Neither the RBI nor the SEBI was interested in regulating deposits collected by jewellers like Tanishq. Now, new Rules under the Companies Act 2013, are forcing corporate jewellers to stop such scheme. Will the money now go into smaller, less reliable jewelers running partnership and proprietary firms?
Titan Company Ltd (TCL) is closing its Tanishq Golden Harvest and Swarna Nidhi gold savings schemes for new and existing depositors. Their advertisement claims to have designed a fair redemption offer, the details of which will be available with their stores. It is unlikely that depositors will get extra month worth of cash or jewellery. It is estimated that TCL will make record payments of Rs1,000 crore to Rs1,300 crore till end of August 2014. Shares in TCL fell nearly 3% on 14th July due to this announcement. PC Jewellers has also unplugged its gold savings scheme “jewels for less” and is asking its customers to get back cash or purchase jewellery of an equivalent amount.
Tanishq was running the popular Golden Harvest Jewellery savings scheme, wherein you pay in instalments for a fixed duration (11 months) and the jeweller would pay the last instalment. With this amount you can buy gold anywhere in India from any Tanishq showroom at the end of the 12-month period. The payment of the last instalment works out to be over 15% return on your scaled investment in the golden harvest scheme. There is no tax deducted and no regulatory hassles like Know Your Customer (KYC) norms.
Under Rule 3(6) of Companies (Acceptance of Deposits) Rules, 2014, no company can accept deposit, which carries a rate of interest more than what has been prescribed by Reserve Bank of India (RBI) for deposit accepting non-banking financial companies (NBFCs).
In other words, jewellers' gold savings schemes needs to be on par with public-deposit schemes. The Rules limit the return companies can offer to deposit holders to 12% and caps the total amount of deposits to 25% of their net-worth. In case of Tanishq, the total deposits are estimated to be 45% of the company’s net worth. It is clear that Tanishq schemes may be violating both conditions under the new Rules.
The way to comply with new Rules is to return the deposits to the public before 1 April 2015. If not, they will be penalised in accordance with the provisions of the Act. It means small or big jewellers will have to comply. But, will it cause trouble for small jewellers, especially if the size of deposits is huge when compared to its own net-worth? Have the jewellers kept the deposited money in safe instruments like bank fixed-deposits (FD) or in risky avenues? Moreover, have they really kept it aside or have they been using it for business operations, which can make the refunds to everyone virtually impossible?
Big jewellers like PC Jewellers, Tribhovandas Bhimji Zaveri, Gitanjali group, Gitanjali Jewels, GRT jewellers and hundreds of small jewellers have their own such gold saving schemes with varying benefits. These schemes had become widespread, with thousands of crores of rupees lying with jewellers as advances, which the government thought could pose risks and hence wanted stricter regulations to safeguard public interest.
However, the new Rules, coming under the Companies Act, covers companies. Jewellers running their stores as sole proprietorships or partnership firms may still continue with this business.
Moneylife had written in mid February 2014 about jeweller gold savings scheme coming under the Securities and Exchange Board of India (SEBI) scanner. But SEBI is yet to wake up to thousands of crores invested by consumers in gold savings schemes of jewellers which can easily qualify as collective investment schemes. SEBI and RBI had replied to an Right to Information (RTI) application stating that such schemes are not regulated by them at all.
Moneylife had done a survey last year for our cover story on gold. Almost half of the respondents were aware of jewellery gold savings schemes offered by jewellers such as Tanishq, but surprisingly only 15%would invest in such schemes and it was more for ease of payment rather than for better returns or tax savings.
The new Rules may not apply to 'Gold Deposit Schemes' (GDS). A gold savings scheme is the opposite of GDS, which is offered by banks like SBI and registered NBFC. GDS from jewellers is unregulated. Under GDS, you give your gold to get a higher quantity of gold at the end of one year, or get monthly payment as well as return of your gold at end of the term. The interest rate for SBI GDS three-year deposit is 0.75%, for four and five years it is 1%. It’s not great, but it is calculated in gold terms. Jewellers offer a high rate of interest of 7.5%, but there is absolutely no safety.
You may also want to read...
Gold investment scheme: Is it illegal under new Companies Act?
Gold savings scheme from jewellers under SEBI scanner
Gold Savings Scheme from jewellers: What you need to know
If you downloaded the privacy software Tor in 2011, you may have been flagged to be spied on
Last week, German journalists revealed that the National Security Agency (NSA) has a program to collect information about people who use privacy-protecting services, including popular anonymizing software called Tor. But it's not clear how many users have been affected.
So we did a little sleuthing, and found that the NSA's targeting list corresponds with the list of directory servers used by Tor between December 2010 and February 2012 – including two servers at the Massachusetts Institute of Technology (MIT). Tor users connect to the directory servers when they first launch the Tor service.
That means that if you downloaded Tor during 2011, the NSA may have scooped up your computer's IP address and flagged you for further monitoring. The Tor Project is a non-profit that receives significant funding from the US government.
The revelations were among the first evidence of specific spy targets inside the United States. And they have been followed by yet more evidence. The Intercept revealed this week that the government monitored email of five prominent Muslim-Americans, including a former Bush Administration official.
It's not clear if, or how extensively, the NSA spied on the users of Tor and other privacy services.
After the news, one of Tor's original developers, Roger Dingledine, reassured users that they most likely remained anonymous while using the service: "Tor is designed to be robust to somebody watching traffic at one point in the network – even a directory authority." It is more likely that users could have been spied on when they were not using Tor.
For its part, the NSA says it only collects information for valid foreign intelligence purposes and that it "minimizes" information it collects about U.S. residents. In other words, NSA may have discarded any information it obtained about U.S. residents who downloaded Tor.
However, according to a recent report by the Privacy and Civil Liberties Oversight Board, the NSA's minimization procedures vary by program. Under Prism, for example, the NSA shares unminimized data with the FBI and CIA.
In addition, the NSA can also later search the communications of those it has inadvertently caught in its Prism dragnet, a tactic some have called a " backdoor" search. It's not clear if similar backdoors exist for other types of data such as IP addresses.
In response to the Tor news, the NSA said it is following President Obama's January directive to not conduct surveillance for the purpose of "suppressing or burdening criticism or dissent, or for disadvantaging persons based on their ethnicity, race, gender, sexual orientation, or religion."
[Disclosure: Mike Tigas is the developer of an app that uses Tor, called the Onion Browser.]
We updated our chart of NSA revelations to include monitoring of privacy software.
For the geeks, here are the IP addresses listed in the NSA Xkeyscore code and when they were added or removed from the list of Tor directory servers:
Added: Fri, 12 Feb 2010 15:31:08 -0400 (14:31 -0500)
Added: Sat, 8 Apr 2006 17:03:49 -0400 (21:03 +0000)
Added: Sat, 5 Nov 2005 16:20:51 -0400 (20:20 +0000)
Added: Thu, 10 Jun 2010 10:56:08 -0400 (16:56 +0200)
Removed: Wed, 29 Feb 2012 14:22:41 -0400 (13:22 -0500)
Added: Thu, 16 Dec 2010 08:10:19 -0400 (13:10 +0100)
Added Wed, 14 Oct 2009 19:36:08 -0400 (19:36 -0400)
Added: Wed, 7 Nov 2007 17:20:45 -0400 (21:20 +0000)
Removed: on Wed, 4 Apr 2012 19:51:04 -0400 (01:51 +0200)
Added: Mon, 10 Aug 2009 01:32:51 -0400 (01:32 -0400)