Indian stocks to open on a cautious note: Monday Market Preview

Concerns about the RBI raising interest rates to rein in prices weigh on the sentiments

The domestic market is likely to open on a cautious note as the possibility of the Reserve Bank of India (RBI) raising rates once again on Tuesday weigh on investor sentiments. Besides, heavyweights like Reliance Industries, Sterlite Industries, HCL Technologies, among others will announce their quarterly earning numbers today, giving further direction to the market.

On the global front, markets in the US finished mixed on Friday as policymakers are yet to hammer a deal to increase the debt ceiling as the 2nd August deadline approaches. Tracking the debt issues in the US, the Asian pack was trading lower in early trade on Monday. The SGX Nifty was down 26.50 points at 5,615 compared to its previous close of 5,641.50.

The market closed with gains of 1% last week, mainly on some good corporate earnings and on the resolution of the debt problem in Greece, after European leaders approved a second bailout package for the debt-stricken country on Thursday.

Debt problems on both sides of the Atlantic pulled the market lower on Monday. But the global debt issues did not deter investors from pumping in funds into Indian stocks, leading to a higher close on Tuesday. Comments from finance minister Pranab Mukherjee that inflation would remain high till December and weak results from IT major Wipro led to a sharp fall on Wednesday.

Concerns that the RBI may hike rates again at its policy review meeting next week and a mixed bag of corporate results, kept the indices in the red for a second consecutive day on Thursday. But the market bounced back on Friday, recovering from the losses of the previous two days.

Overall, the Sensex gained 160 points to close the week at 18,722, and the Nifty finished 53 points higher at 5,634. The market is set on a northward journey with the Nifty likely to go up to 5,700.

The US markets closed mixed on Friday, as concerns loomed over the deadlock on raising the US borrowing limit. Concerns that the US debt ceiling won't be raised before the deadline kept sentiments low, Traders kept close watch on negotiations in Washington over a deal to raise the nation’s debt ceiling ahead of a 2nd August deadline. The impasse has overshadowed the 17 Eurozone governments and the International Monetary Fund 109 billion euros aid package agreed for Greece which sent an optimistic signal across markets across the world.

The Dow declined 43.25 points (0.34%) to 12,681.16. The S&P 500 added 1.22 points (0.09%) to 1,345.02 and the Nasdaq rose 24.40 points (0.86%) to 2,858.83.

Markets in Asia were trailing in early trade on Monday as the impasse among US policymakers to raise the country’s debt ceiling ahead of the 2nd August deadline was seen as hurting the export-driven region. Japan-based Komatsu, the world's second-largest construction machinery maker, fell 2.2% after its US rival Caterpillar disappointed the markets with second-quarter earnings on Friday, sending its shares down nearly 6%. Korean steelmaker Posco fell 1.5% after the world's No.3 steelmaker on Friday warned of weakening demand growth and persistently high input costs in the second half.

The Shanghai Composite and the Hang Seng declined 0.60% each, the Jakarta Composite fell 0.59%, the KLSE Composite slipped 0.25%, the Nikkei 225 fell 0.63%, the Straits Times tanked 0.86%, the Seoul Composite slid 0.67% and the Taiwan Weighted lost 0.67% in early trade.

Back home, the industry ministry is looking at revising the Wholesale Price Index (WPI) base year to 2010-11 for computation of inflation index with a view to present more realistic picture of the price situation.

The government, in September 2010, changed the base year for calculating WPI from 1993-94 to 2004-05 to give a better indication of changes in prices of commodities.

The move to revise WPI data would help in narrowing the gap between the provisional and final data and provide more updated inputs necessary for formulation of policies.



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5 years ago

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Your EPFO savings could be at risk, unless you secure some important aspects yourself

The attitude towards employees, who actually go to an EPFO office, or try to communicate with them directly, is ‘here is somebody who wants his money, how dare he. Let us do as much as we can to trouble him or her, or the nominees, and meanwhile make merry.’ Can the EPFO be trusted completely?

