Insure Smartly

There is a general resistance to buying financial products because there are too many of them, with features that are difficult to comprehend making it hard for the average person to choose. So, financial products end up being sold—not bought. Also, these are intangible products; hence, they do not arouse the same enthusiasm to spend on them. Those who are healthy, see expenditure on health insurance premium as a waste. Yet, when they face a surgery, they ask: “Can I buy mediclaim to cover it?” The more aware keep away because of the horror stories of insurers denying claims. But, it is a well-known fact that hospitalisation often results in the uninsured family falling into a debt trap. So, what should you be doing?

There is no perfect mediclaim product or insurer; only some are better than others. But there are ways to find a reasonable product that meets most of your requirements. Raj Pradhan presents these in our Cover Story which starts on page 26.

Sucheta, in her Crosshairs section, question the corporate social responsibility (CSR) rules of the UPA government that came on top of the massive expansion of government as a non-governmental organisation (NGO). Will the new Modi government change this? Further, she highlights how UTI Mutual Fund’s golden jubilee celebration is a travesty, since the organisation that came into being 50 years ago no longer exists because of the two bail-outs.

In her Different Strokes section, Sucheta points our how Reliance Industries is suddenly acting like a wounded tiger, slapping legal notices on all and sundry even as it has trouble having its way with the new government.

Will the maiden Budget of the Modi sarkar meet the market’s expectations? Moneylife Foundation would be hosting an exclusive session on 12 July 2014 to decode the Budget and how it would affect savers. If you miss the event, tune in to Moneylife TV  for a video recording of the session.


Worth reading by every banker

This is with regard to “Rooting for Right Regulation” by Sucheta Dalal. This is a good piece worth reading by every banker and surely by RBI (Reserve Bank of India) officers in service. I have a small suggestion. There could be implementation committees in each bank and in RBI; these committees could meet in-house once a week and provide inputs to either the ED (executive director) or the DG (deputy governor) in charge of operations about the implementation problems and successes and also suggest areas of inter-organisational coordination. I am not sure whether Ms Dalal would like to reflect on this (which is in operation in the Central Bank of Nigeria) and, if possible, adapt it to suit Indian circumstances.  
A Vasudevan (former ED, RBI), online comment

I have been reading Bapoo Malcolm’s “You be the Judge” articles. These are written in common man’s language which can be easily understood. I like Bapoo’s way of writing. I am a practising lawyer in a Pune court in civil cases. In 1994, I also had written a series on land laws in Arthamanthan (supplement of Sakal) for one year. After many years, I felt liking writing something on law. Once again, the “You be the Judge” articles are much appreciated.
Neelima Mysore, by email

This has reference to “The best letter to Editor” (Moneylife, dated 12 June 2014). Following the letter titled, “Falling Standards of SBH Branches”, I would go a step forward and say that “Falling Standards of SBI and its associate Banks.” State Bank of India (SBI) has its associate banks, like State Bank of Hyderabad, State Bank of Bikaner & Jaipur, State Bank of Travancore and State Bank of Mysore, etc.

Ever since all bank branches have been connected to each other by Internet, it is good enough to have one account in any branch of that bank, and you can operate it from any other branch where you do your bank operations, as if you are an accountholder of that branch.

SBI and its associate bank’s branches allow you to withdraw money by a bearer cheque, only by accountholder/s, from any branch, other than the home branch. They allow you to deposit the cheque in other branches, for your home branch account. Here, also, the cheque gets realised after a delay of one or two days. It allows demand draft service from branches, other than the home branch.

Other services, like cash deposit, NIFTY, RTGS, which any other bank allows to operate from other branches (other than home branch), SBI and its associate banks do not allow this facility from other branches. It is really a strange.

RBI should take this into account and issue instructions not only to SBI and its associate banks, but also to any other bank which does not allow cash deposit, NIFTY, RTGS, etc, from branches other than the home branch. RBI should make them provide such services with immediate effect.
Also, all bank branches should display a board at a prominent place in each and every branch, that “Accountholders of any branch of this bank can avail all the services, that they get at their home branch, except when network is down.”
Shirish S Shanbhag, by email

In Moneylife (Issue dated 26 June 2014), the Cover Story ‘Higher returns than your Bank deposits’, I find a few mistakes which need your attention:
(a) As per article, liquid funds can invest in papers of 91 days’ duration. No; as per the latest guidelines. it is 61 days.

