Investor Issues
Taking the investor for a ride—with government sanction

With accounting standards that keep changing from hour to hour, the balance sheets become irrelevant pieces of garbage. Yes, you will have statutory compliance, but the investor is thoroughly misled

There is wonderful news for companies that are sitting on liabilities in foreign currency. The corporate affairs ministry has put its foot in the domain of the guild called the Institute of Chartered Accountants of India (ICAI) and said that these liabilities can be ignored from the accounting statements till 2020. Effectively, losses on foreign exchange can be taken directly to the balance sheet, without going through the profit and loss account! 

This is very much like the ministry of health changing the name of a terminal disease from, say, cancer, to a minor disorder like ‘fever’. Everyone should be happy.

It is amazing how the government comes in to fool the investing public. The Reserve Bank of India (RBI) comes in and relaxes norms relating to recognition of bad debts. It permits banks to ‘reschedule’ loans so that they do not have to reduce their profits on account of doubtful loans. And the stupid banks will report ‘higher’ profits and pay taxes on it too! And the brokerages will come out with research reports that will end up comparing apples with tomatoes.  

The length to which the government bodies connive with industry bodies to hide things from investors is amazing. And the body called ICAI just keeps it mouth shut.

Now, the accounting standards are supposed to be the sole domain of the ICAI. If the RBI or the corporate affairs ministry permits laxity in accounting norms, should the former toe the line? Is it not the job of the ICAI to qualify the accounts and quantify precisely the impact on the bottomline due to changes brought about by some fiat issued by a third party? If they do not do this, they are not being true to their profession and the investors have a right to seek explanations from the auditors. The auditors should simply ignore the change in reporting standards permitted by some unrelated entities and expose the scam for what it is.

It is no wonder that Indian equities are viewed with suspicion. With accounting standards that keep changing from hour to hour, the balance sheets become irrelevant pieces of garbage. Yes, you will have statutory compliance, but the investor is thoroughly misled.

In case, the rupee gains and there are exchange profits, will the companies stop reporting these? Why are rules and norms being designed to simply pretend that things are fine when they are not? There seems to be a concerted effort between various government agencies and the industry associations to fool the investing public at large. And in this, bodies like the ICAI have become a ‘handmaiden’, who does not care about the fact that it owes legal allegiance to the shareholders and not to the promoters.

The end result would be financial results that are boosted by heavy doses of ‘steroid’ and even the analyst body would not do anything about this. The promoters will use these fairy-tale accounts to raise more money from the public and the banking system. The banking system will in turn use these fairy-tale customers to boost their numbers and fool the public.

It is best to avoid all companies with any kind of foreign exchange liabilities. One simply does not know whether the company is already bust or just bluffing.

 

User

COMMENTS

Nagesh Kini FCA

5 years ago

Apparently Vinod Arora is new to the audit profession. Just by saying AS 11 he simply cannot validate his stand.
The auditors not only winked at but connived in Satyam, allowing the fraud to go on for seven long years.The punishment is meted out not to the lead partner or the one who has signed but the lowest in the team.
The partner was stated to be the Chairman of ICAI's Ethics Committee! And they are out on bail.
The SEC has come out heavily no the company, our SEBI, and Courts are still mulling over the issue.
Our auditors merrily attest the accounts that are neither true nor fair, nor fairly true or at best neither for the right price.What has happened to GTB?
Our so-called Regulators SEBI, RBI and IRDA are toothless watchdogs that can not bite leave alone growl.
The new Companies Bill ought to remedy the malady.

REPLY

Vinod Arora

In Reply to Nagesh Kini FCA 5 years ago

These kind of baseless allegations and discussions are the only reasons which make the virtual platforms on internet, useless and less trustworthy. I dont know you want to discuss AS 11, Satyam, GTB, ICAI or something else, but I am sure that this portal is also surrounded with fake identities and discussions. Although I am in CA Profession for more than 20 years, but it does not make difference if the discussion is on logical grounds even if i am a fresh CA. It also does not make sense, if someone who pretends to be seasoned but utters invalid comments. Its no wonder in India that there are people, those who have never been to Politics or to any School/College, discussing about competence of PM or President !! They also dont find takers except in election days. However when the things are legal, only logic prevails.

nagesh kini

In Reply to Vinod Arora 5 years ago

There is absolutely nothing baseless or invalid comments whatsoever.
Thanks for letting me know that you are a CA of 20 years, I've put in double that period and all of it in corporate audit both in the private and public sectors. I can very claimed to be more 'seasoned' a term you have chosen to use.
When we are talking of Balance Sheets and Investor Protection, pray how does politics and going to school arise at all?
Satyam and GTB were gross audit failures. Why don't you comment on that?

Narendra Doshi

5 years ago

Dear Bala,
Well said and THIS IS THE ETERNAL TRUTH. NEVER FORGET IT IS YOUR OWN HARD EARNED MONEY WHEN you INVEST ANYWHERE.

Prakash

5 years ago

I suggest that this article (link given below) be read to understand and know the plight of investors in this country.

http://www.firstpost.com/investing/dear-...

REPLY

Narendra Doshi

In Reply to Prakash 5 years ago

Dear Prakash,
This sentence from the link summarizes aptly for ALL TIMES to come.
"The only way an investor can protect himself is by learning to take care of his money himself."
NEVER FORGET THIS and then INVEST.

Vinod Arora

5 years ago

Its disgusting to read such Articles which are based on a highly narrow approach about ICAI and Audit Profession. Probably there is a lack of understanding of the Author on the Role of ICAI and the Auditors. Still the Auditors will quantify the impact on the accounts and disclose in due course so that investors can understand the impact of deferment by MCA/NACAs of implementation of AS 11 of ICAI. ICAI and Auditors will be doing their role, where is the doubt? Would request Author to look into the broader picture before stepping into passing wrong judgements. Rgds.

Savings bank a/c number portability on anvil: Finance ministry

Financial services secretary DK Mittal said banks would have to work on identification code, know your customers (KYC) norms and core banking solution (CBS) for implementing the savings bank account number portability

New Delhi: The finance ministry is working on savings banks account number portability, which will allow a customer to retain his account number while changing his bank, reports PTI.

“We want to do it (savings a/c number portability). Right now there are some technical problems...we have identified them. We will overcome them soon,” financial services secretary DK Mittal told reporters here,

He was speaking after a meeting in the ministry, which among others was attended by economic affairs secretary R Gopalan, finance secretary RS Gujral and Chief Economic Adviser Kaushik Basu.

He said banks would have to work on identification code, know your customers (KYC) norms and core banking solution (CBS) for implementing the savings bank account number portability.

The move would help customers change banks, without the need of going through the KYC norms again.

Last year, the government had allowed portability of mobile numbers and health insurance policies.

In October last year, the Reserve Bank of India (RBI) had deregulated interest rates on savings account deposits, following which few private sector lenders have hiked rates to as much as 7%.

Mr Mittal further said capital infusion in PSU banks would be completed by the end of this fiscal. “We will complete the process of bank recapitalisation by 31st March,” he said.

The government has already announced that it is committed to providing adequate capital to public sector banks, so as to maintain their Tier-I capital at 8%.

The government has made Budget provision of Rs6,000 crore for capital infusion in PSU banks in the current fiscal.

State Bank of India, Bank of Baroda, Union Bank of India, IDBI Bank and Syndicate Bank are some of the lenders which will be benefited by the capital infusion initiative of the government.

User

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

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