Here's a question that can be answered with both 'true' and 'false', and both answers will be correct. "Do you think that one of the best savings options available in the country for the salaried class is the Employees' Provident Fund Organisation (EPFO) scheme?"

True: Hardly anything else gives you tax exemption at all three stages of investment, interest earned and withdrawal. The rate of interest, currently at 9.5%, is among the highest guaranteed interest rates, in this case with the backing and security of the Government of India. There is no upper limit on investment and you can make your employer match your contribution up to 12.5% of your total salary if you choose to. And finally, there appears to be a high level of computerisation and online resources, or at least a promise of the same.

False: Between the employers and the EPFO, they will try to keep the company's contribution to a minimum, by all sorts of tricks and false advice. The accounts are a mess. Interest calculation is skewed against us, the constituents/employees. Computerisation is still a distant promise. The online facilities are terribly complicated. And most of all, the EPFO is one government department which appears to be involved in all sorts of fraud, a new one every day, and from all sections and segments of society. And the pension part is totally unprotected for inflation.
A few weeks ago I received information about a case where somebody had just received an EPFO slip for the FY2008-2009 that said, "DOB/DOJ is not available, please furnish the information through your employer." Since this person is now no longer working with the employer in question, he made some enquiries on his own and discovered that not only had the data for his date of birth and date of joining gone missing, but there was also some confusion and lack of data regarding his address, the spelling of his parent's name and worst of all, a total error in the spelling of the name of the nominee.

In addition, he was told verbally that since he had not come forward to correct the errors within six months of the date mentioned in the slip, which expired end-September 2009, it was assumed that the data was correct, and to change it now he would have to perform a vast variety of documentation-related activities, as well as probably genuflect multiple times at the subject EPFO office.
Please note, the slip for 2008-2009 was received by him from his ex-company in July 2011, which delay could have also been due to complicity between the company and the EPFO office, so there was no way this person could have even known that his personal details had suddenly gone adrift, after all these years. And the typical approach towards employees who actually go to an EPFO office, or try to communicate with them directly, is worse than in any other government or private telecom office you can think of. The attitude is that "Here is somebody who wants his money, how dare he, let us do as much as we can to trouble him or her, or the nominees, and meanwhile make merry." If s/he wants his/her money, then we will make them beg for it, is the message that comes out from behind all those citizen's charters.

Luckily there are options, in this day and age of the Right to Information Act, 2005, as well as the simple fact that the EPFO head office in Bhikaji Cama Place, New Delhi, is certainly effective in motivating correctives. But how many people use these routes? Most of them end up falling in neat traps set for them at the local EPFO offices, with the wide assortment of agents and touts who appear to flourish in that eco-system, and then get sucked into the spiral of corruption and fraud surrounding many of the EPFO offices.

So, step one is to write to your employer, or ex-employer, or the specific employer in whose name and number your personal EPFO account operates, and ask them for the following specific details:

# The latest EPFO amount in your account as applicable on 31st of March of the latest year as per their calculations.
# The latest EPFO slip if received from the EPFO, and if not received, then copies of correspondence pertaining to this delay. (By now you should have received the slips for FY 2010-2011 for amounts as of 31st March 2011.)
# Copies of personal data, nomination, DOB, DOJ and other details as filed by the company with the EPFO.
# Copies of latest Form 12A, Form 5, Form 10 and copies of challans as filed by the company with the EPFO going back to your DOJ.
# Copies of any pending investigations or queries that the EPFO has with the company.
# Copies of details of authorised signatories that the company has, and has had in the past with the EPFO.
Mark a copy of this letter to the relevant EPFO office that your account is in, by email as well as by registered post, and email a copy to the EPFO head office in New Delhi also. All contact details are available at their websites:;

