Investor Issues
Relationship managers: tread with caution
There are several incidents of relationship managers misusing access to accounts and their proximity to clients to meet their sales targets. So, one needs to be on one’s toes while dealing with relationship managers
Relationship Managers (RMs) have the potential to either deepen the relationship or to erode it by eating into its roots. They operate in motivated blindness, therefore, indulge in such an exaggerated description of the product that it puts a mask on the risk inherent in the product and are able to sell toxic dubious products. Cases of misconduct on the part of RMs are not uncommon. There are many incidents of RMs misusing access to accounts and their proximity to clients to meet their sales targets. It has on many occasions, come to light, that the Wealth & Relationship Managers did get authorizations from their clients on blank papers with the promise that they will get maximize returns.
A few illustrative cases (picked up from media reports) are described here below…
A few years ago, a fraud in a leading foreign bank was detected, where a relationship manager had forged signatures of many widows whose children were staying abroad and diverted funds into his/her account. Probes revealed that the manager identified targets carefully and by using forged signatures, changed addresses of clients on his/her list so that they didn't get their bank statements. Instead, what they received were forged statements printed by their relationship manager. 
Mr Puri, who was a relationship manager in Citibank's retail banking operations, had illegally promised high returns under a sham deposit scheme and managed to convince about 20 high net worth Citibank customers to park their funds in that scheme. Puri got a forged circular in SEBI’s name, which claimed that the high-returns scheme was only available at this particular branch. After getting big deposits, Puri generated forged bank slips and statements to the duped customers. He then siphoned off the money into the stock market.
A young techie with an information technology company in Pune, says he was cheated of Rs 4.5 lakh by his brokerage firm, thanks to the aggressive intra-day trading advised by his relationship manager. “That’s a huge amount for an ordinary person like me. The relationship manager wiped out all my money in months,” he says.
Misguidance or even mis-selling on the part of RMs in banks and elsewhere is a matter of concern. “A few years ago, only experts would have functioned as relationship managers in Indian banks. But now the position has been sort of degraded — people who are not really experts in the field are being recruited as relationship managers for retail or consumer banking in India. And they are making a lot of mistakes.
On 18 April 2013 Moneylife Foundation presented a memorandum to RBI Governor on unchecked mis-selling by bank relationship managers. It says, “Banks’ relationship managers have been particularly brazen in recommending financial products to their customers while completely disregarding their financial situation. It is commonplace to hear of senior citizens being conned into investing in a mutual funds, unit-linked insurance plans or a hybrid-derivative products on promise of higher returns. In many cases, private bank executives go to their homes and persuade them to break secured fixed deposits and invest the money in Unit Linked Insurance Products (ULIPs) with the false assurance that these are as safe as fixed deposits and offer a higher return and security.”
Moneylife had highlighted the case of Suchitra Krishnamoorthi, a well-known singer and actor, who was taken for a ride by HSBC Bank for over five years. The modus operandi for HSBC in this case has been a combination of toxic churning of the portfolio management system (2% entry load on every purchase made by it on behalf of client), insurance products promising 24% returns, insisting her on taking a loan instead of withdrawing funds without even disclosing that the client was entitled for a smart loan. 
A strong campaign by Moneylife through its website and its social media properties got quick justice for a 79-year old man with his ailing wife. IndusInd Bank officials had deceitfully persuaded him to break his bank fixed deposit and invest in a wrong product. After Moneylife wrote about it, the bankers came at 11.30 in the night, bearing a demand draft of Rs7 lakh and returned him his investment. They had made him invest in DWS’s mutual fund scheme with a five-year lock in period.
Whether they are dangerous or not depends on which side of the fence you are. If you are a victim then definitely you will label them as dangerous but if you’ve had a delightful experience with them, you may not. That does not mean you may not become a victim of their ‘charisma’. It is in your best interest to be on your toes when you deal with them.
(Saiyid (SSA) Zaidi is a training and development consultant as well as external subject matter expert at the Educom Group Banker's Academy in New York.)




