SUCHETA DALAL ON:

SEBI’S DERIVATIVES DECISION IT IS NOT ABOUT CASH

UPSETS SMAC MEMBERS BUT ABOUT CONTROL
Personal Finance Magazine 27 April-10 May 2018 Rs 45

Pages 68 (SUBSCRIBER COPY NOT FOR RESALE) www.moneylife.in

STOCKS

keC iNterNatioNal NaviN FluoriNe iNterNatioNal talwalkars Better value FitNess CesC
Advertisement.indd 2 14-04-2018 18:58:18
Th
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ag
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in
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 ISSUE CONTENTS
27 Apr-10 May 2018

Hold LIC Responsible

I f you have a Jeevan Saral policy of the

Life Insurance Corporation of India (LIC),
please check if the maturity sum assured
(SA) is shown as blank or incorrect in the
policy bond. If so, you can take your case
to ombudsman as LIC has goofed up. You
can demand death SA to be paid to you,
even if you survive till policy maturity. It
will make LIC understand that mis-selling
has cost people in higher age group dearly.
It is amazing that LIC has taken a decade to
try and correct several of its policy bonds.
Policies are even getting matured without

LIC making the correction.
Buyers between the age of 50 and 60
years were lured with the marketing pitch
that Jeevan Saral was going to give returns
of 10%pa. Raj Pradhan found that those
who purchased policy at age 55+ will lose
50% to 70% of their investment (premiums
paid). The entry age for Jeevan Saral should
have been restricted to 50 years instead of 60
years.
Sucheta’s Different Strokes column is
about the recent decision of the Security and
Exchange Board of India (SEBI) to introduce
physical settlements in the derivatives trading
segment in a phased manner. An anonymous
whistleblower, claiming to be a member
of SEBI’s Secondary Market Advisory
Committee, says that the move is contrary
to the Committee’s advice and 95% of the
public feedback. Her Crosshairs column is on
the harassment caused due to cash shortage
caused by ill-conceived decisions and
mismanagement by the government.
SD Israni has some interesting advice for
people on how false claims and delays could
lead to claims being rejected. We also have
32 Cover Story
Will LIC Be Made To Pay for the Horrible
Mis-selling of Jeevan Saral?
Jeevan Saral policy is an extraordinary case of mis-selling and,
yet, 50 million policies were sold. Raj Pradhan finds scores of
senior citizens who have lost massive amounts and LIC is fighting
them at different forums. If you have Jeevan Saral, find out how to
make LIC pay for its mistakes
11 Your Money
– NCDRC Directs Air France To Pay Compensation of
Rs12 Lakh
– Food Items and Bottled Water Should Be Sold at
Regular Prices inside Multiplexes
– CGHS Cover Applies Even to Hospitals Not on
Government List
– Stockbroker F6 Finserve Defaults and Promoters Are
Absconding
– EPS Pensioners Can Submit Life Certificate without
Fingerprint Authentication, Says EPFO
– Air Travellers May Be Entitled to Heftier
Compensation
– Bank Customers Are Being Charged for SMS Alerts

13
some important learnings from a talk by DG MONEYLIFE

QUIZ
Kale, who retired as chief general manager at
the Reserve Bank of India’s customer services
division. Abhay Datar, activist and counsellor

14 Public Interest
at Moneylife Foundation, shares important
tips on how to close your mortgage safely.
Whether India goes digital or not, Moneylife – Before You Close Your Loan Account
is—from next month! Don’t miss the
announcement on page on the next page.
Disclaimer: Moneylife has a policy of not allowing its editorial staff to
Debashis Basu  buy and sell stocks that are written about in the magazine. All personal
transactions in individual stocks are subjected to internal disclosure rules.
MONEYLIFE | 27 Apr-10 May 2018 | 4

