Citizens' Issues
Western Railway seeks fare hike, unmindful of its own wastage of money

Western Railway is seeking a revision in monthly passes on suburban network. However, it would not be required if only the authorities can cut unnecessary expenses and corruption, says Samir Zaveri, who runs Moneylife Railway Helpline

Citing losses incurred, the Western Railway (WR) wants to double the monthly season ticket fares for commuters on Mumbai's suburban network. However, the same WR is relentlessly wasting public money and its officials were found covering up the expenses.


Samir Zaveri, railway activist, in a letter to Railway Minister Mallikarjun Kharge, says, "(The) main reason for losses is inefficiency and rampant corruption in Western Railway. This is evident in the Jagjivan Ram Railway Hospital at the Mumbai Central where the authorities spent about Rs20 crore on its cardiovascular thoracic surgery department but as many as 22 out of the 43 machines installed by them have been out of operation."


Similarly, the WR is spending money on renovation of Churchgate station. "They (WR) are replacing flooring tiles that are in good condition with slippery tiles near the ticket reservation and food courts. When the tiles fitted on platforms have more life and these tiles are not slippery, then what is the point in putting lives of thousands of commuters in danger?" Zaveri asked.


According to a report in Hindustan Times, with expenses of about Rs1,300 crore and revenue of Rs700 crore, the WR is incurring major losses annually. Of the income, nearly Rs500 crore of suburban revenue is earned from monthly passes.  Considering the losses incurred by the railway suburban section, the authorities have suggested revision in fare of monthly passes for both first- and second class to the Parliamentary Standing Committee.


This means, that a second class monthly pass from Virar to Churchgate that costs Rs280 will cost Rs560, and a first-class pass costing Rs1,025 will be available for Rs2,070, the report says.


Shirish Deshpande, chairperson of Mumbai Grahak Panchayat, told the newspaper that, “The railway fare should be linked with the services they provide. Even after paying 5-6 times higher than a second-class passenger, a commuter in the first-class is not assured about his safety.”


Sensex, Nifty in dramatic late selloff: Friday closing report

The market was holding steady but a late selloff erased all the morning gains. Nifty will try to rally on Monday as bears seem to be tiring out.

Yesterday, we had mentioned that the stock markets may move upwards but would remain weak. This is exactly what happened on Friday. Initially, a somewhat spirited opening and some strength in the morning and afternoon session kept the optimism brimming. However, a dramatic selloff was witnessed in the afternoon through the end of the session. The markets fought back and finished flat after briefly being in the red.


The BSE 30-share Sensex opened at 20,316 and moved up to its intraday high of 20,388 before a late sell off pushed it down to its intraday low of 20,137. Sensex closed at 20,217 (down 11 points or 0.06%). Similarly, the NSE Nifty opened at 6,027, hit a high of 6,049, steadying for a lengthy period before a late sell off saw it fall to an intraday low of 5,972. The Nifty closed at 5995, just below the psychological 6,000 barrier.


Volumes were extremely weak, with just 49.43 lakh shares being traded. This means that bears are tiring out.


PSU Banks and Auto were the worst hit indices, falling 1.02% and 1.17% respectively, while public sector enterprises (PSE), finance and energy were the best performing indices moving up 1.28%, 0.52% and 0.78% respectively. The rest of the indices were more or less flat.


Of the 50 stocks on the Nifty, 26 advanced, 23 declined and one remained unchanged. The top gainers were ONGC (3.25%); Cairn (3.23%); Tata Steel (2.85%); GAIL (2.25%) and L&T (2.21%). The top five losers were Sesa Sterlite (2.79%); Tata Motors (2.36%); Bajaj Auto (2.27%); IDFC (1.50%) and State Bank of India (1.39%).


Of the 1,432 shares on the NSE, 603 closed in the positive, 738 closed in the negative while 91 remained unchanged.


The RBI said that the weakening domestic macroeconomic conditions, combined with the continuing subdued global growth posed challenges to the banking sector during 2012-13. According to the Reserve Bank of India, the ratio of NPAs increased further during 2012-13. There was a rise in the slippage ratio as well as the ratio of restructured advances to gross advances. The increased stress in asset quality during the year was primarily on account of non-priority sectors. There was a rise in the NPA ratios for the industrial and infrastructural sectors.


In the meantime, the RBI was suspected to have sold dollars via state-run banks starting at around 62.93 rupee levels in a bid to support the rupee while the dollar strengthens amidst talks of tapering. Gold and crude oil fell as well.