3 years ago

SUB: consumer forum action against Standard Chartered Bank’s arbitrary repossession of vehicle ref news item dated 9.09.2013; warnings issued by Reader’s Digest and Moneylife against Bank Relationship Managers

The consumer forum in question has passed a good judgment in my opinion. Standard Chartered Bank arbitrarily closes accounts without specifying why, there seems to be no coordination between its front-end and back-end operations, between relationship managers and customers, and between relationship managers themselves. The Bank takes its own sweet time ‘resolving’ the issue while offering the aggrieved account-holder some lame excuse or the other for its unjustified act. The victim is denied interest on his deposit during the three-month plus period he is kept hanging on, compelled to call up numbers that do not respond, to drive long distances to meet one executive after the other and to run around in circles trying to find THE right person who, unfortunately, does not seem to stay put in any one seat/location. Moneylife and Reader’s Digest are absolutely right in warning the public about bank relationship managers: In the case of Standard Chartered, such managers, by and large, seem to play the role of arm-twisting account-holders into investing and losing their hard-earned savings on the stock market while earning big, fat commissions for themselves and neglecting to take care of accounts.


3 years ago

Huge target pressure and lucrative incetive tempted front office staff in banks in mis selling of the third party product namely, insurance & MF.
Immedite upfront profit for banks also encourages banks to exert pressure on staff members to sell. There is a wide difference what a bank comits at top and what it tries to execute by applying pressure tactics. It can only be stopped if third party product selling is stopped in banks.

pannag kamat

3 years ago

My dear friends any lucrative investment first go deep into it or get the expert advice who you know very well or whom you find reliable. Because one or the other way your money will siphoned without your knowledge. Indian judicial and bureaucratic condition it is very difficult get your hard earned money back. So prevention is better than cure.

Goldman Sachs downgrades India to underweight on FII outflow

According to Goldman Sachs, investment case for India has turned less favourable because recovery in growth recovery looks elusive and the economy is more vulnerable


Investment banking and securities company Goldman Sachs has downgraded its rating on India to 'underweight' due to increased risk of foreign institutional flow reversal from equities market and sluggish growth outlook as the key reasons. 


Sunil Koul, analyst, Goldman Sachs in a note said, "Very little foreign selling has occurred in Indian equities relative to the massive foreign inflows over the past few years."


Foreign institutional investors (FIIs) have been net buyers in Indian stocks worth Rs66,000 crore ($12.5 billion) so far in 2013 after pumping in about $25 billion in 2012. But, these investors have sold shares worth Rs6,086 crore in July. The more severe sell-off has been in debt, where FIIs offloaded Rs12,037.60 crore worth of bonds.


“Recent activity data has been sluggish with no signs of a pickup in investment demand. The external funding environment has also become challenging causing Reserve Bank of India (RBI) to tighten liquidity,” Koul added.


Goldman Sachs said the investment case for India has turned less favourable because recovery in growth recovery looks elusive and the economy is more vulnerable.


The investment bank also cut its 12-month Nifty target to 6,200 and said it does not rule out further downgrades if the rupee weakens further.



