MF houses receive 3.94 lakh investor complaints in 2009-10, non-receipt of dividends tops the chart

Non-receipt of dividends and redemption proceeds remains the biggest worry for mutual fund investors 

Non-receipt of dividends and redemption proceeds remains the biggest worry for mutual fund investors. For instance, if an individual has invested in four different schemes and has provided an incorrect address or pin code, the dividend warrant may not reach his/her correct address. 

In a bid to improve the grievance redressal mechanism, market watchdog Securities and Exchange Board of India (SEBI) had mandated fund houses to display investor complaints on their respective websites as well as the website of the Association of Mutual Funds in India (AMFI). According to data put up so far on the AMFI website, the 37 fund houses have received 61,604 'non-receipt of dividend' complaints in the financial year 2009-10. There were 51,509 complaints pertaining to non-receipt of redemption proceeds. Issues relating to non-updation of PAN, bank details, nomination, etc attracted 42,515 complaints from investors.

Industry experts point out that it is negligence on the part of the investor while filling up forms as the primary reason behind such complaints. Often, the agent or distributor also fills in the forms on behalf of investors, who may end up furnishing erroneous details.

The mutual fund industry has approximately four crore investor accounts. Many of them are multiple accounts held by single investors. According to the aggregated data available with AMFI, the 37 fund houses received almost four lakh investor complaints during the financial year (FY) 2009-10. If we compare that to the number of folios, the four lakh complaints amount to just 1% of the folios.

"Only bigger dividend amounts are sent by registered post and smaller amounts are sent by ordinary post. If the small dividend warrants are lost, then investors have to obtain a 'reconciled statement' from banks because dividend warrants are usually issued through a cheque payable at par. The 'non-payment certificate' comes easily when a single cheque is issued in favour of a single person at a single bank. But, for 'at par payable' cheques, it takes an average of six months to get a 'reconciled statement'. So even if one complains to MFs, the transaction cannot be retraced easily," Debasish Mohanty, head-marketing, UTI AMC, told Moneylife.  

"Recently, there have been cases where wrong people have claimed dividends on behalf of genuine investors. Therefore, to tighten that loophole, fund houses have applied further restrictions. For instance, if one requests change of address, we will ask the investor to provide proof of old address, new address, etc," added Mr Mohanty.

Industry experts say that the introduction of electronic clearing system (ECS) and core banking facility has helped in smoother distribution of dividends.

Redemption cheques are normally sent by registered post, where the amount involved is higher, unlike dividend cheques. Experts point out that investors do not provide details properly while filling up forms. Many application forms received by the registrar & transfer agents (RTAs) and fund houses are incomprehensible, which results in incorrect data entry. Most cases occur during the time of new fund offers (NFOs) wherein a distributor has to submit many forms.




4 years ago

Credit to the account with a bank must be made compulsory to remove avoidable wastage of time, energy and money.


6 years ago

I have handful experience handling the problems associated with mutual fund schemes. I would like list a few suggestions and observations. SEBI is a big talker and did nothing to bring standardization of service requets. Crying need is that irrespective of the scheme or fund house, common servcie request formats have to be undertaken and published by AMFI. Dont leave this to MF houses. The most confusing service request is on change of bank mandate. Each MF has its own rules and all are equally confusing. The problems encountered in this area are either due to data capture or investors wrongly/carelessly writing their bank manadates or genuine change in the bank mandate. List each possible situation and provide a clear cut requirement and let this be published by AMFI. Further, it has to be manadatory that every common chnage in rule be published by AMFI. For example, change in cut off in Liquid schemes. Why each MF has to spend lakhs of ruppes in releasing the same content? Instead AMFI should publish and MFs have to share the cost. Investors understand better if all industry releases, changes, requirements emanate from a single body. AMFI is just a sitting duck. In all this confusion, poor RTAs are made scape goats whenever investors' grievances are aired. RTAs cant be more efficient than the MFs they service. If MF houses have no keenness in bringing uniform services through AMFI, what these poor and hapless R&T agents would do. In fact, the RTA guys have been doing excellant but thankless job. For instance, I had an excellant welcoming and resolution oriented response from Mumbai office of Karvy and i am sure CAMS also must be doing a good job. Today an investor can pick a piece of paper, scribble for redemption, and expect outcome irrespective of teh manner he expressed in the request. Can any one sell shares through a DP like this? SEBI did nothing.

shamik tiwari

6 years ago

SIR, my mother invested in reliance equity fund in folio no.42618944553in year 2006. on 25 aug 2010 she has submitted a request for redeemption. redeemption processed on 30 th aug. but the redeemption amount could not credited to account because of mistake on the part of the agent or distributor who filled in the forms on behalf of my mother. he did two mistake(I) he wrote cutomer name ASHA TIWAR insteadof ASHA TIWARI.
(II) the payment was done by my bank account cheque instead of my mother. so instead of my mother bak details he filled my bank detals.
suggest me the the right procedure to get rid of this problem.


