Children’s Education Plan:-

It’s that time of the year again when your kids are excited about going to a new class with a new set of books and a new syllabus. Every new academic session, however, also brings with it higher tuition fees.


 As parents, if you are oblivious to the inflation in education cost and do not have enough savings, your dreams of sending your kids to a good university for higher studies may remain unfulfilled. For example, if a university course costs Rs 3 lakh now, it will cost nearly Rs 9.5 lakh after 12 years.

Parents should no longer postpone the planning for their children’s higher education till they pass out of schools. You should start saving early so that your investments get enough time to grow to be able to meet future liabilities. The earlier you start saving for your children’s future education, the less you need to save each month.

Parents need to spend more once their children start their higher secondary education. A student passes Class X at the age of 15. So, you have 15 years since the time your child is born to save for his/her education. Now, given the time horizon, the second important question is what the instruments one should invest in are.

Product spread

Recently, a number of life insurance companies as well as mutual fund houses have come out with children’s education plans. Let us first examine these products on offer.

When it comes to children’s education plans, life insurance companies are more aggressive than mutual funds in their product offerings. Life insurance companies offer children’s education plans in traditional as well as unit-linked (Ulip) platforms.

The traditional plans are money-back schemes that offer annual payouts at specified periods of time during the policy term. These payouts are guaranteed.

Every insurer has on its respective website a premium calculator corresponding to different products illustrating the benefits a policyholder will get during the term of a policy. So, you can compare the costs and benefits of different traditional plans for children’s education of various life insurers.

However, there are better options that give a guaranteed return as well as tax benefits similar to a traditional life insurance plan.

Think of the ubiquitous Public Provident Fund. It gives a guaranteed return of 8 per cent per annum which is fully tax-exempt.

Let us compare the return from a PPF account with that of a traditional education plan from a life insurance company. For this, we will consider the Young Scholar Secure plan of Aviva Life Insurance Company.

The premium calculator and the benefit illustration of the insurance plan shows if you are 30-years-old and have a new born baby, by buying this plan you can get a life cover of Rs 14,03,500 for an annual premium payment of Rs 50,515. You will have to pay the premium for 13 years. When you kid becomes 13, he/she will get an annual payout of Rs 20,000 for five years. On attaining the age of 18, the child will get a lump sum Rs 1 lakh and a guaranteed maturity amount of Rs 12,03,500 at the age of 21.

Now, consider investment in a PPF account. An annual investment of Rs 45,000 in a PPF will give you a maturity amount of Rs 13,19,593 after 15 years when your kid is about to join Class XI. You may ask why we suggested an investment of Rs 45,000 every year instead of Rs 50,515 in PPF?

With an annual premium of Rs 5,530 you can buy a term life insurance of Rs 35 lakh for 20 years that will give you a 2.5 times higher life cover than you get in Aviva Young Scholar Secure.

With this combo investment plan you can ensure that if anything happens to you anytime before your kid turns 20, your family as well as your kid’s higher education are well protected.

After using Rs 19,593 for tuition fee, if you keep the remaining PPF proceed of Rs 13 lakh in a fixed deposit account earning a 6 per cent annual interest for 5 years, you will still get an annual interest income of Rs 78,000. So, under this combo investment plan, your payouts will be Rs 19,593 in the 15th year and Rs 78,000 each year for the next five years and at the end of the 21st year you get the principal deposit of Rs 13 lakh back.

This way you can earn Rs 5 lakh more in terms of survival payouts than buying the Aviva plan.

Emergency situation

Now what happens if you die within these 21 years. Under the Aviva plan, your nominee will get Rs 14,03,500 (the sum assured) in addition to all payouts already made if you die any time between the 12th and 21st year. Unpaid premium if any will be waived off.

However, if you die in the first year of the policy, your nominee will get a lump sum payment of Rs 20,03,500 immediately and the annual payouts at specified intervals. The unpaid premium will also be waived off. The death benefit, however, will decline by Rs 50,000 with every year.

In the combo investment plan, your nominee will get Rs 35 lakh on your death during the policy term — Rs 15 lakh more than the maximum death benefit payable under the Aviva plan.

The return on this Rs 15 lakh when invested in a fixed deposit earning an annual interest of 6 per cent can take care of the annual PPF subscription amount and your family can still have Rs 40,000 annual interest income from the fixed deposit.

This shows that there are better investment opportunities in the assured return space than traditional insurance plans for children’s education. Guaranteed NAV products of insurance companies are also not better products compared with a PPF-term life combo plan.

In fact, assured income products are also not advisable if you are planning a long-term investment.

The greatest risk to a long-term investment is inflation and not capital loss. So, if you choose a fixed income asset for long-term investment, you carry a higher risk of inflation eating into your return. You can gain more by investing in equities than in fixed income instruments.

When it comes to equity investment, the two popular avenues are Ulips of life insurance companies and equity mutual funds. After the September regulations on Ulips, these products have become more attractive and at times better than equity mutual funds.

When it comes to your child’s future, there is no room for hasty decisions. Measure the pros and cons while selecting a plan as it can go a long way in deciding your child’s life.

Investing where? Gold or silver?

It is really important for an investor to first understand the economy and the financial systems prevalent in the market before he decides what to invest in. With the cost of crude oil having increased considerably per barrel, the GOI has also acted by increasing the price of petrol and diesel severely.


Should an investor buy more gold or silver?

Precious metals were the best performing assets for the second consecutive year and also for the fourth time in the last five years. Investors enjoyed a 42% return by investing in precious metals in 2010. Silver performed much better than other precious metals in the market in 2010 with prices rising by an astounding 80% which is two and half times the rise in price of gold (29%).

Along with being deemed a safe investment, the relatively low supply of the metal as compared to the high demand has also contributed to the steady increase in price. In the first two months of 2011, silver's price has increased at a steady 9.3%.

Judging by the present market scenario, investing in precious metals will be a very wise decision. And it will make more sense to invest in silver than in gold….at least now!

Some parameters one should consider before investing in gold or silver?

One of the main reasons investors prefer investing in these two metals is the stability witnessed in the market. Liquefaction is also an easy process for gold or silver bars and coins. However, purity of the mineral is of utmost priority and should be given due importance.

Another important factor governing the decision on whether to invest in gold or silver is the price. Though the variation in the price of gold or silver is not as unpredictable as that of shares and equities, there still is a noticeable difference on a daily basis. But when you are investing a large sum of money then this can make a lot of difference. Hence, one should study the market carefully and invest when the price is relatively low.

Choosing the right vendor is also very important. If carefully observed then the price variations with wholesalers, retailers and commercial banks can be clearly observed. So one should watch out for the purest gold available at a comparatively low price. For a regular investor, it makes sense to invest at regular intervals. This way one can take advantage of the market volatility. Investing in both gold and silver makes sense for a regular investor as he can diversify and can have a steady return irrespective of market fluctuations.

Different forms of investing in gold and silver:-



Bar: One of the most traditional ways, dealing with bars is very simple too.