Here it is important to point out that in all likelihood, unless the employer has a very pro-active and employee-friendly HR and accounts/F&A group, then you are not likely to receive most of this information, which is yours by right. The reality is that most companies depend on their EPFO agents, who depend on making the whole system as opaque as possible, and that there is always reason to believe that the HR/F&A/accounts people like it that way. Maybe it gives them power; maybe it is also true that frauds at EPFO simply cannot happen without participation of employers; maybe some other reason. {break}
We come to the second step, because, remember, this whole "game" of messing with your personal data is not being done because somebody loves you a lot. It is just another root for a variety of possible scams, since most of us do not double-check this data, till it is either too late, or till we cannot. In step two, we assume a little bit of familiarity with the RTI Act, and if you don't have that, then there is no dearth of organisations all over the country, as well as online, who will help you draft a simple RTI application and send it to the EPFO offices.
In this RTI application you are basically asking the EPFO for the same information as you have already asked your employers for, that is listed above, but in addition you will also want to ask the EPFO for some extra information. Like,
# Information on any existing frauds or investigations in the EPFO office relevant to your account.
# Information on any and all correspondence between the EPFO office and the company.
And two additional queries, which are important, too:
# If any of the above said statutory records are not available, the complete details of how it was destroyed/weeded out in each case.
# Electronic access to the catalogue (or catalogues) of all records of your public authority duly indexed in a manner and the form to facilitate right to information, either over the computer networks, or in the form of a diskette, or other electronic media at the prescribed fees.
Please note, while you are not obliged to send a copy of this RTI application to your employer, it helps if you do so, since, on receiving it, they will hopefully take on a very grieved and hurt approach, and then run around really fast to fulfil all compliances at their end, and respond to the first letter you wrote to them  that they probably ignored till then.

The third step gets slightly complicated and will require the help of somebody who works in a bank, or is an accountant who knows how to calculate to the finest details possible the tricky business of compound interest on increasing balances. By this stage, presumably, you will have received a lot of paper and slips with present balances, carry-forward balances from previous years, interest earned, company contributions, deductions by EPFO for service charges and for pension, and other details.

The most important piece of information here is that which tells you how much the company deposited on your behalf as your share, and the company's contribution. All these will be in formats that make mobile phone bills look like nursery primers, I have a few and have never been able to understand them , though my CA friends get their trainees to work on them and produce simple few line statements of flaws which show how the interest has been mis-calculated. Especially since the balance in your account was increasing month on month.

And with this information on hand, you approach the EPFO office again; by now they know that you are a practitioner of the RTI Act and will hopefully be treating you with a lot more respect and caution.

The question to the EPFO now is, 'What was the relevant date that the EPFO took to calculate the interest?' And you as an employee are not responsible for your employer defaulting or delaying in a choice of many ways; getting those defaults and penalties from the employer is the EPFO office's business, not yours.
To complicate issues even more, the EPFO office often chooses to take into account what date the company deposited the money in the bank, what date the money came into the EPFO coffers, and most unfairly, what date the money started reflecting in that specific branch account. The local EPFO office will then take all these factors in a way that gives them (and the employer) the maximum benefit, and you bear the loss. There have been cases where interest is simply not applied on the pending sums for months, or the increased balances are not reflected, thereby resulting in reduced interest earnings.
In actual fact, the EPFO is supposed to calculate interest for the increased amount on a monthly basis, on the 1st of the month it was due for, even if there were any defaults or delays by the employer or in transit. As far as the employee is concerned, the EPFO deductions and company contributions were made in their salary slip on the last date of the month, and need to be reflected as with EPFO on the 1st of the month, that is, the next day. All losses incurred by the EPFO due to default or delay by the employer are supposed to be collected from the employer, with penalties.

You now have to take these calculations, set them off against the details gathered above, and demand that the EPFO corrects their records in your case accordingly. And if you have got so far, then do your friends, colleagues, fellow employees and ex-employees a favour, and demand that the EPFO correct the interest calculations for them, too, along the same lines.
This, however, is only as far as your main component of EPFO is concerned. There are a few more elements, which shall be addressed in subsequent articles, like,
# Pension under the EPFO scheme.
# Lower or no contribution to EPFO by your employer.

Do feel free to write for more guidance on these aspects, if necessary, at [email protected].



