India’s largest lender offers attractive home loan schemes to generate demand, then loses interest when it comes to processing loan requests. One such complaint against SBI exposes the situation
Customers lining up for home loan offerings better size up the uphill task ahead of them. For, even though SBI is going all out to woo customers with attractive packages, it is making them run from pillar to post before releasing even a penny.
One particular complaint by Mr Kalyan Chakravarthy speaks volumes about the troubles home loan customers go through while dealing with bank officers. His case exposes the bureaucratic practices prevalent at the country’s largest bank, State Bank of India. Between the day that SBI’s representative came to collect all the relevant documents till the loan was actually sanctioned, the complainant has been made to run around in search of various documents (among other things) over and over again, and has been yelled at by the bank officials, for no fault of his.
After waiting for two weeks without any answer since providing the documents, when he met the manager for a preliminary enquiry, the Bank referred him to a separate branch where all the loans get processed. This is where his troubles began. Mr Chakravarthy states, “When I went there to know the status, they yelled at the top of their voice as to why we always keep on following up and they would call us once the application is processed. Again we waited for a week and finally I gave up and went to the branch again. Then ironically they asked me to get an estimate of the construction done by a prescribed engineer (Mr Chakravarthy had earlier submitted a valuation report from his engineer). I had to run to that engineer to get the valuation done again, for which he took four-five days and took a fee for the service.”
After he submitted the valuation report, again nothing moved and Mr Chakravarthy had to approach the branch again. This time they demanded legal advice, again from a prescribed legal advisor. He was also asked to get an encumbrance certificate and a duplicate will of the property. Even after doing all this, and after waiting for ten more days, SBI demanded the details of his previous employment as the Bank wanted a two-year working record. Even though he had already submitted relevant IT returns for three years, his arguments fell on deaf ears.
A week later, the complainant finally got a call from the manager asking him to sign the final documents, to seal the deal. Needless to say, his troubles didn’t end here. The manager asked him to pay stamp fees, which came to a staggering 0.5% of the loan amount! The reason for this absurd demand—the Bank was worried that in case he defaulted, it would have to file a case in the court, where the Bank needs to pay the stamp duty fee. As the complainant puts it, he was already being made out to be a defaulter!
Even after paying the required stamp duty, Mr Chakravarthy was referred to another manager, who made his own new list of requirements, including another encumbrance certificate. To complete all the formalities, when the complainant tried to open a new account, his request was flatly refused, as he had made the abominable mistake of coming on a Saturday! His alacrity won him a further round of abuses. After two days, his loan was finally sanctioned, but not without the customary new list of requirements. Even after going through all this mess, the complainant still remains unsure of getting the loan disbursed!
Mr Chakravarthy has highlighted the following issues:
They (the Bank) are asking the customers to get various documents which are very crucial (like legal advice and an encumbrance certificate). I guess this should be done by them independently as in today's world it’s very easy to get a fake certificate and the possibility of a fraud is not ruled out in these circumstances.
They (the Bank) are advertising 0% processing charges, but asking the customers to bear the expenses of getting a valuation certificate, legal advice, encumbrance certificate and also the stamp duty which in my case came to around 1.2% of the amount of loan. Is this not cheating, had I gone to any private bank wouldn’t I have just paid the 0.5% processing charges and got the loan without any hassles?
With such kind of practices, won’t SBI lose the customer base and business thereby, as many customers would opt to go for private banks and avoid PSUs as far as possible?
What is the reason for taking the stamp duty from all the customers in the beginning; is SBI of the impression that all will default on payments or do they want to increase the revenue for the government from these stamp duties?
This is the response they give to educated professionals—I’m not sure about the plight of a common man who is not aware of financial jargon and procedures, forget about illiterates.
That is the alarming situation currently playing out. After squirming about low credit off-take for the most part of this year, when customers are now slowly lining up for credit, SBI is getting cold feet in expediting the processing of loan requests. Moneylife tried to contact SBI for its comments, but didn’t get any reply.
–Sucheta Dalal with Sanket Dhanorkar [email protected]
Aiming to enhance the distribution network for mutual funds, SEBI has allowed mutual fund schemes to be routed through stock exchange brokers. Are brokers equipped to handle an entirely different business?