Coins: This sort of investment depends on the weight of the gold or silver coins.

Accounts: Swiss banks provide a Gold-account option which aids in transactions involving the precious metal.

Gold Exchange Trade Funds: This method helps gold transactions through the stock exchange.

Spread betting: This involves predicting the rise and fall in the price of gold or silver before investing in it.

Investing with mining companies: This is just like investing in the stock exchange. The only difference is that here one deals with shares from mining companies.

When is the right time to sell gold or silver?

With the current financial slump, people are selling their gold and silver as a means to make some extra cash. But with the price of the two precious metals having reached an all-time high, it would probably be wise to hold on to it and see how far the prices soar and then cash in at the opportune moment.

There are two factors that govern the decision of the timing of a transaction involving gold or silver. The value of the US Dollar at that moment and the investor's financial situation. Usually, the price of gold is inversely proportional to that of the US dollar. But most investors don't have pure gold lying around in large quantities. So unless you are investing or speculating on a really large amount of gold or silver, the drop in the US Dollar's value will not matter.

How to pay off your education loan

Many young people have a serious problem on their hands today - they have a degree which does not help them get a nice job. They have taken a loan to get that degree, and they have no place to stay in a big city.


Welcome to the American lifestyle. Children who have left their houses to go to a bigger city to get a degree - quite likely an MBA are wondering what to do. The actual scenario may be a little different from case to case, but it is somewhat like this:

Here is a boy or girl from a not-very-well-off family who has been enticed into doing an MBA with a huge bank loan. However, by the time the student completes the course the market is in a downward spiral and he/ she is unable to find a job. Actually not enough jobs are being created. In this situation what can a student do? Well, here are some useful tips:

1. Go get a job, any job: It is quite surprising as to how people can sit at home and twiddle their thumbs WAITING to see what to do in life! Go get a job, any job. This has to be the most important advice for an MBA graduate or also an engineering graduate! If you think an MBA degree should get you a Rs. 500,000 job at the least, it may not always happen in real life. I have seen MBAs working on a starting salary of Rs. 6500 (year 2009) and are not badly off for it!

2. Stop thinking sales job should not be done: There are many MBA students who have unfortunately got into a mindset that sales jobs are bad. Sales people bring in the money for the organization to run, so selling is not so bad after all. If you ever want to be a CEO, go and learn how to sell. Other tasks can be outsourced, but if you have a product, YOU NEED to be passionate about it. Learn selling skills is very important – do quick arm-chair researches on how many Managing Directors have reached that post from the sales side of the organization. If you have to be on your own, then you need to be passionate about sales. That is one very important characteristic that venture capitalists will look for if you are seeking funding for your project.

3. Try to defer your student loans: Just check out the possibility of deferring your student loan repayment. The bank may agree to charge you interest for the deferred period, but at least the day-to-day worry about the month end payment is postponed. If your parent has given the guarantee, keep them informed and let them know that you will not be able to meet the commitment either in full or part.

4. Take no chance with insurance: Ensure that your vehicle insurance, medical insurance and life insurance payments are up to date! These are the easiest of payments to skip, and tempting too. Do not delay or neglect to pay - if you break your leg you still need medical insurance. Make sure that you have a cheap term insurance and some minimum medical insurance at least.

5. Keep your chin up: Learn to laugh about what is happening in your life. I am sure that this is easier said than done. I recently heard of a client whose daughter was in coma for 9 days. Would not have been easy, but he was holding his chin up. So remember, tough times do not last, tough people do.

6. Move back to your parent’s house: If you have moved from your town to a city to study or take up a job, seriously reconsider moving back. It is all right to come to town for interviews instead of incurring rent at a new place. This is really a tough call - it is a mix between wanting to be where the action is and saving some money. Tough call kids, but you have to take the call.

7. Join groups: Alumni, HR groups - any group to keep in touch with the corporate world. All colleges have (and need) such groups which meet - accounting, finance, Human Resources, just about anything. There is some chance of meeting a potential employer!

8. Some small companies will happily let you work for free! Well, if they offer you Rs. 5,000 per month, do not get into an ‘I am a MBA’ kind of aggressive mode. Just take it. Yesterday heard of a kid who moved from Rs. 5k a month in a production house (media companies are perhaps the worst exploiters!) in the year 2007 to freelancing today at a price of Rs. 80,000 a month (year 2010). Yes, on an assignment basis! It pays to have a worn out sole and some time spent in the sun.

9. Learn some skills: Public speaking, dramatics, Excel, Power-point, basics of business finance, sales marketing, and written communication - all are useful skills. See what you can learn for free, and what you can learn cheap. Offer to do some marketing for the organizer – tell him you will get them five people signing up – and can you attend for free? No harm in asking. See if you can get something free or for a pittance. Learn everything that you think is transferable...all this can add up.

10. Be clean: Say no to drugs, tobacco, alcohol - all these have a terrible way of catching up in your corporate life later on. Be clean, be clean, be clean, need one say more? No drunken driving, getting into trouble for anything illegal. And do not get into some bravado about doing something like this and putting it on Facebook. Enough numbers of HR people keep prowling FB for tell tale signals.

11. If you rely just on job websites for a job, you are doomed! Be on job sites, be on networking sites, be on Facebook, be on LinkedIn, just connect, call, meet and get a job. If you still cannot get a job (be honest to yourself, not to me) there is something wrong with your attempt.

12. Keep that credit card at home: If you do not know how you will repay a loan, do not take the loan. Carrying a credit card with you everywhere is not a great way of avoiding temptation. If you know you cannot resist the urge to buy, destroy the credit card. Get a new card when you have a job. By that time if you have learnt to live without a credit card, rejoice! An eight percent growth economy creates enough jobs. You will find yours, for sure.

Harshad scam crores released

The custodian appointed to look into the 1992 securities scam today released payments worth Rs 2,196 crore to the income tax department and the State Bank of India from the liquidated assets of Harshad Mehta’s group of companies.


Nearly 19 years after the share scandal shook the BSE, Satish Loomba, the custodian (trial of offences relating to transactions in securities), handed over cheques worth Rs 1995.66 crore to B.P. Gaur, the director-general of investigation (central) of income tax, and Nilima Mansukhani, the chief commissioner of income tax in his Nariman Point office.

Another cheque of Rs 199.25 crore was given to B. Sriram, the chief general manager (securities) of the SBI.

The amounts were released after the Supreme Court on Monday declined to stay the distribution order by Justice D.K. Deshmukh of the special court, Mumbai, on payments to the IT department and the SBI.

Justice Deshmukh had issued the order on February 25. The payments were released on the basis of undertakings given by the department of revenue and the SBI that the amounts would be brought back, if ordered by the special court.

Loomba told reporters that the nearly Rs 2,000 crore payment had settled the IT department’s claims of principal amount of dues from Mehta’s companies.

He said according to court orders, the IT department’s claims had to be settled before those of banks and financial institutions. If any money remained, claims related to interest and penalties would be settled for the IT department as well as banks and financial institutions, he said.

