The MLM company promises five-star travel packages on joining and lucrative compensation fees up to Rs4.5 lakh on its direct selling model
Travel Ventures International (TVI) Express, a multi-level marketing (MLM) company, is growing its base in India. And like in the recent case of another MLM, Speak Asia Online that is being investigated, some people are questioning the big promises on its business model.
TVI Express claims to be in the home-based direct selling business, inviting those interested, to become members on a payment of Rs15,500. Members get a seven-nights-eight-days travel package in 3/5 star hotels of their choice, from about 4,000 hotels that the company has a tie-up with. A new member also gets a personal portal, which is primarily a booking website.
The company has a business model which, it says, is compensation-based. The member can sell the travel package to two new members. Those two new members would in turn sell the travel package to a further two members each. This goes on till level four, which is known as "Traveller Board". On completion of Traveller Board the top member is paid a compensation of Rs31,000.
Beyond this there is an "Express Board" level. Once the Traveller Board is completed, members can enter the "Express Board". Here too, the number of new entrants increases, taking the original members a step ahead. On completion of "Express Board", the top member gets Rs4.5 lakh as compensation fees.
Members also get a 5%-10% bonus for every new member joining after he/she "cycles out of Express board". It also rewards the members with incentives "ranging from luxury cars to private jets and splendid villas in exotic locations around the world."
However, contrary to the company's claims, members have alleged that it is not paying the promised compensation. According to complaints posted on consumer forums on the Internet, the TVI Express business model is a scam, as many members who have increased their down line have not been paid any compensation.
TVI Express has a presence in many countries, among them the United Kingdom, South Africa, Canada, France, Germany and China.
Interestingly, according to a news report, The Bank of Namibia had warned people about investing in TVI Express and Holiday and Cash because they were operating in Namibia in violation of the laws.
When Moneylife called TVI Express, a company official said: "We abide by the laws. We follow all the rules and regulations. Ours is not an investment scheme; our business works on compensation fees which we pay to our members, who generate business for us. Those who work, earn. All these complaints are posted by our competitors who are jealous of our business growth."
Meanwhile, it has been reported that bank accounts in Singapore of Speak Asia, the online survey company which is being investigated, have been frozen, disrupting payouts to vendors, clients and staff.
Moneylife has consistently exposed the dubious claims made by such MLM companies that are promising high returns in a short span. (Read, "Stay on guard: Need to regulate MLM firms, websites, so investors don't suffer".)
The Reserve Bank of India has written letters to several banks because they have crossed the limit of instruments dishonoured under the Electronic Clearing Service (ECS); 3%-5% is the acceptable apex bank norm—in a few cases, the percentage of dishonoured instruments under ECS has been as high as 30% to 40%. However, this move is a warning, and may not lead to punitive action
The RBI (Reserve Bank of India) keeps a track on the percentage of dishonoured instruments cleared under the ECS of all banks.
The ECS allows paperless direct credit and debit transactions for all banks. However, if a bank crosses the limit of instruments dishonoured under the ECS, the RBI asks the respective bank for an explanation.
According to the apex bank, "3%-5% is the tolerance level on a daily basis. At times when it goes up to 30%-40%, we ask the bank to find out about the particular accountholders whose instruments are not being honoured under ECS." Often, banks are not aware about the accountholders who are repeatedly dishonouring their financial instruments as ECS is transmitted in bulk to the clearing house.
The main problem is that even if one of the ECS instruments bounces, then it affects two or three banks at a time. It affects the ECS user bank, the ECS beneficiary bank and the destination bank to which the amount has to finally get transferred.
In a letter addressed to ICICI Bank, a copy of which is with Moneylife, the RBI has said: "Please refer to paragraph 2 of the Minutes of the General Body Meeting of the Chennai Bankers Clearing House (CBCH) held on August 2, 2010 and our letter dated October 28, 2010 relating to return clearing discipline. In pursuance of the instructions contained therein, it has been decided to invoke penalty @Rs. 1000.00 per return for the month of January.
The number of MICR and as well as RECS (Dr) returns of your banks has since been generated from the system and the details are been given in annexure. After deducting the tolerance of 4% and 5% on MICR and RECS returns respectively, a penalty of Rs 39821000.00 (Rupees Three Crore Ninety Eight Lakh twenty One Thousand only) is proposed to be imposed on your bank for non-adherence to the return discipline. You are hereby advised to put forward your case as to why Rs 39821000.00 (Rupees Three Crore Ninety Eight Lakh twenty One Thousand only) shall not be imposed on your bank. Your response should reach this office on or before 15 days from the issue of this letter, failing which it shall construed that you have nothing to report and accordingly the Bank shall proceed with a suitable action."
