Stocks
Urgent Need for a Single Demat Account
One of the most harrowing experiences in India is to complete the transfer of assets after a person has passed away. Often, the heirs are clueless about a person’s investments; there are innumerable complaints of harassment faced by nominees, even for transfer of money lying in bank accounts. Then there is the problem with physical paper. Fixed deposit (FD) receipts, savings certificates and passbooks are often tucked away in cupboards, lost, misplaced or unaccounted.
 
The numbers indicate the size of this problem. Unclaimed bank deposits of over Rs3,600 crore have been transferred to a depositor education fund by the Reserve Bank of India (RBI) a couple of years ago. Unclaimed dividends, interest and redemption of deposits transferred to the Investor Education & Protection Fund aggregate well over Rs1,000 crore; unclaimed insurance policies are approximately Rs1,700 crore. The largest of all—nearly Rs26,000 crore—is lying unclaimed in provident fund accounts, says a business daily. 
 
Imagine having a single demat account, with a single know your customer (KYC) registration, which holds all your financial assets, such as corporate fixed deposits, bank fixed deposits, corporate bonds, gold bonds, National Savings Certificates, Kisan Vikas Patras, pensions products, insurance policies, etc. Every investor can then receive an updated statement of his complete assets every month. A change of address to update the KYC or change in nomination, bank account, etc, will also be at a single point and, in case of death, the transmission of all assets can also be made easy. It will also be easier to track interest/dividend earnings or the transfer of redemption proceeds to bank accounts linked to the depository account. 
 
There is also a cost advantage in moving to a single demat account. India has over 20 million depository participant (DP) accounts on which each investor pays annual maintenance charges (AMC) of around Rs300. Those with a pension account pay another Rs200 plus. Investors are already irritated with having to pay AMC charges on dud shares held in demat accounts, because it is almost impossible to convert them back to paper. 
 
Adding other financial assets to these demat accounts will reduce costs. The Central Depository of Securities Limited (CDSL) had estimated savings of Rs580 crore for the entire system, in 2014. The cost efficiencies would be greater as the number of demat accounts increase and enable the introduction of value added services, such as sending alerts regarding maturity of instruments or payment of insurance premium. 
 
There is another advantage to dematerialisation. The process of obtaining duplicates for physical paper that is lost or misplaced is arduous, if not impossible. However, when stored electronically, the onus shifts to depositories, who are obliged to obtain a comprehensive risk cover and indemnify investors for the assets. In 2014, finance minister Arun Jaitley had said, “I propose to introduce one single operating demat account so that Indian financial sector consumers can access and transact all financial assets through this one account.”
 