The custodian said of the Rs 4,500 crore obtained from liquidation of Mehta’s companies, Rs 4,000 crore had already been disbursed. The rest would be distributed according to apex court orders, Loomba said.

He said of Rs 1,717 crore in claims from banks and financial institutions, nearly Rs 1,000 crore was claimed by the SBI, Rs 500 crore by Standard Chartered Bank and the rest by other banks and FIIs. He said after the nearly Rs 200 crore payment, the SBI had now received the principal amount totalling Rs 800 crore.

The custodian is the principal administrative officer appointed under the Special Court (trial of offences relating to transactions in securities) Act of 1992 to deal with the securities scam and the recovery of huge amounts of money lost by the banks.

Under the act, the officer has the powers for attachment, management and liquidation of assets of notified persons and functions under a system of concurrent judicial review by a special court comprising sitting Bombay High Court judges.

With today’s payments, the custodian has released over Rs 4,000 crore worth of payments from the liquidated assets of Mehta’s group of companies.

Courtesy: - The Telegraph,Kolkata.17/03/2011.

Skype and the Sendai earthquake and tsunami - free WiFi and Skype Credit vouchers

A great move by Skype. Skype and the Sendai earthquake and tsunami - free WiFi and Skype Credit vouchers

3 essential finance resolutions for and from 2011

The start of the New FY is a great time to put in place practical resolutions for your personal finances. Here are 3 simple resolutions that are within the reach of everyone, irrespective of your knowledge of finance or your current income level.

1. "I will be a smart saver to protect myself against inflation"

Inflation is a hidden tax that eats away into our money. For example, food inflation is currently being reported as running at approximately 14%. That means that assuming your income stays the same, your money will only be able to buy lesser food than it was able to in the past. The purchasing power of your money is being eroded.

The best thing for you to do is to put your money into instruments that generate a long-term rate of return that is higher than inflation. Only then can you maintain the purchasing power of your money. As far as possible, avoid fixed deposits and fixed income instruments, especially if you are young. Rather, invest in equity mutual funds or instruments where the after tax-return is higher than the long-term inflation rate.

2. "I will prioritize productive assets over consumptive assets"

All of us are tempted to buy the latest mobile phone, fashion accessory, or use our money towards eating out and going to the movies every other day. After all, we work hard so we deserve all the pleasures of life. However, by spending our money this way, all we are doing is "consuming", with no real asset to show at the end of the day.

No one is suggesting that you totally stop the discretionary spending that gives you pleasure. Rather, recognize that if you prioritize building assets that can give you income, in just a few months you will likely have more sources of income to spend on discretionary items. So, before you use your bonus or pay rise to buy that hot new gadget which will get obsolete in no time anyway, use these funds to invest. Thereafter, use the returns from these investments for whatever consumption you still want to do.

3. "I will spend 1 hour in every month from the FY reviewing my financial goals for 2012 and onwards"

History suggests that those who take time to identify their goals in life are usually better prepared to achieve them. It should be obvious that if you don't know what you want to achieve, you might just wander directionless, and you might not be happy with where you end up.

So, if you want to buy a house, upgrade your car, get out of debt, or pay for your child's education - whatever the goal, spend at least 1 hour in March reviewing what you want to achieve, and then consciously create a plan to achieve this.

All of us have busy lives and chances are that most resolutions don't last beyond March. However, if you stay realistic about the above, come March you will be financially much happier.

Good Luck.

Taxation Of Non Resident Indian

General Information


Under the Income Tax act, every person who is an assessee and whose total income exceeds the maximum exemption limit, shall be chargeable to the income tax at the rate or rates prescribed in the finance act. Such income tax shall be paid on the total income of the previous year in the relevant assessment year. But the total income of an individual is determined on the basis of his residential status in India.

Resident and Non Residents

The income tax to be paid by an individual is determined by his residential status. An individual can be termed as a 'resident' if he stays for the prescribed period during a fiscal year i.e. 1st April to 31st March either for

 182 days or more

 60 days or more (182 days or more for NRIs) and has been in India in aggregate for 365 days or more in the previous four years

 However, the criteria of 60 days are extended to the first criteria of 182 days for any one of the following instances:

 1. If you reside abroad for the purpose of employment.

 2. If you reside abroad as the member of the crew of an Indian ship.

 3. If you are an Indian citizen or a person of Indian origin who comes to India on a visit.

Any person who does not satisfy these norms is termed as a 'non-resident'. A resident individual is considered to be 'ordinarily resident' in any fiscal year if he has been resident in India for nine out of the previous ten years and, in addition, has been in India for a total of 730 days or more in the previous seven years. Residents who do not satisfy these conditions are called individuals 'not ordinarily resident'.



In recent times the Government of India has opened the Indian market and economy to attract more foreign capital and technical know-how. The foreign investors may be Indian Nationals who resided outside India and other foreign investors including corporations. A person who resides outside India is technically known as 'non-resident'. The residential status of an individual does not depend upon the nationality or domicile of that person but it depends upon his stay in India during the previous year.



In case of an assessee, other than an individual, the residence depends upon the place from which its affairs are controlled and managed. If the control and management of the affairs of a foreign company is, during the previous year, located wholly in India, it shall be treated as resident in India. Where part of the control and management of the affairs of a foreign company is situated outside India, it shall be treated as a non resident company.



Status Indian Income Foreign Income

Resident and ordinarily resident Taxable Taxable

Resident but not ordinarily resident Taxable Not taxable

Non Resident Taxable Not taxable

Life insurance IPO a distant dream

Domestic life insurance firms are in no hurry to hit the market with their initial public offerings (IPOs) even if the regulator announces the guidelines now, according to a research report by HSBC. According to the report, the hitches — such as limits on foreign direct investment, a 10-year track record and the absence of IPO guidelines — that have prevented floats by domestic life insurers will be removed this year. However, it believes “only a brave Indian insurer” will come out with an IPO now, given the impact of the new regulations on unit-linked insurance plans (Ulips) and the pending direct tax code (DTC) bill. New policy sales by private firms have fallen 20.78 per cent to 88,45,283 till the end of January this fiscal from 1,11,65,771 a year ago. The decline in the sale of individual regular premium policies was sharper at 22.7 per cent — from 1,05,67,140 to 81,68,782. “New business margins are also under pressure given the imposition of fee and surrender penalty caps in Ulips,” the report said. Following the new guidelines, the share of unit-linked business to total policy sales came down to 48 per cent from 52 per cent before September 2010. Though the premium income (of private players) from new policy sales during April-January rose 5.84 per cent year-on-year, it came on the back of a steep increase in the premium rates of Ulips. “Some insurers have started offering more guarantees on unit-linked products (such as NAV guarantee, capital protection) as they are not subject to Irda cap on charges and are hence high-margin business,” the report said. “Insurers have also tried to tap traditional products that are also not subject to caps on charges and fees. However, it will be difficult for private insurers to compete on profitability because the Life Insurance Corporation of India is able to fund higher policyholder participation rate with free reserves accumulated over past generations.” The DTC, if implemented unchanged in March 2012, could result in a collapse in sales and significantly lower earning for the life insurance sector. The current DTC proposal will strip Ulips of all tax advantages and also does not provide relief to existing Ulips. The latest published draft proposals for DTC provide for only Rs 50,000 tax deduction for life insurance premium, medical insurance premium and tuition fees taken together compared with Rs 1 lakh available for deduction now. Besides, the insurers’ corporate tax liability will also increase to 30 per cent from 14 per cent. R. Krishnamurthy, former managing director of SBI Life Insurance Company and the present MD (distribution channel) of Towers Watson, had said, “Many domestic promoters of life insurers will be in a dilemma because these changes will put capital strain and promoters having non-financial sector as core business will find it difficult to pump in money in their insurance venture.” Source: The Telegraph, Calcutta March 9,2011

