Money & Banking
Loans to industry continues to be weak

RBI released its sector-wise monthly loan data for January 2013 which reveals that non-collateralized loans (credit cards and personal loans) and vehicle loans were the best-performing segments

Industry loans remained weak (year-on-year) y-o-y in January 2013 YTD (year-to-date). The key growth drivers within the industry segment have been power, iron & steel, chemicals and roads. Retail loans and agri loans are the strongest—retail loans grew at 13.5% y-o-y and agri loans grew at 19.8% y-o-y in January. Within retail, non-collateralized loans (credit cards and personal loans) and vehicle loans were the best-performing segments. This is according to an analysis of key trends by Nomura Equity Research in credit trends based on the RBI’s (Reserve Bank of India) sector-wise monthly loan data for January 2013.


As of January 2013, aggregate non-food credit growth was 14.6% y-o-y with primary contributions from industry (15.2% y-o-y), agri (19.8% y-o-y) and retail (13.5% y-o-y).  As per the RBI's weekly statistical supplement, non-food credit as of 22 February 2013 was 16% y-o-y.


On an YTD basis (April 2012-January 2013), aggregate non-food credit growth was 7.9% over the base of March 2012 (compared with 10% in YTD FY12 and 14.6% in YTD FY11). The key contributions to YTD growth came from retail loans at 10.1% and industry at 8.3%. Agri loans grew at 6.8% while SME (small and medium enterprises) loans grew at 4.6%. Ex-infra industry growth was 4.9% during this period. 


Within the industry sector, y-o-y growth for key sub-sectors was 28.4% for power, 18.7% for iron & steel, 19.2% for engineering, 18.7% for roads, and 22% for chemicals. Loans to the telecom sector were flat y-o-y. 


One interesting observation to note is the declining loan share of medium & “small & micro” corporates within the industry segment. At their peak during April-August 2009, these corporates commanded a 12% and 17% loan share, respectively, within the industry segment, with large corporates having a 71% share. Comparatively, as of January 2013, the medium corporate share is now 9%; small & micro 13%; and large corporate share 78%. This share shift has been driven by the increasing loan share of the infrastructure segment which has increased from 24% in Jan 2009 to 34% in January 2013 (as a percentage of industry loans).


Over the last one year, medium corporates have lost the loan market share to the large corporates (11% share for medium corporates declining to 9%), while the small and micro corporates have held their ground. In Nomura’s view, this reflects the loan portfolio decisions of large banks like SBI which have been cutting back their medium corporate exposure over the last one year.


Within retail loans, credit card loans had the highest y-o-y growth at 24.3%, followed by vehicle loans at 21%, other personal loans at 16.3% and mortgages at 12.3% in January. Within mortgages, the bulk of the increase in January 2013 came from low-ticket mortgage loans which fulfil priority sector norms. 


In the services segment, loans to the retail trade had the highest y-o-y growth at 27.8% followed by loans to NBFC at 21.6%.


Nomura predicts that if we assume that the same quantum of loan growth for February 2013 and March 2013 as was achieved during February 2012 and March 2012 then the industry can expect to see loan growth of 13.8% for FY13F.


High value applications perverting RGESS, while SEBI remains mum

New fund offers of the Rajiv Gandhi Equity Savings Scheme are seeing applications being made as high as Rs10 lakh, much of this is attributed to the high commissions paid to distributors. However, the regulator continues to remain silent

Many fund houses which have launched Rajiv Gandhi Equity Savings Schemes (RGESSs) are paying as much as 6% commissions to distributors, who, attracted by high commissions are pitching the schemes to high net worth individuals (HNIs).

RGESS is meant for new investors who have an annual income of less than Rs10 lakh. These investors would get a tax deduction of 50% of the investment up to a maximum deduction of Rs25,000. However, it is seen that investments as high as Rs10 lakh and more are being invested in the last few days of the New Fund Offers (NFO) of RGESS. This clearly shows that distributors are promoting these schemes to high net worth clients and the sole reason for this is that distributors are getting large commissions, making a mockery of the RGESS.

