Taxation
Reliance SIP Insure investor caught in a trap

A few months ago Reliance and Birla Mutual Funds were pushing hard a combo plan of mutual fund and insurance. One investor is now caught in a bind having fallen for Reliance’s pitch. Don’t expect SEBI to do anything about it though

If you were a mutual fund investor, investing in Reliance Tax Saver Fund (which also provides life cover) via the SIP (systematic investment plan) route, and wanted to change the bank from which you’re paying SIP, you probably would not be able to do it! Such is the case for Deepak from Karnataka, who has been investing Rs1,000 per month from his Punjab National Bank account in the Reliance MF scheme that came with a coverage of Rs10 lakh. However, when he wanted to switch banks, as he had moved to a new company, he could not do so. Reliance MF had told him that such a move was not possible and that the insurance cover would be reduced or completely nullified if he changed his bank account!

“How can Reliance MF not have the facility for investors to seamlessly change bank accounts?” moans Deepak. Apparently, Reliance MF had stated this anti-investor clause in the offer document itself. The facility for switching banks is only available with ECS debit, and not auto-debit as in Deepak’s case. If Deepak wishes to accede to Reliance MF’s demand of reduced coverage, he would get a reduced coverage of Rs5.4 lakh instead of Rs10 lakh, merely because he had switched bank accounts. The other option, of course, would be to continue to invest in the SIP insurance plan from his existing bank account, and keep transferring money from his new bank account for the remainder of the scheme which is 12 years (!)—a major hassle. Deepak adds “to impose a harsh penalty just for switching banks is beyond our imagination and goes against basic business principles.” He had complained to Reliance MF’s Karnataka state head as well as compliance head, and has not got any help so far.

In a supreme irony, Reliance Mutual Fund CEO Sandeep Sikka was quoted in the media in August as saying “There cannot be any short-cut to reach out to the under-penetrated market but to create financial literacy and spread knowledge about what a mutual fund is,” added Mr Sikka. If this is the case, why hadn’t Reliance MF informed Deepak before-hand of this auto-debit clause since he had opted for it? Indeed the Reliance MF website lists auto-debit as an important convenience.

http://www.reliancemutual.com/SIP/RelianceSIPInsure.aspx
According to Sunil Nair, R&T operations of Reliance MF, “We need a cancellation request to cancel the mandate registered in one bank and registration mandate to register the mandate in another bank.” Unfriendly banking regulatory laws are forcing customers to jump from one place to another in order to get a seemingly simple thing done. Why should a customer like Deepak work hard to get these things done? He has to get two letters now—a cancellation mandate from PNB and a registration mandate from the new bank he had signed up—and then produce both these to Reliance MF. Why can’t the institutions step up and make it easier for customers to do business with them and, in this case, make bank switching easier? Obviously, if this facility is available— it is a win-win for both institution and consumers.

The recent tightening of fund regulations and strict banking laws has forced mutual funds to look to alternative sources of income. Some of the regulations have squeezed the cost structure of the fund industry as a whole, and thus have been forced to mis-sell products to consumers in search for better margins. Deepak’s case is one such case where the fund changed the rules to suit itself while at the same time passes the onus to the customer to solve the problem.

This is yet another case where institutions, and the broad regulatory environment, short-change the small investor for their own benefit. What is appalling in this case is that it lacks empathy and common sense. How difficult is it to switch bank accounts? If it is due to regulatory requirement that an institution cannot entertain this simple facility to customers, it only shows how ignorant our regulators are, and it badly reflects on the way consumers are treated in this country. Not only this, but Reliance MF failed to inform Deepak of the auto-debit clause when he had opted for it. It also shows that regulator’s apathy towards institutions and consumers alike will only make it more difficult to for products to reach a wider section of the population. Moreover, as more and more cases like this crop up, consumers will be more aware and stay away from them.
Investors, after reading this episode, will be less inclined to invest with such institutions and products that are not customer friendly. No wonder investor population in India is not rising but shrinking!

User

COMMENTS

girish

5 years ago

this is not the only case.
they have issued the ATM card to me and now card is expired now so they have not issueing card t me .reson is that now they are issueing card if i will invest in rmoney manager fund .i was using atm card facilities fro 2 to 3 years now it is with drawn with out informing me .
it means that they can withdraw any facility is future . it may be insurence in sip insure.
girish

Reliance Mutual Fund

5 years ago

Dear Sir ,

This is with reference to your article on Money life.com

We are reviewing the details as highlighted and shall respond conclusively at the earliest.