We gather that several other banks have been pulled up in a similar fashion. Thus, the RBI has defined a definite tolerance level beyond which it would charge a bank a certain fine on each rejection. That is why the RBI has threatened to charge a Rs3.98 crore fine for ECS dishonour beyond acceptable limits on ICICI Bank.
Moneylife spoke to the RBI for clarification. The central bank spokesperson said, "There were several banks that were not adhering to what we call 'return discipline' in Chennai and the notice was issued to all of them. The fine amount, though, varied. The purpose of the show-cause notice was to shake the banks out of complacence and to ensure that the rate of 'returns' fell within our comfort zone (and not really to collect fine amounts from them). There is significant improvement in the position now and we are not pursuing the penalties with the banks."
It was only after receiving the letter from the central bank that banks started screening accounts and transactions and are stopping all ECS debits.
ECS is a mode of electronic funds transfer from one bank account to another using the services of a clearing house. This is normally utilised for bulk transfers from one account to many accounts or vice-versa. This facility can be used both for making payments like distribution of dividend, interest, salary, pension, etc. by institutions or for collection of amounts for purposes such as payments to utility companies (telephone, electricity), or charges (house tax, water tax), etc or for loan instalments of financial institutions/banks or regular investments of individuals.
The ECS user bank is called the 'sponsor' bank under the scheme and the ECS beneficiary accountholder is called the ECS 'beneficiary' bank. The destination account holder's bank or the beneficiary's bank is called the 'destination' bank.
The beneficiaries of regular or repetitive payments can also request the paying institution to make use of the ECS (Credit) mechanism for effecting payment.
As the sector chokes, borrowing rates are skyrocketing; but housing prices continue to remain unaffordable
The real estate sector seems to be getting desperate with a shortage of funds climbing to alarming levels. Now, several small and medium-size developers are hoping to raise money by selling risky non-convertible debentures (NCDs), much of it at an astonishingly high coupon rate of 19%. But with the big builders continuing to hold on to their housing stock, there appears to be little chance of relief for the sector.
Lily Realty, one of the companies seeking funds, is planning to raise about Rs250 crore through unlisted NCDs to fund its projects in Mumbai and Bangalore. The higher coupon rate, which is similar to the interest payable on bonds, is 19% per annum, paid quarterly. The projects are to be completed within 2-5 years. The minimum investment amount is Rs1 crore.
Sources say Lily is not the only realty company and many medium and small developers are planning to take this route. "The RBI has placed so many restrictions on fund raising and investors are opting out of the realty sector as the returns have been poor. So many developers who are not so big are opting for alternative means to raise money. They are offering NCDs in lieu of high rates. It's a risky proposition, but they have to find ways to raise cash," one expert said.
However, considering the depressing phase the market is going through, it seems unlikely that people will rush for the NCDs. Pankaj Kapoor, managing director, Liases Foras, the realty research company, said, "The market is in desperate need of cash and these are alternative ways of raising money. I don't think many people will fall for such things as NCDs, which are unlisted and cannot be sold. They are very risky investments. Such schemes will do nothing for investors."
If this scheme does not work well it will only result in further worry for developers. For, not only are sources of funding decreasing, but high prices have put off customers. Prices have remained fixed in many parts of Mumbai for the last one year; they may not have increased, but they haven't come down either.
Many builders say the demand-supply gap is enormous and, hence, prices have shot up. This, however, does not explain why completed projects remain unsold. Sales are at a two-year low, according to Liases Foras, and an estimated 88,000 flats remain unsold in Mumbai. Many brokers and investors have their hands full with available spaces, but there are no buyers.
One analyst said, "If the prices don't come down, the situation will not change. The sector will be choked further. But since the big and influential developers are not willing to bring prices down, and they continue to hold their stocks, houses and properties will remain unaffordable, and there will be no off-take."
If this trend continues, it may mean trouble for the sector as well as customers. Rental values are already shooting up, and the salaried class is finding it difficult to pay for housing. If developers don't relent, their situation will worsen too.