In India, we are plagued with a multiplicity of authorities and shadow boxing of regulators in the financial arena. There is an urgent need to place consumer protection at the heart of financial regulation with a stronger Financial Redressal Agency or mechanism
Now that our financial regulatory, legislative and administrative frameworks have failed the common Indian, it calls for immediate fundamental system overhaul. The multiple regulatory authorities have in no way curbed the menaces of money laundering, black money, insider trading, mis-selling of insurance, mutual fund products and chit funds that have turned cheat funds.
The numerous financial swindles have mostly harmed the lower income segment of society who is lured by promises of extremely unimaginable returns by agents whose commissions run as high as 40%. West Bengal-based Saradha and its associate chit funds has galloped people’s savings from other states like Assam, north-eastern states, Odisha, Bihar and Jharkhand. The ramifications of Sahara with much wider footprints are yet to turn up as so far it had simply ignored directions from the Supreme Court and Securities and Exchange Board of India (SEBI).
The sheer lack of regulatory oversight by any one or more of the high-level authorities has proven them toothless paper tigers. The regulators have failed as watchdogs, which can neither bark nor bite. This has necessitated the need for a more effective watch on the watchdogs.
That scams of such great magnitude running into thousands of crores of rupees are perpetrated under their very noses cannot go unnoticed. This occurs primarily because unscrupulous market players taking unfair advantage of the multiple orders from the Supreme Court and SEBI. Yet they cannot be touched as they know the regulators are operating in grey areas. This is exactly the situation the Saharas and Saradhas who have been very conveniently been exploiting with their schemes that were neither here nor there, regulated neither by Reserve Bank of India (RBI) nor SEBI nor Insurance Regulatory and Development Authority(IRDA) nor the State Governments. Sahara has been dragging its feet, buying time with impunity.
In India we are plagued with a multiplicity of authorities and regulators shadow boxing in the financial arena, with vast scope for regulatory arbitrage and not acting effectively in their mandate of protecting consumer interests. At the top of the pyramid in New Delhi are the Prime Minister’s Office (PMO), followed by the Ministries of Finance and Corporate Affairs. The Central Bureau of Investigation (CBI) reports to the PMO, the Central Board of Direct Taxes (CBDT) and Enforcement Directorate (ED) to the Ministry of Finance while the Special Frauds Investigation Office (SFIO) reports to the Ministry for Corporate Affairs. Next come the three Financial Regulators - RBI for the banking sector, SEBI for the capital markets both are Mumbai-based and the Hyderabad-based IRDA for the insurance sector. Each of them have their own file pushing babus duplicating investigations by stepping on each other’s toes, resulting in harming genuine consumer interests. Each of them jealously guards their turfs. Typically, it happened during investigations into the Satyam investigation where the local police station despite not knowing the ABC of the fraud wanted a piece of the action!
The Government of India, pursuant to the 2011 Budget announcement setup an Expert Group designated the Financial Sector Legislative Reforms Commission (FSLRC) with an extremely lofty mandate ostensibly, “to re-study the regulatory requirements of banking, payments, public debt management, securities, insurance, pension funds and small savings and rewrite and harmonize the century old financial sector legislation by creating an umbrella Unified Financial Regulatory (UFRA) to oversee all the regulators – SEBI, RBI and IRDA as well as Forward Markets Commission (FMC) and Pension Fund Regulatory and Development Authority (PFRDA) to move from narrow sectoral regulation to a broader framework of rules and principles. To deal with all financial transactions, help regularizing economies of scale and scope, provide a common platform for organized financial trading in all kinds of financial instruments spanning equities, bonds, currencies and commodities.”
Presently, there are no effective regulations to effectively supervise financial entities masquerading as chit funds, mutual funds, insurance under undefined grey areas in the unorganised sector that commence operations merely by producing a registration certificate issued by either the Registrar of Firms or Companies. The confusions of jurisdiction of different agencies over products and services are galore.
At present efforts are on to keep RBI out of the purview of the UFRA. The inter-regulator turf war spat in 2010 over the jurisdictional issues like unit linked insurance plan (ULIP) among RBI, SEB and IRDA makes it all the more imperative to mandate that the RBI is also brought in the loop. There are no convincing reasons to keep RBI out. Like its other counterparts, the RBI too has to share the blame for allowing matters to deteriorate.