Fund houses probably feel they will only be able to attract investors if they promote their schemes by paying a significant upfront commission. With almost every fund house launching an RGESS mutual fund scheme, some fund houses are paying a huge commission to ensure that their scheme is pitched first. Hence, to earn a higher income, distributors would naturally pitch the schemes of fund houses paying a higher commission. However, some unscrupulous distributors are probably looking to take advantage of this high commission and pitching the product to high networth clients seeking big ticket applications.

The Securities and Exchange Board of India (SEBI) was contemplating scrapping this commission paid to distributors last year, however, it changed its mind as it could not reach a consensus with the mutual fund industry body—Association of Mutual Funds in India (AMFI).

New fund offers had dried up over the previous year, hence, this issue had not cropped up. With the rush for RGESS NFOs, high upfront commission is again creating an issue which the regulator needs to address. However, banning upfront commission would lead honest distributors to abandon the mutual fund industry altogether and move to other investment products that pay a higher commission. The regulator would need to set a limit to the upfront commission being paid or set a fixed upfront commission which would be the same for every scheme. By doing this, the distributor would not get any benefit for promoting one scheme over the other as the commission would be the same. We wonder why the regulator has not done this as yet.

Way back in August 2009, entry load was banned in order to curb mis-selling, however, an upfront commission paid to distributors still continues. Fund houses on an average pay an upfront commission of 1.50% to 2.50% to the distributors. The upfront commission paid is an additional sum of money that fund houses pay to distributors from their own accounts and not from the corpus of the scheme. Therefore, the investors’ investment corpus remains unaffected and only the expense ratio is allowed to be charged. The issue with upfront commission is that it leads to mis-selling and excessive churning by distributors looking to earn a quick buck.

It’s not that HNIs cannot invest in this scheme, but the big question is—why would they invest such huge amounts in a scheme which has no track record? Even if they are new investors looking for a tax rebate, the minimum they could invest is Rs50,000 to get a Rs25,000 rebate. However, it seems like some distributors have managed to get their clients to invest huge amounts in these schemes.

Some distributors feel that this issue is being blown out of proportion, as even in Equity Linked Savings Schemes (ELSS) where the upfront commission has been similar, investors put in over and above the Rs1 lakh limit available for income tax deduction. But the difference is that ELSSs have a track record. Getting an investor to invest in a scheme with no track record just to earn a high commission is nothing but mis-selling.




4 years ago

Whoever is the writer of this article is no better than an advocate/attorney who turns law to the favour of the client who pays high. These attorneys or advocates are least concerned of overcrowding of cases in courts, delays, losses to both clients and direct and indirect losses to those who are concerned but are burdened by delayed decisions and so on.

It is just like a "FREE PRESS" can turn matters to suit his/her comfort zone and so on and on.

My fundamental question here is it is out and out recommendation of all analysts to give due consideration to a (1) "process driven fund house" (2) "acknowledged and proven fund manager, (3) "A fund house whose maximum funds are not losing/bleeding, may not giving profits in a negetive market and so on and on again.

What is the harm if an investor is lured into an NFO, by a fund house which meets all above parameters and are closer to bench mark returns in each of their categories.

Also a fund that has a track record and has amassed huge corpus, can that perform as well as it has performed? In such cases fund houses are known to have closed selling of such funds. Why then should this be a taboo to sell an NFO from a well reputed and stable fund house.

Same analysts have been raising hue and cry all over spilling ink and wasting time and energy defending the IFAs who are losing their livelihoods and blaming SEBI for capping upfronts. If the same IFA is able to make some money somewhere why is it a EYESORE to these analysts is anybody's guess.


R Balakrishnan

4 years ago

Another reason- You get more units because the par value is only ten rupees. See the other schemes? you will get lesser units if you buy existing schemes. Typical sales pitch and I know many investors who believe this.

R Balakrishnan

4 years ago

The AMFI ad is right. The injection hurts

R Balakrishnan

4 years ago

Clearly, the distributors are at it again. Quick to take offence at passouts, do they have an answer for this unethical selling?



In Reply to R Balakrishnan 4 years ago

Dear Sir,

The solution lies in identifying & punishing the miscreants.

For the misdemeanor of a small fraction, please don't paint black the fraternity.

Also there is nothing stopping AMCs, AMFI or SEBI from rejecting such applications & refunding the investment amount.

