Reliance SIP Insure investor caught in a trap
Moneylife Digital Team 03 January 2012

A few months ago Reliance and Birla Mutual Funds were pushing hard a combo plan of mutual fund and insurance. One investor is now caught in a bind having fallen for Reliance’s pitch. Don’t expect SEBI to do anything about it though

If you were a mutual fund investor, investing in Reliance Tax Saver Fund (which also provides life cover) via the SIP (systematic investment plan) route, and wanted to change the bank from which you’re paying SIP, you probably would not be able to do it! Such is the case for Deepak from Karnataka, who has been investing Rs1,000 per month from his Punjab National Bank account in the Reliance MF scheme that came with a coverage of Rs10 lakh. However, when he wanted to switch banks, as he had moved to a new company, he could not do so. Reliance MF had told him that such a move was not possible and that the insurance cover would be reduced or completely nullified if he changed his bank account!

“How can Reliance MF not have the facility for investors to seamlessly change bank accounts?” moans Deepak. Apparently, Reliance MF had stated this anti-investor clause in the offer document itself. The facility for switching banks is only available with ECS debit, and not auto-debit as in Deepak’s case. If Deepak wishes to accede to Reliance MF’s demand of reduced coverage, he would get a reduced coverage of Rs5.4 lakh instead of Rs10 lakh, merely because he had switched bank accounts. The other option, of course, would be to continue to invest in the SIP insurance plan from his existing bank account, and keep transferring money from his new bank account for the remainder of the scheme which is 12 years (!)—a major hassle. Deepak adds “to impose a harsh penalty just for switching banks is beyond our imagination and goes against basic business principles.” He had complained to Reliance MF’s Karnataka state head as well as compliance head, and has not got any help so far.

In a supreme irony, Reliance Mutual Fund CEO Sandeep Sikka was quoted in the media in August as saying “There cannot be any short-cut to reach out to the under-penetrated market but to create financial literacy and spread knowledge about what a mutual fund is,” added Mr Sikka. If this is the case, why hadn’t Reliance MF informed Deepak before-hand of this auto-debit clause since he had opted for it? Indeed the Reliance MF website lists auto-debit as an important convenience.

http://www.reliancemutual.com/SIP/RelianceSIPInsure.aspx
According to Sunil Nair, R&T operations of Reliance MF, “We need a cancellation request to cancel the mandate registered in one bank and registration mandate to register the mandate in another bank.” Unfriendly banking regulatory laws are forcing customers to jump from one place to another in order to get a seemingly simple thing done. Why should a customer like Deepak work hard to get these things done? He has to get two letters now—a cancellation mandate from PNB and a registration mandate from the new bank he had signed up—and then produce both these to Reliance MF. Why can’t the institutions step up and make it easier for customers to do business with them and, in this case, make bank switching easier? Obviously, if this facility is available— it is a win-win for both institution and consumers.

The recent tightening of fund regulations and strict banking laws has forced mutual funds to look to alternative sources of income. Some of the regulations have squeezed the cost structure of the fund industry as a whole, and thus have been forced to mis-sell products to consumers in search for better margins. Deepak’s case is one such case where the fund changed the rules to suit itself while at the same time passes the onus to the customer to solve the problem.

This is yet another case where institutions, and the broad regulatory environment, short-change the small investor for their own benefit. What is appalling in this case is that it lacks empathy and common sense. How difficult is it to switch bank accounts? If it is due to regulatory requirement that an institution cannot entertain this simple facility to customers, it only shows how ignorant our regulators are, and it badly reflects on the way consumers are treated in this country. Not only this, but Reliance MF failed to inform Deepak of the auto-debit clause when he had opted for it. It also shows that regulator’s apathy towards institutions and consumers alike will only make it more difficult to for products to reach a wider section of the population. Moreover, as more and more cases like this crop up, consumers will be more aware and stay away from them.
Investors, after reading this episode, will be less inclined to invest with such institutions and products that are not customer friendly. No wonder investor population in India is not rising but shrinking!