The ministry of corporate affairs (MCA) was particularly keen to demat corporate FDs. Apart from the benefit to individuals, the MCA would have access to real-time information on payment of interest, redemption dues or defaults by companies, allowing it to initiate quick regulatory action where necessary. The MCA formally approached the Securities and Exchange Board of India (SEBI) with a request for dematerialisation of FDs, but this was rejected. After the 2014 Budget, the Financial Stability and Development Council (FSDC) was asked to implement the decision of consolidation into a single demat account. This would require appropriate statutory amendments, regulatory changes and checks & balances to ensure that DPs do not misuse the information available with them to hard-sell toxic investment products, or dubious unit-linked insurance. However, the single demat idea has gone off at a tangent. primarily due to turf issues between the four financial sector regulators, lack of interest on the part of the finance ministry in making it happen and callousness towards investor protection. Here is what we gather from sources:
  • Depositories are regulated by SEBI, but also have their own statute, allowing them much wider scope of operations. Taking advantage of this, the National Security Depository Limited (NSDL) had decided that it did not need SEBI approval for setting up the tax information network or taking on custodial responsibility in other areas. However, NSDL’s role in what was called the multiple IPO application scam of 2006 and DSQ Software, along with its apparent ability to dictate to the finance ministry, led to a messy situation that was finally cleaned up in 2013 only after CB Bhave’s term as SEBI chairman ended. Depositories were asked to demerge their non-capital market business into separate entities. Interestingly, Mr Bhave also launched a turf war with the insurance regulator which had to be resolved through a formal statute called The Securities and Insurance Laws (Amendment and Validation) Act, 2010. With this background, both SEBI and the Insurance Regulatory and Development Authority of India (IRDAI) remain wary of each other and about the ambitious plans of depositories.  
  • NSDL has aggressively pushed for a single demat account to include various savings instruments and succeeded in tying up with RBI to dematerialise certificates of deposit (CDs), commercial paper (CP), bonds and debentures. But this does not seem to have increased the trust quotient on either side.  
  • Meanwhile, IRDAI decided to set up insurance repositories and has permitted five of them to dematerialise insurance policies, ignoring the existing depositories with proven systems, even though this imposed additional costs on the industry. But the mammoth Life Insurance Corporation (LIC) refused to join the repository system. This only exposes how powerless IRDAI is against the largest insurance player. 
  • The Pension Fund Regulatory and Development Authority (PFRDA) set up a central record-keeping agency (CRA) with NSDL through separate entities. In 2016, it invited bids for a second CRA, which allowed Karvy Computershare Pvt Ltd to enter the business by quoting a quarter of the fee charged by NSDL. Although this is a good step, including pension schemes in a single demat is a far better option. 
  • In fact, the move to create a single demat account is in line with recommendations of multiple committees to unify financial regulation and to set up a single financial redress agency with a formal mechanism for cooperation between regulators, as also the Competition Commission of India (the last bit was recommended in 2011by the Financial Sector Legislative reforms commission—FSLRC). This too, has failed to materialise, since FSLRC was seen as working with an agenda to cut the regulatory pre-eminence of RBI. Hopefully, the disastrous handling of the demonetisation will put the financial consumer’s needs at the forefront and revive the effort. 
  • Shockingly, instead of working on the single demat, FSDC and the financial regulators have decided to go with a wholly new plan. In September 2016, RBI issued elaborate guidelines for setting up account aggregators who are supposed to aggregate information on investments, including deposits with non-banking finance companies, structured investment products, CDs and CPs, government securities, equity, bonds, debentures, mutual fund units, exchange traded funds, collective investment schemes, alternative investment funds, insurance policies, units of infrastructure investment trusts and units of real estate investment trusts. 
 
Will nobody question RBI about the need for this wasteful duplication when more than half these products are already with depositories? Given how badly RBI has handled the demonetisation process, do we really want it to supervise this aggregation? RBI also has a pathetic record of grievance redress and has stonewalled the creation of an effective consumer charter that would have ended the egregious mis-selling of third-party insurance and hybrid financial products to investors by banks. One would even question its ability to ensure that dubious collective investment schemes and Ponzi schemes are excluded by account aggregators. 
 
Unfortunately for us, financial consumers are a passive lot and have absolutely no representation among members of parliament. So it is no surprise that consumers are made guinea pigs of another expensive experiment which has the danger of handing over aggregated information on assets to an untested new system with poor supervision and consumer protection.

User

COMMENTS

K VENKATARAMAN IYER

4 weeks ago

I can state about reliability of my ADDHAR card data with my personal experience,when I was in the process of authenicating my fingerprints for getting sim card and it was not matching and could not processed.I am seventy five year old person and many more senior persons and other persons due poor technological data capture and retrieval system in India's ADDHAR system.Nobody is addressing this issue and remedial action!If all my assets like bank accounts are linked,what will be my fate!Thank GOD my last days are nearing and will be away from mad crowd from NEW DELHI

Trivendra

2 months ago

Many times we find multiplicity of work which can save scarce national resources Duplicacy of work at RBI, NSDL & CDSL is no joke. There must be only one account & one e-vote casting plateform. Likewise an Income certificate is issued by State Revenue department while income record is maintained Income tax department. There is no correlation & data sharing in working of both departments. Then why income certificate is issued by State Revenue department. A question beyond any prudent understanding. FM admitted overlapping of jurisdiction of Tribunals. Hope FM is vigilent on other issues too.

Gupta

2 months ago

Excellent thoughts. The one concept that may make this saleable to the current govt is to mandate all investments only through this unique demat account. The same demat account should also be linked to Aadhar since not everyone has PAN numbers. And then, this could become the best source for the govt to track black money. All they have to do is to track net investments (investments made less assets sold during the year) and compare to income filed in ITRs.... There will be immense collateral gains apart from what is described in the article above in unifying investments at one place.

Ramesh Poapt

2 months ago

Great, of course!

Suketu Shah

2 months ago

Properties also shd be included in demat account.In todays world people donot murder-they rob steal properties and in the guise /alibi of their profession they do this.Properties also shd be dematted with all the assets you have stated above.

Francis Xavier

2 months ago

excellent.. as usual...

