This can happen to you—bank customers beware. Lack of financial literacy can cost you big time as reputed banks target the gullible with money to spare. PMS, insurance, loans are pushed by relationship managers to make a killing, at your cost!
HSBC Bank took Ms Suchitra Krishnamoorthi, a well-known singer and actor, for a ride over a five year period by promising an extravagant assured return of 24% from mutual funds as well as insurance. Each time the customer complained about losses in her account, the standard reply was that the relationship manager has been fired and that the bank will make up for the losses with judicious investments. Needless to say, the losses were never made good. The one-way road for the customer was downhill. If a well-known celebrity could be cheated with such impunity, it is surely happening routinely with others.
It is a case of systematic looting and exploitation of emotionally vulnerable who had got Rs3.6 crore as part of a settlement in September 2006. The money was supposed to be the means of livelihood for herself and for her daughter. The bank used confidential information about the hefty deposit in her savings account and began to market its toxic services to her. Since bankers are seen as trustworthy, she believed that her relationship manager was advising her correctly.
The modus operandi for HSBC in this case has been a combination of toxic churning of the portfolio management system (2% entry load on every purchase made by it on behalf of client), insurance products promising 24% returns, insisting her on taking a loan instead of withdrawing funds without even disclosing that the client was entitled for a smart loan.
The end result after five years was Rs83 lakh—direct loss from investment, Rs29 lakh in commission to HSBC, Rs8 lakh (50% of investment) lost from an insurance policy, Rs10 lakh (again, 50% of investment) valuation decline in insurance policy still in force, Rs4.5 lakh tax paid on redemption of short-term mutual funds (including Rs1.85 lakh penalty to the Income Tax department due to non-disclosure of gain by HSBC to the client) and Rs58 lakh interest on home loan earned by the bank.
When Suchitra wished to surrender her insurance policies, HSBC refused to act for her by contending that they no longer had any tie-up with Tata AIG and that it was not their business to get client’s money back that they had recommended in the first place.
Apart from the losses, the so-called customer service was pathetic after the relationship started getting sour. The bank was appallingly evasive and non cooperative even for basic requests such as furnishing of documents or revoking power of attorney for the investment portfolio. It took the bank four months and repeated requests to furnish inchoate standard forms that Suchitra had signed at the time of appointing HSBC as her portfolio manager. Moreover, the documentation was incomplete.
According to Suchitra, “It took my chartered accountant six months to authenticate the figures of losses—as not only was the HSBC team adept at covering its paper trail. They also very conveniently refused/evaded furnishing me the documents to which I am legally entitled for over a year—giving me one silly excuse after another like mismatch of signature/officers being on leave, etc.”
She adds, “While I was warned that the legal system in India is such that the matter will drag on forever probably causing me further expenditure and loss of peace of mind and reputation, I was determined to see this through. It is my moral responsibility and a warning to other vulnerable targets—small investors like me should not get conned by aggressive MBA's in suits who are preying on their customers like sharks in the big bad ocean. All the while getting richer and richer while making us small gold fish go bust.”
Last year Moneylife Foundation had conducted a seminar with Ravi Subramanian, banker and author of three well-known books like “If God Was a Banker”, “I Bought the Monk’s Ferrari” and “Devil in Pinstripes”. According to him, “Banks and relationship managers often indulge in cross-selling to earn more revenues and therefore, the customer has to be more careful while dealing with them. Bankers become ‘bhayankar’ when they fail to deliver what they have promised and try to hard-sell products on which they earn more money to the gullible customers. A customer can protect himself from falling into the hands of mercenary bankers by being alert, vigilant and at the same time doing due diligence.”
The ED is probing if the defence deals of Vectra chief generated any illegal funds that could have been subsequently laundered in other investment avenues.
New Delhi: A money laundering case has been registered against Vectra chief Ravinder Rishi and his firms by the Enforcement Directorate (ED) to probe alleged generation of illegal funds in the defence deal between Tatra Sipox UK and state-run Bharat Earth Movers Ltd (BEML), reports PTI.
The agency has registered the case after gathering initial details of the probe from the Central Bureau of Investigation (CBI) and other official channels and it is set to question few people including Mr Rishi in this regard.
The ED, according to sources, is probing if these defence deals and those involved in the execution of the agreements had 'off the book' or overpriced transactions leading to generation of illegal funds which could have been subsequently laundered in other investment avenues.
The CBI has earlier questioned Mr Rishi many times in connection with the alleged irregularities in the Tatra truck supply to the Army.
The ED has asked Mr Rishi to produce documents related to memorandum of understanding between Tatra Sipox UK and BEML which was inked in 1997 including the details of their financial statements and tax returns.
The Directorate will ask for similar documents from BEML and if need arises, from the Defence Ministry, the sources said.
The probe agencies, according to sources, have found out that it was in 1997 that Tatra Sipox UK signed the truck supply deal with BEML which was in alleged violation of defence procurement rules which say that procurement should be done directly from original equipment manufacturer only.
The first agreement for the supply for Tatra all terrain truck used for the transport of soldiers, heavy machinery, missile systems among others was signed with the Czechoslovakia-based company Tatra in 1986.
In 1997, BEML started procuring trucks through Tatra Sipox UK, claimed to be the marketing arm of Tatra, in which Ravinder Rishi had a substantial stake.