Reliance Life with Japanese firm

  

Japan’s largest life insurer Nippon Life Insurance Company is in talks to pick up a 26 per cent stake in Reliance Life Insurance Company of the Anil D. Ambani group.

Nippon Life will reportedly pay close to 60 billion yen ($723 million) for the stake in Reliance Life, the arm of Reliance Capital Ltd, according to a report in Japan’s Asahi newspaper.

So far, the group has made a capital infusion of around Rs 3,100 crore in Reliance Life.

However, a spokesperson for Reliance Capital declined to confirm reports that its insurance arm was in talks with Nippon Life.

The entry of Nippon is expected to benefit Reliance Life as it will not only be able to gain access to more capital but also tap into the skills of the Japanese insurer. On the other hand, the latter will gain an entry into India where a huge potential for insurance business is seen despite it having low penetration currently.

At present, there are 23 life insurers who have set up operations in India. A significant number of these players (21) have tie-ups with foreign partners.

Reliance Life has an 8 per cent market share in the private sector when it comes to new business premium. It has more than 1,200 branches and over 200,000 agents. As on December 31, 2010, its total funds under management stood at Rs 17,355 crore. For the third quarter, the company’s total premium was placed at Rs 1,447 crore, of which renewal premium stood at Rs 857 crore.

The insurer had earlier said it could engage a foreign partner ahead of its proposed initial public offering.

Senior officials had then indicated that if the partner picked up the entire 26 per cent, the float may be postponed.

Costly Affair

Patients will now have to pay more for treatment in big private hospitals and getting their medical tests done in diagnostic centers as the government has brought these under the service tax net.

All private air-conditioned hospitals having more than 25 beds will now attract 5% services tax.

The burden will be on 75- 80% of patients in India who still don’t have health insurance cover and pay from their pockets for their treatment. For instance, a patient running hospitalization bill of Rs 20,000 having to fork out Rs 1,000 extra or 5% as tax to the government.

Similarly, patients will also have to pay 5% more for medical tests in diagnostic centers. This means, a diabetes patient who pays anywhere between Rs 60-100 for a routine monthly blood test will need to shell out as much as Rs 60 more in a year.

The tax on diagnosis is detrimental to preventive healthcare and early diagnosis which is the key to address the mounting burden of chronic non-communicable diseases, estimated to cost India $237 billion in national income over the next 10 years.

 Hospitals air-conditioning is used primarily to control infections, unlike in hotels where it is used for comfort. This (tax on air-conditioned hospitals) is a retrograde step for the industry.

Form of complaint (to be lodged) with the banking ombudsman

To:


The Banking Ombudsman

Place of BO’s office…………………………..



Dear Sir,

Sub: Complaint against …………………….(Name of the bank’s branch) of

…………………………………………………………………………………(Name of the Bank)



Details of the complaint are as under:

1. Name of the Complainant …………………..



2. Full Address of the Complainant ……………………

……………………

……………………

Pin Code ………………..

Phone No/ Fax No. .……………………

Email …………………….



3. Complaint against (Name and full address of the branch/bank) ………………………….



Pin Code …………………….

Phone No. / Fax No. …………………….



4. Particulars of Bank or Credit card Account (If any)

…………………………………………………………………………



5. (a) Date of representation already made by the complainant to the bank (Please enclose a copy of the representation) ……………………….



(b) Whether any reminder was sent by the complainant? YES/NO

( Please enclose a copy of the reminder )

……………………….



6. Subject matter of the complaint (Please refer to Clause 8 of the Scheme)

…………………………………………………………………………………………



7. Details of the complaint:

(If space is not sufficient, please enclose separate sheet)

………………………………………………………………………………………………



8. Whether any reply (Within a period of one month after the bank concerned received the representation) has been received from the bank? Yes/ No

( if yes, please enclose a copy of the reply )



9. Nature of Relief sought from the Banking Ombudsman

………………………………………………………………………………

( Please enclose a copy of documentary proof, if any, in support of your claim )



10. Nature and extent of monetary loss, if any, claimed by the complainant by way of compensation (please refer to clauses 12 (5) & 12 (6) of the Scheme) Rs.……………….



11. List of documents enclosed:

(Please enclose a copy of all the documents )



12. Declaration:

(i) I/ We, the complainant/s herein declare that:

a) the information furnished herein above is true and correct;

and

b) I/We have not concealed or misrepresented any fact stated in the above columns and in the documents submitted herewith.

(ii) The complaint is filed before expiry of period of one year reckoned in accordance with the provisions of Clause 9(3)(a) and (b) of the Scheme.

(iii) The subject matter of the present complaint has never been brought before the Office of the Banking Ombudsman by me/ us or by any of the parties concerned with the subject matter to the best of my/ our knowledge.

(iv) The subject matter of the present complaint has not been decided by/pending with any forum/court/arbitrator.

(v) I/We authorise the bank to disclose any such information/ documents furnished by us to the Banking Ombudsman and disclosure whereof in the opinion of the Banking Ombudsman is necessary and is required for redressal of our complaint.

(vi) I/We have noted the contents of the Banking Ombudsman Scheme, 2006.





Yours faithfully,

(Signature of Complainant)



NOMINATION – (If the complainant wants to nominate his representative to appear and make submissions on his behalf before the Banking Ombudsman or to the Office of the Banking Ombudsman, the following declaration should be submitted.)



I/We the above named complainant/s hereby nominate

Shri/Smt………………………………………….. who is not an Advocate and whose address is

……………………………………………………………………………………………………………………… ………

as my/our REPRESENTATIVE in all proceedings of this complaint and confirm that any statement, acceptance or rejection made by him/her shall be binding on me/us. He/She has signed below in my presence.



ACCEPTED



(Signature of Representative)

(Signature of Complainant)

Note: If submitted online, the complaint need not be signed.

Insurance Ombudsmen in India

The institution of Insurance Ombudsman was created by the Government of India to handle complaints of aggrieved insured person’s pertaing to Insurance in India.


