IRDA should act a little more in consumer interest
ARight to Information (RTI) application to the Insurance Regulatory Development Authority of India (IRDA), followed by an appeal, is what it took to ferret out the information that, until August 2013, Reliance Life Insurance, through its corporate agent, had defrauded 2,141 persons into buying insurance with the false assurance that they would get an interest-free loan equal to 10 times the premium. The agent was AB Capital which ran a call centre that expertly duped people by claiming that the loan would be processed once the policy was bought. Immediately after the policy purchase, they would stop taking the calls.
Until the RTI, Moneylife Foundation (MF), our not-for-profit entity, and Raj Pradhan our insurance expert, had been plodding, case after case, to help the 30-odd victims of this fraud to get back nearly Rs22 lakh from Reliance Life. We repeatedly wrote that the geographical spread of the victims made it clear that the complaints reaching us were a fraction of those duped. It is not that Reliance Life has not initiated action. It has terminated the agency contract AB Capital and filed a criminal complaint, leading to the arrest of five officials. But, contrary to what it claimed to the regulator, the fraud has not ended with 2,141 cases. Our insurance helpline continues to receive complaints even today. In fact, Reliance Life has now adopted stricter standards for making payments. Why would IRDA not follow a clear and simple process to find out how many people have been cheated? The process would be to ask Reliance Life to provide a list of all policies sold by AB Capital, eliminate those who have got their money back and publish a list of all others on IRDA’s website, or in a national daily, asking people to write to a central helpline if they have also been cheated. The job of the regulator is not merely to act as a post-office while harried persons run from pillar to post seeking redress.
We do admit that IRDA has levied stiff penalties against several insurers, including Reliance Life, for mis-selling and other violations after due process and investigation. That surely has its place, but a financial regulator needs to have a parallel process of forcing those guilty of mis-selling to collate, compile and redress grievances through refunds. The regulator must recognise that Indian regulatory and legal systems rarely compensate victims by way of costs, interest or for the mental agony and hardship suffered in fighting their battles; so, the least they can ensure is that the money is refunded quickly.
We have a long way to go before financial consumers feel safe
Consumers International (CI), a global network of 240 consumer organisations, has decided on four key areas of financial consumer protection (FCP) that will be the focus of its consumer advocacy in the coming year. CI will campaign to place FCP on the agenda of the G20 nations, and also work at influencing recommendations of Financial Stability Board (FSB) and OECD. These four areas are: action to prevent abusive financial products and practices; promotion of competition in financial services; measures to tackle consumer debt and consumer access to basic products.
Where does India figure in all this? And what is the attitude of our regulators to the concerns of global consumers of financial products? Probably, for the first time ever in the 25 years since SEBI came into existence, the Sensex is scaling new, all-time highs but the majority of Indians are completely uninterested.
The same is true of insurance where, too, the regulator does not seem to understand that keeping the faith of consumers must be a priority. As far as the Reserve Bank of India (RBI) is concerned, there is now an inclination to work at a comprehensive consumer protection framework, but RBI still has no formal engagement with consumers. The top brass at the banking regulator believes that the many complaints it receives everyday gives it a fair idea of consumer grievances. We beg to differ.
Most consumers articulate their issues poorly and are unable to place them appropriately in the context of a regulatory or consumer protection framework. That is why an NGO like Disha Financial Counselling is required to guide people correctly. More important, the availability and willingness of banks to provide basic banking services, which the RBI governor mentioned recently, will be the key to financial inclusion in India, along with a focus on ensuring safer mobile payments, which is also a global concern. (Moneylife Foundation, of which this writer is a founder trustee, is a supporter-member of CI.)
Water security is as important as food security, and there is a dire need to stop millions of cusecs of water being discharged by Indian rivers into the sea
About two-thirds of Indian farmlands depends upon rainfall and a good monsoon is crucial for our agricultural output. Last year's record high output of 263 million tonnes and the overflowing stocks of essential grains, covering our buffer norms and strategic reserves, do give us a sigh of relief, should the monsoon really fail and leads to a drought condition.
According to forecasts issued by Asia Pacific Climate Centre in Busan, South Korea, El Nino is seen choking moisture feed into Bay of Bengal and Arabian sea that may deny rains in India. The first phase, during May to July, may leave Central India, West India and west coast in deficit but excess rain may fall in Rajasthan and parts of south-west Punjab!
In the second phase, covering August to October, excess rain in parts of Madhya Pradesh Maharashta and Seemandhra may occur. Tamil Nadu, parts of Rajastan, Punjab, Jammu and Kashmir, Himachal Pradesh and Uttarkhand may get adequate rains but Gujarat, South west Rajasthan and rest of India may find a dry spell. All these are current predictions; a wind or two may change the directions, which is why not only Indian Meteorological Department (IMD) but other weather forecasting centres are closely watching the El Nino movements. At least one agency has cautioned that July could be a troublesome month to pass over.
To be prepared for a bad monsoon (or an insufficient one, at that) is of paramount importance. In case of paddy, both Food Corporation of India (FCI) and state agencies have so far procured 27.29 million tonnes against their target of 34.5 million tonnes during the current season, ending in June. Kharif procurement is already over and currently it is rabi season and they may end up getting 30-32 million tonnes. Procurement has been slow, according to the market, due to sluggish conditions and poor arrivals of paddy.
We may also remember that rice producing states like Andhra Pradesh and Odisha were subject to cyclones (Phalin!) and excess rainfalls. Fortunately, rice stocks in central pool is stated to be 20.27 million tonnes, almost 70% higher than the buffer norm and strategic reserve of 14.2 million tonnes, as on 1st April. Yet, rice stocks are said to be lowest in six years, since 2009.
When the new government takes over power, it is hoped that they do not inherit a bad monsoon resulting in a drought. Moneylife had recently covered (El Nino effect may cause trouble for Indian Monsoon) the El Nino conditions recently and cautioned the need to take precautionary steps to safeguard the stock holdings in various godowns of the FCI and other agencies, in terms of proper storage, rodent attacks and pilferage. They need to be shifted to closed godowns where heavy rains do occur so as to prevent damage.
In order to maintain our international image it is imperative that all export commitments of rice, wheat, soya, maize etc need to be honoured; recently procured order for shipment of one million tonnes of wheat should also be shipped in time.
Among the priorities that the new government need to plan seriously are, a national mandate for harvesting of rain water throughout the country. A few years ago, Tamil Nadu government set a classic example of this rain water harvesting for all the new buildings to be constructed, and those (old ones) were given a time frame within which to comply with this order.
The second more important project should be for the new government to revive the century old engineering masterpiece suggested by Late Viswesvaraya of Karnataka (erstwhile Mysore State) that proposed inter-linking of all the Indian rivers to ensure perennial supply of water throughout the country. This document is collecting dust in our national archives and it is time it is put into practice, as a separate seven year plan, to complete, and to run parallel with our standard five year plans. Water security is as important as food security, and we should stop millions of cusecs of water being discharged by Indian rivers into the sea.
There is no need to panic but it is better to take all precautionary steps to prevent any drought conditions.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)