6 years ago

I feel it is only just to put this new comment on this forum.

Post my comment on this article, promptly the Karvy machinery was put in action. The GM at Mumbai got in touch with me on my email and also left a standing instruction at UTI (where I am forced to frequent every few days), a very smart move indeed, I must say, to get my name and contact details the moment I came there next. The moment I visited UTI at Churchgate, I was asked for my contact details and promptly the GM contacted me and requested to meet me. We met the next day and I must say that he had come there with a determined and positive mind and desire to not only look into problems faced by me but thereby eliminating and/or reducing similar problems faced by lakhs of investors. In our talk of nearly 4 hours, it was apparent that the GM and Karvy management were very keen indeed to know the problems at the investor levels so that they can improve on them and become more investor friendly in their working, at their counters across and also on the web. So, though the web site as of today is yet to evolve to make it investor and user friendly, they have promised to work towards it and improve upon it asap.

What I have liked is their promptness, willingness to address investor issues at the grass root level.

Thank you Moneylife for this platform and thank you Karvy for your whoeheartedness in resolving issues.


6 years ago

UTI is one of the worst amc's in terms of customer service.They donot have properly trained customer service executives to guide a investor on any of the customer service requests.
I had once given for a partial redemption , but my whole corpus was redeemed, but the problem doesnot end there though all my bank details were updated (ie my ifsc and micr) i got a warrant.This shows the professionalism displayed by AMC's.
I want SEBI to take some stringent action against the mutual funds who harass the customer in this way.


6 years ago

The good thing first:
I have scores of folios in numerous schemes under multiple heads. Yet I hardly face a problem of dividend not being received. Almost all go directly to ECS.

CAMS is excellent and I applaud their services as well as online website which I use it extensively since last one year. Their website is simple to use and user-friendly and provides all useful reports in a jiffy. No, I am not their marketing person.

Having said that, I would now like to point out the problems: The problems I face is with KARVY. I face maximum problems with them. e.g. In Reliance MF, the data is almost always wrong. The name, address, bank name, address... practically everything would be misspelt. In Reliance's case the problems end here. I do indeed get dividends in time.

But the combination of KARVY and UTI spells disaster. First of all, all old holdings show wrong data. e.g. Out of three holders the second and joint holders will show as Nominees, Anyone or Survivor becomes Joint, Birth date goes haywire, and so on. Okay the problems do not end here. When I complained about this at their Churchgate office, the officer accepted that there is Data Capturing Error. When you want to redeem, you realise that UTI and your money have almost become inseparable and they are so reluctant to return your money that most of the redemption requests would come back as 'Signature not tallying' after many days. It is known that the re-presentation of redemption request will take quite some time. Till that time the money lies with UTI. So, you ensure that every signature is attested. But then you are under estimating the ingenuity of UTI+KARVY. Even though bank account number is mentioned properly and a cheque copy is attached with redemption request, you now receive cheques with wrong bank account numbers. I have just received three cheques the same way. So, again it is know that for re-validation it will take many days. This is how your hard earned money is used by them and you once again have to work hard to get it back.

When this issue was raised, a very evasive and round about answer was given that because of frauds taking place Karvy+UTI are very stringent. That is why REDEMPTION CHEQUES WITH WRONG ACCOUNT NUMBERS ?

I would request Moneylife to carry out an article and study on these dubious ways to retain investors' money for as long as possible.

Karvy is pathetic. Their website too is so complex and un-user-friendly that I have never been able to use it.

R Balakrishnan

6 years ago

Involving the CDSL etc has created enormous problems. They do not uddate records in time. This is the biggest culprit. CAMS and Karvy were doing a good job.
Also, AMC's should send at least one yearly statement without demur. I never receive a statement except when any transaction is done. About dividends, if people give the bank account number correctly, there should be no problem. Half the time, the investor screws up and blames the AMC.