The many transgressions and misdemeanours that are the fall out of unbridled growth of unorganized entities masquerading as non-banking financial companies (NBFCs) which are cheating citizens of their hard earned savings. This is the result of throwing up of hands by the banking, markets and insurance regulator by trying to palm off the blame to the state governments who are expected to have their own laws.
West Bengal has a special Assembly session to get a new one. None of the state governments are equipped with the wherewithal and manpower qualified to audit or inspect the massive financial frauds. None of the Regulators have been able to prevent these unorganized entities from constantly hawking all kinds of finance, money and insurance products with fancy names, fabulous returns, incentives and commissions.
This is all the more reason when all the three of them viz. SEBI, IRDA and RBI have abjectly failed in discharging their sovereign duties of protecting the aam insaan calling for setting up a super watchdog like the UFRA to oversee their functions as proposed by the FSLRC.
The interests of millions of consumer deserve special attention as problems of moral hazard and incidence of white-collar economic offences are hitting the common citizens and there are no credible institutions that can be approached to address the consumers’ legitimate grievances concerns and award appropriate compensations.
Read SEBI vs Investors by Sucheta Dalal
Under the present dispensation, the FSLRC points out that action are initiated far too late when the entities whether commercial or co-operative banks or the NBFCs get into trouble. It recommends the setting up of a ‘Resolution Corporation’ a hybrid covering Deposit Insurance and Credit Guarantee Corporation (DICGC), which is an out dated slow active passive body.
This is a cash rich wholly owned subsidiary of the RBI sitting over premiums collected from all banks, disbursing hardly any sums and showing massive profits. The maximum cover of Rs1 lakh per capita of deposit it provides to depositors is grossly inadequate when compared with the scams and non-performing assets (NPA).
In its recommendations the FSLRC seems to disregarded some of the path breaking recommendations made by the Jagdish Kapoor Working Group on Deposit Insurance (2000). The working group had advocated differential deposit premium for banks in keeping with their respective risk profiles and providing teeth granting regulatory and supervisory powers to the DICGC in line with the US Federal Deposit Insurance Corp (FDIC) to trigger faster and prompt corrective action. There are disagreements on replicating the US Resolution Trust that was set up following the sub-prime crisis. There are two opinions whether the NBFCs should also be brought into the net.
In India today the NBFCs and co-operatives operating as banks function in opaque no-mans-land of dual-but-no control of state and central government legislations, this has been put an end to. There is an urgent need to place consumer protection at the heart of financial regulation with a stronger Financial Redressal Agency or mechanism that the FSLRC also recognizes.
(Nagesh Kini is a Mumbai-based chartered accountant turned activist.)
In case you are filing your RTI application to any of the central government departments, just head to the designated Post Office where the central assistant Public Information Officer (CAPIO) is duty bound to not only accept but also help you out in filing the application
Recently, I filed a Right to Information (RTI) application to the union home ministry and the central public works department (CPWD) to get information on the new post-retirement home of Pratibha Patil (after she abandoned her palatial one which was on 2.6 lakh odd sq ft on prime defence land at Khadki in Pune, after a series of articles in Moneylife. Her new one is a modest one – an existing government bungalow of around 2,500 sq ft, which is being refurbished. Apparently, though, it has been extended to 6,000 sq ft as per newspaper reports. I wanted to have details of that through RTI, which I am still awaiting.
Instead of sending my RTI application through courier by attaching the Indian Postal Order (IPO), (last time I had quite stupidly made a DD of Rs10, which cost me Rs35 to make it, when I had sent my RTI to the Rashtrapati Bhavan). Therefore, this time I decided to try out the Post Office.
I headed for the Pune General Post Office (GPO). Remember that you may not be able to file your RTI in each post office. You need to ask the post office headquarters of your village/ town/ city to find out in which branch the assistant central public information officer (ACPIO) has been designated under the RTI Act. The Department of Post (DoP) has designated around 4,707 ACPIOs across the country as of 30 June 2011.The numbers may have increased by now.
As per the RTI rules, you can pay Rs10 as fees in cash, DD or IPO. When I went to GPO, Pune, the ACPIO argued that I should stand in the long queue and first buy an IPO of Rs10 IPO. I insisted that I have the right to pay in cash too. When he declined, I called up RTI activist Vijay Kumbhar to take his advice. He advised me to ask the ACPIO to show any central government order or amendment which says you cannot pay in cash. That did it. The ACPIO quickly accepted cash though in a few minutes, got the IPO himself.
