Separately, the market regulator has also barred 14 people and four entities from accessing the markets in the JVG Finance case
Market regulator Securities and Exchange Board of India (SEBI) has barred 16 people from dealing in the securities market with immediate effect till further directions on charges of synchronised trading. Separately, SEBI also barred 18 people from accessing the securities markets in the JVG Finance Ltd case.
A group of 16 individuals, including Hemlata Ramesh Hankare, Rashmi R Ghandhi, Anil Rajmal Shah, Alpesh R Shah, Jitendra Mannalal Jain, Renu Madhusudhan Paliwal, Hasmukh Valchand Jain and Naresh V Rajawat, was prima facie involved in synchronised or circular trading, SEBI said.
The companies in which the group artificially created trading volumes during March 2009 to September 2009 are Allcargo Global Logistics, Asian Star Co, KSL & Industries, Mavens Biotech, Panoramic Universal, Rasi Electrodes, Sat Industries and Ushdev International.
"The group had indulged in creation of artificial volume by trading among themselves. Most of the trades among the group were synchronised," the regulator said.
SEBI said that the National Securities Depository Ltd and the Central Depository Services (India) Ltd have been directed to freeze the beneficial owner accounts of these 16 people.
It also directed the National Stock Exchange and the Bombay Stock Exchange to square off any existing open positions of these individuals in the futures and options segment.
In the matter of JVG Finance, while barring 14 people and four entities from accessing the securities markets, the market regulator in its order issued on 22nd February, has disposed the proceedings against the company and Jagdish Narain and Pramod Kapur without giving any directions.
The group barred in the JVG Finance case include VK Sharma, Tripat Singh Bhan, Biresh Prasad Singh, DP Nayyar, SP Sharma, BB Sharma, MN Badam, A Subba Rao, Rakesh Mishra, Hari Kumar, Rana Das, SK Gupta, Ashok Kumar Kohl and Gopal Gupta as well as Hoffland Finance Ltd, Marisia Financial Services Ltd, VM Investments and Evergrow Financial Services Private Ltd.
With its foray into the asset management space, L&T has taken a bold step even as the mutual fund industry is undergoing one of its most challenging transformations ever
When global engineering and construction giant Larsen & Toubro Ltd’s (L&T) financial services arm L&T Finance had acquired the assets of DBS Cholamandalam Mutual Fund in early February of last year, it was at a time when the stock markets were in a freefall. DBS Cholamandalam, along with others, was limping along, unable to sustain business operations.
L&T Finance has now officially launched its mutual fund operations, in an environment that is not exactly the most welcoming for a mutual fund business. Regulatory changes in the last year have left the industry licking its wounds, with distributors getting cold feet over selling mutual funds and retail investors simply shying away from the volatile stock markets.
Responding to Moneylife’s question on how L&T justifies putting money into this business at this juncture, YM Deosthalee, whole-time director and chief financial officer, L&T said, “It is not that we are entering into the mutual fund business. We are in the financial services business and therefore we need to offer services to customers in order to be able to retain the customer. This is very critical. From that perspective, it is important to take care of their investments. That is the philosophy behind acquiring this entity. Yes, there are challenges. But ultimately if the products and services are innovative enough to make their presence felt in the market and deliver returns to the customer, then these challenges can be overcome.”
Asked about L&T’s strategy to attract retail investors, Sanjay Sinha, chief executive officer, L&T Mutual Fund remarked, “We already have an investor base of about 1.1 lakh. We are pleased to tell you that in the exit option, not even 3% of these investors chose to leave. Therefore, we have a lot of confidence that we can expand on this base. Also earlier, we did not have a sizable distribution network. Now, we will be present in about 80 locations together with L&T Finance. We will also be able to connect to a larger number of distributors. Thereby, our ability to attract a larger segment of retail investor population is now stronger.”
L&T plans synergies with its existing financial services businesses to provide a suite of products catering to retail as well as corporate investors. For this, it plans to leverage its existing distribution presence and its customer base across the spectrum of L&T Finance businesses.
However, L&T can easily draw a blank with this strategy, as it lacks the sort of business edge that banks possibly have in marketing and selling mutual funds. Banks derive significant strength from their robust distribution network and are more aggressive when it comes to pushing financial products. As such, mutual funds are products that are sold, not bought.
Although the fund house plans to expand its network and distribution base substantially in the coming months, it will not be an easy task to attract investments. L&T Mutual Fund will mostly rely more on its brand equity and trust to gain a foothold in the industry. It will also take strength from the expertise of Mr Sinha, regarded as a sound fund manager within industry circles.
L&T Finance also plans to launch its general insurance operations soon, subject to regulatory approvals.
With the central bank of the country mandating all banks to compute interest on savings accounts on a daily basis, account-holders will reap better rewards from their deposits
The credit side of your passbook will soon show much healthier figures, instead of the measly amount your savings deposits earned until now. The Reserve Bank of India’s (RBI) recent directive to banks to start calculating interest rates on such accounts on a daily basis from 1st April will bring cheer to millions of savings account-holders in the country.
Under the new system, banks will now calculate interest on your savings account on daily balances, replacing the current archaic system where banks compute interest on the lowest available balance held between the tenth and the last day of the month.
The current system is no less than a rip-off for the common man, as banks have become used to getting low-cost funds at the cost of hapless savings account holders. This is how it used to work: Suppose you held Rs20,000 in your savings account at the end of the 10th day of a month, subsequently withdrawing Rs15,000 at the end of the month, you would only earn interest on the lowest balance in your account for the entire month—in this case, Rs5,000. As such, your account will be credited with Rs175.
However, under the new system, even if you have withdrawn Rs15,000 at the end of the month, you will get interest not only on your account balance on the last day of the month (Rs5,000), but also on the daily balance held for the first 29 days of the month. In this case, the interest will add up to Rs682.50.
For banks, though, this will obviously raise the cost of funding. Banks with higher proportion of CASA (current account and savings account) deposits in their funding sources will get hurt the most. Margins will get squeezed unless the RBI decides to act on the bankers’ call to reduce interest rates on savings accounts. This is highly unlikely, however, as it would defeat the very purpose of RBI’s depositor-friendly stance in this matter.
Speaking about the impact of this move on banks, SSN Murthy, senior vice president, Indian Banks’ Association (IBA) said, “The interest payment will now be high for banks. We are asking for some reduction in interest rate. We are trying to either continue the old procedure or are asking for a reduction to 2.5%.” He also added that it would likely result in a rise in liquidity for banks as people will put money into savings accounts to get the benefit of more interest payout.
Although the central bank had proposed this move two years back, banks had asked it to postpone the same citing unfeasibility due to lack of computerisation. Now that majority of the banks are well-equipped with computers, RBI has finally asked banks to implement the decision from 1st April. Customers are unlikely to be fooled this April Fool’s day.
However, banks may still try to circumvent the new regulations by attempting to reduce the interest rate chargeable on daily basis through some subterfuge. In such a scenario, depositors may still find themselves short-changed, unless the RBI takes a hard stand on the matter.