Many customers, harassed HDFC Bank’s new KYC norms, have complained to Moneylife on the issue. Moneylife followed up with HDFC Bank and the regulator and this is what we found out
HDFC Bank, which has been the subject of innumerable customer complaints about harassment to resubmit Know Your Customer (KYC) documentation, has been told by the regulator, Reserve Bank of India (RBI), not to demand a full re-submission unless there is a significant change in customer profile. Moneylife has received many complaints from customers being harassed by the bank for re-submitting KYC details which have all been forwarded to Aditya Puri, the managing director. Initially, the bank took the stand that it was only following RBI directives on KYC and that continuous re-submission of details was also a global norm.
However, Moneylife pointed out that almost all the complaints received by us were only about HDFC Bank; no other banks seemed to be asking customers to re-submit KYC documents. Kartik Jain, vice-president at the bank said, “KYC is a regulatory requirement and the RBI has a set of FAQs regarding the same published on their website: http://www.rbi.org.in/scripts/FAQView.aspx?Id=82. However, this link does not insist that KYC norms will have to be compulsorily and automatically updated every three years or else customer account will have to be made inoperative.
In fact, one customer, Trishul Wadhwa wrote to us saying, “The teller at the other end (HDFC Bank) was not that courteous. He was mildly threatening that I needed to complete KYC formalities for my savings account within the next few days, or else…” Mr Wadhwa says that other banks with whom he is a customer have not made such a demand. Prof Anil Agashe of Pune had similar complaints. He pointed out that his credit card dues and his electricity bills were debited directly from his HDFC Bank accounts, providing ample evidence that there was no change in his KYC details. However the bank found this unacceptable.
Moneylife then took up the matter with the RBI. Senior RBI officials told us that they had only asked banks to “complete the review of risk categorization”. While this involves updating addresses and including photographs, if they do not exist on the records, the address details only need a one-line confirmation from the account holder. This could all be done without harassing customers to re-submit all KYC documents. Moneylife pointed out that many complaints were from high-networth individuals who were assigned relationship managers to sell them third-party products. We asked why these officials could not hand-hold customers to get details. We also learn that most banks have created a check-list based verification that does not require asking customers to resubmit documents to the bank.
Mr Puri also told Moneylife, three months ago, that the bank changed its rules on sale of third party products, in order to deal with the large number of complaints about mis-selling, especially of insurance products. He claimed that this had led to a significant drop in complaints.
At our request, Neeraj Jha, communications head of the bank has outlined the following process of “right selling” that has apparently been adopted by the bank. He says, “To ensure that the customer is buying a product he actually needs, we communicate and engage with him at three distinct stages. Each time, the policy features are detailed and the customer has an opportunity to exit, if he thinks the product doesn’t align with his need. At the outset, the insurer (HDFC Life Insurance Co) initiates a verification call to the customer to explain the policy features and benefits and make sure it serves the customers purpose. This call is recorded. Once the customer has agreed to take the policy, he receives a letter from the bank in addition to his policy documents, highlighting policy features, premium, term and charges/commission. A dedicated email ID and address of the bank for grievance redressal is also provided in the letter.”
Furthermore, he says, “The customer is given a choice to exit the policy without any charges within the free look-in period, which starts from the receipt of the policy documents. When it comes to identifying our customers, it's pertinent to mention that sale of third-party products is restricted to HDFC Bank customers only, with payments debited from their bank accounts only. Most Important Document (MID) lists key points that need to be noted.“
Moneylife invites comments from bank customers on the efficacy of this new initiative by the bank.
T+1 settlement appears to be a good idea on paper. However, brokers and small investors are not too happy with it due to lack of infrastructure like banking services
Yesterday, Moneylife published an article T+1 settlement system proposed by SEBI: How will it benefit you? written by Gurpur. However, several of our readers, including brokers and investors have termed the T+1 settlement system as great idea only on paper. The banking system will be a big bottlenck to put T+1 into practice.
“Assuming cheque truncation system (CTS) comes into place and I get the cheque from the client at 6pm, where do I deposit it? Even today, when the client pays on T+1 basis, it is the broker who pays the exchange from his own pocket, because the proceeds are realised only after two days. No tech savvy banks credit the proceeds on the same day. Banks may be tech savvy, people are not. Even today, I write cheques because it is convenient to pay my bills although electronic clearing service (ECS) is available,” said one of the brokers.
Hemant, one of our readers, always get his shares directly from the exchange on pay-out day only. He says, “Even now people are allowed to sell shares, next day of purchase. The only risk is of short delivery, which investors have to bear. As per new system suggested, the buyer will have to pay T-1 (i.e one day before he/she purchases), so that broker has money, to pay-in the market. Hence I feel that, till we rectify the problems of banking system no point in advocating T+1 in the market.”
Another issue with the T+1 settlement is the transfer of shares from client’s demat account to brokers account in a short span. The trading closes at 3.30 pm. The process, however, gets over only by 5pm. This means only those who have given a power of attorney (PoA) for debiting shares can survive in this system. In short, small brokers who cannot provide depository participant (DP) services have to shut shop or tie up with clearing members for opening demat accounts to facilitate PoA system, the use and abuse of which is well known. Further the brokers cannot insist on a client to give a PoA or open a demat account where he wants.