Comments
Pradeep Jain
4 years ago
Reliance Mutual Fund does not facilitate life insurance cover on its own. It actually buys it from a life insurance company. Hence the investors are bound by the terms imposed by the life insurer whether they like it or not.
girish
1 decade ago
this is not the only case.
they have issued the ATM card to me and now card is expired now so they have not issueing card t me .reson is that now they are issueing card if i will invest in rmoney manager fund .i was using atm card facilities fro 2 to 3 years now it is with drawn with out informing me .
it means that they can withdraw any facility is future . it may be insurence in sip insure.
girish
Reliance Mutual Fund
1 decade ago
Dear Sir ,

This is with reference to your article on Money life.com

We are reviewing the details as highlighted and shall respond conclusively at the earliest.

Thank you

Regards,

Reliance Mutual Fund
Saurabh Aggarwal
Replied to Reliance Mutual Fund comment 1 decade ago
Reliance M.F. ,I am really tired of your late services , i have registered for physical copy of statement but despite getting request no. & assurances i have not recieved any statement.I am providing details if possible please help.
Reliance Diversified Power Sector.
Request no. 12904664 , 14244506 , 17018914 , 17208526 , 18234231 from july 2009.
Reliance Regular Savings Equity.
Request no.14244526 , 15706334 ,17018881 ,18234265 from august 2010.
Saurabh Aggarwal. Mobile no.9560750503.
nagesh kini
Replied to Reliance Mutual Fund comment 1 decade ago
What's the time frame for resolving each of the concerns?
Please respond in this medium too.
Shrigopal Jhunjhunwala
Replied to nagesh kini comment 1 decade ago
Mr Kini Do not expect any reply from them as it is a ANIL AMBANI group Company just like Reliance Communication where I am still waiting for a reply from the Nodal Officer of Mumbai from Feb 2010 onwards even after repeated attempts (like sending letter/e-mails) and telephoning them just to get an answer of my query.
monil
1 decade ago
reliance is the biggest fund house of india,but not cooperating with investors in bank details changing. its a huge problem
with RIL AMC.& at the time of redeemtion also a sign mismatch problem
Vijaya Krishna
1 decade ago
I had invested in SIP Insure, and I could change the bank (ECS mandate) a couple of years ago. I think the investor should talk to the customer care to get this sorted out.
Dr Sandeep Sharma
1 decade ago
How does this effect the reliance mutual fund house. These days all MF houses are giving option of registering more than one bank account with them. If they can register for this why can't they switch. WHATS THE INTEREST OF RELIANCE IN NOT ALLOWING THIS SWITCH ?
sandeep
Replied to Dr Sandeep Sharma comment 1 decade ago
Wake up. The quality of top management is so poor everywhere that they dont care about what is in the interest of the company forget about the investor.
Vikas Gupta
Replied to sandeep comment 1 decade ago
I totally agree with Mr. Sandeep.
Reliance Mutual Fund
Replied to Vikas Gupta comment 1 decade ago
Dear Sir,

This is with reference to your article on MoneyLife.com.

The operational process for investment in a mutual fund via SIP and SIP Insure is the same. A significant number of investors invest in SIP via ECS and do not face this issue. However, we do acknowledge that there were unforeseen operational impediments for investment via the auto debit mode. We have resolved this and now offer change of bank facility for auto-debit SIP transactions.

Thank you
Regards,
Reliance Mutual Fund
Sanjeev
Replied to Reliance Mutual Fund comment 1 decade ago
I do appreciate positive responce from RMF.
burntByReliance
1 decade ago
It is Reliance FFS; stay away from Reliance products/services at all costs. PERIOD. Reliance is synonymous with bad governance and customer unfriendliness.
Vikas Gupta
Replied to burntByReliance comment 1 decade ago
Very rightly written. All ADAG Co.s are totally unethical in practices.
Sanjay
1 decade ago
Just like how one should not buy ULIP's. One should not buy SIP iNSURE products. They will never pay claims. Reliance Mutual Fund is within it rights. Hence, investors should not get into should fancy products.
Reliance Mutual Fund
Replied to Sanjay comment 1 decade ago
Dear Sir,

Reliance SIP Insure is a benefit which is offered free at no cost to investors who invest in designated schemes via the SIP mode. In fact, the entire cost associated with the insurance cover which is quite significant, is borne by Reliance Capital Asset Management Ltd. Since launch of Reliance SIP Insure in 2008, the product has benefited a significant number of investors. The total number of claims settled by us since inception has been 146 claims amounting to Rs 2.96 crores. All this has been done at no cost to the investor.

