Citizens' Issues
Rail Neer racket: CBI recovers Rs.4 lakh fake currency
The CBI told a court here on Monday that searches conducted as part of its probe in a case of supplying inferior-quality packaged drinking water in premium trains had led to recovery of approximately Rs.28 crore out of which around Rs.4 lakh was counterfeit.
 
After hearing the arguments, Special CBI Judge Vinod Kumar allowed probe agency to quiz, for five days, to interrogate arrested railways officers Sandeep Silas and M.S. Chalia and businessman Sharan Bihari Agarwal.
 
The Central Bureau of Investigation arrested the three on Saturday and on Sunday, all the three were sent to a day's police custody.
 
They were presented before the court on Monday after expiry of their one-day police custody.
 
The CBI while seeking custody of the three accused told court that it has recovered Rs. 28 crore from the possesion of Agarwal, owner of R.K. Associates Pvt. Ltd, which was managing supply of packaged drinking water, out of which Rs.405, 500 was fake currency.
 
It added that accused has not given reasonable explanation for the possession of huge cash and therefore to establish the chain of cash flow, custodial interrogration is required.
 
Silas and Chalia are required to be interrograted with respect to their investment in various companies and properties which is either in their names or in the names of their family members.
 
The agency also submitted that they are investigating the role of railway officials in favouring Agarwal, and also held the accused are influential people and can tamper with evidence and documents related to the case.
 
The CBI said that accused were not cooperating in the probe and they were required to be interrogated regarding some bank lockers in and outside Delhi and also in Agra.
 
Defence counsel of the accused opposed the plea and said their clients were cooperating with the agency.
 
One of the defence counsel said that the packaged drinking water of the other companies were supplied due to insufficient quantity of Rail-Neer brand. 
 
According to a CBI release, Sandeep Silas is a 1984-batch Indian Railway Traffic Service (IRTS) officer.
 
Chalia, the second officer, also came under the scanner of the CBI for the alleged involvement of his son's company in the scam.
 
The CBI suspected that the private catering companies could have paid illegal remittances to the officer through the company run by his son for favours shown to them for supplying inferior quality of packaged drinking water on premium trains.
 
On Friday, CBI registered a case against Chalia, Silas and seven private companies -- RK Associates Pvt Ltd, Satyam Caterers Pvt Ltd, Ambuj Hotel and Real Estate, PK Associates Pvt Ltd, Sunsine Pvt Ltd, Brandavan Food Product and Food World -- under the provisions of Prevention of Corruption Act.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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HC imposes Rs.50,000 cost on AAP lawmaker
The Delhi High Court on Monday imposed Rs.50,000 cost on AAP legislator Surender Singh for delay in filing response on an election petition of BJP leader Karan Singh Tanwar alleging that he furnished false information about his educational qualification in a poll affidavit.
 
Joint Registrar Ashutosh Kumar imposed the cost after Surender Singh's reply was not found on record, but he however filed his response in the petition. The registrar had earlier granted a last opportunity to him.
 
Surender Singh, the Delhi Cantonment legislator from the Aam Aadmi Party, had denied the allegations and told the court that the allegation was "frivolous, vague and misconceived".
 
Tanwar, in his petition, said Surender Singh "misrepresented himself to be BA in 2012 from Sikkim University... which amounts to corrupt practice within the meaning of the Representation of the People Act".
 
He had said a Right to Information (RTI) reply from Sikkim University said it did not have any record of a student named Surender Singh, and sought the court's directions to declare Surender Singh's election "void".
 
Surender Singh had said that he completed his graduation from the Eastern Institute for Integrated Learning in Management (EIILM) University in Sikkim, but due to an inadvertent typographical mistake, the name of the university was shown incorrectly.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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RBI’s Diwali gift to India Inc! But what is there for the common man?
Despite all media hype and excitement over RBI's repo rate cut, the common man is in for a rude shock, as interest rates on all savings schemes are also being reduced to the detriment of savers, who have no say in these matters
 
Kudos to Reserve Bank of India (RBI) for its Diwali gift to India Inc. Late last month, the RBI surprised the market with 50 basis point (bps) cut in the repo rate. This cheered the industry and the central government, who hailed the rate cut as a move that will propel the economy to a higher growth trajectory.  Finance Minister said that the rate cut will help the recovery process.  Whether it will indeed achieve the desired result is anybody’s guess. There are too many imponderables and the real beneficiaries of RBI action are few and far between, for a variety of reasons. 
 
Will industries benefit?
 
The leaders of trade, commerce and industry were excited because they expected that the rate cut would lead to an equivalent reduction in lending rates of banks. But banks are reluctant to pass on the entire interest rate reduction, since it adversely affects their profit, which is already under stress due to bourgeoning non-performing assets (NPAs). 
 
While the RBI has reduced repo rate by 125 basis points (i.e. 1.25%), since January 2015, banks have passed on only 60 to 70 basis points to their borrowers so far. 
 