Govindaraju Adabala

6 months ago

Good morning sir my pf account Date of joining is rong please telme correction process
thanking you sir


5 years ago

EPFO is headed by an IAS and manned by govt. servants who claim that they can do whatever they want as their topmost boss is above the law. All political parties in India, all union ministers, all CMs, all leaders have accepted that it is not possible to annoy the bureaucracy and hence none in govt. service is bothered about the CVC or the CBI. Everything in Indian government is purchasable. Hence, it is no use writing about EPFO. The organisation lives by corruption. One does not get to the top just by remaining honest. In fact, in India, honesty and integrity in govt. service are positive disqualifications and this can be empirically proved inter alia by the history of the bureaucrats selected by all governments for all jobs everyehere in every respect of statecraft. The EPFO beneficiaries must suffer at the hands of the organisation and the head of EPFO does not care.



In Reply to CJyoti 5 years ago

Dear C Jyoti ji, thank you for writing in. Humbly submitted, but I disagree with your view, and suggest you try a few RTI Applications directly to the Head Office of EPFO and see the results.

There is a change in India, it takes time for this change, but it will happen. However, we have to make some effort too, and for that may i request you to please try along the lines I have written?

Thanks and rgds/VM


5 years ago




In Reply to nn 5 years ago

PPF is already available for online viewing through your Bank's website. My PPF acct is with SBI & is linked to my Savings account. I can do online txfer to my PPF acct from my Savings account. Have never visited SBI for PPF passbook updation in last 5 yrs as It is always available online :)

R Nandy

5 years ago

This is a very timely article.
I can also some other accounting discrepencies which are effected due to ommission and commision
of EFP clerks.

(1) Even after receiving the transferred amount for other PF trusts or EPFO all the ledgers are not update due to which effectively an accounting discrepency is created and money doesen't get reflected in the recepients
account nor is interest accrued.In my case money received by Bangalore EPFO in 2007-8 is not yet reflected in my account.I had filed a grievance and they falsely closed the report that
money is credited in account in 08-09 .I have further fileda grievance with account slip of 08-09 stating that no money is received as claimed by them.

I have also visited their EFF office and did inspection of the account
records. For many people in our organisation the transferred monies from pevious years are not added to their accounts.This was admitted by our company EPF agent.

It seems they are reluctant to update account rcords and do it only once a
years during Aug-Sept during statement generation.

(2) The EPFO has also decided to stop giving interest for money for dormant account more than 3 years old. I am not sure how the trustees agreed to this.This will defraud
lacks of poor people of their retirement savings as the procedure of EPFO is so cubersome that many people cant get the money transferred. They should have rather rolled out
the unique EPF number and then initiated this measure to expediate the transfer all dormant accounts to the unique account number.

(3)I am not sure if money is safe in the hands of the EPF.A major scam is waiting to happen as there is complete lack of transperancy.

(4)The newly rolled out registration of mobile number for balance doese'nt work for me or my colleagues.This is guess is also another eyewash by the EPFO for the ministers and the public.

(5)RTI seems to be the most effective step as it seems even the company EFP agent is also in a helpless situation to provide details.I also feel the EPF clerks are indulging in rent
seeking after a discussion with one of their clerks.

R Nandy



In Reply to R Nandy 5 years ago

Dear Nandy ji, thank you for writing in.

You are correct, EPFO accounts appear to be a scam waiting to explode, but hopefully correctives are being applied. I did meet some senior EPFO people at their HO, and their point of view was that over-dependence by companies as well as members/employees on agents meant that they received hardly any direct feedback, and that they encouraged the same direct to HO.

Updating of ledgers, crediting of amounts, calculation of interest, all this and more is all very opaque, and the person at the bottom of the chain, the employee, seems to get the worst end of the stick. Which is why many people who know about EPFO call it a "tax", implying that it is money that will never come back - or even if it does, it will be diluted.