The main function of the office of the Indian Insurance Ombudsman is to quickly dispose the grievances of insured customers and lessen the problems involved in redressing complaints. This institution of Insurance Ombudsmen is vital and relevant to protect the interests of policyholders and also shape their belief in the system. The existence of an Insurance Ombudsman has helped generate and sustain faith and confidence amongst both consumers and insurers alike.

Insurance Ombudsmen are chosen from various fields such as the Civil Services, Insurance Industry and Judicial Services. They are appointed for a term of three years or till they turn sixty-five years of age. Currently there are twelve Insurance Ombudsmen appointed in different parts of the country. They all have defined jurisdictions.

Details of the Insurance Ombudsmen can be obtained from the Insurance Regulatory and Development Authority (IRDA) website www.irdaindia.org or from any Indian insurer’s office.

Claimants who could not get their complaints redressed by insurers may get in touch with the Insurance Ombudsman relevant to their states within India.

For more details, please visit: http://www.irdaindia.org/ins_ombusman.htm

15 Indians named--------Black money list revealed

Names of 15 Indians who have stashed away wealth in offshore banks have been made public by Tehelka magazine in its latest issue.


Tehelka claimed it has in possession two more names, but were holding them back for verification. One name is alleged to be that of a prominent politician and the other chairman of a leading company.

The 15 names include Manoj Dhupalia, Rupla Dhupalia, Mohan Dhupalia, Hasmukh Gandhi, Chintan Gandhi, Dilip Mehta, Arun Mehta, Arun Koohar, Gunwanti Mehta, Rajnikant Mehta, Prabodh Mehta, Ashok Jaipuria, Raj Foundation, Urvasi Foundation and Ambunova Trust.

According to information with ET, a member of a promoter family of a reputed Chennai-based business group and some diamond traders also figure in the full list furnished by German authorities to the Indian government two years ago.

The German government purchased the data from an ex-employee of LGT Bank, the flagship bank of Liechtenstein , a country viewed by global banking groups as one of the major tax havens in the world.

Germany handed over the list on March 18, 2009, but the Government had refused to divulge the names as it had to honour the commitment given under tax treaties. Under provisions of the tax treaties, information exchanged is to be used only for the purpose for which it is sought.

Therefore, the government is not in a position to make these names public, but only recover tax on the unaccounted income.

The Income -Tax Department has sent notices asking 15 entities to pay up but the government has taken special care to ensure that no name was released to the public. The amount of money stashed away in Liechtenstein's is minor, compared to the size of the black money stashed in several other offshore banks.

As per an estimate by Tax Justice Network, an NGO, the volume of money lying in these banks could be over $11 trillion.

Hai Preet Jahan Ki Reet Sada

Nominee of bank account does not get succession rights

The Supreme Court (SC) has clarified the nominee of a depositor in a bank does not get ownership of the money in the account after death of the depositor. The nominee gets exclusive right to receive the money lying in the account. It gives him all the right of the depositor as far as the depositor's account is concerned, according to Section 45ZA of the Banking Regulation Act.

But the banking law is not concerned with the succession. The money in the account will form part of the estate of the deceased depositor and devolve according to the rules of succession. In this case, Ram Chander vs Devender Kumar, one son was the nominee of his mother. After her death, he claimed he was the owner of the money in the account, to exclusion of his brother. The same rule will apply to government savings and other investments.

Courtsy-BS Reporter / New Delhi November 15, 2010, 0:23 IST

Sebi suspects growing insider trading trend; ups vigil

NEW DELHI: Suspecting an uptick in the insider trading activities in the recent market rally, Sebi has enhanced its surveillance for possible violations of rules prohibiting trading based on prior and inside information.


The market watchdog has come across over two dozen instances of major suspected violations of insider trading norms during the recent rally to new record levels above 21,000 level and the subsequent correction last week, a senior official said.

While the suspicious trading activities have been noticed in the Sebi's routine surveillance of market activities, the regulator has decided to probe further into these cases and enhance its oversight for such matters going ahead, he added.

Major violations have been suspected in trading of 25-30 stocks over the past few weeks, the official said, adding that suspicious activities have been noticed in many other shares also but those are minor in terms of trade value and nature.

Insider trading relates to purchase or sale of shares by people having prior and privileged information about an upcoming development by virtue of they themselves or those related to them having holding a position in the company.

As per the Sebi's Prohibition of Insider Trading Regulations, an 'insider' is defined as any person "who is or was connected with the company or is deemed to have been connected with the company, and who is reasonably expected to have access to unpublished price sensitive information in respect of securities of a company, or who has received or has had access to such unpublished price sensitive information."

The stock market benchmark Sensex recently crossed 21,000 level to record its highest closing level at 21,004.96 points on November 5, after a sharp rally over the past few weeks, but has corrected about 900 points since then. The sentiments have been upbeat on the bourses, as also reflected in robust response to recent IPOs like Coal India.

Insider trading activities increase during market rally and an environment of improved investor sentiments makes it easier for insiders to make money on the bourses, experts said.

Sebi has systems in place to monitor unusual stock trends and suspicious activities are probed further for violations of norms including those regulating insider trading.

Recently, Sebi slapped a penalty of Rs two crores on Gujarat NRE Coke promoters A K Jagatramka and G L Jagatramka and their companies for indulging in insider trading. This is said to be the largest fine imposed this year for violations of insider trading norms. Later, the company said it would challenge the order.

"Many cases of insider trading do go undetected. Only a very small percentage of the total number of insider trading cases comes under regulatory scrutiny," said Sudip Bandyopadhyay, MD & CEO, Convexity Solutions and former CEO and MD of Anil Ambani group firm Reliance Money.

"It is difficult to specify the exact extent or percentage of insider trading. However, it does happen," he added.

Bandyopadhyay said that the regulations are in well in place, but the difficulty lies in implementing them and detecting the offence.

He advocated enhancement of powers of SEBI for seeking cooperation of other relevant regulatory authorities in matters of insider trading.

Another market observer Arun Kejriwal, director of KRIS, said that Sebi should keep a watch on dealing rooms of brokers and fund managers as also the companies' board meetings.

"Insider trading is rampant... It appears that almost all spiked movement in Indian markets can be linked to insider trading," he added.


Courtsy-http://economictimes.indiatimes.com/markets/regulation/Sebi-suspects-growing-insider-trading-trend-ups-vigil/articleshow/6923867.cms.

Diwali Time For Indian Bond Market

IRFC is hoping to attract retail investors with its forthcoming tax-free bond issue


Even as all eyes are turned on the booming stock markets, the last few months have seen a spate of bond offerings for risk-averse investors. Players like IDFC and L&T Infrastructure Finance have issued long-term infrastructure bonds to take advantage of Section 80CCF, which allows tax deduction on investments of up to Rs 20,000. Coming up next week is another kind of bond issue — tax-free bonds from Indian Railway Finance Corporation (IRFC).