Earnings Review: Bajaj Auto, Dr Reddy’s, Sesa Goa, BoB, Asian Paints, United Spirits, CG, Lupin, Zee, UBI, Ashok Leyland and Glenmark

BAJAJ AUTO (Q1) - Zooming ahead of competition

Results were within expectations though sales were on the higher side and profit was on the lower side. All segments did well - motorcycles up 72%, two-wheelers up 71%, three-wheelers up 58% and exports up 82%.

Margins went up slightly due to scale of operation (volumes were up almost 70%) and lower employee costs. Increase in production at Pantnagar led to lower tax rate. Other income was also higher because of the Duty Entitlement Pass Book scheme benefits from the higher scale of exports. The management believes export volume will be strong and will be primarily driven by the African markets (51%) followed by Sri Lanka, Egypt and Columbia. Bajaj\'s total production capacity is
4.26 million units per annum (pa), which it plans to increase to 4.98 million units pa, but it may still face supply constraints in the festive season as it is already operating at full capacity. In its analyst call, it reiterated its guidance to clock 4 million vehicle sales in FY11. It seemed confident about the volume success of recently-launched models Pulsar 135 and Discover 150. The company has said that it has hiked prices in the export markets (it has already hiked the same in domestic markets) in July 2010. Bajaj expects steel and aluminium prices to soften and expects to benefit in terms of raw
material costs.

DR REDDY\'S LABS (Q1) - All eyes on the US

Adjusting for one-offs, both sales and profits were way below expectations. Revenue growth faltered due to lower-than-expected core generic revenue in the US and a fall in PSAI (Pharmaceutical Services and Active Ingredients). However, sales growth in India and Russia ROW branded finished dosage markets was strong. Betapharma (Germany) saw a further 6% reduction. Going forward, one needs to track traction in branded formulations and US businesses closely. Revenue generation from limited competition products (US) in 2HFY11E will be important. It now has five ParaIV/low competition products - namely Arixtra (GSK, Fondaparinux, preventing blood clots); Prilosec OTC
(AstraZeneca, omeprazole, controls stomach acid); Prograf  (Astellas Pharma, tacrolimus, lowers immune system); Lotrel (Novartis, amlodipine and benazepril, relaxes blood vessels) and Clarinex
(Schering, desloratadine, antihistamine).

SESA GOA (Q1) - A lot hinges on shipments picking up

Results were mostly better than expectations; realisations at $92/tonne were above almost everybody\'s expectations. Volumes were sharply lower q-o-q but 14% higher y-o-y. Iron ore costs per tonne also rose sharply. It is possible that iron ore shipments will pick up in 2HFY11 due to favourable weather but China demand needs to be followed closely.

Another big factor in stock performance will be ramping up of volumes. Existing permissions allow Sesa shipments of 25 million tonnes (MT) per year - it remains confident of ramping up production to 50MT in 2-3 years. However, it is facing challenges in getting new permits especially from the ministry of environment and forests (a recent example: the forest permits in Karnataka), which may
delay volume expansions. Rail freights may also weigh on the stock performance - these have gone up by Rs900/tonne from mid-March (largely applicable to Orissa in Sesa\'s case where its production is 640k tonnes). Mining companies are lobbying with the Indian Railways to cut freight.

BANK OF BARODA - Way ahead of the street

The bank surprised the street on profit and NII numbers. Overseas advances and deposit growth came in strong too - but could be peaking out. Asset quality slipped a wee bit. The bank has contained slippages below its target of 1.25% for the past six quarters. Restructured assets were Rs53 billion (2.8% of loans), of which ~9% have turned NPAs (bit on the higher side). However, its coverage ratios are more than adequate. Staff costs were lower. CASA at 35.3% slipped a bit q-o-q but is still to get back to 3QFY10 levels of 37%. Fee income growth is an area where the bank has scope to grow.

ASIAN PAINTS (Q1) - Margin protection

Results were generally better than expected numbers. Recent price increases indicate it will continue to defend margins. Another 2% price hike likely in August so there is some stocking up at the dealer end and that too has driven high sales this quarter. The company has warned that it could face high raw material prices especially in titanium dioxide and acrylic acid.

UNITED SPIRITS (Q1) - Good show (excluding AP)

Results were in line with estimates. Whyte & Mackay posted an EBIDTA of £5.93 million versus £5.44 million in Q1FY10. Volumes were impacted because of Andhra Pradesh where there was a delay in renewal of licenses. Excluding AP, volumes were up 15% y-o-y. As expected, interest charges shot up.