While RBI has been nudging banks for transmission to the maximum extent, banks have their own reasons not to pass on the entire reduction, causing a bit of unhappiness among the corporates. Nevertheless, government hopes that the reduction in repo rate will improve the investment climate in India and provide impetus to the projects that are suffering due to the high cost of funding, thereby helping banks to bring down their NPAs also. 
 
The rate cut is certainly a sentiment booster for industry, and will help reduce their borrowing cost to an extent and improve their cash flow giving them a ray of hope during these uncertain times due to turmoil in Europe and China.
                                                
Home loan beneficiaries to benefit: 
 
Home loan borrowers too will benefit, as banks are willing to reduce lending rates to homebuyers for several reasons. Firstly, with lower borrowing costs, they will increase their lending to this sector.  As this is the safest way to increase their retail loan portfolio, since the delinquency is lowest in housing loans. Secondly, RBI has since rationalised the risk weight and loan to value ratios, which gives them better leverage and return on equity will improve to some extent. Thirdly, reduction in interest rate will help debt-ridden builders to reduce their borrowing cost and some of them may pass on a part of such savings to consumers.
 
Home loan borrowers, though not very large in number, are expected to benefit by this to the extent of cut in interest rate as well as reduction in the price of houses. It is certainly good news for homebuyers, who will benefit by lower equated monthly instalments (EMIs) if they borrow from banks or housing finance companies.
  
But what does the common man get from the rate reduction?
 
According to government statistics, inflation measured by consumer price index (CPI) is slowly going down, which should benefit the common man. But in reality, the prices of food items of everyday use are continuously rising, though in small doses, leave alone coming down. As per the monetary policy statement of RBI, “inflation expectations of households remained elevated in double digits likely in response to recent month-on-month increase in the prices of vegetables and pulses.” 
 
In fact, CPI for the month of September 2015 came in at 4.41%, much higher than the 3.66% recorded in the month of August 2015 as just announced last week.  Obviously, this reduction in repo rate may further fuel inflation, unless rain gods come to our rescue. 
 
Besides, ratings agency India Ratings’ says that the interest rate cuts and hikes have been utilised by banks “to absorb the upside and pass on the downside to customers”. 
 
RBI has cut repo rate by 125 bps since January 2015, and banks have cut one year deposit rates by an average 130 bps but the lending rates have fallen by a meagre 50 to 60 bps, including the base rate cuts announced by banks recently. Banks are using the policy cycle to their advantage, says the rating agency. 
 
From a study of the last 10 years, it appears that in most cases when policy rates have reduced, deposit rates have come down faster and the quantum has also been higher compared to lending rates, the note says.
 
So what has the large majority of common people who do not borrow from banks got from this repo rate reduction? There are no tangible benefits to the common people by this rate reduction. On the contrary, despite all the media hype and the excitement over repo rate reduction, the common man is in for a rude shock, as interest rates on all savings schemes of the govt. are also being reduced to the detriment of the large majority of savers, who have no say in these matters.  
   
Interest rates on small savings schemes to fall: 
 
The deposit rates offered by banks have already come down and as if to add insult to injury, interest rates on savings schemes of the government are likely to be reduced to match the deposit rates of banks. If the interest rates on senior citizens savings schemes and the post office savings schemes are also reduced, ordinary citizens, who make their living from the interest derived from bank deposits and other small savings schemes, will suffer the most. By reducing the interest rates on all savings schemes, innocent, semi-literate people will fall a pray to the Ponzi schemes promoted by the fraudsters who will cheat them making life miserable for the hapless victims.    
                                 
Middle class and the lower middle class, who form more than 50% of our population, are at the receiving end of the price rise without commensurate increase in their earnings. For instance, two years back when the oil price was much higher, most of the public transport companies raised their fares according to the oil price existing then. But since then, oil price has come down by nearly 50%, but none of these transport companies have reduced fares, and the public are still paying the same old fares. Same is the case with railways, power, telephone and many other utilities that have not reduced their tariffs even though the oil, diesel and gas used by them cost much less now. 
 
Even today, when the domestic gas price has been reduced, the biggest beneficiary of the fall in gas prices is the government, whose subsidy burden has steeply come down and the common man continues to pay the same price paid two years back. It is, therefore, a myth to say that the fall in inflation directly benefits common people, as the principle of ‘what goes up must come down’ does not apply mostly to prices of essential articles of daily use.  
 
What can RBI do to mitigate the sufferings of the growing middle class?
 
Though RBI is right in bringing down repo rate to prop up the economy, they certainly have a duty to take care of the common people, who find it difficult to make both ends meet due to reasons beyond their control. Occasionally, we see RBI Governors sympathising with common people and refuse to act under pressure unless they are thoroughly satisfied that their actions are in the best interest of common people. 
 
With a view to improve the life of common people of our country, RBI should walk the talk by taking some positive steps to offset the fall in interest rates, which will severely hurt the savers who depend on bank interest for their livelihood. Here are three concrete suggestions for RBI to urge the government to implement them for the benefit of all stake holders.
 
