Regulations
Regulators seek to create financially aware and empowered India

The draft “National Strategy for Financial Education” seeks to create a “financially aware and empowered India” and convert savers into investors over five years

Mumbai: Financial sector regulators, including Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and the Insurance Regulatory And Development Authority (IRDA), on Monday proposed a nationwide survey for assessing financial inclusion and literacy in the country and educate 50 crore adults, besides providing financial education to school children, reports PTI.

 

The draft “National Strategy for Financial Education” seeks to create a “financially aware and empowered India” and convert savers into investors.

 

It pitches for a five-year action plan for financial literacy with initial focus on four sectors—banking, securities market, insurance and retirement planning.

 

The strategy, the draft said, is to undertake a massive financial education campaign to help people manage money more effectively to achieve financial well being by accessing appropriate financial products and services.

 

“In India, we need to convert savers into investors,” the draft, pared under the aegis of the sub-committee of the Financial Stability and Development Council (FSDC) and simultaneously released for comments by all financial sector regulators, said.

 

On more participation of domestic retail investors in the securities market, the draft said it will reduce dependence on foreign investors and domestic savers reaping benefits of corporate growth and reducing strain on government for investment in national infrastructure.

 

Acknowledging that increasing range and complexity of products has made it very difficult for an ordinary person to take an informed decision, the draft said financial literacy will help in protecting society and individuals against exploitative financial schemes and exorbitant interest rate charged by moneylenders.

 

Financial education will help to avoid over-indebtedness, improve quality of services and make wise financial decisions, the draft said.

 

On delivery channels for financial education, the draft policy said governments have recognised that it should start at school and that people should be educated about financial matters as early as possible in their lives.

 

“Our educational system should equip students with these necessary life skills, without which, education will be incomplete,” it said, adding the Central Board of Secondary Education (CBSE) has agreed, in principle, to introduce it in an integral manner in school education.

 

It said social marketing campaigns such as polio eradication, prevention of child marriage and female foeticide, can serve as models in financial education.

 

Pitching for using services of self-help groups and NGOs, the draft said mass media like TV, radio, print and internet should be exploited fully for financial education.

 

It further said there is a need of multi-lingual, toll-free helpline where an investor, customer and client can call and get friendly assistance.

 

“It (helpline) should be like a friend who is available to guide you in case of difficulties. All regulators can think of such initiative, if they have not already thought of it,” the draft proposed.

 

The document said the entire policy is sought to be implemented through existing institutional mechanism.

 

National Institute of Financial Education (NIFE) could be a specialised institute under National Institute of Securities Markets (NISM) reporting to the technical group for implementation of National Strategy for Financial Education.

 

The draft said as a very first step towards financial literacy, a nationwide sample survey through an outside agency like NCAER, should be carried out for assessing the state of financial inclusion and financial literacy.

 

The survey should cover the state of financial inclusion, awareness of financial products, financial competency and his/her attitude towards money and risk.

 

Click here to see the draft (http://www.sebi.gov.in/cms/sebi_data/attachdocs/1342416428845.pdf)

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COMMENTS

Dayananda Kamath k

4 years ago

regulators must be taught first as to what is their duty and how financial markets function many a times it is the regulators who manipulate markets and allow the manipulators to profit by their unwarranted actions and flimsy rules. and not bothered to take action on the guyilty instead they create rules so that everybody will become guilty and then they can choose and fleece.my complaint with prime ministers office and presidents office against all financial regulators is pending for last more than one year.

A BANERJEE

4 years ago

Who will investigate into the huge number of corruption complaints against SEBI itself?

MK Gupta

4 years ago

Despite all these attempts at eye-washing the unsuspecting public, nothing will change until and unless the floating of fly-by-night operators and their systematic looting of the people can be checked. And, this will go on under the very patronage of the regulator's pampered corrupt officials. Despite specific information about the top echelons of the SEBI, etc., the anti-corruption bodies refused to act against them, many of whom have been taken on boards of prestigious companies with the approval of the MoCA. Cheating is a very established modus operandi of the most successful businessmen--ask the IT people, who of course do receive crumbs of the left overs of these mafia, and the real truth will be known. Contrary to the public belief and misplaced govt. perception, it is really the IT deptt. which is in the know of the modus operandi, extent and the identity of India's underworld operators, ostensibly the leading lights of the society, film personalities not excluded. And that is why successive Revenue Secretaries "meddle" with IRS postings/transfers, as per a recent press report conveniently ignored by the mainstream media and the govt, and this most important arm of revenue collection will all along remain a mere subordinate deptt. in MoF under junior mandarins of the IAS. But, that apart, the registration and floating of bogus companies has not stopped, and there are still thousands fly-by-night entities allowed by the corrupt RoCs to be created which never file IT returns despite mandatory requirements and their promoters/directors never traced at their given addresses. Or, even if traced, the premises are found to be owned by very powerful political leaders/their cohorts. Income tax people from the top to bottom are happy with the petty "tips" received from these people, along with post-retirement placements, but the cream is shared by the top bureaucracy, as usual. SEBI itself requires a regulator to conduct a daily "integrity" (like internal) audit, as much as the IRDA, etc. do.