The IRFC issue is aimed at big investors since the minimum investment — and the face value of each bond — is Rs 1 lakh. Indeed, the private placement issue is essentially targeted at corporations but IRFC is hoping to draw retail investors too.


IRFC will issue tax-free, secured, redeemable non-convertible Railway Bonds of five, seven and 10-year tenures. The interest rate is expected to be 6.05 per cent on the five-year bonds, 6.32 per cent for seven years, and 6.72 per cent for 10 years. The interest, completely tax-free, will be paid out twice a year. So, on the five-year bond, the equivalent taxable rate would be around 9 per cent.


The IRFC bonds are attractive for high net worth investors who’re looking to diversify and want a fixed rate of return with a regular income flow. “For retail investors, these bonds are as good as investing in government securities because they’re absolutely risk-free. And the return is a lot higher than the return on government securities. The tax-adjusted return is quite attractive too.


How do these bonds compare with other options? If you’re looking for a sovereign guarantee, the five-year RBI Relief Bonds carry an interest rate of 8 per cent. But the interest income is taxable. Banks like State Bank of India are offering five-year fixed deposits at 7.5 per cent, though the interest income is taxable and tax is deducted at source.


However ,the big ticket size of the IRFC bonds means that their retail reach will be limited.These are not classified for 80CCF exemption so for retail investors, it doesn’t make sense. Also, tradability may be an issue because if you want to sell just two-three bonds, you may not get a buyer easily.


In comparison, take a long-term infrastructure bond issue like the one from L&T Finance, which offers 7.5 per cent interest on its 10-year bonds with a buyback option after five years. The big kicker here is the Rs 6,000 tax saving (for the highest tax slab) on an investment of Rs 20,000.


If you’re a conservative investor who wants only risk-free products, infrastructure bonds are a brilliant idea. For big investors, the IRFC bond may give better returns as tax deduction is limited to investments of Rs 20,000.


More infrastructure bond issues are expected before the close of the financial year. Non-convertible debenture issues are in the offing too.

Cheap credit card at India & Some preventive measure

Recently, I took my second credit card. The first one I was using since a long. My bank told me this is very convenient and cheap. I tried to found the reality through my own recearch. What I found and what I am realising are just hear in a brief.

credit cards are available aplenty everywhere now a days and with every major banking firm, everyone has an appetite for one. The cash-free cult has already acquired a huge following all over the globe, and even more so in India. The trick of choosing a low cost credit card that has a series of advantageous options such as cash back and others is not at all easy. Spending money wisely and correctly through cheap credit card deals is something not many clients are aware of. And this fact is exploited to the hilt by the banking firms to their advantage.


Choosing the cheapest credit card is not often easy. This is because even if you research and determine a low cost credit card that has low interest rates and cheap interest APR, your spending habit might just do you in. This is because even with cheap credit card rates, if you mindlessly spend your money as if it was doomsday tomorrow, the whole purpose of the advantage of low cost credit card processing is lost on you. As you pay off the low interest items on your recently-bought list, the high interest stuff eats away at your bank balance. Therefore, it is as important to check it out whether the charging methods of your credit card firm fit your spending style.


Moreover having different cash back options available at your beck and call should be one primary option that these low cost credit cards must provide you with. The fact that most credit card companies default back on the cash back option is a potential cause of worry for all clients. Thus you will gain an upper hand in the cheap credit card deal only if you are absolutely well-versed with the array of cash back and other options provided to you by the firm.

The option of lucrative offers such as valuable points of fuel or grocery reward programs should also be considered while considering cheap credit card rates. This is because whilst you might lose out on different offers that come with more high-interest credit cards, such basic reward programs will more than compensate the loss.


Usually, low cost credit cards both in India are more about tall claims than reality. Hence, you as a potential client must keep in check the history as well as the track record of the credit card firm or banking organization that is dealing out cheap credit card interest et al. But above all, the lowest of all interest rates and APR rates will not be able to help you gain anything if your spending methods are not in sync with your actual income and lifestyle.

When shopping for credit cards get to know all the details, especially the fine print ones which one tends to ignore. Study its terms and costs for the best credit card rate. If you are looking for a no-frills, low-rate card offer, theres no need to pay the annual fees. Avoid cards that charge them. Many credit card rewards are given like air-mile credit card and some super high-end prestige cards charge annual fees in exchange for rewards and perks and services. Weigh these credit card offers carefully.

The best credit card interest rate is the one which is, obviously, the lowest. The lower the interest rate, the less money you will pay when you carry a balance. If a card comes with a super-low introductory rate, find out how long will this rate last and will you be able to pay off your card balance before the teaser rate expires. Use a low-interest rate credit card to make high-end purchases.

Precautions which helps against credit card fraud is listed as follows:


1.Ensure that you have received your credit card in sealed condition.

2.As soon as you receive your card, sign on its back.

3.Check your cards periodically to ensure that none are missing

4.Regularly monitor your account either from call centers or on the internet.

5.Subscribe to email/mobile alerts to monitor your card usage.

6.Ensure that wherever the card is presented it is swiped in your presence.

7.Keep track of your transactions, when you are traveling abroad.

8.Preserve the PIN and the card account number in a confidential place. .

9.PIN number should be memorized.

10.All records such as copies of receipts, airline tickets, travel itineraries, etc., should be destroyed.

11.Never share PIN with anyone.

12.Cancel all inactive accounts

Report credit card fraud or for lost/stolen cards immediately to the issuer.

The IT Act and Rules 2000, provide penalties for hacking of computer systems as a credit card fraud help to the masses. The RBI has formed the CIBIL in collaboration with Dun and Bradstreet who will maintain the records of all wanting to avail of finance from credit card companies and banks in India

IRDA not looking at consumer benefit: D Swarup

CNBC-TV18’s has learned from sources that the Insurance Regulatory and Development Authority, or IRDA, may send its dissent on the recommendations of the Swarup Committee as it is vehemently opposed to the suggestions, which included a no-load model for insurance products.

Commenting on the recommendations, Chairman of the pension fund regulator- PFRDA, D Swarup said the entire opposition to the draft recommendation in the consultation paper was only on one side of it. He accused the IRDA of only looking at the business side of the aspect without taking into account the consumer benefit. “They are being very sensitive about only the business side of the equation. They are not looking at the consumer side of the equation. The entire committee’s terms of reference is with reference to seeing the consumer’s interest and whatever opposition you might have heard either from the regulator or from the industry only talks about the impact it will have on the industry because they are dependent on the agent who pushes a product because of the commission’s structure.”


“What we have said is there is a commission that ranges from something like 6% and goes to as high as 40% in a product per se. The average commission paid out in 2007-08 has been of the order of 16.25%. The NPS right from day one has been a no-load product. Sebi followed suit on August 1 and they have declared.”


Here is an excerpt of the exclusive interview with D Swarup on CNBC-TV18. Also watch the accompanying video.


Q: We haven’t really spoken over the last year or two while we talked about the NPS but we haven’t really spoken about the larger picture, are pension reforms on track you feel, are they making a serious positive impact for the reason we first went in for these reforms?