Market watchdog Securities and Exchange Board of India (SEBI) has enlisted the services of stock exchange brokers for dealing in mutual fund units. SEBI plans to use the existing infrastructure in stock exchanges for facilitating investors to buy and sell units in a mutual fund. Over two lakh exchange terminals are to be used for facilitating transactions in mutual fund schemes, providing a reach to over 1,500 towns and cities. Notwithstanding infrastructure advantages over current distributors, it remains to be seen how brokers actually go about dealing in mutual fund units. Chandrashekhar Layane, senior VP, Fairwealth Securities said that a separate order routing mechanism would be developed for the same in the existing broker terminal. Existing mutual fund holders who are not having demat accounts would need to open demat accounts to allow smooth transactions through the broker terminal.
The fact is, mutual funds represent a broadly different line of business altogether. Brokers’ expertise lies in dealing with equity instruments and for them, switching over to the complexities of mutual fund schemes will involve a huge learning curve. Said Jagannathan Thunuguntla, equity head, SMC Capitals, “The various qualification exams can help brokers to gain knowledge. However, to make them completely conversant with the nuances of the mutual fund products can take some time. Over a period of time, the brokers can gain the relevant expertise and knowledge. However, the large brokers who have the in-house research arms, databases and the network can have an edge in terms of the research.”
While fund investors will benefit from the convenience of getting access to their neighbourhood broker, clarity is yet awaited on the costs involved for transacting through brokers. Presently, distributors are required to charge commissions directly from investors through negotiation, after SEBI banned funds from levying entry loads or initial fees for participation in their schemes. This has deprived distributors of large commissions and they have lost their incentive to sell mutual funds. Brokers’ charges for transacting in mutual funds would be same as that for equities. This means commissions could range somewhere between 0.25%-0.50% per transaction. However, it is not clear how additional costs such as securities transaction tax and stamp duty would be levied. Mr Layane confirmed, “The commission structure will be roughly equal to a delivery-based brokerage i.e., from 0.25 to 0.50 of the transaction value. Roughly it will be less than the existing entry load—around 1.25% charged by MF houses, which has been abolished by SEBI recently. But still some things will be unclear, like what will be the commission charges for SIP units.” Mr Thunuguntla said, “The commissions that brokers are going to charge will evolve over a period of time, once this new system gets operational and once all the market participants become familiar with this.”
Further, brokers would be wary of the poor volumes that mutual funds normally attract, especially from retail investors. For brokers, trading in equities is a bigger game, where the volumes are far better and hence the total commissions are also larger. Mr Thunuguntla added, “The volumes are better in equities. However, selling mutual funds can give brokers one more revenue stream and over a period of time, even the volumes in mutual funds can pick up.”
–Sanket Dhanorkar with Ravi Samalad [email protected]
There would be more efficiency in the listing process, if the time taken for processing an IPO application can be reduced
In a bid to bring in more efficiency in the primary market, market regulator Securities and Exchange Board of India (SEBI) on Wednesday said that it wants to bring down the time required for initial public offer (IPO) processing to seven days from 20 days at present over the next one year, reports PTI.
This would mean that the time taken for processing an application for an IPO will be lesser, which will bring in more efficiency to the listing process.
"The listing time should come down from 20 days to seven days. The primary market is somewhat inefficient compared to the secondary market," SEBI chairman CB Bhave said at a conference in Mumbai.
However, while doing so, the timely settlement of transactions will become the biggest bottleneck to the system, which needs to be addressed, Mr Bhave said.
SEBI has requested the Reserve Bank of India (RBI) to allow clearing entities to have an account with the central bank, Mr Bhave said.
With a view to bring in more transparency, SEBI had introduced Application Supported by Blocked Amount (ASBA) process in the IPO process and is looking at making it applicable to retail investors as well, Mr Bhave said.
The ASBA allows releasing an applicant's money only if the allocation is made. If ASBA process becomes popular, SEBI would like to reduce the IPO allotment period to five days, Mr Bhave had said earlier.
Earlier in August, the market regulator had issued a circular that said that changes in sections like any material development in risk factors, an aggregate increase of 5% or more of the shareholding of promoters, change of more than 10% in the estimated issue size or estimated means of finance, change of more than 10% in estimated deployment of funds, among others, as reasons required for fresh filing of draft offer document with the board. According to media reports, some merchant bankers felt that the directives from SEBI related to updations in the offer documents for initial public offerings, would make the process as tedious as filing a fresh offer document.
The move came after SEBI observed that in some cases material changes informed by merchant bankers resulted in major deviations from the draft offer document that was available in the public domain and called for fresh scrutiny and processing of the draft offer document by the SEBI board.
At present, it takes around two weeks for allocation of public issues and around three weeks for them to be listed after they close.
-Yogesh Sapkale [email protected]