase Amount Rs100 and in multiples of Re. 1/- thereafter
Entry Load: Not Applicable
3% if redeemed / switched - out up to 6 months from the date of allotment
2% if redeemed / switched - out after 6 months & up to 12 months from the date of allotment
1% if redeemed / switched - out after 12 months & up to 24 months from the date of allotment