The State Information Commissioner has issued a show-cause notice to the PIO of home ministry for not providing information under the RTI Act, within the stipulated time
Taking a strong objection on the Public Information Officer (PIO) of the home ministry for issuing orders instead of the First Appellate Authority (FAA), the Maharashtra State Information Commissioner (SIC) has issued a show-cause notice to the PIO.
Hearing an appeal filed by noted activist Samir Zaveri, SIC Ratnakar Gaikwad said both the FAA and the PIO are prima facie found neglecting the application filed under the Right to Information (RTI) Act.
During the hearing, Zaveri pointed out that the information sought by him in point A and C in his RTI application dated 13 July 2012, was still not provided by the PIO. To this, the PIO could not provide any explanation.
The SIC also noted that from the facts before the Commission it appears that the then PIO was guilty of not furnishing complete information within the time specified under sub-section (1) of Section 7 as per the requirement of the RTI Act. “It appears that the PIO’s actions attract the penal provisions of Section 20(1) and Section 19(8)(g). A show-cause notice is being issued to him, and he is directed give his reasons to the Commission to show cause why penalty should not be levied on him on 1 April 2013,” Mr Gaikwad said in his order.
Mr Gaikwad also directed the PIO to allow Zaveri to inspect the records related with the information he sought. The PIO can also take help from otter officers if needed under Section 5(4) of the Act for providing the information to Zaveri, the SIC said in its order on 11 March 2013.
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.
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.