Thank you
Regards,
Reliance Mutual Fund
Sanjay
1 decade ago
Now that RBI has allowed Bank Account Number portability, may be the investor like Deepak can move his current Bank acct to their new town/banks while retaining the bank account number. Thus the challenge being faced by deepak will be nullified.
Mitul Desai
1 decade ago
Instead of highlighting such small issue investor's money is not siphoned off, you should concentrate in exposing Fund Management of AMCs where NAV is Rs.2.72. Fund house have merged all their schemes below Rs.2 to existing scheme and masked their mid-deeds.
J M Mutual Fund
Vikas Gupta
Replied to Mitul Desai comment 1 decade ago
I totally agree with Srini & Ruchi Malhotra.
Srini
Replied to Mitul Desai comment 1 decade ago
Since you are new here, spend some time exploring Moneylife before ranting.
Moneylife has written on a lot of issues other media companies will not touch. JM Mutual is one of them. Read this and shut up

http://www.moneylife.in/article/81/6696....
ruchi malhotra
Replied to Mitul Desai comment 1 decade ago
you have obviously come to moneylife straight from Reliance - otherwise you would have known that all this and more has been extensively covered ... esp JM. Try attending Moneylife Foundation seminars also. I do.... and I am better informed.
ravishankar
1 decade ago
Great expose.
Thanks Moneylife for writing what other bigger media companies won't
Anish Supran
1 decade ago
I have one advise for Moneylife, invest in some quality reporters / writers. you are making a big issue out of nothing, cant you write something that will add value to your readers than write nonsense like this.
Rajiv
Replied to Anish Supran comment 1 decade ago
Big issue out of nothing!
Write a point of view at least, if not facts
Company stooge
Vikas Gupta
Replied to Rajiv comment 1 decade ago
I totally agree with Mr. Rajiv. I think Mr. Anish has got some connections with Reliance AMC.
vikas batra
1 decade ago
why the writer is forgetting that auto debit is a facility provided by some banks at non ecs locations and in mutual funds you get world class mgmnt at the least rates, yes now mkts are down so everybody will be cursing mutual funds but if the investors didnt have asset allocation or for these problems how are companies ( which are giving free insurance) responsible, its the banking industry. please check your facts right before just writing an article and get after the beaten industry
Deven
Replied to vikas batra comment 1 decade ago
Facts are right there. Who is talking of performance here, (though the best days of Reliance are over. World class management? My left foot).
It is practices like these that give banking, insurance and mutual funds the bad name.
Vikas Gupta
Replied to Deven comment 1 decade ago
I totally agree with Mr. Deven. Reliance MF Marketting Team is busy to be No.1 again by hook or by crook. It doesn't matter to them at all.
R Balakrishnan
1 decade ago
Reliance - what an oxymoron!
Nagesh Kini
Replied to R Balakrishnan comment 1 decade ago
No Sir, it is apparent and built in contradiction plain and simple - be it insurance, MF, power supply or telcom. Complaints galore
R Balakrishnan
Replied to Nagesh Kini comment 1 decade ago
Reminds me of an old joke.
Seller says'Money back if not satisfied".
Customer who is not, seeks a refund. Company refuses, saying that "They" are perfectly satisfied with the money
Nagesh Kini FCA
1 decade ago
The initial spat between the two Regulators - SEBI and IRDA was bad enough, it turned out to be case of ego clashes. Now it is the turn of the third big guy - the oldest of them all to jump in the fray - how can any one, for that matter, a MF or Insurance Co. stop the migration from one bank account to another.
We are operating in a world of "Portability" from telecom to health insurance covers.
It is time for the RBI and SEBI to come down heavily on such consumer unfriendly acts with a heavy hand, by imposing suo moto penalties, sooner the better.
I speak in my capacity as a professional-turned consumer activist of long standing well versed in banking, insurance and capital markets.
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