Sucheta Dalal :Discriminatory strategies (7 Sep 2003)
Sucheta Dalal

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Discriminatory strategies (7 Sep 2003)  

Retail investors were recently shocked to learn from the capital market regulator that many so-called mutual funds schemes had just one or two investors. A close look at the fine print reveals that the Mutual Fund (MF) industry is in fact gradually structuring itself to cater mainly to corporate and High Networth Individuals (HNIs). Corporate and institutional investors get concessions on entry and exit loads. Debt funds usually waive exit loads for investments of over Rs 10 lakh and equity funds waive both entry and exit loads for investment of a couple of crore rupees.

The retail investor is discriminated against, and also pays for the concessions enjoyed by large investors. Moreover, the big guys are in fact, enjoying tax concessions granted to the MF industry to help them attract retail investment. We learn that banks are now investing money in mutual funds, instead of lending it to business and industry.

SEBI’s investigation into the manipulation of bank stocks was to have looked at possible links between their mutual fund investment and the price of certain scrips. But so far, the regulator is keeping its findings under wrap.

ATMs to charge?

ALL over the world, Automated Teller Machines (ATMs) offer a two-way benefit. While their 24-hour availability is a boon for bank depositors, banks save on the higher cost of human interface involved in simple banking functions such as making deposits and withdrawals. But typical of India, where labour is cheap, media reports say that banks plan to slap a charge on users for the benefit of technology. According to CNBC-TV18, banks may find it necessary to recover the high cost of technology from consumers.

That is all very well, but who is to decide whether banks have over-paid for the technology or to rent ATM space, have installed unviable add-ons (such as sale of movie tickets, payment of bills, pujas at temples etc.) or are unviable because their choice of location has been foolish?

The danger is that when it comes to extorting additional money from depositors, banks will happily form one large cartel to impose these charges. Hopefully, the Reserve Bank will question ATM service charges before they lead to messy disputes. After all, by allowing banks the freedom to start ATMs it has helped them expand their network and grow their business.

Quiet defiance

MUMBAI’S quiet defiance of the Conditional Access System (CAS) has exposed the gaping hole in government legislation. Without an independent regulator to enforce compliance, the government opened itself to humiliation by cable operators who simply ignored the CAS.

In Chennai, where pay channels were switched off on September 1, a majority of consumers are reportedly staying with the free-to-air channels and watching developments. Some subscribers say that if the issue is not resolved in the near future they will challenge the bundling of channels as a restrictive trade practice and demand curbs on advertisements aired by pay-channels.

They also wonder why set-top boxes have to be bought from cable operators instead of being sold like other consumer durables.

Victims of fraud

LAST week we wrote about how the Haryana police had arrested Manik Lal Maitra, an NRI who ran a fraudulent ‘bank’ called the NRI Lead Bank in Delhi without the Reserve Bank’s permission. This week, various victims of Maitra are finding ways to ensure that he remains in custody or returns the money collected as deposits on the promise of arranging External Commercial Borrowings (ECB). One such victim is Mr Bhojwani, the former owner of Holiday Inn in Pune, whose hotel was possessed by his bankers following orders of the Debt Recovery Tribunal and sold to the Sun N Sand Group. According to Mr Bhojwani, he would not have lost the hotel if Maitra’s fraud bank had come up with the promised lending.

Varishta issues

THE Varishta Bima Yojana, announced by the Finance Minister in his last budget, was a big hit with senior citizens because it offered a higher interest rate than is currently available in the market place.

But Pune-based Stephen D’souza, who specialises in financial planning for retired people, points to a couple of niggling issues that LIC’s offices seem unwilling to pay attention to. For instance, one of his clients, who tried to change his bank account crediting interest through the electronic clearing system (ECS), was told that there is no provision for changing bank details. Well, if there isn’t, it is common sense that the scheme must be modified to provide for it. It is ridiculous to harass senior citizens on that score. As Mr D’Souza points out, if the savings account details for interest payment are so sacrosanct, what happens to NRI’s or those who have accounts in rural branches and post offices where there is no ECS facility?

-- Sucheta Dalal