Thank you

Regards,

Reliance Mutual Fund

REPLY

Saurabh Aggarwal

In Reply to Reliance Mutual Fund 5 years ago

Reliance M.F. ,I am really tired of your late services , i have registered for physical copy of statement but despite getting request no. & assurances i have not recieved any statement.I am providing details if possible please help.
Reliance Diversified Power Sector.
Request no. 12904664 , 14244506 , 17018914 , 17208526 , 18234231 from july 2009.
Reliance Regular Savings Equity.
Request no.14244526 , 15706334 ,17018881 ,18234265 from august 2010.
Saurabh Aggarwal. Mobile no.9560750503.

nagesh kini

In Reply to Reliance Mutual Fund 5 years ago

What's the time frame for resolving each of the concerns?
Please respond in this medium too.

Shrigopal Jhunjhunwala

In Reply to nagesh kini 5 years ago

Mr Kini Do not expect any reply from them as it is a ANIL AMBANI group Company just like Reliance Communication where I am still waiting for a reply from the Nodal Officer of Mumbai from Feb 2010 onwards even after repeated attempts (like sending letter/e-mails) and telephoning them just to get an answer of my query.

monil

5 years ago

reliance is the biggest fund house of india,but not cooperating with investors in bank details changing. its a huge problem
with RIL AMC.& at the time of redeemtion also a sign mismatch problem

Vijaya Krishna

5 years ago

I had invested in SIP Insure, and I could change the bank (ECS mandate) a couple of years ago. I think the investor should talk to the customer care to get this sorted out.

Dr Sandeep Sharma

5 years ago

How does this effect the reliance mutual fund house. These days all MF houses are giving option of registering more than one bank account with them. If they can register for this why can't they switch. WHATS THE INTEREST OF RELIANCE IN NOT ALLOWING THIS SWITCH ?

REPLY

sandeep

In Reply to Dr Sandeep Sharma 5 years ago

Wake up. The quality of top management is so poor everywhere that they dont care about what is in the interest of the company forget about the investor.

Vikas Gupta

In Reply to sandeep 5 years ago

I totally agree with Mr. Sandeep.

Reliance Mutual Fund

In Reply to Vikas Gupta 5 years ago

Dear Sir,

This is with reference to your article on MoneyLife.com.

The operational process for investment in a mutual fund via SIP and SIP Insure is the same. A significant number of investors invest in SIP via ECS and do not face this issue. However, we do acknowledge that there were unforeseen operational impediments for investment via the auto debit mode. We have resolved this and now offer change of bank facility for auto-debit SIP transactions.

Thank you
Regards,
Reliance Mutual Fund

burntByReliance

5 years ago

It is Reliance FFS; stay away from Reliance products/services at all costs. PERIOD. Reliance is synonymous with bad governance and customer unfriendliness.

REPLY

Vikas Gupta

In Reply to burntByReliance 5 years ago

Very rightly written. All ADAG Co.s are totally unethical in practices.

Sanjay

5 years ago

Just like how one should not buy ULIP's. One should not buy SIP iNSURE products. They will never pay claims. Reliance Mutual Fund is within it rights. Hence, investors should not get into should fancy products.

REPLY

Reliance Mutual Fund

In Reply to Sanjay 5 years ago

Dear Sir,

Reliance SIP Insure is a benefit which is offered free at no cost to investors who invest in designated schemes via the SIP mode. In fact, the entire cost associated with the insurance cover which is quite significant, is borne by Reliance Capital Asset Management Ltd. Since launch of Reliance SIP Insure in 2008, the product has benefited a significant number of investors. The total number of claims settled by us since inception has been 146 claims amounting to Rs 2.96 crores. All this has been done at no cost to the investor.

Thank you
Regards,
Reliance Mutual Fund

Sanjay

5 years ago

Now that RBI has allowed Bank Account Number portability, may be the investor like Deepak can move his current Bank acct to their new town/banks while retaining the bank account number. Thus the challenge being faced by deepak will be nullified.