RTI Judgement Series: Application under RTI Act must be dealt under the same Act
PIO rejected a request for information under the RTI Act asking the appellant to seek the same under different Act. This contention was rejected by the CIC. This is the 146th in a series of important judgements given by former Central Information Commissioner Shailesh Gandhi that can be used or quoted in an RTI application
The Central Information Commission (CIC), while allowing a complaint, directed the Public Information Officer (PIO) of Debts Recovery Tribunal under the Ministry of Financial Services at Pune to provide complete information sought under the Right to Information (RTI) Act. The PIO while denying to furnish the information had asked the appellant to apply under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBI Act) for inspection and to obtain the required information.
While giving this judgement on 20 September 2011, Shailesh Gandhi, the then Central Information Commissioner said, “A citizen should be able to decide on the method most convenient and expedient by which she would obtain information. If the PIO has received a request for information under the RTI Act, the information shall be provided to the applicant as per the provisions of the RTI Act and any denial of the same must be in accordance with Sections 8 and 9 of the RTI Act only.”
Pune resident Madhav Balwant Karmarkar, on 24 March 2010, sought information about Board meetings, cases, summons and notices issued by the DRT, Pune between 21st and 23rd December 2009 from the PIO. Here is the information he sought under the Right to Information (RTI) Act...
1. The daily board for the days 21 December 2009 to 23 December 2009.
2. The cases which were kept for hearing on 21 December 2009 to 23 December 2009 transferred to for hearing before DRT - II, Mumbai before when the charge was kept by in- charge Registrar, DRAT, Mumbai.
3. The number of cases which were on the Board of 21 December 2009 to 23 December 2009 but adjourned to dates subsequent to 21 December 2009, but not before 28 December 20098.
4. Number of cases from the Boards dated 21 December 2009 to 23 December 2009 transferred to DRT - II, Mumbai for hearing since charge was kept with DRT - II, Mumbai by in- charge, DRAT, Mumbai.
5. The number of summons issued for hearing on 21 December 2009 to 23 December 2009 for hearing before DRT - II, Mumbai with whom was charge was kept of DRT, Pune.
6. Order received from in- Charge Registrar, DRAT, Mumbai for DRT - II, Mumbai to attend Pune for hearings on 21 December 2009 to 23 December 2009.
7. Application of the party concerned for holding the hearing before DRT - II, Mumbai on 23 December 2009 vis-à-vis sanction of the said application.
8. The application of the party concerned for taking the matter on board on 21 December 2009 which matter was filed on 21 December 2009 itself.
9. The list of objections raised on the above concerned matter before it was registered.
10. Whether notice of hearing on 21 December 2009 of the interim application to be heard by in- charge DRT, Pune was served. 
11. The authorisation issued by the Central Government in the name of PO, DRT, Pune authorizing hearing of the subject matter by another DRT i.e. DRT - II, Mumbai on 23 December 2009.
12. The orders issued by competent authority to delegate powers to a person other than the Registrar, DRT, Pune for issuance of notice dated 21 December 2009 for hearing the matter before DRT, Mumbai on 23 December 2009 when order of keeping charge with DRT, Mumbai was not issued at all on 21 December 2009 and when DRAT, Mumbai was on casual leave and that the letter of sanction of casual leave was issued by in- charge Registrar, DRAT, Mumbai with alleged oral instructions of Chairperson, DRAT, Mumbai.
13. The request/ application made by DRT, Pune for keeping charge with DRT, Mumbai prior to his proceeding on casual leave though casual leave is not a leave and is considered as duty.
14. Orders of competent authority in DRT, Pune permitting an employee to take the records and papers in the matter to DRT, Mumbai on 23 December 2009.
15. Date of return of papers and records by DRT - II, Mumbai to DRT, Pune.
16. Orders of transfer of matter to DRT, Mumbai with whom charge was kept vis-à-vis application of party for such transfer.
17. The reasons recorded for transfer of and hearing of solitary case by DRT - II, Mumbai sent/transferred by DRT, Pune that too for interim matter.
18. The oral instructions given by DRT, Pune for issuing notice for taking up the interim matter to DRT, Mumbai for hearing since DRT, Pune had left the HQ and gone to Kolhapur on casual leave or to DRAT, Mumbai who was also on casual leave.
19. This information seeker be also granted satisfactory inspection of all the relevant files in the matter on a convenient day with intimation in eight days in advance, and be permitted to take copies of the documents found necessary during inspection.  
In his reply, the PIO stated, "Given that there were three Boards in DRT, it was not clear in relation to which Daily Board was information required. Further, since DRT was a court, there was already a provision in law for taking inspection, asking certified copies, etc. The requisite information could be obtained by following due process of law. The Appellant was requested to apply under the RDDBI Act for inspection and to obtain the required information."
Dissatisfied with the PIO's reply, Karmakar on 20 April 2010 filed a complaint before the Commission under Section 18 of the RTI Act. However, the CIC, vide its letter dated 30 June 2010, advised him to file a first appeal before the concerned public authority. 
Karmarkar filed his first appeal before the First Appellate Authority. The order of the FAA was not enclosed. However, on perusal of the documents, the CIC said it appeared that the first appeal was returned by the FAA vide letter dated 8 September 2010 due to procedural inadequacies.
Karmarkar then approached the CIC with his second appeal.
During the hearing on 15 September 2011, Mr Gandhi, the then CIC, noted that the PIO denied the information on the basis that information must be sought under the DRT Rules. The PIO relied on the decision of the Commission in Ajay vs CPIO, Debts Recovery Tribunal (CIC/SM/A/2009/000990+1506 dated 5 May 2010) in support of his contention. 