Arun Adalja, another reader, feels the T+1 system is good but difficult in practice and may create problems for small investors who do not have internet facility readily available. “In such case (unavailability of internet) one has to carry the signed delivery instruction and his cheque book while visiting the DP. The visits to DP would also increase.”
There is already an option to pre-pay in case of heavy selling by a single client so that margin is released earlier. Brokers can always pay their clients a day earlier in case there is such requirement, provided the shares come into his account.
While the regulator wants to introduce T+1 system, brokers and investors, especially small investors seems to be reluctant to adopt it due to practical difficulties. But, of course, when has the regulator engaged with actual users of system. Retail participation in the stock market is decreasing day by day because of poor regulation and cumbersome rules. The T+1 concept is another step in that direction.
Nomura Equity Research on the media sector believes that that the initial seeding of STB by cable operators, which has not been backed up by proportionate increase in service infrastructure, will mean that a significant part of these subscribers can still churn away to the DTH industry in the medium term
As per the latest data release by the ministry of information and broadcasting (MIB), between 1 March 2013 and 12 April 2013, multiple system operators (MSOs) have seeded 4.45 million set-top box (STB) compared to 0.38 million STB seeded by direct-to-home (DTH) players. This highlights that, in the short term, MSOs have gained more market share versus the DTH industry which is now focussing on profitability (package price increase), cash flows (reducing subsidy on STB) and adding “value conscious” and not “price conscious” customers, which will impact churn positively.
Dish TV increased the price of its STB in February, which was followed by similar action from other players like Tata Sky in February. While some of MSOs have also increased prices (Den Network increased the price of its STB by Rs200), but clearly the differential versus DTH has increased as the DTH companies choose to position themselves as an “upgrade option”.
Nomura Equity Research in its Quick Note on the media sector believes that that the initial seeding of STB by cable operators, which has not been backed up by proportionate increase in service infrastructure, will mean that a significant part of these subscribers can still churn away to the DTH industry in the medium term.
Nomura expects Dish TV’s reported ARPU in 4Q to improve to Rs161.8 (versus Rs160 in 3Q and Rs159 in 2Q). The brokerage has factored in the following impact to arrive at this number:
Package price increase of July 2012 to be reflected partially in 4Q ARPU—The company hiked the price of its non-south pack by Rs20 in July 2012 which has been partially captured in 2Q-3Q ARPU. Nomura expects its effect to be visible in 4Q as well (building in Rs3 increase in 4Q).
Lower number of days in 4Q—As per the company, billing to customer is done on per day basis. Since 4Q will have two lesser days than 3Q (as February 2013 had 28 days), reported average revenue per user (ARPU) will be depressed by around 2.2% compared to 3Q assuming everything remains same.
Removal of free one-month subscription period for new subscribers—The company has removed the one-month free viewing period on purchase of new connection from February 2013 end (at the time of its latest STB price hike). This would have a positive impact on ARPU.
Content negotiation for FY13 between Dish TV and Media Pro was partially (around 27% as per Nomura’s estimate) completed in 3Q. The brokerage expects the negotiation to be complete in 4Q and, therefore, as in 3Q, Dish TV will pay increases pertaining to prior
FY13 quarters as well in content cost to Media Pro in this quarter.
On other hand, Zee Entertainment has not yet accounted for any incremental revenue from increase in content cost post partial competition of negotiation between Media pro (JV between Zee and Star) and Dish TV in 3Q. Nomura analysts expect Zee’s subscription revenue to be boosted in 4Q as the company will retrospectively capture increase in content revenue from Dish TV.
The brokerage expects no major surprises in the Dish TV results except that subscriber addition will be lower given that it took a lead in increasing the set top box price:
Content cost increase—Assuming 12% y-y increase in content cost as guided for FY13, the brokerage expects content cost to increase by around Rs693 million in 4Q y-o-y.
ARPU—Nomura expects the company to report 4Q APRU of Rs161.8 as it factors in the remaining impact of the July price increase, impact of fewer number of days in February and removal of one-month free subscription period for subscribers in February.
Subscriber addition—As highlighted above, STB price increase will mean subdued subscriber addition in the short term for DTH players. Nomura expects Dish TV to add 0.35 million subscribers in 4Q (versus 0.8 million in 3Q).
Strong growth in subscription revenue to continue—The brokerage expects Zee’s subscription revenue to be boosted (it will get around Rs391 million based on Nomura’s assumption of around 40% market share ) in 4Q from increase in content cost post negotiation between Media Pro and Dish TV which Zee will book retrospectively for FY13 in 4Q. In 4QFY12, Zee captured July 2012-March 2013 (nine months) revenue from Media Pro of Rs506 million. Adjusted for July 2012-Dec 2012 revenue in 4QFY12, it expects Zee’s domestic subscription revenue to grow by nearly 30% y-o-y in 4QFY13.
Management has indicated increased losses in the sports business in the quarter—In 4Q, Zee broadcast the South Africa-Pakistan (3 Tests, 5 ODIs and 2 T20s) and South Africa-New Zealand (2 Tests, 3 ODIs and 3 T20s) cricket series which will lead to higher losses in the sports business. The brokerage is building in around Rs435 million loss in sports business in 4Q.
Steady growth in advertising—The brokerage expects advertisement revenue to grow by around 15% driven by a combination of robust advertising spend especially by FMCG companies, and uptick in advertising revenue from sports.