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.
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.
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.
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!