1. There is a need to exempt a part of bank interest from personal income tax to encourage savings through bank deposits. As the entire interest earned on bank deposits is now subject to income tax beyond the basic exemption, the government should exempt at least an amount up to Rs2 lakh from the basic exemption, which will help in improving the yield on bank deposits. 
 
2. At present, interest earned on savings accounts in excess of Rs10,000 is taxable, which is out of sync with banking operations. This is because every bank is anxious to improve their savings deposits and exempting the entire interest on savings bank accounts will give a boost to achieve this objective. Besides, to develop savings habit among the young and the new generations of savers, government should exempt from I-T the entire interest earned on recurring deposits as well. This will not only benefit savers but also help in developing customer loyalty to banks, as these are long-term deposits generating value to savers. 
 
3. The tax deduction at source (TDS) on bank deposits is the most obnoxious regulation, which causes considerable irritation and displeasure, provoking people to shun banks for investing their surplus funds. There is also a dichotomy in the present regulations where senior citizens are not required to pay advance tax on other than business income, but are still subject to TDS on their bank interest. With the help of technology, banks today report to I-T department all interest earned by depositors, so much so, nobody can evade tax on interest, if applicable. Therefore, to make life simpler for individual savers and encourage them to patronise banks, the government should completely abolish TDS on bank deposits.  
 
These initiatives will be of immense help to not only small savers but also the banks to improve deposit inflows, which otherwise are likely to be diverted to unproductive assets and risky investments in search of higher returns.
 
RBI can do yeoman service to the common people of this country and to the banking industry by persuading the government to radically transform the income tax regulations applicable to bank depositors on the above lines, which can create a new paradigm of customer satisfaction and banking excellence, not experienced so far in our country. If these ideas are implemented in the ensuing central government budget, it will be a New Year gift to the common people of this country, closely following the Diwali gift to India Inc. 
 
(The author is a financial analyst, writing for Moneylife under the pen-name ‘Gurpur’.)

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COMMENTS

Chandragupta Acharya

1 year ago

I am glad you have raised this issue, which no one seems to be talking about. If rate cuts were a solution to low economic growth, why are western economies not reviving despite near zero interest rates? No has an answer to this.

Haresh Patel

1 year ago

There are several negative effects of rate cuts That are not taken into account. One is depositors get less interest which means they can spend less. The reduction in mortgage rate will actually cause house prices to go up more than offsetting the reduced rates. The already ridiculous inflation in house prices makes any reduction in mortgage rates meaningless. Economics is a pseudoscience perhaps worse than astrology. In a resource constrained economy financial manipulations do not produce any positive effects. It only shifts wealth from section of society to another usually in the wrong direction.

laxman guruvayur

1 year ago

It is interesting to read the article given by (Gurpur-fin analyst )about the present eco scenario and the action by RBI in reducing repo rate
The intl. oil price having come down has not made impact in our domestic transport fares/transportation of goods tariff and fuel price for vehicle owners.
Fin analysts and economists only give pep talks and write aricles which one can read and get satisfied to the extent.The Govt/RBI and MOF are just fooling around with the economy and not doing anything to curb inflation/hoarding and improvePDS.
Reducing repo rate will have some sense if Banks pass on to customers for finance in retail loans.RBI Governor has failed in his promises when he took the saddle in Oct2013.

u k saluja

1 year ago

Extremely valid observations made pertaining to levy of tax on bank deposits which is perhaps the only way for senior citizens to keep their money safely for meeting their expenses for medical and other emergent requirements. Corporate deposits are absolutely unsafe and unrealiable looking at the winding up of companies like micro Technologies india ltd., Avon Corporation ltd., mumbai after collecting huge amounts as FDs and failure on the part of Unitech to pay even interest to their FD holders. Companies after collecting FDs are now seeking approval from CLB for extension of time in repayment of their matured FD claims thereby putting small investors to terrible financial hardships. Mca/clb/liquidators should help small investors in settling claims on top most priority after selling assets of such wound up companies. Thanks.

Anand Vaidya

1 year ago

Fully agree with the points you raise.

Certainly TDS & advance IT is the foulest of all that the gov has done. Must be removed immediately.

Also there must be a cap on bank charges such as NEFT, fines etc. Banks are fleecing customers in the name of "charges"

Vinayak Bhimrao Mudholkar

1 year ago

EMI = earnest monthly instalments? or equated monthly instalments

nginx

1 year ago

Not even a year ago, SBI's highest interest rate on FD/RD was 9%. Now within 12 months, that rate has come down to 7.5%. Only 7.25% for a 1 year deposit. So a 150-175 basis point rate cut has happened within a very short term. After taxes (30.9%), a 1 year term deposit will give 5% only.

Do the banks really think anybody should deposit their hard earned money at those rates? They must be crazy. I believe it's time to move our money to other asset classes. Banks will learn the hard way when deposits stop rolling in.

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