US equities saw some strength yesterday, with Dow closing above 16,000 for the first time. This was boosted by better jobless claims by the Labour department, which fell by 21,000 to 323,000, better than forecasts for 334,000. Existing-home sales declined for the second consecutive month in October, while constrained inventory means home prices continue to see double-digit year-over-year gains.


In Europe, German November IFO confidence was pegged at 109.3, when compared to median estimates of 107.7. This implies much improved economic climate and recovery of the biggest economy in the Euro region. According to Bloomberg, German business confidence surged to the highest in more than 1.5 years. Germany’s DAX was seen flat. Additionally, there are rumours that the British economy is also improving, after the British pound rose to its 4-week high against the dollar. European markets were seen flat, with a slightly positive bias.


Asian markets were mixed, with Nikkei still extending gains by 0.11% while Shanghai Composite extending losses by 0.44%. The rest of the Asian markets were flat.


US futures were seen trading flat, with a slight positive bias during early trade.


RBI asks banks to treat customers fairly

RBI has asked banks to follow its 'treating customers fairly' policy while selling third party products like mutual funds, capital market products and insurance policies

Reserve Bank of India (RBI) has asked banks to follow its 'treating customers fairly' (TCF) policy for third party products like mutual funds, capital market and insurance that are often mis-sold. The central bank also decided to extend its Banking Ombudsman Scheme (BOS) to non-scheduled banks.


RBI, in a paper 'Trend and Progress of Banking in India',  mentioned 232 recommendations made by the Damodaran Committee on Customer Services. However, the central bank has implemented only 155 recommendations of the Committee so far. Some of the important recommendations which are yet to be implemented are, minimum account balance- transparency, uniformity in charges for non-maintenance, charges for basic services, compensation for wrong returns of cheques by banks, internet banking - secure total protection policy, home-loans - non-discrimination between existing and new borrowers with floating interest rate and onus on banks to prove customer negligence. "The Reserve Bank is in consultation with the Indian Banks’ Association (IBA) for early implementation of these recommendations," the report says.


Treating Customers Fairly: Obligation of Banks towards Customers

Treating Customers Fairly (TCF) is a consumer protection policy designed to address the problem of asymmetric information in the financial services industry where financial service providers possess certain information that the consumers do not. It is a regulatory initiative by which firms are required to consider their treatment of customers at all the stages of the product life-cycle, including the design, marketing, advice, point-of-sale and after-sale stages. By encouraging firms to re-evaluate their company culture and to inculcate the attitude of treating customers fairly, the outcome is likely to result in a more optimal one from the perspective of regulators, consumers and ultimately, firms. TCF is an initiative that was introduced by the Financial Services Authority (FSA), UK in 2006.


In recent years South Africa also adopted TCF based on the UK version. South Africa’s projected timeline for full implementation of the TCF policy is 2014.


As per FSA, 2006 desired outcomes of the TCF programmes are:

(i) Consumers can be confident that they are dealing with firms where fair treatment of customers is central to their corporate culture;

(ii) Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly;

(iii) Consumers are provided clear information and are kept appropriately informed before, during and after the point of sale;

(iv)Where consumers receive advice, the advice is suitable and takes account of their needs and circumstances;

(v) Consumers are provided with products that perform as firms have led them to expect, and the associated service is both of an acceptable standard and as they have been led to expect; and

(vi)Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch providers, submit a claim or make a complaint


These outcomes of TCF are now well accepted across countries. In order to achieve these outcomes, cultural and operational aspects of the bank may need to change. Also, the firm needs to consider what the TCF programme means for each phase of the product life cycle.


In terms of implementing the TCF programme, the UK experience suggests that however well-worded the principles and rules may be, there are additional factors affecting successful implementation. This includes a change of mindset in the firm’s leadership. Successful adopters of the TCF programme have been those where the CEO or managing director of the firm had typically endorsed the programme, spelt it out for middle management and employees and received regular data on consumer complaints and redress. Moreover, TCF measures were used to influence performance appraisal and incentive structures in a firm. The least successful firms were those that left it all to their compliance department (or an outside consultancy) to design a programme but whose feedback was neither presented nor understood at the Board level.


The Reserve Bank has also taken a lead in ensuring that bank’s customers in India are treated fairly. Over the years, it has initiated several customer-centric measures and inculcated a culture of treating customers fairly through regulatory and supervisory interventions. The Reserve Bank initiative led to the setting up of the Banking Codes and Standards Board of India (BCSBI), an autonomous and independent body, which has been entrusted with the task of setting codes and standards for banking services in India. The Codes of Commitment are binding on BCSBI members and non-compliance thereof by member banks is a valid ground of complaint under the Banking Ombudsman Scheme (BOS). In a bid to empower consumers and protect their rights, the Reserve Bank has also instituted the Banking Ombudsman Scheme as an apex level, cost free grievance redressal mechanism for deficiencies in services by banks.