Vaibhav Dhoka

4 years ago

It is investor who will judge the fund at the end of 3 years.Distributor has no role and all wants money.Regulator is always found to be napping when time to act.


4 years ago

We suggest that investments in equities should be long term in nature. So what's wrong with suggesting an HNI to invest larger amouonts in RGESS. Also because the mandate would be invest in Bluechip stocks only and not in mid or small cap...If this was not the case, the AMC's would also have strugled to cover the min requiremnet for the nfo. You should infact come out with the stats as to how many direct investors came for RGESS, it would be a fair indicator of the plight of mutual fund industry in india...Play the blame game for as long as you like on "who KILLED the investors/industry ?" rather than focusing on improving penetration of these products...that's seems to be the motive of all those who raise such hue and cry over these issues....


Jason Monteiro

In Reply to creazyfinancials 4 years ago

Guess you missed this line in the article—"It’s not that HNIs cannot invest in this scheme, but the big question is—why would they invest such huge amounts in a scheme which has NO TRACK RECORD?"

If the AMCs are paying such a huge commission to distributors, should'nt the distributors use this amount to improve the penetration of this product by spreading awareness to attract first time investors?

Sadly some prefer getting HNIs to invest to earn a fatter commission.


In Reply to Jason Monteiro 4 years ago

I am sure the rate of addition of folios pre and post removal of entry load stands testimony to the fact that distributors played a major role in improving penetration......there may be some who would have missold...and thats the reason its called financial market.....E.O.M


In Reply to Jason Monteiro 4 years ago

Disagree Mr. Monteiro.

Mobilisation commission is paid to distributors for sourcing business from existing and new clients. It is not mandatory to source investment from far off areas - Please do not float / incubate new 'hair-brained' ideas

Spreading awareness and market penetration is the responsibility of the regulator, AMFI & Fund Houses. - It is certainly not the responsibility of the existing distributors.

Moreover, it is nobody's business to tell mutual funds distributors how to spend their commission.

Jason Monteiro

In Reply to Nilesh KAMERKAR 4 years ago

Mr Kamerkar,

I am not referring to small distributors. There are big distributors, mostly banks, which which earn total commissions going up to crores.

Apart from the regulator, AMFI & Fund Houses, don't you feel they have a responsibility as well?


4 years ago

Congratulations Team Moneylife! Excellent article!!

One also hears about money being switched from other mf schemes into RGESS - This is a blatant abuse as RGESS was meant to attract first time investors only.

NFOs are being extended for lack of response, rules are being bend to accommodate RGESS by extending the NFO period to one month from 15 days.

If one takes out the big ticket investments all RGESS NFO put together may not cross Rs.100 crores mobilisation - While BIG noises would continue to be made about retail participation into India Capital markets

All kinds of mis-selling seems to be acceptable to earn brownie points from powers that be.

And last but not the least.

Those who were party to the decision of 'Low-cost-direct-option' must be given responsibility for getting in meaningful numbers in RGESS under the low cost option. . . Or should be shunted out of the mutual funds advisory committee set up for the revival of mutual funds in India.

Everything we know about what data brokers know about you

The companies that sell information about how much money you make — and whether you’re pregnant, divorced, or trying to lose weight — are facing new scrutiny in the US

Data companies are scooping up enormous amounts of information about almost every American. They sell information about whether you're pregnant or divorced or trying to lose weight, about how rich you are and what kinds of cars you have.


Regulators and some in Congress have been taking a closer look at these so-called data brokers — and are beginning to push the companies to give consumers more information and control over what happens to their data.


But many people still don't even know that data brokers exist.


Here's a look at what we know about the consumer data industry.

How much do these companies know about individual people?

They start with the basics, like names, addresses and contact information, and add on demographics, like age, race, occupation and "education level," according to consumer data firm Acxiom's overview of its various categories.


But that's just the beginning: The companies collect lists of people experiencing "life-event triggers" like getting married, buying a home, sending a kid to college — or even getting divorced.


Credit reporting giant Experian has a separate marketing services division, which sells lists of "names of expectant parents and families with newborns" that are "updated weekly."


The companies also collect data about your hobbies and many of the purchases you make. Want to buy a list of people who read romance novelsEpsilon can sell you that, as well as a list of people who donate to international aid charities.