Mitul Desai

5 years ago

Instead of highlighting such small issue investor's money is not siphoned off, you should concentrate in exposing Fund Management of AMCs where NAV is Rs.2.72. Fund house have merged all their schemes below Rs.2 to existing scheme and masked their mid-deeds.
J M Mutual Fund

REPLY

Vikas Gupta

In Reply to Mitul Desai 5 years ago

I totally agree with Srini & Ruchi Malhotra.

Srini

In Reply to Mitul Desai 5 years ago

Since you are new here, spend some time exploring Moneylife before ranting.
Moneylife has written on a lot of issues other media companies will not touch. JM Mutual is one of them. Read this and shut up

http://www.moneylife.in/article/81/6696....

ruchi malhotra

In Reply to Mitul Desai 5 years ago

you have obviously come to moneylife straight from Reliance - otherwise you would have known that all this and more has been extensively covered ... esp JM. Try attending Moneylife Foundation seminars also. I do.... and I am better informed.

ravishankar

5 years ago

Great expose.
Thanks Moneylife for writing what other bigger media companies won't

Anish Supran

5 years ago

I have one advise for Moneylife, invest in some quality reporters / writers. you are making a big issue out of nothing, cant you write something that will add value to your readers than write nonsense like this.

REPLY

Rajiv

In Reply to Anish Supran 5 years ago

Big issue out of nothing!
Write a point of view at least, if not facts
Company stooge

Vikas Gupta

In Reply to Rajiv 5 years ago

I totally agree with Mr. Rajiv. I think Mr. Anish has got some connections with Reliance AMC.

vikas batra

5 years ago

why the writer is forgetting that auto debit is a facility provided by some banks at non ecs locations and in mutual funds you get world class mgmnt at the least rates, yes now mkts are down so everybody will be cursing mutual funds but if the investors didnt have asset allocation or for these problems how are companies ( which are giving free insurance) responsible, its the banking industry. please check your facts right before just writing an article and get after the beaten industry

REPLY

Deven

In Reply to vikas batra 5 years ago

Facts are right there. Who is talking of performance here, (though the best days of Reliance are over. World class management? My left foot).
It is practices like these that give banking, insurance and mutual funds the bad name.

Vikas Gupta

In Reply to Deven 5 years ago

I totally agree with Mr. Deven. Reliance MF Marketting Team is busy to be No.1 again by hook or by crook. It doesn't matter to them at all.

R Balakrishnan

5 years ago

Reliance - what an oxymoron!

REPLY

Nagesh Kini

In Reply to R Balakrishnan 5 years ago

No Sir, it is apparent and built in contradiction plain and simple - be it insurance, MF, power supply or telcom. Complaints galore

R Balakrishnan

In Reply to Nagesh Kini 5 years ago

Reminds me of an old joke.
Seller says'Money back if not satisfied".
Customer who is not, seeks a refund. Company refuses, saying that "They" are perfectly satisfied with the money

Nagesh Kini FCA

5 years ago

The initial spat between the two Regulators - SEBI and IRDA was bad enough, it turned out to be case of ego clashes. Now it is the turn of the third big guy - the oldest of them all to jump in the fray - how can any one, for that matter, a MF or Insurance Co. stop the migration from one bank account to another.
We are operating in a world of "Portability" from telecom to health insurance covers.
It is time for the RBI and SEBI to come down heavily on such consumer unfriendly acts with a heavy hand, by imposing suo moto penalties, sooner the better.
I speak in my capacity as a professional-turned consumer activist of long standing well versed in banking, insurance and capital markets.

Ramesh A

5 years ago

The article is badly one sided. It is very clearly written in the KIM/SID that the said investment will be treated separately... and that no additional purchase is possible... about the cease clause of insurance while redeeming...etc. This is a freebie without any cost and naturally some conditions are to be met. How can this be a trap for somebody who cannot meet the prescribed clause on a later day. This will just become a normal SIP if the conditions are not met. This cannot be considered as a trap... Please note that this kind gesture was shown to genuine young customers only by Reliance and Birla when all other AMCs were mute spectators to the party. These are operational hassles which has to be treated separately with open heart... Time only will heal such procedural issues...
Ramesh A
9847080473
Kochi

Share prices to rally further: Tuesday Closing Report

A short term rally has started which may see the Nifty reach 4,900

Across-the-board buying by institutional investors helped the market log gains for the second day in a row. The two days of gains have nearly wiped off most of the losses incurred in the prior four days (between 27 December 2011 and 30 December 2011). Today’s gain happened on an increasing volume of 52.10 crore shares on the National Stock Exchange (NSE). We may see this rally to be a small one pushing the Nifty up to the level of 4,900. Today, after a positive opening the index easily crossed its 20-day moving average of 4,740, which indicates that the rally may continue for few more days.