Please file RTIs on the subject, they were never easier.

best regards/VM

Establish standards for MFI independent directors as first step to ensure good corporate governance

The RBI and the Union Finance Ministry must provide clear guidelines on the appointment, roles, compensation and evaluation of independent directors for microfinance companies, critical for effective and ethical operations

As the Reserve Bank of India (RBI) and the Union Ministry of Finance (MoF) work hard on building a clear regulatory architecture for microfinance, they would do well to remember that an important cog in the whole scheme of things is to ensure good corporate governance on the ground. There can be no compromise on that as much of the Andhra Pradesh and Indian microfinance crisis of 2010 can be traced to poor implementation of (existingi) corporate governance standards in MFIs. It goes without saying that 'independent directors' are indeed critical in real time for implementation of any such corporate governance standards in practice. Therefore, the RBI and Ministry of Finance, as part of their mandate to create a permanent regulatory architecture for microfinance, must provide clear (supervisable) guidelines with regard to appointment, roles, compensation and evaluation of independent directors, so that corporate governance in MFIs does not exist merely on paper.

The various specific issues that would have to be looked into by the RBI and MoF, in this regard, are highlighted below.

Practice of CEO hiring board/independent directors in many MFIs

First, in many MFIs, the promoter who is (often) also the CEO, hires the board and this practice needs to be questioned from the perspective of implementing corporate governance directives on the ground. The key questions are: How can boards hired by the promoter/CEO of an MFI be really independent? How will they perform the roles that they are supposed to, to safeguard the interests of various stakeholders including minority shareholders?

Criteria for being an independent director

Second, there is a lack of clear-cut eligibility requirement for independent directors—in terms of objective criteria such as age, expertise and experience (especially related to microfinance) as well as having had past relationships with the same MFI (which can result in significant conflicts of interest). And it goes without saying that the task of identifying independent directors (for MFIs) should indeed be made more transparent and relatively easier and there must be some regulatory guidelines for the same.

Appointment of independent directors

Third, it seems appropriate to vest the powers of appointment of new, independent and executive directors in board nomination committees (at MFIs) specifically constituted for this. These committees should follow a transparent process and lay down clear criteria for selecting board members. Further, an independent director must chair the board nomination committee so that 'truly' independent candidates are hired to the MFI board, and the climate for their 'real' independent functioning is ensured. This is another aspect that the RBI and the Ministry of Finance could look into as part of their ongoing work to create a regulatory architecture for microfinance.

Time spent by independent directors on work at MFIs

Fourth, is the issue of whether the independent directors should be mandated to spend a certain minimum time on work at the MFI and especially, in the field at the grassroots? As an industry observer argues that 'independent directors should be mandated to devote a certain minimum number of hours every quarter (or regular period) so as to understand the business of microfinance and gain insights about the MFIs in which they are serving as directors. This will enable them to examine the risks being taken and the appetite of their MFI to take such risks as well as understand and provide guidance on other strategic aspects, as may be required.' This again could be looked into by the RBI and MoF as part of the guidelines and regulatory architecture being framed.

Number of MFI boards on which an independent director can serve concurrently

Fifth, a related aspect is the amount of time spent by independent directors on board meetings at MFIs annually. When there are people who, at any one point in time, serve as independent directors on several MFI boards, the quality of directorship is naturally likely to suffer. This is especially true of microfinance. It may be appropriate for the RBI and/or MoF to recommend a threshold level for the number of MFIs, in which people (professionals) could serve as independent directors. This is a very critical aspect indeed.

Peer appraisal of independent directors must be made mandatory

Sixth, peer appraisal of independent directors is an option for enhancing their effectiveness in working, and this, again, needs to be examined from the perspective of independent directors in MFIs. While such an appraisal process would need to be managed with associated sensitivities, board members should also view this as an opportunity for continuous learning and improvement. Traditional methods of evaluation (in terms of share valuations/prices and strategy initiatives) perhaps would need to be augmented by a formal and objective appraisal of the independent directors' performance with regard to governance (in terms of various parameters). Such an appraisal should enable identification of gaps in governance, enhance the decision-making process and improve effectiveness of board meetings and various processes at the MFI. This is also an aspect that could be looked at by the RBI and MoF, in the context of MFIs.