Vinayak Bhimarao Mudholkar

4 years ago

Instead of converting savers into ivestors; the regulators should change the casino like nature of Markets & save the already invested retail investors.

Deepak Parekh to head High-Level Committee on Financing Infrastructure

The committee is mandated to review existing policies and suggest necessary changes in the investment framework in the high-priority infrastructure sector

New Delhi: The union government appointed eminent banker Deepak Parekh as the new Chairman of the High Level Committee on Financing Infrastructure, reports PTI.

 

The committee was first set up in November 2010 under the chairmanship of Rakesh Mohan, former Deputy Governor of Reserve Bank of India.

 

The committee was mandated to review existing policies and suggest necessary changes in the investment framework in the high-priority infrastructure sector.

 

Parekh was appointed chairman of the committee earlier this month after approval from Prime Minister Manmohan Singh.

 

Parekh, who is the Chairman of housing finance major HDFC Ltd, would function in an honorary capacity with the rank of a minister of state.

 

Parekh is also a part of the sub-committee of the Prime Minister's council on Trade & Industry for promoting Financial Inclusion, besides being a member of the expert group on restructuring of Hindustan Aeronautics Ltd (HAL).

 

Parekh is known for his frank views on various policy issues and has often been drawn in for consultation during crisis situations including in Satyam and UTI cases.

 

While setting up the HLC on Financing Infrastructure, the government had said in November 2010 that it would have a tenure of 18 months.

 

The other members of this committee now include R Gopalan (Secretary, Department of Economic Affairs), DK Mittal (Secretary, Department of Financial Services), insurance regulator IRDA Chairman J Hari Narayan, PFRDA Chairman Yogesh Agarwal, RBI Deputy Governor Subir Gokarn, SBI Chairman Pratip Chaudhuri and LIC Chairman DK Mehrotra.

 

The other members include PFC Chairman Satnam Singh, ICICI Bank chief Chanda Kochhar, IDFC chief Rajiv Lall, as also Uday Kotak, GM Rao, GV Sanjay Reddy, Sonjoy Chatterjee and Madhav Dhar.

 

Gajendra Haldea, Advisor to Planning Commission Deputy Chairman, will be the member-convenor of the committee.

 

The special invitees to the committee include Railway Board Chairman Vinay Mittal, secretaries in power, road transport and highways, urban development, petroleum and natural gas, telecom and water resources ministries, SEBI Chairman UK Sinha, Finance Ministry's Chief Economic Advisor Kaushik Basu and the chief statistician TCA Anant.

 

Among other things, the committee would make recommendations relating to financing of the projected investment of Rs40,99,240 crore (over $1 trillion) during the 12th Five Year Plan period (2012-17).

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COMMENTS

T D Sharma

4 years ago

Why must a particular man always? Is there no other choice? One smerlls a rat, as usual with the govt.'s (read: IAS') choice.

SBI Life Flexi Smart: Why push a product with little value?

SBI Life is seeking media support to publicise the one year old SBI Life Flexi Smart variable insurance plan. It seems to be a desperate attempt to entice those who put money in traditional products

The PR agency of SBI Life has just sent us an email to help readers understand the one year old SBI Life Flexi Smart product. This has left us bemused. Is the company desperate to cash-in on the growing trend of traditional products and position variable insurance plans (VIP) as some better option? Is it a rude joke on customers who are already becoming worse off by shoving hard earned money on traditional products? The product is called "Flexi Smart", but it is targeted for the naive investor. It would have been understandable if SBI Life was trying to promote the SBI Life Annuity Plus product which was launched few months ago with competitive annuity rates.

Over a year ago SBI Life launched a variable non-participating insurance plan, "Flexi Smart Insurance". This variable insurance plan (VIP) was a new identity (after revamping) given to the banned toxic universal life policy. VIP combines the worst of both-ULIPs and traditional plans. The charges are transparent like those of ULIPs. It is 27.5% in the first year; 7.5% in the second and third years and 5% thereafter. There will also be a risk premium on mortality charges based on the policyholder's age, to cover the sum assured-which is 10 to 20 times of annualised premium. The heading of the product brochure is "No pain, only gain". You should read it as "No gain, only pain".