SuchindranathAiyerS

2 months ago


You are taking up cudgels for citizen's welfare. This is antithetical to the purpose of the Indian Constitution and Kleptocracy and borders on sedition.

krishna

2 months ago

UAN for epf OR
aadhar OR
pan OR
driving licence or
voter id OR
any govt. proof.

Govt. won't insist on pan/aadhar but creates a new mess "universal account number" where subsriber registers online with mistakes e.g name "mohandas karamchand ghandhi" and later in epf office it gets recorded as mkgandi and at time of claims it gets rejected. hence funds lying idle.

Congress did nothing and bjp started "universal account number" instead of sticing to pan/aadhar. (may be with foresight that uan will be valid in any part of universe like jupiter mars , moon , other galaxies , and even in black holes)

SOLUTION:
for every aadhar card holder auto create a (payment bank account+demat account) with zero percent charges and zero balance.

when a person opens bank account he can details of (payment bank account and demat account) bank manager should assist in transferring funds/securities/asserts into account with fingerprint/aadhar verification. (remember: minimal or no paperwork, rubber stamps, affadavits, and all that 17th century procedues duing regime of queen elgibeth )

Trump Order Will Block 500,000 Legal US Residents From Returning to America From Trips Abroad

When details leaked earlier this week about a spate of immigration-related executive orders from President Donald Trump, much public discussion focused on a 30-day ban on new visas for citizens from seven "terror-prone" countries.

But the order signed this afternoon by Trump is actually more severe, increasing the ban to 90 days. And its effects could extend well beyond preventing newcomers from Iran, Iraq, Libya, Somalia, Sudan and Yemen, from entering the U.S., lawyers consulted by ProPublica said.

Are you from Iraq, Iran, Syria, Yemen, Sudan, Libya or Somalia and live in the United States either on a visa or a green card? We want to hear from you if President Trump's travel ban is impacting your life. You can email us at [email protected], or text me an encrypted message using Signal to (609) 613-0526. Share your story.

It's also expected to have substantial effects on hundreds of thousands of people from these countries who already live in the U.S. under green cards or on temporary student or employee visas.

Since the order's travel ban applies to all "aliens" — a term that encompasses anyone who isn't an American citizen — it could bar those with current visas or even green cards from returning to the U.S. from trips abroad, said Stephen Legomsky, a former chief counsel to the U.S. Citizenship and Immigration Services under President Obama.

"It's extraordinarily cruel," he said.

The order bans the "entry" of foreigners from those countries and specifically exempts from the ban those who hold certain diplomatic visas.

Not included in the exemption, however, are those who hold long-term temporary visas — such as students or employees — who have the right to live in the United States for years at a time, as well as to travel abroad and back as they please.

"If applied literally, this provision would bar even those visitors who had made temporary trips abroad, for example a student who went home on winter break and is now returning," Legomsky said on Friday evening executive order.

Trump made "extreme vetting" of foreigners a cornerstone of his campaign, particularly those from countries that are predominantly Muslim and that he considers hostile to the U.S.

"I'm establishing new vetting measures to keep radical Islamic terrorists out of the United States of America. We don't want them here," Trump said this afternoon, describing the intention of the executive order. "We want to ensure that we are not admitting to our country the very threats our soldiers are fighting overseas."

Trump signed the directive just before 5 p.m. but it took the White House almost three hours to release the actual text.

About 25,000 citizens from the seven countries specified in Trump's ban have been issued student or employment visas in the past three years, according to Department of Homeland Security reports.

On top of that, almost 500,000 people from the seven countries have received green cards in the past decade, allowing them to live and work in the United States indefinitely. Legally speaking, green card holders are considered aliens. While lawyers are unsure if they would actually be barred from reentering the U.S. if they have traveled abroad, they conceded it's a possibility.

The White House did not immediately respond to a request for comment asking for clarification on the meaning of the executive order.

Citizens of Iran and Iraq far outnumber those from the other five countries among green card and visa holders. In the past 10 years, Iranian and Iraqi citizens have received over 250,000 green cards.

Iran also has the 11th most students in the U.S. among foreign nations, according to the Institute of International Education's Open Doors report, which tracks the demographics of international students.

"We are inundated with calls and questions of how this is going to affect people," said Jamal Abdi, policy director for the National Iranian American Council, an organization that advocates for better relations between Iranian and American people.

Abdi is concerned the temporary ban will become permanent. The order says the 90-day ban is meant to allow the U.S. and the seven targeted countries to discuss what information would need to be shared in order to start granting visas once again. But if no agreement is reached, citizens would remain blocked from entry.