Capacity building of first-time (independent) directors

Seventh, another critical area often ignored is the need for continuous education programmes for independent directors, especially for entry or first-time (independent) directors. This is very critical for microfinance which is a nascent field, and especially if we have to ensure that the same people do not serve on the boards of too many MFIs (again causing conflicts of interest). This capacity-building support could be offered through IIMs, or College of Agricultural Banking, or other appropriate institutions. This is a very critical issue and should be examined by the RBI and MoF as part of their mandate to draft detailed regulatory guidelines with regard to (corporate governance in) microfinance.

Compensation of independent directors

Eighth, the compensation of independent directors is a very critical issue and there have been a lot of controversiesii in recent months. The RBI and MoF must surely set standards for the same and ensure that the independence of the independent directors is not compromised under any circumstances. One option would be to entrust this task to the board nomination committee and ensure that the promoters/CEOs do not interfere in setting and implementing norms of compensation for independent directors. While there could be other strategies, I think this is one of the most important issues that the RBI and MoF would need to address.

Protecting client interests on the MFI board

Last, but not the least, the RBI should also examine whether there could be specially designated independent directors, representing client interests. We have directors in banks representing staff interest and the same could be done in microfinance to safeguard client interests. This is especially crucial in MFIs that have and use the Mutual Benefit Trust (MBT) structure, which is indeed a client owned body-please recall that there have been many issues with regard to governance of MBTs in the recent past and the extent to which their interests are being protected in the boards of MFIs. This should be explored by the RBI and MoF as part of the process of drafting of detailed guidelines and building a regulatory architecture for microfinance and suitable recommendations provided. Like compensation, this is indeed a very important issue in MFI governance.

Thus, while enhancing the quality of independent directors would surely enhance governance, there is also a right mindset aspect that we should not forget. As Mr Kris Gopalakrishnan, CEO, Infosys, once said, "We may not be able to eliminate corporate frauds altogether. No amount of regulation will help to stop frauds. At the end of the day, corporate governance is a mindset issue. We need stricter, stronger and quick enforcement of law by regulatory agencies so that it will act as a deterrent for others.iii

Other observers agree. "As a rule rather than exception, MFIs need to practice good governance in order to sustain in the long run. And for this, promoters and senior management must practice good governance at all times including, when faced with the most difficult of situations."

Therefore, while practicing good governance at all times is certainly a mindset issue, the least we can do is to incentivise good governance and, perhaps, penalise bad governance, and do this consistently and without fear or favour. For this, we need a practical guiding (regulatory) framework pertaining to appointment, roles, responsibilities and compensation of independent directors in MFIs and this is something that the RBI/Union Ministry of Finance should gift to the Indian microfinance sector that is perhaps low on its governance quotient, at least at this moment. This is yet another place where regulatory reform could begin.

i There are existing corporate governance guidelines for NBFCs, but many of the aspects, including related party lending, have been kept in abeyance. This aspect assumes greater importance because most of the MFIs are not listed entities and hence, they do not come under the SEBI corporate guidelines/directions as well.
ii Please look at: 'Share Microfin MD takes home Rs7.4 cr, more than double HDFC Bank MD's salary' by John Samuel Raja D & M Rajshekhar, ET Bureau, 1 February 2011.
iii Quoted from The Satyam Saga, by Bupesh Bhandari, Prashanth Reddy Chintala, Vandana Gombar, Latha Jishnu, Shyamal Majumdar and Aanand Pandey, (2009), Business Standard Publication.

(The writer has over two decades of grassroots and institutional experience in rural finance, MSME development, agriculture and rural livelihood systems, rural/urban development and urban poverty alleviation/governance. He has worked extensively in Asia, Africa, North America and Europe with a wide range of stakeholders, from the private sector and academia to governments.) 



Nagesh KiniFCA

5 years ago

The RBI appoints CAs as independent directors on the Boards of PSBs. In stead of appointing members with hard core banking exposure any one running CA coaching classes or IT or ST practice cannot in any way intellectually contribute to the discussions they are more of a liability or nuisance rather than an asset. independent is a sham it is their clout in the ICAI that works the wrong way. The post-scam Satyam/Mytas appointments are cases in point.

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