It was astounding to read an article one year ago in a leading business newspaper The Economic Times, which tried to project VIP as best of ULIP and traditional plan. It was deplorable that the article quoted SBI Life Actuary saying that the product interest rate works like a bank account. Which bank you walk in today will take your Rs100 and give you deposit receipt of Rs72.50?  It can only happen with a VIP product from an insurance company. Even LIC Bima Account I and II (also VIP) will not break-even in five years.

The investments are opaque like traditional plans and will be mostly in the debt market and hence, will fetch low returns. The SBI Life Flexi Smart plan provides a guaranteed annual interest rate of 2.5% which is absolutely pathetic. The carrot offered to lure the customers is 7.25% interim interest rate for 2012-13. The truth is that the interest rate is net of all the astronomical charges!

The product offers flexibility of a premium holiday option, facility of increasing or decreasing the sum assured as per the changing needs and an option to top up premium. The premium holiday option offers the flexibility of not paying the premium for one to three years after completion of five annualised premiums. Many ULIPs offer a limited premium payment term wherein the policy remains in force until the policy term, without the payment of premium. The flexibility of increasing the sum assured is not allowed after age 50; the cost of medical expenses is to be borne by the life assured and it will not be allowed if the policyholder has already exercised the option to decrease the sum assured.

Needless to say, the increase in sum assured will be accompanied by increase in risk premium (mortality charges). Neither the increase nor decrease in sum assured will reduce the premium amount. The death benefit will be the sum of the policy account balance and the sum assured. The maturity benefit will be the terminal interest rate along with the balance in the policy account.

You may also want to read:
http://www.moneylife.in/article/variable-insurance-plan-no-gainonly-pain/18821.html

http://www.moneylife.in/article/variable-insurance-plan-lic-bima-account-attacking-your-savings/14981.html
 

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COMMENTS

Veenaa Natchimuthu

6 months ago

Worst policy. i continue the policy for 5 years and total sum i paid was 245000 and the amount i got was 250000. stupid plan and all these agents are cheaters

KARISHMA SHAH

11 months ago

I had bought SBI flexi smart policy 1 year ago with 1 lac premium amount for 5 years. I have paid the first yearly installment and the 2nd installment is due in a few days. I do not see any growth in the amount invested. Should I discontinue or continue with the policy since discontinuing would lead to discontinuance charges ?

KARISHMA SHAH

11 months ago

I had bought the flexi smart policy 1 year ago with 1 lac premium for 5 years.I have paid the first installment and the 2nd installment is due in a few days time. I do not see any growth in 1 year. Would it be better to discontinue or should I continue with the policy ?

Saleem Ahamed

1 year ago

after 5 years if i will withdrawal my policy with 30000 yearly than how much will revived approx.

Saleem Ahamed

1 year ago

after 5 years if i will withdrawal my policy with 30000 yearly than how much will revived approx.

akashdeep sandhu

3 years ago



I am akashdeep sandhu. I have recently bought flexi smart insurance policy. My yearly premium is 99000 for 10 years. I hav paid only one premium. yesterday I received documents. I was assured by agent that interest will be calculated on sum assured. policy document have furnished details on assumed interest after various deductions. certainly it is not the plan I was looking for then. I visited the agent in person today. person is assuring again that interest will be calculated on sum assured compoundly. online customer service was also of no help. please help me out. I am thinking of returning the policy as thry have given me 15 days for free look.agent has estimated around 22 lacs on policy maturity while I doubt it according to document. Document assumes maximum surrender value of abt 14 lacs. Help. Any advice. reply. It's my hard earned money. Thanks

REPLY

Sucheta Dalal

In Reply to akashdeep sandhu 3 years ago

Request you to come through the helpline . i am sure raj will be happy to guide.
link here

http://moneylife.in/promotion/insuranceh...

Ronak Hindocha

4 years ago

Raj, You know what's even sadder? When the ULIPs will no longer be considered a tax saving product, traditional policies will be sold even more.(even now they account for 75% share).

ULIPs (although not a great product, per se) scores over a traditional policy over transparency of costs/ equity investment option. Selling a traditional plan to a young investor under the guise of tax planning is a terrible prospect.

Ronak Hindocha

4 years ago

Raj, you know what's even sadder? A gross way to look at it but makes sense: When the ULIPs will no longer continue to avail tax benefits, the traditional policies will be sold even more. We are already seeing that (about 75% policies sold are traditional). Between the two, ULIPs are definitely better on account of transparency and with an option to invest in equity oriented scheme.

Note: I personally do not recommend ULIP but between the two it is relatively better.

Madhusudan Thakkar

4 years ago

This plan is a joke.This is insult to Indian people.Raj you deserve our sincere thanks in exposing this plan.I fail to understand why such type of TOXIC plans are approved by IRDA?

REPLY

raj

In Reply to Madhusudan Thakkar 4 years ago

thanks. I agree

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