The CBI has alleged that since Tatra Sipox UK was not the original manufacturer of these all terrain trucks, the rule that defence procurements should be made from original manufacturer was violated.
However, the Nifty should restrain itself from closing below 5,185
A rout in IT and technology stocks following lower-than-expected fourth quarter results from Infosys and a negative opening of the European indices saw the market plunge in the post-noon session. Yesterday we had mentioned that there may be an upmove to the level of 5,450 if the Nifty manages to close above 5,360 in the coming sessions. We continue to maintain that trend, subject to the index restraining itself from closing below 5,185. The National Stock Exchange (NSE) saw a lower volume of 64.21 crore shares, which was below its 10 day moving average.
The indices managed to close trade marginally above the lows. The Nifty closed 69 points down at 5,207 and the Sensex finished at 17,095, a cut of 238 points from its previous close.
The market opened in the red, weighed down by the dismal guidance announced by IT bellwether Infosys for the first quarter of 2012-13 before the market opened. The Nifty resumed trade at 5277, down 21 points, and the Sensex opened 100 points lower at 17,233. Markets in Asia were up, tracking overnight gains in the US and Europe.
However, positive global cues soon led the indices into the green. Choppiness saw the market fluctuate near its previous close in the first hour of trade. Select buying gradually lifted the benchmarks to their intraday highs in late morning trade. At this point, the Nifty touched 5,307 and the Sensex went up to 17,398.
The market came of the highs and began a gradual southward journey in subsequent trade. The indices slipped into the red at around 1.30 pm, but intense selling pressure in IT and technology stocks and a negative opening of the key European markets saw the Nifty tanking 76 points and the Sensex tumbling 279 points at around 2.00pm. The Sensex touched its intraday low around the same time with the index sliding to 17,027. The Nifty continued its decline and touched 5,185 at the low point of the day.
Meanwhile, the market regulator Securities and Exchange Board of India (SEBI) today asked private companies and PSU to hike their public holding to 25% by August 2013.
The advance-decline ratio on the NSE was negative at 504:930.
Among the broader markets, the BSE Mid-cap index declined 0.72% and the BSE Small-cap index settled 0.63% down.
The sectoral gainers were BSE Healthcare (up 1.03%); BSE Fast Moving Consumer Goods (up 0.59%); BSE Oil & Gas (up 0.51%) and BSE Auto (up 0.45%). BSE IT (down 8.76%) led the losers’ pack. It was followed by BSE TECk (down 6.90%); BSE Realty (down 0.93%); BSE Bankex (down 0.80%) and BSE Capital Goods (down 0.55%).
Sun Pharma (up 2.54%); Coal India, Hero MotoCorp (up 1.52% each); Tata Motors (up 1.33%) and Reliance Industries (up 1.12%) were the top Sensex gainers. Infosys (down 12.61%); TCS (down 5.47%); Wipro (down 4.10%); Hindalco Industries (down 2.58%) and Jindal Steel (down 2.43%) were the top losers on the index.
The Nifty gainers were Dr Reddy’s Laboratories (up 2.36%); Kotak Mahindra Bank (up 2.30%); Sun Pharma (up 2.13%); Coal India and Grasim (up1.65% each). The key losers were Infosys (down 12.82%); TCS (down 5.89%); Wipro (down 4.35%); HCL Technologies (down 3.83%) and Jindal Steel (down 3.41%).
Markets in Asia settled higher brushing aside China’s slower-than-expected first quarter growth and the failed rocked launch by North Korea. China’s gross domestic product expanded 8.1% from a year earlier, the slowest in nearly three years, after an 8.9% gain in the previous quarter.
The Shanghai Composite rose 0.35%; the Hang Seng surged 1.84%; the Jakarta Composite gained 0.48%; the KLSE Composite added 0.12%; the Nikkei 225 climbed 1.19%; the Straits Times advanced 0.33%; the Seoul Composite was up 1.12% and Taiwan Weighted settled 1.64% higher. At the time of writing, the key European indices were down between 0.39% to 0.77% and the US stocks futures were trading in the negative.
Back home, foreign institutional investors were net buyers of shares totalling Rs135.98 crore on Thursday and domestic institutional investors were net buyers of equities amounting to Rs237.40 crore.
IDBI Bank plans to mop-up to $1 billion in 2012-13 from the overseas markets through syndicated loans and by issuing bonds. In the just-concluded fiscal, the lender had raised around $720 million. The resources so raised will be given as loans to Indian companies with overseas expansion plans. The stock tumbled 2.32% to close at Rs105.25 on the NSE.
State Bank of Travancore (SBT), part of the SBI group, is mulling a foray into the gold bullion trade by diversifying its products and services. At present it is expanding its branch network across Kerala and other metro cities by adding more than 100 branches, including NRI-specific centres, over the next 12 months. The bank aims a branch network of more than 1,000 units. The stock rose 0.27% to close at Rs571.45 on the NSE.
eClerx Services has signed a definitive agreement to acquire 100% of Agilyst Inc, a closely held US-based KPO company, through its overseas subsidiary eClerx Investments. Post-acquisition, Agilyst will operate as a fully-owned subsidiary of eClerx while Agilyst’s management team will continue to manage day-to-day operations. The stock fell by 0.26% to close at Rs730 on the NSE.