Consumer Issues
Things you did not know about financial counselling

The common person has been left far behind as complexities of financial products increase. Financial counselling is the need of the hour in our country

The financial landscape has changed. It is not simple anymore. The common person who has difficulties in understanding the complexities of financial products but, at the same time, cannot help availing them for the sake of survival has, no doubt, been left far behind the pace of development. The rapid advancement in information and communication technology, the advent and range of complex hi-tech asset-liability products, innumerable number of insurance and mutual funds schemes have changed the traditional face of the financial sector. There has been a tremendous increase in the speed and quality of banking services. Financial transactions, or for that matter, practice of banking has existed in some form or the other from time immemorial and will continue to remain as long as the human race exists However, the digital divide is so wide that every household is caught in this vortex and many of them simply carry on helplessly. Therefore, it is imperative to address the concerns of the common man. In such a scenario, financial counselling can play a major role in bridging the gap.


The concept of inclusive growth for a country as a whole has now become a global phenomenon. On the supply side, we have put in place a sound financial system that has the capability to cater to all segments of society. However, inclusive growth is not possible without financial inclusion i.e. provision of banking services at affordable costs to the unbanked segment of population, which has so far been excluded from such services. Unless we are able to create a demand for it, the financial system so established over the years will, sooner or later, collapse. On the demand side, financial inclusion through the provision of financial literacy, financial education and qualitative customer service is the only way to supplement the supply side. Although the Indian economy has grown steadily over the last two decades, its growth has been uneven among different geographic regions, rural and urban areas, social groups and economic classes. A third of the global poor reside in India. The benefits of economic growth have not been equitably shared among the various classes of population. The standards of living among various segments of population show glaring disparities. Given the present context, financial counselling becomes crucial for creating necessary demand for financial products and services among the people left behind, creating awareness among them about their rights as consumers and instilling in them trust and confidence in the system with a view to ultimately improving the quality of their lives. Financial Counselling is one of the means to the end.


The term counselling is much misunderstood. Some people think that counselling is needed for those who are weak or crazy. Particularly in our country, it is commonly associated with psychiatric treatment or those whose performance in the school, college or workplace is not found to be satisfactory. Such people are living in a denial mode. Showing openness to change and willingness to look forward is nothing but a sign of strength. The clients learn new skills and learn to help themselves. When you fall sick you go to a physician who diagnoses and prescribes the treatment for prevention or cure. Similarly when you are confused before availing a product or facing financial crisis after availing a product or in debt trap, you are said to undergo financial ill-health. You, then, need diagnostic financial counselling. Like healthcare, financial counselling process comprises both preventive and curative counselling.


Financial counselling means providing financial literacy, financial education, credit counselling and debt management for those in financial distress i.e. guidance on personal financial management—budgeting, saving and credit issues/debt management and managing money for a secure future. It is important to know that saving leads to investment and asset creation. Appropriate asset allocation leads to wealth creation. By savings alone one cannot meet all current and future needs, which also depends upon the given lifestyle. Thus, counselling is essentially for livelihood and mitigating financial distress is part of the process.


The counselling process enables customers to take informed decisions before availing a product or service. Hence, there is less scope for grievances. Lenders can then gainfully utilise the resources earmarked for the grievance redressal mechanism. As a customer resorts to responsible borrowing, it results in viability of credit for the lender. Similarly, customers would be more comfortable in dealing with non-partisan counsellors rather than lenders themselves for the purpose. If lenders tend to accept the suggestions made by the counsellors, then the customer’s debt burden is mitigated and at the same time the lender can avoid the burden of handling a possible bad asset or dispute. Thus, counselling is advantageous to both the customers and the service providers.


Meanwhile, the counsellor’s objective should be customer-centric because the relationship between the customer and bank is based on an unequal contract. The counsellor is expected to listen to the customer and show signs of understanding of his problems with a view to winning over his trust, so that he comes forward to share all the facts and circumstances of any underlying issue. Otherwise, the whole exercise would become futile. This is all the more important because the counsellor would get only the customer’s version of the story. The counsellor has to constantly remember that his mission is only to guide the customer, and not attempt to directly or indirectly resolve any dispute between the bank and the customer as the line of demarcation—between where the process of counselling stops and that of grievance redressal starts—is very thin. Promoting a product or showing bias towards any service provider is not within the framework of the scheme of things. He is unbiased. A counsellor should not indulge in full-scale investment counselling since it is limited or incidental to budgeting and saving for a secure future in regard to the targeted segment. Further, it is distinct from investment counselling which is prohibited under the present regulations. A counsellor is just a facilitator.