Nevertheless, you need to know that the Post Office accepts your RTI application for the central government. Its website www.indiapost.gov.in , states in its instructions regarding implementation of the Right To Information Act 2005: “The Central Government has entrusted the Department of Posts to assist other interested public authorities under the Central Government including Ministries, Departments, PSUs, and Autonomous Bodies etc. in implementation of the RTI Act by designating CAPIOs on their behalf. While the role of the Department in implementation of the Act stems directly from the provisions of the RTI Act, the latter role, and perhaps the more demanding one, arises out of a decision taken by the Prime Minister of India that the Department of Posts should provide its services to the Central Government as a collection point for request for information under the Act by designating its CAPIOs as CAPIOs for the Central Government.’’
Remember, that being a CAPIO, he is given five days to submit the RTI application to the PIO that you have addressed to. Over and above the Rs10 fee, for additional Re1, the CAPIO also sends your request online, there and then.
So, what does the CAPIO of the post office do after he accepts your request? He generates three copies of the forwarding letter. The first copy is addressed to the Nodal Officer/ Central Point of the concerned Central Public Authority, second is meant for the requestor/ appellant as intimation and the third is kept as an office copy by the Postal department. The onward transmission of the request/ appeal is done through registered post. It is wiser to carry two copies of your RTI application yourself, besides your original one so that you can get the acknowledgement immediately.
Remember, that the DoP has given specific instructions to the CAPIO while receiving a RTI application from you. This includes the ACPIO helping you to file the RTI application if you need such help; checking that your RTI application is rightly written and; helping you to find the public authority if you so require.
The instructions are as follows:
At the time of receiving a request, the ACPIO should ensure the following:-
• Receive the request, personally, so far as possible and Check whether the application has the following details:
1. Name of the applicant
2. Contact details of the applicant including complete postal address, telephone numbers and email address (if any)
3. Name of the public authority from whom the information is being requested
4. Nature and details of the information requested
5. Whether proof of payment of application fee is attached or not
• If the applicant claims fee waiver whether proof of BPL status is attached or not.
• Whether the applicant wishes to receive the information by post?
• Date on which application is being submitted.
Besides, following are the guidelines for the ACPIO:
(a) If the application is not legible assist the applicant to write it clearly. If the applicant has not filled in one or more of the above details bring the same to his/her notice and request him/her to fill in the details. Make sure that the date mentioned on the application matches with the date on which the CAPIO is actually receiving the application. This is very important for calculating the deadline while forwarding the application to the CPIO. The applicant may have attached a bank draft or a Banker’s Cheque or UR Receipt or proof of payment of application fee by any other mode prescribed by the Government. All such payments are valid. The CAPIO may not insist on a particular mode of payment. If claiming fee waiver, the BPL applicant must attach a photocopy of a BPL/ Antyodaya ration card or any other valid proof of BPL identity that may be prescribed by the Government.
(b) The applicant may not always know the exact name and complete postal address of the public authority who has the information he/she wants. So please do not insist upon the applicant to furnish these details. It is the duty of the CAPIO to send the application to the concerned CPIO. (The CPIO directory published may be consulted for this purpose.)
(c) To check if the applicant has not already attached proof of payment of application fees or if the applicant has not attached proof of BPL identity in support of his/her claim for fee waiver please request the applicant to furnish the same.
(d) To issue receipt for receiving complete request along with fees/ exemption there from in the prescribed format with due authentication (signature, stamp and date of receipt). The receipt cum acknowledgement may be issued to the requestor. The cash collected for the entire day may be deposited under ACG-67 receipt in the Post Office on the same day/next morning under clear records maintained separately for department of Posts and other public authorities.
(e) Record the particulars of the request received including date of receipt, identification number, name of the applicant with contact details, subject matter of the request, name of Ministry/Department/public authority to whom it is related, name and address of the CPIO, date of forwarding the application to the CPIO, particulars of mode of dispatch like RL No. date etc. The entries in the concerned register are to be made on the same day. Despatch should be made at the first available opportunity thereafter. The particulars in respect of the request received for the Department of Posts may be entered separately. A format has already been prescribed and available on the website.
If the application is not addressed to a specific CPIO or a public authority the CAPIO may read through the nature of information being requested. This will help the CAPIO to identify the public authority that is most likely to possess the information requested. The CAPIO may then dispatch the complete application to the concerned CPIO using the CPIO directory. The CAPIO need not maintain a copy of the application for their records.