(b) The cut-off time for withdrawal/ repurchase for liquid funds of 2pm is mentioned in the article. It is wrong. The cut-off time for withdrawal is 3pm, whereas for sale/ purchase transaction it is 2pm.
Raj Kumar, CFP, by email

Raj Pradhan replies: Thank you, the reader is correct. Other readers are requested to note these corrections.

On page 40 of the 26 June 2014 edition of Moneylife, the Street Beat team has reviewed the company, National Peroxide Limited (NPL). The financial data given would be all correct as also the information on NPL’s expansion of capacity for hydrogen peroxide. But just the crunching of numbers should not suffice to judge what the future holds. The real and current situation in the marketplace has not been looked at. There is a flood of cheap hydrogen peroxide coming in which also receives the special benefit on import duty bestowed on imports from certain neighbouring countries.

The production of hydrogen peroxide is by a continuous process which means that you cannot shut down the plant every now and then. Due to accumulating stocks of this inflammable liquid, bulk storage capacities soon get filled up. This results in prices crashing.

And this is what makes me sceptical of the limited analysis done by financial experts by just looking at figures in the past balance sheets. How do I know all this? For 11 years, till I retired in 1999, I was the general manager-marketing of NPL.
Sunil Gupta, by email

Thanks for sharing this with us. I just looked at the price trend. Guess what? In 1999, NPL’s stock price averaged Rs30. The current price is Rs620. That is 20 times in 16 years. Not too bad, for all the problems facing the company, would you say? Better than many of the 30 gems in the Sensex. By the way, blue-chip Hindustan Lever is up just 3 times over this period.

Well, “crunching numbers” and “limited analysis done by financial experts by just looking at figures in past balance sheets” actually works more often than not, for our readers who pay Rs30 a fortnight. In fact, it works surprisingly better than it does for equity fund investors who are charged 2% a year on assets to be managed by fund managers who are paid crores of rupees, not Rs30 a fortnight, and sifting through long reports, not such “limited analysis”. A paradox, perhaps, worth pondering? Thanks for the interest in Moneylife. — Editor

This is with regard to “The Black Money Trail” by Sucheta Dalal. This government’s move to set up a SIT to find and get the black money from outside is laudable. Hope they succeed ASAP.

We have to accept that we have a parallel economy of black money in circulation within the country which is also huge. We need to get this also back into the government treasury by any means. Both issues have to be tackled on a war footing and separately, if need be.

I am not putting the cart before the horse, but, the prime minister must also spell out what he plans to do when he gets even 5% of this huge treasure.

One of the many ways is to identify the areas in which this hoarded wealth can be invested for national development, by an amnesty and, without question, though a reasonable taxation, maybe a flat 30%-40% should be charged from the offender. If within the timeframe some illegal wealth is not brought back to India, when found, it should be confiscated. Where this is hoarded in bank accounts in foreign countries, it need to be frozen by diplomatic pressure, as a first step.
For black money within the country, we need to take stringent action and it is time the government demonetises high-value notes (Rs500/1000) when the amnesty period expires. This can be done when we are able to bring in polymer currency into circulation, about which we have been hearing for years now. This move would kill fake Indian currencies minted in Pakistan and circulated by greedy desh-drohis and stop counterfeiting activities also.

Not a small deal by any means, but we have to start somewhere and sometime.
Dr Anantha K Ramdas

This is with regard to “Themes: High-return Stock Ideas” by R Balakrishnan. A very good article.
Suiketu Shah

This is with regard to “Why revised version of Inflation Index Bond may fail again?” by Vivek Sharma. Inflation index bonds are intended to protect the purchasing power of the investor. But, in reality, they do not; a part of the interest would be appropriated by government as income-tax. Make it tax-free and inflation-free and see the rush.
Kanchan Kumar


Flouting Fire Norms

Owners of at least 100 multi-storeyed buildings have been issued a 15-day notice by the district authorities in Kanpur for flouting rules set by the fire department. The buildings include residences, hotels, a hospital and certain shops in a market.

The notices were issued on the recommendation of the chief fire officer. District magistrate Roshan Jacob has asked the owners to explain why they had not constructed the buildings according to the rules of the fire department.

Kanpur has around 500 multi-storeyed buildings, of which around 100 have not been built in conformity with the rules of the fire department, according to reports. There are others whose plans have not been approved by Kanpur development authority (KDA).

The fire department is checking the multi-storeyed buildings of the city and has found residential buildings along with eight hotels, one hospital and 11 shops, in which fire department rules have not been complied with.


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