A subsidiary of credit reporting company Equifax even collects detailed salary and paystub information for roughly 38 percent of employed Americans, as NBC news reported. As part of handling employee verification requests, the company gets the information directly from employers.


Equifax said in a statement that the information is only sold to customers "who have been verified through a detailed credentialing process." It added that if a mortgage company or other lender wants to access information about your salary, they must obtain your permission to do so.

Of course, data companies typically don't have all of this information on any one person. As Acxiom notes in its overview, "No individual record ever contains all the possible data."
And some of the data these companies sell is really just a guess about your background or preferences, based on the characteristics of your neighborhood, or other people in a similar age or demographic group.

Where are they getting all this info?

The stores where you shop sell it to them.

Datalogix, for instance, which collects information from store loyalty cards, says it has information on more than $1 trillion in consumer spending "across 1400+ leading brands." It doesn't say which ones. (Datalogix did not respond to our requests for comment.)

Data companies usually refuse to say exactly what companies sell them information, citing competitive reasons. And retailers also don't make it easy for you to find out whether they're selling your information.


But thanks to California's "Shine the Light" law, researchers at U.C. Berkeley were able to get a small glimpse of how companies sell or share your data. The study recruited volunteers to ask more than 80 companies how the volunteers' information was being shared.


Only two companies actually responded with details about how volunteers' information had been shared. Upscale furniture store Restoration Hardware said that it had sent "your name, address and what you purchased" to seven other companies, including a data "cooperative" that allows retailers to pool data about customer transactions, and another company that later became part of Datalogix. (Restoration Hardware hasn't responded to our request for comment.)


Walt Disney also responded and described sharing even more information: not just a person's name and address and what they purchased, but their age, occupation, and the number, age and gender of their children. It listed companies that received data, among them companies owned by Disney, like ABC and ESPN, as well as others, including Honda, HarperCollins Publishing, Almay cosmetics, and yogurt company Dannon.

But Disney spokeswoman Zenia Mucha said that Disney's letter, sent in 2007, "wasn't clear" about how the data was actually shared with different companies on the list. Outside companies like Honda only received personal information as part of a contest, sweepstakes, or other joint promotion that they had done with Disney, Mucha said. The data was shared "for the fulfillment of that contest prize, not for their own marketing purposes."

Where else do data brokers get information about me?

Government records and other publicly available information, including some sources that may surprise you. Your state Department of Motor Vehicles, for instance, may sell personal information — like your name, address, and the type of vehicles you own — to data companies, although only for certain permitted purposes, including identify verification.


Public voting records, which include information about your party registration and how often you vote, can also be bought and sold for commercial purposes in some states.


Are there limits to the kinds of data these companies can buy and sell?

Yes, certain kinds of sensitive data are protected — but much of your information can be bought and sold without any input from you.

Federal law protects the confidentiality of your medical records and your conversations with your doctor. There are also strict rules regarding the sale of information used to determine your credit-worthiness, or your eligibility for employment, insurance and housing. For instance, consumers have the right to view and correct their own credit reports, and potential employers have to ask for your consent before they buy a credit report about you.


Other than certain kinds of protected data — including medical records and data used for credit reports — consumers have no legal right to control or even monitor how information about them is bought and sold. As the FTC notes, "There are no current laws requiring data brokers to maintain the privacy of consumer data unless they use that data for credit, employment, insurance, housing, or other similar purposes."


So they don't sell information about my health?

Actually, they do.

Data companies can capture information about your "interests" in certain health conditions based on what you buy — or what you search for online. Datalogix has lists of people classified as "allergy sufferers" and "dieters." Acxiom sells data on whether an individual has an "online search propensity" for a certain "ailment or prescription."


Consumer data is also beginning to be used to evaluate whether you're making healthy choices.

One health insurance company recently bought data on more than three million people's consumer purchases in order to flag health-related actions, like purchasing plus-sized clothing, the Wall Street Journal reported. (The company bought purchasing information for current plan members, not as part of screening people for potential coverage.)


Spokeswoman Michelle Douglas said that Blue Cross and Blue Shield of North Carolina would use the data to target free programming offers to their customers.