(f) In certain cases, the application may be received by the CAPIO by post also. In such cases, the checks to be applied by the CAPIO would be the same as in cases where the application is received personally. If the request is complete in all respects and proof of payment of fees is also enclosed, the request should be entered in the register as in other cases and forwarded to the CPIO concerned.
Receipt of appeals by the CAPIO
7. The CAPIO may also be required to receive appeals made to various departmental appellate authorities or to the Central Information Commission in cases where the citizen is not satisfied with the response of the CPIO. No fee is applicable in appeal cases.
(a) In such cases, subject to the checks mentioned above, the following particulars should be available in all appeal applications.
• Name of the appellant
• Contact details of the appellant including complete postal address, telephone numbers and email address (if any)
• Authority to which appeal is being sent (whether DAA or the CIC)
• Details of the authority against whose decision the appeal is being made (whether CPIO or DAA)
• Nature and details of the information requested originally
• Copy of the information request submitted to the CPIO/appeal letter sent to the DAA (whichever is applicable)
• Nature and details of the information requested originally
• Rejection letter issued by the CPIO against the appellant’s information request (if any)
• Copy of the order issued by the DAA (if any)
• Date on which appeal is being submitted.
(b) No receipt would be required in such cases but an acknowledgement for receiving the application along with date of application will be necessary.
(c) The entries required in case of original applications to CPIOs will also be required to be made in case of appeals along with dispatch particulars of the appeals received. A separate register for recording the details related to appeals should be maintained. A format has been prescribed in the regard and available on the website.
Last month, all Indians abroad have the facility of filing RTI applications online. Now, Indian citizens too can file RTI applications online but only to issues related to Department of Personnel & Training (DOPT) ()
Please login to www.rtionline.gov.in
(Vinita Deshmukh is the consulting editor of Moneylife, an RTI activist and convener of the Pune Metro Jagruti Abhiyaan. She is the recipient of prestigious awards like the Statesman Award for Rural Reporting which she won twice in 1998 and 2005 and the Chameli Devi Jain award for outstanding media person for her investigation series on Dow Chemicals. She co-authored the book “To The Last Bullet - The Inspiring Story of A Braveheart - Ashok Kamte” with Vinita Kamte and is the author of “The Mighty Fall”.)
217 companies from the Moneylife sample of 1,190 companies that have declared results so far, reveals muted sales growth but strong operating profit growth during the March quarter
Of the 217 that have declared results so far out of the 1190 companies in the Moneylife database, net sales has increased by 8% year-on-year (y-o-y) for the March 2013 quarter. Operating profit numbers for the corresponding period rose 18% y-o-y, showing strong focus on internal operations in face of slack demand. However, interest and depreciation limited the increase in net profit to 12%. The net profit margin rose from 10.42% to 10.87%.
A more detailed analysis reveals some interesting findings. Despite nearly three out of four companies reporting increased y-o-y net sales, only little more than half of the companies saw their bottom line increase on a y-o-y basis. This shows that many companies are unable to contain the finance and depreciation costs. On the brighter side, nearly 60% of the 217 companies have reported increase in operating profit, as costs were contained on back of lower commodity prices, better inventory management.
The operating profit results reflect the performance of some of the largest companies so far such as Reliance Industries, Cairn India, Maruti Suzuku, Axis Bank, HCL Technologies, Hindustan Unilever, IDBI Bank, Adani Power, Idea Cellular are names of big companies who have grown their operating profit significantly. With the exception of TCS and Infosys, all the large companies reported expanding net profit margin, though marginally. Operating profit margins of corporate India have also increased from 16% during the March 2012 quarter to 18% in the March 2013 quarter.
Recently, the Reserve Bank of India (RBI) cut the repo rate by 25 percentage points in order to boost the economy so that companies will be able to borrow at lower costs and also be able to finance their debts cheaply. Whether this move will stimulate the economy, as we move towards the 2014 season, remains to be seen. However, two factors stand out: manufacturing and inflation. Whilst inflation has indeed come down, there’s a possibility that the rate cut may stoke it again. Also, manufacturing remains stagnant with the index of industrial production (IIP) slowing down. The cumulative growth in the mining, manufacturing and electrical sectors during April-February 2012-13 over the corresponding period of 2011-12 has been -2.5%, 1.0% and 4.0% respectively.
A small set of companies contributed to the 18% growth in corporate profits. In fact, 97 companies out of 217 companies in the Moneylife sample have recorded above-average profit.
Rise in OP No. of Companies