In your interest.
Online Personal Finance Magazine
No beating about the bush.
Pamphlets meant for training agents are being used as promotional material
Life Insurance Corporation of India’s (LIC) agents have apparently been issuing misleading letters in Amravati, a district in Maharashtra, regarding LIC’s ‘Jeevan Nischay’ policy. These agents are using training literature issued by Dilip Dumbare, LIC’s senior divisional manager at Amravati, for selling this policy, in a clear contravention of the insurance regulator IRDA’s (Insurance Regulatory and Development Authority) norms.
An existing policy holder, Sanjeev G Sangai, has accused the insurance behemoth of ignoring the fact that agents have been misusing product literature meant for internal consumption. The complainant has also found some irregularities in the pamphlets which enumerate the benefits of the Jeevan Nischay policy.
The single premium Jeevan Nischay policy assures its policy holders a guaranteed maturity benefit and is only available to existing policy holders. According to the plan, an investment of Rs1 lakh would mature to Rs1.70 lakh after a span of 10 years. The policy was available for a limited period until the end of March 2010.
On the front page of the pamphlets that are being circulated, LIC has mentioned details about the policy and on the reverse, there are a set of calculations for return on investment. At the bottom of these calculations, a note indicates that the letter is ‘Insurance Agent Training Material’.
Mr Sangai claims that the pamphlet being distributed by LIC’s agents in Amravati contravenes the IRDA regulation which states that “materials used solely for the training, recruitment, and education of an insurer's personnel, intermediaries, counsellors, and solicitors, provided they are not used to induce the public to purchase, increase, modify, or retain a policy of insurance,” shall not be used as an advertisement.
The policy holder says that he has shot off letters to IRDA, LIC and the finance secretary. Moneylife has a copy of the complaint letter. “I have not got any response from IRDA yet,” said Mr Sangai.
Mr Sangai has also pointed out some irregularities in the method of calculating 12.70% returns (after-tax) on premium paid by the policy holder. The advertisement fails to indicate the amount of maturity benefit at different premium slabs. Instead, it only mentions the maturity amount at different age groups (18, 35 and 50), while showing the indicative returns as 12.70%. This leads the investor to believe that the returns will be applicable on any premium amount.
LIC has also considered loyalty additions in its calculations, but it however fails to mention any rate at which they assume the loyalty additions. Loyalty addition rates are also not fixed and depend on the basis of the rate declared by the insurance giant from time to time.
“The question is, can LIC or any other insurance company give misleading information to its agents? This is more dangerous as agents forward the same information to their clients,” says Mr Sangai’s letter.
An email query sent to LIC remained unanswered at the time of writing this story.
If the RBI’s circular dated 22 February 2010 is implemented, cheque-bouncing cases will increase dramatically
If a recent Reserve Bank of India’s (RBI) circular is implemented, bank customers will have to be extra careful whenever they issue a cheque. If customers have made any correction like change of amount (numerically or in words), or the name on the cheque issued, then it would be returned by the clearing branch. The only correction that would be allowed is the date of the cheque. The circular is designed to prevent fraudulent cheque alterations.
“We are in the process of implementation of the circular issued by Reserve Bank of India. As this will have an impact on customers, we have already commenced the exercise of informing them about this change. This communication will continue throughout the first quarter of this financial year. Simultaneously, notices are also being put up in all the branches. This will come into effect from 1st July 2010, by which time adequate notice would have been given to all customers,” said S. Ramakrishnan, Head - Retail Liabilities Product Group,HDFC Bank.
In its circular dated 22 February 2010, RBI states, “No changes/corrections should be carried out on the cheques (other than for date validation purposes, if required). For any change in the payee’s name, courtesy amount (amount in figures) or legal amount (amount in words), etc., fresh cheque forms should be used by customers.” If there are any alterations on the cheque, except the date, customers will have to issue a fresh cheque. RBI believes that this would help banks to identify and control fraudulent alterations.
Chequebooks carry a standard tip wherein customers are requested to refrain from carrying out any alterations in amount and payee name. But usually banks clear cheques if there are any minor corrections. Currently banks clear a cheque if it is counter-signed by the issuer in case of any corrections.
“There is no rule as such. If one or two corrections are made and if it is countersigned then the cheque can be cleared,” said an official from a private bank.
“As of now we have not fixed any date for implementation of this circular. Somebody who is in a state of readiness can implement it. It is for the benefit of the customers,” said a top official from RBI.
“Frauds do not only happen because of cheque alterations. This is only one modus operandi. Some people change the cheque’s page name; remove account payee and amount etc. Some people also print fake cheques. This one circular is not going to reduce such fraud cases,” said Ramavatar Singh, general manager, Bank of India.
The ratings agency believes that the worst is over for the Indian economy, and present trends indicate that upgrades will outnumber downgrades in 2010-11
Ratings agency CRISIL has said that in a reversal of a three-year trend, it has upgraded more companies than it downgraded in the second half of 2009-10 as against 108 rating upgrades, there were 95 downgrades. The number of defaults too declined during the second half of the year to 20 from 29 in the first half, it said in a release.
Roopa Kudva, managing director and chief executive officer, CRISIL, said, “We believe that the worst is over for the Indian economy, and present trends indicate that upgrades will outnumber downgrades in 2010-11. However, the degree to which the credit cycle turns will depend on the sustainability of demand growth, and the impact of fresh capital expenditure on players’ balance sheets.”
This reversal resulted in CRISIL’s modified credit ratio (MCR; the ratio of upgrades plus reaffirmations to downgrades plus reaffirmations) increasing 0.93 times for the entire 2009-10 period from 0.86 times for 2009-09, snapping a four-year trend of decline that had begun in 2005-06, it said.
With this, the credit cycle seems to have turned after the recent global economic slowdown. These trends were observed on a portfolio of almost 4,000 CRISIL-rated entities; of these, 75% are mid-sized entities, each having an annual turnover of less than Rs5 billion, the ratings agency added.
CRISIL, a Standard & Poor's unit, said that companies in the real estate and real-estate-dependent industries account for 18% of the ‘negative’ outlooks, while those in the textile business account for 12%. Both these industries are still highly leveraged, and will require strong demand revival or large equity infusions for their credit profiles to stabilise. Textile players will also need to contend with exchange rate volatility, it added.
Construction players, on the other hand, are witnessing robust demand, arising from the government’s increased focus on infrastructure spending, account for almost 20% of the ‘positive’ outlooks, CRISIL said.
The ratings agency said that it believes that the outlook for credit quality in 2010-11 is positive. While present trends indicate that upgrades are likely to outnumber downgrades in 2010-11, a global credit event on sovereign debt, a build-up of inflationary expectations, and exchange rate volatility may yet disrupt the trends over the near to medium term.
“The credit fallout of these events can be significant because governments have limited room to address them through further fiscal and monetary measures,” cautioned Ajay Dwivedi, director, CRISIL Ratings.
CRISIL said that infrastructure and infrastructure-related industries (including power equipment, steel, cement, healthcare, and education) and the financial services sector are likely to witness high demand growth over the medium term. Export-dependent industries, such as gems and jewellery, textiles, and information technology (IT) and IT-related services, are likely to grow moderately on the back of revival in the global economy. Commercial real estate and leisure industries are likely to face severe demand-supply imbalances.