IRDA has finally woken up to the ill-effects of ULPs, which we again highlighted four days ago. The question to ask is why these products were even allowed in the market? It gave insurers ample time to make a killing by charging 80% premium allocation charge in the first year as in the case of Reliance
One would think that 80% premium allocation charge in the first year would ring alarm bells with the regulator, but the Insurance Regulatory and Development Authority (IRDA) had approved one such universal life policy (ULP), launched less than a year ago. It is Reliance Super InvestAssure Plan which had 80% premium allocation charge for the first year premium.
But ULPs, which were being promoted as an alternative to unit-linked insurance plans (ULIPs) had a field day for a year. Yesterday IRDA announced an overnight ban on all ULPs. In the past IRDA gave advance notice to insurers, but companies have taken undue advantage of this and have pushed these products by positioning them as a "limited period offer".
"After examining the complaints, the authority is satisfied that universal life products need a better regulatory framework for protecting policyholders' interests," IRDA said. Interestingly, Moneylife had reported just four days ago on 18th October that IRDA will go after toxic ULPs; Reliance will be hit the most. (See: http://www.moneylife.in/article/76/10112.html).
ULPs come mainly from four companies - Max New York Life, Aviva Life, Bharti Axa Life and Reliance Life. Companies had built in high commissions into these plans. In a way, they contain the shortcomings of both traditional plans and ULIPs - high costs and pathetic returns.
Reliance Super InvestAssure Plan had 80% allocation charge for first year premium while Max New York Life Secure Dreams plan had 30% of the same. There are additional charges like policy administration charge and fund management charges that eat into investor premium.
According to industry sources, insurers anticipated that IRDA would order ULPs to be wound up effective from the end of year. This anticipation only prompted them to go all out and push this toxic product with even more vigour. It happened for ULIPs and now for ULPs. It will happen again in the future unless IRDA is proactive and not reactive.
Mumbai: The tax dispute with telecom major, Vodafone, has not impacted foreign fund inflows into the country which, on the contrary, has increased substantially, reports PTI quoting a top income tax official.
"The issue (Vodafone tax liability) has not impacted foreign funds inflow," Central Board of Direct Taxes (CBDT) chairman, S S N Moorthy, told reporters on the sidelines of an event here today.
"Foreign funds inflows have increased in 2009-10 as compared to 2008-09," the official said.
Mr Moorthy's assertion came in the wake of a section of India Inc voicing apprehensions that the huge tax liability raised against Vodafone could discourage multi-nationals from investing in India.
The income tax (I-T) department has finalised its tax liability claim against Vodafone at around Rs12,000 crore, he said.
"It (the tax liabilities) is around Rs12,000 crore," the CBDT chairman said in response to a query.
The IT department is likely to issue a fresh tax demand notice to Vodafone amounting to around Rs12,000 crore today.
The Supreme Court had on 27th September issued notices to the tax authorities directing them to decide within four weeks the liabilities of Vodafone.
It had refused to offer any immediate relief to the company, which has challenged the Bombay High Court order allowing the government to tax the company's $11 billion deal with Hutch.
The Vodafone case will come up in the Supreme Court on 25th October.
Tata Mutual Fund floats Tata Fixed Maturity Fund Series 29 Scheme A; Kotak Mahindra MF launches Kotak FMP 370 Days Series 10; HDFC Mutual Fund unveils HDFC FMP 100D October 2010 (3); Sharekhan ties up with US-based academy to offer stock market courses
Tata Mutual Fund floats Tata Fixed Maturity Fund Series 29 Scheme A
Tata Mutual Fund has launched Tata Fixed Maturity Fund Series 29 Scheme A, a close-ended income scheme. The investment objective of the Scheme is to generate income and/or capital appreciation by investing in debt and money-market instruments having maturity in line with the maturity of the Scheme.
The Scheme offers growth and dividend (payout). During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The exit load for the Scheme is nil. The Scheme opens on 22nd October and closes on 27th October. The minimum investment amount is Rs10,000.
The benchmark index for the Scheme A (371 days maturity) is CRISIL Short Term Bond Fund Index.
Kotak Mahindra MF launches Kotak FMP 370 Days Series 10
Kotak Mahindra Mutual Fund has launched Kotak FMP 370 Days Series 10, a close-ended income scheme.
The investment objective of the Scheme is to generate returns through investments in debt and money-market instruments with a view to significantly reduce the interest rate risk.
The Scheme offers growth and dividend (payout). During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The Scheme closes on 26th October. The exit load for the Scheme is nil.
The minimum investment amount is Rs5,000. The Fund seeks to collect a minimum subscription amount of Rs1 crore.
CRISIL Short Term Bond Index is the benchmark index. Deepak Agrawal and Abhishek Bisen are the fund managers.
HDFC Mutual Fund unveils HDFC FMP 100D October 2010 (3)
HDFC Mutual Fund has launched HDFC FMP 100D October 2010 (3), a close-ended income scheme. The investment objective of the Plan under the Scheme is to generate income through investments in debt/money-market instruments and government securities maturing on or before the maturity date of the Plan. The Plan will invest 60%-100% in debt and money-market instruments having low to medium risk. The Plan will invest 40% in government securities having low risk.
The Plan offers growth and dividend (payout). During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The exit load for the Plan is nil. The Plan closes on 1st November. The minimum investment amount is Rs5,000.
CRISIL Liquid Fund Index is the benchmark index. Bharat Pareek and Anand Laddha are the fund managers.
Sharekhan ties up with US-based academy to offer stock market courses
Mumbai-based retail broking house Sharekhan Ltd has tied up with California-based financial education provider Online Trading Academy (OTA), to offer courses in stock market education in India. The curriculum will be based on OTA's hands-on coaching style to provide live trading experience to students.
All trading costs and losses, if any, incurred by the students, will be borne by OTA. The seven-day introductory course called Professional Trader India Course has been specifically designed to suit Indian trading conditions.
Sharekhan will offer brokerage discounts to students till their entire tuition fee is virtually reimbursed. It will also offer access to its recently launched Trade Tiger platform - a single online platform for multiple exchanges as well as mutual funds and initial public offerings.