A: We moved from 2005 and we began, the pension story began in 2005 when the PFRDA got constituted but there after you know that the progress has been slow mainly because of the PFRDA bill having not been passed by the Parliament and thanks to the government and they finally we agreed to what we had requested them and we don’t really require a bill to be passed by the parliament, to introduce a pension product in the country. We do require the bill to give statutory powers to the regulator but in the interim it could manage some pension reforms through a contractual arrangement with all the stakeholders in the business, so we have come a long way since then now. From 2005, we have introduced a new pension system, the government transferred the funds early April 2008 which are being managed by three fund managers. Then from the May 1 this year, we have opened up a scheme too all the citizens of the country. So we have moved far but other than that you are talking about the pension firms as well as a whole for the other participants, we also move in that direction also.


Q: The detractors of the whole pension reforms, thankfully are not there in the government any more but they would always say that there is a risk that this is pension money and you are going to investing a larger part of it as compared to the pervious regime where it was hardly ever invested in equities, its been over a year and a half when atleast the government corpus and employee corpus has been managed and this one year perhaps has seen a tsunami in the markets, can you give us a sense if you were to tell people that these are kind of returns that these managers have delivered in a market which was perhaps the worst in recent times, do you have some numbers that you can share with us?


A: I can but prior to the period when pension reforms were introduced, it was available to only 12-13% of our workforce so the story is only of those 12-13% people who are in a defined benefit regime like government employees and those are in the organized sector and covered by the provident fund organization. So the question of risk remains only in the remaining 87% people whose investment returns would be market related but as you mentioned. We have had experience of something like a full lone year now 2008-09 and the average returns have been 14.8%, but the fund managers have been a little conservative in the beginning so they didn’t invest more than 5% of the AUM in equity markets so 90% of the money was invested in debt and the returns have been 14.82% but we have seen a secular trend in the equities market also we have done an exercise to see us as to what have been the returns in the equity markets in the last 30-35 years and if you remain invested, the average return in the equity market ranges from 14-15% per annum and on a compounding basis and that’s not a bad story.


Q: So what you are saying is even despite being conservative?


A: Yes.


Q: It’s been 14%?


A: Yes


Q: In a market which has gone through perhaps an upheaval, and unparallel?


A: That risk will be there in any market related regime but you can always diversify risk before our investment options are flexible depending on your own personal risk appetite you can select and put more money in corporate bonds in government securities market, so their risk can be diversified but if you are not wanting to take that burden for deciding for yourself, we have worked out what we call an auto choice and depending on your age we have worked out how much you must invest in equities and in corporate bonds and how much in government securities market,


Q: Are you hopeful that this government will be able to now push through with the PFRDA bill?


A: I am very hopeful now because I understand the bill is now almost ready to go to the cabinet for the clearance and thereafter to be introduced in the next session of the parliament and hopefully before the end of this calendar year we should see that the PFRDA bill being converted into an act.


Q: The other big change which you mentioned about which happened is that earlier this year you threw open pension to every individual in the country through the NPS route hasn’t really taken off in the way perhaps even you would have thought it would have taken off? What is the problem?


A: Not really because we knew we won’t have a spectacular success story in the beginning because our product really suffers from three negatives and they are firstly awareness about saving for pensions, its not that much in the country as it should be, the second issue is about our selling model which is a direct selling model as distinct from the mutual funds and the insurance industry which are actually sold by the financial advisors and agents etc but our product has direct selling and distribution model, the individual has to go to a bank and has to go to somewhere to buy that product and the third reason why the success is not there as much as it should have been because of the tax disadvantage we suffered from.


Q: Why did that happen, here is a government which is committed at the highest level on pushing pension reforms and you make a change of a kind which says that I can invest in any other instruments and not need to pay tax after a certain point of time when I get my returns but in this its going to be taxable, have you been able to talk to the government, what is the feedback you have got from it?


A: We have been in discussion with the government for more than two years now on this area and ideally a retirement and a pension product should receive the most preferential tax treatment like the way it happens all over the world but somehow we began with the tax disadvantage but our discussions have borne fruit now and as you are aware the new tax code brings every long term savings product including retirement or the same tax stream which is the double ET regime as against the EEE which they enjoy today and we have EET, so now the government is taken a view that instead of taking us to a EEE tax regime that on stages is free on tax, they are bringing the other product into a EET regime.




Q: So they have removed the dis-incentive and they haven’t provided the incentive?


A: The first step is to have a level playing field, so I am quite happy that even though it’s still a little way away, something like 18 months from now the new tax code will come into being and hopefully the government will see that yes a level playing field is important in the financial product.


Q: Do you feel let down by the entities who you asked to sell these products, the NPS for instance and that really is the cornerstone for the success in NPS because as you said you went for a different model. But are you happy with the way they have gone about?


A: Let me talk about why we selected the Derick’s Selling Model and direct distribution model because of two main reasons, the first was that had we had an intermediary and an agent between the subscriber and the bank etc, then the cost would have gone up for the NPAs and ultimately the incidence of any cost falls on the investor like in insurance and like in mutual funds, so we didn’t want the cost to be high, the second reason was that we have seen and from the experience we have learnt that similar products get mis-sold by the agencies etc so they are the two main reasons, so we are willing to be patient and we are willing to wait rather than change our distribution model but having said that yes the impression that we had the points of sale that we selected and it would have done some preparation prior to being licensed in selling the product because they had been in discussion with us for quite some time and they were aware that this product is coming and I thought they will be ready to sell it but I found that they have started really doing the groundwork only after they got the license in May. So it obviously takes a little, training the individuals, printing the brochures and things of that nature and let me also say that the same points of sale are selling some competitive products also like insurance and mutual funds, as long as these products carry, some commissions built in into the price of product but obviously our products will not push across the counter by the bank etc. So we know these are the handicaps which we are suffering from, the corrective measures are in the pipeline.


Q: Are you de-licensing some of them?


A: No; I think that is too early for really to do that, we have had a detailed meeting with all and we have worked out a strategy for that and we have requested them to give us a business plan, to fix targets and so we will monitor their performance against that business plan and thereafter but its too early days to really de-license them..


Q: Let me come to the other very major decision that you’ve taken recently. A very critical component of our financial sector, which is the entire investment advisory community, which was till now not regulated or rather regulated by multiple entities, there was a committee that you chaired, which is the sort of first draft of your findings have been put out for public comment by you. You’ve called for certain fairly drastic changes and while you have started your product from the very beginning with a basic premise that you are not going to be making it a commission driven product. We have seen Sebi having said recently on August 1 that entry load is banned. The insurance industry seems a little concerned about what you announced. Where do you stand on this? Is this the basic fundamental principle that you as an investor should decide, and I think the misconception seems to be that commissions have been banned and that is not what you have done? All you have said is they should not be embedded into a financial product and that should be decided between an investor and the agent or the distributor or whatever you may call it?