Overall, the counselling process would contribute immensely in building customer confidence as well as improving the efficiency of the delivery channel which are supplementary to each other. Financial counselling is at its nascent stage. We have to create awareness about the concept among the common people. And its wide acceptance depends upon how it is offered, sought and delivered. Further, the beneficiaries should be able to appreciate the benefits derived. Thus, financial counselling may perhaps become the key-differentiator in the realm of possibilities.


About DISHA: As part of corporate social responsibility ICICI Bank has set up DISHA Trust under the aegis of ICICI Trusteeship Services Ltd. The Trust has established as many as nine DISHA Financial Counselling Centres across the country. They are manned by ex-bankers who have rich banking experience for over 20-25 years. The thrust area of counselling would be on medium and low-income individual customers who do not have the ordinary means to know or wants to know the details of a product or those who are having budgeting problems and worried about their financial future or when they are facing problem of repayment of a loan or any other debt. The customer will really benefit only if he is willing to share with the counsellor all the facts leading to his financial crisis. The DISHA counselling process is unbiased, personalized, non-judgemental, confidential and free of cost and it is done with the involvement of the customer. ICICI Banks initiative is for serving all customers across banks.


DISHA Financial Counselling has a tie-up arrangement with Moneylife Foundation (both non-profit entities) to spread financial literacy and to provide free counselling for those who are in need of financial education and credit counselling. Those who want to avail free financial counselling may contact the following centres for appointment.



Raman Sridharan

4 years ago

A good and simple article which will useful to a common man who does not know the complications and implications in financial products. I suggest Mr.Gopalakrishnan should come out with a booklet or a handbook which will be very useful in the present scenario of financial products which are being introduced more and more.

Mr.Gopalakrishnan - please keep up your task and this will go a long way in bringing about awareness in the financial field for a common man!



4 years ago

Very good article. Enjoyed reading it .

Inflation continues; forget rate cuts

 Headline inflation is expected to rise above 8% by the year-end. So, all those hoping for a rate cut at the RBI’s 30th October meeting would be disappointed. A 25 bps cut in the cash reserve ratio (CRR) remains possible, according to Nomura

Headline inflation is expected to inch above 8% in the coming months. The diesel price hike has not yet been fully reflected in the WPI (Wholesale Price Index) reading, and that will add another 20 basis points (bps) to the headline inflation in October 2012. According to Nomura Economics Research, higher transportation costs will push food inflation, particularly fruit and vegetable prices, in the coming months. The recent rupee appreciation should ease cost pressures, but with growth bottoming, the risk of recent input cost pressures being passed through to consumer prices cannot be ruled out.


According to Nomura, the implications for the monetary policy are that today’s inflation print does not make a convincing case for the Reserve Bank of India (RBI) to cut the repo rate at its 30th October meeting. A 25bps cut in the cash reserve ratio (CRR) remains possible.


WPI inflation has bounced back to 7.81% in September from 7.55% in August, led by higher fuel inflation. Although food inflation eased, core inflation remained steady at 5.6% y-o-y (year-on-year) in September 2012 due to an across-the-board increase in prices. The rise was largely due to the hike in diesel prices in mid-September, which contributed about 44bps to headline inflation. Food inflation eased to 8.5% y-o-y last month from 9.1% in August as lower fruits and vegetable prices more than offset increased prices for manufactured (processed) food items. Core inflation remained unchanged at 5.6% y-o-y in September. However, prices of all the sub components increased, with basic metals, chemicals and textile categories rising most. Elsewhere, July WPI inflation was also revised up to 7.52% from 6.87% following an upward revision to manufactured food and electricity prices.


One might attribute the uptick in inflation to the diesel price hike. However, there has been an across-the-board increase in prices of manufactured items, and we believe price pressures are unlikely to wane anytime soon, as suggested by the quarter over quarter seasonally adjusted annualized rate (a measure of sequential momentum) of core inflation. With the risks of inflation clearly tilted to the upside, the trade deficit worsening and CPI (consumer price index) inflation near double digits, it is not appropriate for the RBI to let its guard down on inflation. It is expected that the central bank will cut the repo rate only in the first half of 2013, premised on a moderation in inflation starting in December 2012 (data released in January).