The intent and basic structure for TCF is in place in India for banking products of scheduled banks. However, it is now being considered to extend the TCF structure to third party products, viz., mutual funds, capital market and insurance products sold by banks and also extending the BOS Scheme to non-scheduled banks, RBI said.



As per RBI paper 'Trend and Progress of Banking in India', during March, 2013, an online media portal raised certain allegations against three private sector banks that these banks were indulging in practices that encouraged money laundering, sale of gold and other third party products such as insurance and wealth management.


The central bank then scrutinised 39 banks and issued show cause notices to 36 banks. "After considering the facts of each case and the individual bank’s reply, the Reserve Bank came to the conclusion that some of the concerns were substantiated and warranted imposition of monetary penalty. Monetary penalty was imposed on 31 banks," the report said.


In April 2013, Moneylife Foundation sent a memorandum to RBI governor on behalf of more than 21,500 members to free the system of mis-selling of financial products by bankers, misusing the savers’ trust.


Moneylife has for long been highlighting the mis-selling of these services with specific examples. This was among the many issues taken up by Moneylife Foundation with RBI deputy governor, Dr KC Chakrabarty, at an Open House meeting in June 2013. In a recent cover story on such issues, (Read: Banks Vs Depositors ) Moneylife pointed out how selling of insurance, mutual funds and equity advisory services by banks have affected customers, who do not know which regulator will redress their grievance. RBI ignores complaints about third-party products (some are not even regulated), while Securities and Exchange Board of India (SEBI) and Insurance Regulatory Development Authority (IRDA), both already poor at grievance redress, are even more reluctant to address complaints about mis-selling by banks.


Moneylife has highlighted several stories on mis-selling. A year ago, we wrote about how HSBC Bank promised Suchitra Krishnamoorthi, a well-known singer and actor, extravagant assured return of 24% from mutual funds as well as insurance, but instead continuously churned her portfolio. (Read: HSBC loots Suchitra Krishnamoorthi after big promises of 24% returns).


In a similar case, another high net worth individual (HNI) based in London, found out abnormal churning of mutual funds in his portfolio that was managed by HSBC bank. Both are HNIs who were made to sign a power of attorney (POA) in favour of HSBC to handle their investments smartly.


After Moneylife raised these issues at several platforms, earlier this month market regulator SEBI issued a show cause notice to HSBC to explain why its acts in handling the portfolio of Suchitra Krishnamoorthi are not in violation of its regulations governing fraudulent and unfair trade practices and violation of the code of conduct governing mutual fund distributors.


In another such case, 79-year old Mangelal Sharma was persuaded by IndusInd Bank officials to break his fixed deposit with the bank and invest in a mutual fund product saying it was a low-risk banking product. Moneylife’s aggressive stance on mis-selling by banks, and campaigning against this case led the Bank refunding the money back to Mr Sharma (Read: Mangelal Sharma gets his Rs7 lakh back—another Moneylife victory )


Complaints against ATM/debit/credit cards and foreign bank rising

According to the RBI report, complaints about ATM, credit and debit cards continued to dominate, accounting for about 25% of the complaints received by the Banking Ombudsman. Next in line are complaints relating to non-adherence to the Fair Practices Code and non-adherence of the codes laid down by the BCSBI.


More number of complaints against foreign and private sector banks

Although public sector banks accounted for a larger share in the total number of complaints, when normalised by the number of bank branches and accounts (deposit + loan accounts), the number of complaints about foreign banks worked out to be the highest followed by private sector banks (Chart IV.30). In 2012-13, there were 1,543 complaints per 100 bank branches of foreign banks, highest among all bank groups, the RBI said.





nagesh kini

3 years ago

Thank God the RBI has at last found merit in various complaints on commercial banks hawking third party products.
Treating Customers Fairly appears great on paper.
Our banks are in no way geared to sell mutual fund and insurance products and gold.They are most ill-qualified to do so. They fail miserably on the after-sale services like expediting maturity proceeds and insurance claims. These days bank employees know very little on core banking functions of deposits and advances that are centralised at their 'back offices' and much less on banking itself.
Banks should spend more time and money on adequate appraisal of borrowing proposals, monitoring them for warning signs and initiating prompt recovery proceedings instead of locking the stable after the horse has bolted and making a hue and cry on mounting NPAs that primarily arise out of bank inefficiencies in their timely identification.

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