However, Karmarkar contended that as per the DRT Rules, only litigants can obtain information and since he was not a litigant in the relevant matter, he would not be able to obtain the information. He relied on the Commission's decision in RS Misra vs CPIO, Supreme Court of India (CIC/SM/A/2011/000237/SG/12351 dated 11 May 2011) in support of his argument. 
The PIO stated that even non-litigants can obtain information under the DRT Rules.
The Bench then decided to reserve its order.
During the next hearing on 20 September 2011, the Bench noted that based on the contentions of the parties, the main issue which arises for determination was where there were methods of obtaining information from a public authority in existence before the RTI Act and can a citizen insist on obtaining the information under the RTI Act.
Mr Gandhi said, "The right to information is a fundamental right of the citizens of India. Section 3 of the RTI Act lays down that subject to the provisions of the RTI Act, all citizens shall have the right to information. The RTI Act is premised on disclosure being the norm, and refusal, the exception. Further, Section 22 of the RTI Act expressly provides that the provisions of the RTI Act shall have effect notwithstanding anything inconsistent therewith contained in the Official Secrets Act, 1923, and any other law for the time being in force or in any instrument having effect by virtue of any law other than the RTI Act."
"In other words, where there is any inconsistency in a law as regards furnishing of information, such law shall be superseded by the RTI Act," he said.
The Bench said, given this, two scenarios may be envisaged:
1. An earlier law/ rule whose provisions pertain to furnishing of information and is consistent with the RTI Act: 
Since there is no inconsistency between the law/ rule and the provisions of the RTI Act, the citizen is at liberty to choose whether she will seek information in accordance with the said law/ rule or under the RTI Act. If the PIO has received a request for information under the RTI Act, the information shall be provided to the citizen as per the provisions of the RTI Act and any denial of the same must be in accordance with Sections 8 and 9 of the RTI Act only; and
2. An earlier law/ rule whose provisions pertain to furnishing of information but is inconsistent with the RTI Act: 
Where there is inconsistency between the law/ rule and the RTI Act in terms of access to information, then Section 22 of the RTI Act shall override the said law/ rule and the PIO would be required to furnish the information as per the RTI Act only.
"Therefore," Mr Gandhi said, "The DRT Rules as well as the RTI Act coexist and, it is for the citizen to determine which route she would prefer for obtaining the information. The right to information available to the citizens under the RTI Act cannot be denied where such citizen chooses to exercise such right, as has been done by the PIO in the instant case."
The Bench said it noted that the PIO has rejected the request for information under the RTI Act without taking recourse to Sections 8 and 9 of the RTI Act, which is clearly against the statutory mandate. Moreover, it is pertinent to mention that the RTI Act, at no place, stipulates that in the event there is consistency between an earlier law/rule and the RTI Act, the citizen shall have to seek information under the former. In the absence of such a provision, there is no requirement to read in such an interpretation to the RTI Act.
The Bench said, it would like to mention certain decisions of the Supreme Court in CIT vs A Raman & Co [1968] 67 ITR 11 (SC), which was upheld in CIT vs Calcutta Discount Co Ltd. [1973] 91 ITR 8 (SC) and subsequently in UOI vs Azadi Bachao Andolan [2003] 263 ITR 706 (SC), where Justice Shah had observed as follows: 
"… Avoiding of tax liability by so arranging commercial affairs that charge of tax is distributed is not prohibited. A taxpayer may resort to a device to divert the income before it accrues or arises to him. Effectiveness of the device depends not upon considerations of morality, but on the operation of the Income Tax Act. Legislative injunction in taxing statutes may not, except on peril of penalty, be violated, but it may be lawfully circumvented..." (Emphasis Added)
"Therefore," Mr Gandhi said, "even when the state may lose revenue, the Supreme Court has ruled that an individual tax payer has the liberty to arrange her commercial affairs in order to reduce her tax liability, so long as such arrangement is within the operation of tax legislation(s). Drawing an analogy, it certainly stands to reason that a citizen should be able to decide on the method most convenient and expedient by which she would obtain information."
"In view of the reasons enumerated above, the decision cited by the PIO in Ajay vs CPIO, Debts Recovery Tribunal (CIC/SM/A/2009/000990+1506 dated 5 May 2010) is per incuriam inasmuch as it was rendered in ignorance of a rule having the force of law laid down by the Supreme Court and by reading in an interpretation to the RTI Act which was hitherto not stipulated by the Parliament. Given the same, the said decision is not binding on this Bench. It is also important to mention that no legal basis has been given by the Information Commissioner for arriving at his conclusion," Mr Gandhi said.
While allowing the appeal, the Bench directed the PIO to provide the complete information as per records to Karmarkar before 20 October 2011, subject to the provisions of the RTI Act.  
Decision No. CIC/SM/A/2010/001646/SG/14708
Appeal No. CIC/SM/A/2010/001646/SG
Appellant                                   :   Madhav Balwant Karmarkar, 
                                                          Pune - 411038  
Respondent                                :   KR Joshi,
                                                          PIO & Section Officer, 
                                                          Debts Recovery Tribunal,
                                                          Ministry of Financial Services, 
                                                          PMT Commercial Building - 1,
                                                          Shankarsheth Road, Swargate,
                                                          Pune - 411042


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