The market extended Monday’s gains by opening higher today on optimism in the Asian markets in morning trade today. Better-than-expected manufacturing data from China and India supported gains across the region, however, European concerns kept investors guarded. The Nifty opened 39 points up at 4,676 and the Sensex added 123 points to start the day at 15,641. The opening figures of the two benchmarks were their intraday lows.

Brisk across-the-board buying led all sectoral indices higher. Metal, banking, capital goods and realty led the rally. The green opening of the key European markets pushed the market to a higher trajectory in noon trade. The indices continued their northward journey with the market hitting its intraday towards the end of trade. At the highs, the Nifty climbed to 4,754 and the Sensex scaled 15,907. The market settled marginally off the highs and in the green for the second straight day. At the close, the Nifty gained 129 points at 4,765 and the Sensex jumped 421 points to finish trade at 15,939.     

The advance-decline ratio on the NSE was a splendid 1446:334.

In line with the handsome gains on the Sensex, the broader indices also joined the rally. The BSE Mid-cap index surged 2.42% and the BSE Small-cap index climbed 2.33%.

All sectoral indices closed higher, led by BSE Metal (up 5.05%); BSE Capital Goods (up 4.40%); BSE Bankex (up 4.35%); BSE Realty (up 4.28%) and BSE PSU (up 3.78%).

DLF (up 6.84%); Tata Steel (up 6.06%); Jindal Steel (up 5.67%); Tata Motors (up 5.50%) and Tata Power (up 5.16%) were the top performers on the Sensex. Mahindra & Mahindra (down 1.09%) and Hero MotoCorp (down 0.06%) were the only losers on the index.

The main gainers on the Nifty were DLF (up 6.58%); Kotak Bank (up 6.24%); Axis Bank (up 5.81%); Tata Steel (up 5.73%) and BHEL (up 5.58%). On the other hand, BPCL (down 1.77%); M&M (down 1.56%); Ambuja Cement (down 1.02%) and Hero MotoCorp (down 0.75%) settled at the bottom of the index.

Markets in Asia settled higher on better-than-expected manufacturing data from China and India. Meanwhile, South Korea announced an increase in Budget spending in the current quarter to help its economy cope up with the global slowdown. Singapore’s GDP fell 4.9% in the December quarter following a 21.7% decline in manufacturing activity, government data showed. Despite the negative data, Singapore’s benchmark Straits Times index settled higher.

The Hang Seng jumped 2.40%; the Jakarta Composite climbed 1.28%; the Straits Times gained 1.59%; the Seoul Composite surged 2.69% and the Taiwan Weighted advanced 1.46%. Markets in China, Malaysia and Japan were closed for trade today. At the time of writing, the key European indices were mixed and the US stock futures were in the red.

Back home, foreign institutional investors were net sellers of stocks amounting to Rs93.87 crore on Monday. On the other hand, domestic institutional investors bought shares worth Rs84.34 crore.

Bajaj Auto today unveiled a mini four-wheeler for intra-city urban transportation targeting three-wheeler customers. The company, which had in 2008 showcased a concept small car but decided not to go ahead with the project, will launch the new product named RE60 later this year. The stock gained 1.14% to close at Rs1,492.25 on the NSE.

Bhushan Steel has deferred its planned Rs20,000 crore steel project in West Bengal due to the state government’s decision not to acquire land for industry as well as uncertainty over Sumitomo Industries’ participation in the project. The stock jumped 5.62% to settle at Rs328.75 on the NSE.

Orchid Chemicals & Pharmaceuticals has successfully completed Phase-I trial of its orally-administered phosphodiesterase 4 inhibitor (PDE4) molecule OCID 2987 positioned for the treatment of inflammatory disorders including chronic obstructive pulmonary disease (COPD). The trial was conducted in Europe. The stock climbed 3.72% to close at Rs139.45.