Finally, there is the possibility of the RBI cutting the CRR by 25bps as a positive response to the government initiating the reform process.


PharmaCity units have been disposing of their effluents leading to severe water pollution, says EAS Sarma

The Andhra Pradesh Pollution Control Board apparently has not cared to take the water samples on time and subject them to an analysis in PharmaCity, Vishakapatnam, thereby allowing the polluting units to get off the hook, says EAS Sarma, convener, Forum for Better Visakha

There have been serious apprehensions about the manner in which the PharmaCity units have been disposing of their effluents, says EAS Sarma, convener, Forum for Better Visakha (FBV) and former secretary to the Government of India. Since December 2009, it has found Uracheruvu (a water body) in Tanam village adjacent to these units heavily polluted, presumably as a result of the effluents of PharmaCity draining into it. The Andhra Pradesh Pollution Control Board (APPCB) apparently has not cared to take the water samples on time and subject them to an analysis, thereby allowing the polluting units to get off the hook.


FBV refers to a copy of the report submitted by the expert committee headed by Prof JM Dave submitted to APPCB in October 2009 on PharmaCity’s waste treatment facility. The report indicated the leaching of hazardous chemicals into the ground water and the unsatisfactory functioning of the treatment plant. The following questions are there for APPCB to answer:


(a) What is the follow up action taken by the APPCB on each of the findings of the Dave Committee?

(b) Why has the APPCB not displayed Dave Committee report and the action taken on it at its website as required under Section 4 of the Right to Information (RTI) Act? Are they not matters of public importance?

(c) Has the APPCB penalized PharmaCity for damaging the quality of the water? Has the APPCB asked for expert opinion on assessing the damage and recovering the costs from the Ramky Group?

(d) Ramky’s track record elsewhere has not been satisfactory. Why is the APPCB not taking stringent action against PharmaCity’s activities at Vizag, based on the Dave Committee’s findings?


In particular, FBV requests the APPCB to periodically monitor the quality of water in Uracheruvu, as it is likely that a part of the effluents from PharmaCity will enter the water in that tank. Downstream, this water mixes with the saltpans and the sea water.


The FPV is not alone in this battle against pollution. It is distressed at the reports appearing in the press of hazardous chemicals being dumped by some anti-social elements into Yeleru Canal near Lankelapalem village, as evidenced by the death of fish on a large scale in the water flowing in the Canal. FPV appeals to APPCB and the district collector (Visakhapatnam district) to undertake an urgent investigation to identify the culprits and prosecute them for this grievous offence that would have led to loss of life and widespread damage to the health of the people living downstream. The investigation should determine the nature of the pollutants and trace them to such industrial units that are known to have delayed setting up adequate effluent treatment facilities.


Here too, there has been inappropriate use of government funds. According to EAS Sarma, “I am surprised that the government (Industries Department) should issue orders on 2 December 2009 bestowing a grant of around Rs6 crore on the Ramky Group, in addition to allowing it to borrow another Rs32 crore from public financial institutions to set up a centralized effluent treatment plant for all chemical units in north Andhra. This is when the units in PharmaCity themselves have repeatedly indulged in wanton acts of pollution. As a regulatory authority, the APPCB should come clean on this and ask the government to keep the GO (Government Order)  in abeyance, failing which we will be constrained to conclude that APPCB is also a party to all this.”


The Ramky Group is a specialist multi-disciplinary organization with a turnover of over Rs4,500 crore, focused in the areas of civil, environmental and waste management infrastructure with specific emphasis on public private partnership (PPP) projects. The Group has over 6,000 employees. While the Group is yet to clear its name with environmentalists and NGOs, the Group has been flourishing in Andhra Pradesh and on the stock exchange, as well. It had the powers to sanction environmental clearances to industrial units. It was responsible for waste disposal. On the stock exchange its listed company was trading at around Rs450 just two years ago, and is now trading at an unexciting Rs111.


There is a clear case where the government should be strict with its funds and the public in PharmaCity, and the rest of Andhra Pradesh, must be allowed to use safer water.


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