CROMPTON GREAVES (Q1) - International operations pick up

International subsidiary revenues picked up 7% in euro terms against a 13%-14% decline in the past three quarters. Subsidiary order inflow growth was also strong. While orders for its standalone power business remained strong too, the flat revenues were due to delays in client off-take and sluggish exports. Consumer products and industrial segments showed strong growth. Margins were better due to cost-saving measures.

CG maintained its full-year revenue growth guidance of 15% at the standalone level and 5% at the subsidiary level (in local currency terms).

LUPIN (Q1) - A little disappointing

Lupin\'s numbers were not quite up to the mark, probably because expectations were high. Excluding US one-offs, it reported a 15% increase in sales. The key revenue drivers in the quarter were
domestic formulations (up 21%, 34% of sales) and the US business (up 25%, 32% of sales). Japan growth was sluggish. Its US branded business reported healthy growth.

ZEE ENTERTAINMENT (Q1) - Star threat still clear and present

Results were more or less on the lower end of the expectations spectrum. Losses in the sports channels (Zee Sports and Ten Sports) dragged down margins. Ad and subscription revenue growth was steady.

UNION BANK OF INDIA (Q1) - Ambitious targets

Profit growth was at 36%; loan growth at 30% and NII growth was at 68%. The results looked good except for higher slippages. The management has set up ambitious targets - 25% loan growth; 22% deposit growth, CASA at 35% from the current 33%; RoE of 25%; RoA of 1.25%, transaction through electronic mode to reach 50% and gross NPA levels below 2.1% with slippages at 1.85%.

ASHOK LEYLAND (Q1) - Strong quarter

Good volume growth led to a 157% increase in sales. EBITDA margin at 10% was the best in 8 years. Since the Pantnagar plant has begun operations, interest payments are now no longer being capitalised, hence interest payments were higher - however, it is expected to make up for this in terms of margins. AL upped its volume guidance for FY11 to 89,000 units. Engine volumes declined to 4,000 units from 5,400, due to a fall in supply of \'Leypower\' engines to the telecom sector.

GLENMARK PHARMA (Q1): Out-licensing saves the day

Base business was subdued. The generic formulation business reported only 6% revenue from the USA. The domestic formulations business was good at 19%. Out-licensing revenue growth was good. Going forward, Tarka\'s generic launch will show fully from Q2, more out-licensing deals and milestone payments expected.


Exchanges gearing up to launch trading in currency options

New Delhi: The country's leading bourses are gearing up to start trading in currency options, a move that provides another alternative to traders for hedging against currency fluctuation, reports PTI.

While, the MCX Stock Exchange (MCX-SX) has started mock trading in currency options, two other bourses, the National Stock Exchange (NSE) and the United Stock Exchange (USE), are likely to launch the live trading soon after getting the approval from the Securities and Exchange Board of India (SEBI).

On Friday, market regulator SEBI allowed exchanges to introduce currency options on the US dollar pairing with rupee. At present, only trading in currency futures are allowed in the country in four currencies against the Indian rupee.

Currency option is a derivative instrument that gives an owner the right, but not the obligation, to exchange money denominated in one currency into another currency at a pre- agreed exchange rate on a specified date.

"We are applying to SEBI soon (for the launch of currency options trading) and will start as soon as the permission comes," a senior official of NSE told PTI on Sunday.

"The introduction of options trading is expected to give a fillip to currency volumes," a market expert said.

Exchanges are enthusiastic about the launch of currency options and said the approval has been long awaited by market.

"Introduction of currency options has been long awaited by market and is definitely a step in the right direction," United Stock Exchange CEO T S Narayanasami said.

Currency option is primarily a retail product and we hope corporates and small and medium enterprises (SMEs) to enter this market in a big way by hedging their forex risk at the minimal cost, he added. USE is yet to start operations.

"We will start full-fledged operations in currency futures in September, followed by trading in options and interest rate futures," Mr Narayanasami said.

On the likely benefits of exchange-traded currency options, Reserve Bank of India (RBI) chief general manager foreign exchange department (trade) G Jaganmohan Rao had said, "By doing that, we will have another option in our pocket. Companies and exporters both will benefit."

In August 2008, SEBI allowed exchanges to introduce currency futures, a derivative contract to buy or sell one currency against other on a specified future date, at a price decided in the contract.

RBI and SEBI jointly regulate these products. While RBI approves the products, SEBI decides on the trading platforms.


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