A: We had, as you said, put up a consultation paper on our website something like three or four weeks ago. We had an interaction, which I call a public hearing for the first time and probably the first hearing on this subject something about 10 days ago in Delhi where we had invited all the stakeholders of the business including the insurance industry and the mutual fund industry, the pension industry and financial advisors and agents, experts etc., and all industry federations as well.


The three main recommendations in the consultation paper are: Firstly, the financial advisors need to be regulated more than what they had done or what happens today, and that too by ‘a’ agency and not by multiple agencies.


Secondly, there must be common minimum standards for these financial advisors in terms of the entry level, entry barriers, in terms of the examinations that they have to pass, in terms of continuing education etc. Then we came to the conclusion that there needs to be common disclosure norms for the benefit of the consumers of financial products. Finally, we thought that the time has now come that in all financial products, there should be no commission embedded in the price, which technically what we call a no-load structure, in the financial product.


There has been no opposition to any other conclusion except the last one that I mentioned that all products should go no-load and there should be no commission embedded in the product per se. As you rightly said, we have nowhere said that agents or financial advisors should not be paid for the services. In fact the committee has recognised the key role, which the agents and the financial advisors play in terms of personal finance, in terms of savings or in terms of investments in the country. So, we know that they will continue to play a very important role in this area. But we are only saying for the benefit of the consumer: Firstly, it needs to be disclosed to him as to what are the costs and commissions and fees and other charges and risks involved. So, all that has to be put in very understandable language to the consumer.


The second is, if you embed a commission in the price, then obviously the financial advisor will push that product in which he gets the highest commission. We think that is detrimental to the interests of the consumer of the financial product. We have said let it be converted into a fee, which the consumer must pay the agent directly. I am not saying that it should be paid through two different cheques. It can be paid in the same cheque as well. That is only a micro detail that we can work on. So, that is the only reason we have said the commission will be converted into a fee.


Q: Why then is the insurance industry up in arms? What you are saying is the fact that it is a consumer driven initiative that is meant to benefit the consumer? Why has the insurance industry, the regulator, come out so openly, and questioned the very logic of the recommendations of this committee?


A: Obviously it affects the industry’s role. In fact, as I mentioned earlier, the entire opposition to the draft recommendation in the consultation paper is only on one side of it, and that is, they are being very sensitive about only the business side of the equation, of what we are mentioning. They are not seeing the consumer side of the equation now. The entire committee's terms of reference is with reference to seeing the consumer's interest and whatever opposition you might have heard either from the regulator or from the industry, only talks about the impact it will have on the industry because they are dependent on the agent who sort of pushes a product because of the commission structure.


What we have said is there is a commission that ranges from something like 6% and goes up to as high as 40% in a product per se. The average commission paid out in 2007-08 has been of the order of 16.25%. The NPS right from day one has been a no-load product. Sebi followed suit on August 1 and they have declared.


Q: All global regulators are going the same way?


A: Yes, most of the global regulators also are going the same way. It is not that we have been influenced only by what is happening across the world. We think the time has come in India as well that the consumer must be aware firstly of what he is paying and secondly it should not be embedded in the price because whatever the level of financial literacy is there in our country, a product that has a high commission structure will continue to be pushed in case it is embedded in the price of the product per se.


Q: An IRDA representative was a part of your committee. That was a multi-regulatory committee. Have they dissented?


A: In fact we had two members from IRDA as against one member each from RBI, Sebi and PFRDA. But the fact really is they have not really dissented as such but they have expressed the view that this is going to hugely impact the industry. But as I mentioned, they are seeing only the business side of the equation, they are not seeing the consumer. We have trying to persuade and convince them that the time has now come to see the consumer side of the equation.


Q: If I remember right, in the previous committee, which went nowhere after 18 months, you had dissented and said that there needs to be more thought given to this report?

A: That is right.

Q: Today you are faced with a situation where one regulator is atleast openly, publicly saying that this is not the right way ahead. Are you going to change your mind? Are you very clear about your decision?


A: As I said, this is only at the draft stage at this point in time. We have sort of discussing within the committee and in fact we had a meeting yesterday. Some more facts and figures have to be collected. Finally, we are going to take a view in the second week of October and that is the end of the commission.


Q: But are you saying that you may look at the timeframe, you may look at the timetable and numbers. But in principle you are very clear that this whole concept of embedded commissions into a financial product must go?


A: I think conceptually and all the inputs that we are getting in the committee’s consultation paper point to the direction that conceptually we are in the right direction. I see no reason why conceptually anything should change from what is said that all – there should be a level playing field including in the commission structure across financial products. Conceptually I don’t think the majority in the committee is likely to change their point of view.


Courtesy-Published on Thu, Sep 24, 2009 at 21:37
Updated at Sat, Sep 26, 2009 at 14:38
Source : CNBC-TV18

New Pain of Life Insurance companies in India

The new Ulip norms are taking its toll on policy sales by life insurers, including the Life Insurance Corporation of India (LIC).


The new regulations came into force in September and premium income from new policy sales in the month is nearly half of that in August this year.

According to experts, the minimum premium for Ulips has gone up under the new regime leading to lower sales.

Moreover, the new norms have trimmed the agent’s commission for selling Ulips, who are no longer pushing these products aggressively.

Ulips make up almost 55 per cent of all insurance policies sold in the country. These policies constitute almost 80 per cent of a private life insurer’s business portfolio.

In August, life insurers together collected Rs 18,500.49 crore as premium from sale of new policies. However, premium income from new policies in September stood at Rs 9,612.74 crore, a month-on-month decline of 48.04 per cent.

The business of private life insurance companies slipped 21.85 per cent to Rs 3,006.10 crore in September from Rs 3,846.67 crore in August.

The steep decline in life insurance business in September can be attributed mostly to the LIC, which recorded a first-year premium income of Rs 6,606.64 crore last month against Rs 14,653.82 crore collected in August, a decline of nearly 55 per cent. Keeping the September deadline in mind, the LIC had been aggressively selling its unit-linked Market Plus-I plan between April and August this year. LIC controls a 74 per cent share of the new business premium market.

Among the front-running private players, SBI Life lost the least, while Birla Sun Life’s business declined the most. SBI Life’s first premium income in September dipped only 8 per cent, while that of Birla Sun Life plummeted 43 per cent.

In case of Reliance Life Insurance, premium income from new businesses went down 33 per cent in September from the previous month.

Given the fact that traditionally September-March is the peak period for life insurance policy sales in India, it will be interesting to see how insurers gear up to cope with this situation. They had done brisk business during April-August this year, particularly by selling single-premium unit-linked pension plans.

Interestingly, a number of insurers, such as Aegon, Religare and Reliance Life have already launched defined benefit health insurance plans to diversify their product portfolio and thereby shore up premium income. Some insurers, such as ICICI Prudential, have started focusing on selling single-premium Ulips.

While premium income from new businesses has declined in September, the average size of premium ticket has gone up for all insurers, except for the LIC. This is because insurers have increased their threshold premium for Ulips.