Douglas suggested that it might be more valuable for companies to use consumer data "to determine ways to help me improve my health" rather than "to buy my data to send me pre-paid credit card applications or catalogs full of stuff they want me to buy."

Do companies collect information about my social media profiles and what I do online?


As we highlighted last year, some data companies record — and then resell — all kinds of information you post online, including your screen names, website addresses, interests, hometown and professional history, and how many friends or followers you have.

Acxiom said it collects information about which social media sites individual people use, and "whether they are a heavy or a light user," but that they do not collect information about "individual postings" or your "lists of friends."


More traditional consumer data can also be connected with information about what you do online. Datalogix, the company that collects loyalty card data, has partnered with Facebook to track whether Facebook users who see ads for certain products actually end up buying them at local stores, as the Financial Times reported last year.


Is there a way to find out exactly what these data companies know about me?

Not really.

You have the right to review and correct your credit report. But with marketing data, there's often no way to know exactly what information is attached to your name — or whether it's accurate.

Most companies offer, at best, a partial picture.

While Acxiom lets consumers review some of the information the company sells about them, New York Times reporter Natasha Singer discovered this summer that only a sliver of information is shared, including whether you have a prison record or bankruptcy filings.

When Singer finally received her report, all it included was a record of her residential addresses.


Some companies do offer more access. A spokeswoman for Epsilon said it allows consumers to review "high level information" about their data — like whether or not you're listed as making a purchase in the "home furnishings" category. (Requests to review this information cost $5 and can only be made by postal mail.)


RapLeaf, a company that advertises that it has "real-time data" on 80 percent of U.S. email addresses, says that it gives customers "total control over the data we have on you," and allows them to review and edit the categories (like "estimated household income" and "Likely Political Contributor to Republicans") that RapLeaf has connected with their email addresses.


How do I know when someone has purchased data about me?

Most of the time, you don't.

When you're checking out at a store and a cashier asks you for your Zip code, the store isn't just getting that single piece of information. Acxiom and other data companies offer services that allow stores to use your Zip code and the name on your credit card topinpoint your home address — without asking you for it directly.

Is there any way to stop the companies from collecting and sharing information about me?

Yes, but it would require a whole lot of work.

Many data brokers offer consumers the chance to "opt out" of being included in their databases, or at least from receiving advertising enabled by that company. Rapleaf, for instance, has a "Permanent opt-out" that "deletes information associated with your email address from the Rapleaf database."


But to actually opt-out effectively, you need to know about all the different data brokers and where to find their opt-outs. Most consumers, of course, don't have that information.

In their privacy report last year, the FTC suggested that data brokers should create a centralized website that would make it easier for consumers to learn about the existence of these companies and their rights regarding the data they collect.


How many people do these companies have information on?

Basically everyone in the U.S. and many beyond it. Acxiom, recently profiled by the New York Times, says it has information on 500 million people worldwide, including "nearly every U.S. consumer."


After the 9/11 attacks, CNN reported, Acxiom was able to locate 11 of the 19 hijackers in its database.


How is all of this data actually used?

Mostly to sell you stuff. Companies want to buy lists of people who might be interested in what they're selling — and also want to learn more about their current customers.

They also sell their information for other purposes, including identity verification, fraud prevention and background checks.

If new privacy laws are passed, will they include the right to see what data these companies have collected about me?


In a report on privacy last year, the Federal Trade Commission recommended that Congress pass legislation "that would provide consumers with access to information about them held by a data broker." President Barack Obama has also proposed a Consumer Privacy Bill of Rights that would give consumers the right to access and correct certain information about them.


But this probably won't include access to marketing data, which the Federal Trade Commission considers less sensitive than data used for credit reports or identity verification.

In terms of marketing data, "we think at the very least consumers should have access to the general categories of data the companies have about consumers," said Maneesha Mithal of the FTC's Division of Privacy and Identity Protection.

Data companies have also pushed back against the idea of opening up marketing profiles for individual consumers' inspection.

Even if there were errors in your marketing data profile, "the worst thing that could happen is that you get an advertising offer that isn't relevant to you," said Rachel Thomas, the vice president of government affairs at the Direct Marketing Association.

"The fraud and security risks that you run by opening up those files is higher than any potential harm that could happen to the consumer," Thomas said.



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