User

Mukesh Ambani, the media baron

After today’s announcement Mukesh Ambani now controls Eenadu TV and the Network18 Group with an indirect finger in NDTV. That is about 30 channels across entertainment and news segments in English and regional languages

In his second move to enter into media and entertainment, Mukesh Ambani, the richest person in India, finally made his intentions clear. In a deal that may appear complicated to a lay person, Independent Media Trust, a trust set up by Mukesh Ambani's flagship Reliance Industries (RIL) has agreed to fund promoters of both Network18 Media and Investments (Network18) and TV18 Broadcast (TV18) to subscribe to the proposed rights issue of these companies. Last month, Moneylife had reported about Mr Ambani's interest in the debt-ridden Network 18 Group.

According to a media release issued by RIL, Raghav Bahl, the promoter of Network18 and TV18, and his team would continue to have full operational and management control of both the companies. Network18 Media and Investments, the holding company for the conglomerate, has annual revenue of about Rs1,500 crore but makes losses. The Network18 Group is up to its neck in debt and was apparently talking with Thomson Reuters to sell a 26% stake in Newswire18, a real-time financial news agency.
 
"The Promoter Companies of Network18 and TV18 and the Trust have entered into a Term Sheet under which the Trust would be subscribing to the Optionally Convertible Debentures (OCDs) to be issued by the Promoter Companies. Reliance will leverage its deep understanding of the Indian markets—consumer insights, technological expertise, and the ability to build & manage scale—to make this a "win-win" partnership. This will create value and be accretive to the shareholders of RIL," the Mukesh Ambani group company said in a press release.

This is the first part of the deal. In the second part, Infotel Broadband Services (Infotel), a unit of RIL, has signed a memorandum of understanding with both, TV18 and Network18 for preferential access to distribute all contents of the media group companies through its fourth-generation (4G) broadband network. As per the agreement, RIL would divest part of its interest in Eenadu TV (ETV) channels to TV18.

Both Network18 and TV18 are raising funds worth Rs2,700 crore each through rights issues. Network18, the promoter and majority shareholder in TV18 would subscribe to around Rs1,400 crore out of the total Rs5,400 crore rights issue. "The contribution of the current promoter entities of Network18 in this net aggregate rights issue of both Network18 and TV18 will be about Rs1,700 crore, the companies said in a release to the stock exchanges.

ETV owned by Ramoji Rao has a bouquet of vernacular channels and some of the language channels enjoy top position in that region. Earlier, RIL had admitted that the company and its group companies invested Rs2,600 crore in Ushodaya Enterprises, the holding company of ETV channels.

At present, RIL holds 100% interest in regional news channels such as ETV Uttar Pradesh, ETV Madhya Pradesh, ETV Rajasthan, ETV Bihar and ETV Urdu channel, and entertainment channels like ETV Marathi, ETV Kannada, ETV Bangla, ETV Gujarati and ETV Oriya. RIL also holds 49% interest in ETV Telugu and ETV Telugu News, through its investment.

The Mukesh Ambani group has divested its 100% interest in ETV news channels, 50% in entertainment channels and 24.5% interest in Telugu channels to TV18.

According to media reports, billionaire Mukesh Ambani, India’s richest person has also been holding talks with a host of media and entertainment firms, including Walt Disney’s Indian venture UTV Software, to acquire content for its upcoming telecom venture. US-based Walt Disney holds over 50% stake in UTV Software Communications and it is in process of acquiring the entire stake in the Indian firm. A deal with Walt Disney would give RIL’s telecom venture access to a host of games, entertainment and other children-focussed content solutions.

RIL has a 95% stake in Infotel Broadband Services, marking its entry into the telecom sector. Infotel is the only company to have pan-India BWA (Broadband Wireless Access) licence.
 
More than two decades ago Reliance had made a bid to enter the media by buying the Observer newspaper which it ran half-heartedly and closed down. Anil Ambani, the estranged and debt-strapped younger brother of Mukesh was leading that effort. The ADAG group controlled by Anil Ambani has large stakes in TV Today and other media companies.

The Network 18 Group comprises a variety of television, print, web and entertainment properties most of which are losing money. Its main properties are collaborations with top media companies such as CNBC, CNN, MTV and Viacom.

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