"My interpretation is that the Iranian government is not going to comply regarding sharing information," Abdi said, "which would render this a permanent ban."

ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for their newsletter.

 

 

 

 

 

 

 

 

 

 

User

COMMENTS

BR

2 months ago

Govt of India must write to US Govt & get urgent clarification if Green card or H1B or other visa holders from India will be let back in to USA if they go out.The reply must be got & published immediately.

BR

2 months ago

Govt of India must write to US Govt & get urgent clarification if Green card or H1B or other visa holders from India will be let back in to USA if they go out.The reply must be got & published immediately.

BR

2 months ago

Govt of India must write to US Govt & get urgent clarification if Green card or H1B or other visa holders from India will be let back in to USA if they go out.The reply must be got & published immediately.

Nifty, Sensex to remain range-bound – Monday closing report
The major indices of the Indian stock markets were range-bound on Monday and closed with marginal losses over Friday’s close. The trends of the major indices in the course of Monday’s trading are given in the table below:
 

 

Hopes of budgetary sops and a strong rupee buoyed the Indian equities markets during the mid-afternoon trade session on Monday. The key indices have traded on a flat-to-positive note on Monday, as buying was witnessed in the telecom, healthcare and Teck (technology, media and entertainment) stocks. The BSE market breadth was marginally tilted in favour of the bears -- with 1,349 declines and 1,220 advances. The markets traded in the range-bound territory ahead of the Union Budget on February 1, pointed out market analysts. Markets were expecting weak numbers from the corporates following demonetisation. However, the numbers were better-than-expected. This might be the reason for the upward trend in the Indian rupee, observed market analysts. However, the major indices slipped in the later afternoon and the key indices closed in the red for the day, over Friday’s close. On the NSE, there were 659 advances, 972 declines and 293 unchanged on Monday.

Housing finance major Housing Development Finance Corporation (HDFC) on Monday reported a rise of 11.88% in its standalone net profit for the third quarter (Q3) of 2016-17. According to the company, its standalone net profit grew to Rs1,701.21 crore during the quarter under review from Rs1,520.51 crore reported for the like period of last fiscal. The company's standalone total income from operations (net) rose by 11.95% to Rs8,137.18 crore during the quarter under review. The company’s shares closed at Rs1,368.90, down  0.13% on the BSE.
 
Ending months of speculation, Vodafone on Monday confirmed it is in talks with the Aditya Vikram Birla group for the merger of its Indian entity and Idea Cellular in what will be the largest such deal in the country's telecom space once it materialises. The merger will create an entity with a subscriber base of more than 400 million to emerge as the largest player in India, replacing the current dominant player Bharti Airtel, which currently has over 260 million users on its network. "Vodafone confirms that it is in discussions with the Aditya Birla Group about an all share merger of Vodafone India -- excluding Vodafone's 42% stake in Indus Towers -- and Idea," the Indian entity's parent company said in a statement. "Any merger would be effected through the issue of new shares in Idea to Vodafone and would result in Vodafone deconsolidating Vodafone India." In a clarification later, Idea Cellular said it is in preliminary discussions with Vodafone. "In view of the fact that the discussion is at the preliminary stage, the company is not in a position to share any further details," Idea Cellular said in a regulatory filing. Idea shares closed at Rs97.95, up 25.90% on the BSE.
 
Industrialist Anil Ambani-led Reliance Reliance Defence on Monday said it has signed a contract with the Ministry of Defence for the design and construction of 14 Fast Patrol Vessels for the Indian Coast Guard valued at Rs916 crore, the company said on Monday. These ships are medium range, high speed vessels, and primarily used for patrol within the exclusive economic zone, costal surveillance, and anti-smuggling, anti-piracy, search and rescue operations. They also support front-line warships in the hour of need. Virtually all the private sector and public sector Shipyards had bid for the project, including Larsen and Toubro, Cochin Shipyard, Goa Shipyard, and Garden Reach Shipbuilders and Engineers. "This is the first time, a private sector shipyard has been awarded a contract to design and build such class of ships for the Indian armed forces. Reliance Defence will be developing the design in-house," a regulatory filing by the company said. The company’s shares closed at Rs61.80, up 7.95% on the BSE.
 
The top gainers and top losers of the major indices are given in the table below:
 
 
The closing values of the major Asian indices are given in the table below:
 
 

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