Content.indd 2 20-04-2018 18:27:27

 Dear Readers

As we enter the 13th year of our operations, we are making a fundamental change in direction. After
running a successful print magazine for more than 12 years, we plan to stop the print publication
after the next issue and spend our resources in creating more compelling digital content. The
transition has many advantages. It will enable to us to:
1. Instantly reduce the time to reach you, our readers, with high-quality reports and analysis.
2. Allow us to react to news and other developments quickly to create content that is relevant
and topical.
3. Eliminate the complex issues, time-consuming and expensive processes related to production
and distribution of print copies through institutional, retail, courier and own staff.
6. Eliminate the unremunerative collection mechanism. Recovering money from even well-known
institutional distributors has become impossible, as their business is on a decline and we have
not been receiving payments for 12-18 months. The costs for ensuring direct delivery have
gone up significantly after implementation of GST.
7. Monetise our magazine archives which we are not able to today.
8. Come out with an app that will make it easy for you to download and read our magazine
content.

What Does the Transition Mean for You?

The transition will mean that the print magazine will stop after the next issue and you will be
able to read the magazine both on our website and on your phone through an app which will be
launched soon. Your question may be: ‘What if I don’t want to read digital Moneylife?’ If you have
a print subscription and wish to continue to read Moneylife in digital format, do nothing. If you
wish to get a refund for the unused period, we will offer a refund. We had stopped taking print
subscriptions from 9 October 2017. For those who subscribed after this date, nothing changes.
Please look for our email making this announcement which will have all the details and will
guide you on how to avail a refund or a continued (digital) subscription.
Moneylife works hard to bring you unbiased content and trustworthy financial reportage and
analysis.. This entails sacrifices in terms of refusing advertising revenue and paid content which is
a big source of income for many publications. We believe this is important to help you keep your
money safe and to make it grow.
We remain thankful to you, for being with us as print subscribers. We look forward to your
continued support in the digital era.

Debashis Basu
Editor & Publisher

Digital.indd 1 20-04-2018 18:30:22

 CONTENTS
18 TAX / FIXED INCOME ML FOUNDATION EVENTS

It Is Not about Cash, but

Control, Stupid!
27 Corporate
FD Offers
for You
20 Different Strokes
SEBI’s Opaque Decisions
– G-Sec
Yields Up
about Derivatives Settlement
Market INSURANCE 58 “To avoid mis-selling
or overpaying, bank
customers need to
FUND POINTERS 30 Insurance
Trends be alert to what they
really need”
24 DoTo Save
Not Wait until January
Tax, Start ELSS
Car Insurance
– Tata AIG Denies Car OD Cover
Renewal
SIP Now! Health Insurance
– Mediclaim Policy Exclusions Can
xUSEFUL APPS

FUND FACTS
Be an Excuse To Reject Claim
Car Insurance
– Mandatory 3-year and 5-year
60 IPLAction,2018:NoLiveAds
Third-party Cover for Cars and

26 Hot and Cold Stocks of

Mutual Funds in March
Two-wheelers? – DND: Cut Out the
Spam Messages

2018
MONEY MANTRA

STOCKS
42 SIP: Systematic but Not
Safe Investment Plan
– Google Opinion:
Share Opinion, Get
Play Credit

– Microsoft Launcher:
22 Smart Money Personalise Your
Android Device
Stock Analysis: Focus on Debt
and Cash Flows, Not Just Profits
TECHNOLOGY

45 Stock Watch
KEC International: Towering
LEGALLY SPEAKING
61 Cyber Insurance,
Anyone?
54 Fraud or Negligence
Growth

Can Scuttle Your

Insurance Claim
Navin Fluorine International:
Power Chemistry HEALTH

Talwalkars Better Value Fitness:

56 What Is the ‘Normal’
Blood Pressure Level?
PS

Strength-training Needed, Not

Cosmetic Changes
CESC: A Special Situations
Play
Market Trend: More Postives?
66 Man-made
Shortage
Cash
– No Standardisation of Browsers
under Digital India
DEPARTMENTS
– Drug Abuse: Campaign against Readers’ Response ........... 8
Unnecessary Medication Book Review ....................62
– Junk Food Advertising and
Children’s Health Money Facts ....................64

Content.indd 4 20-04-2018 18:27:55

Advertisement.indd 5 19-04-2018 20:10:35
 Volume 13, Issue 6
27 April–10 May 2018
Debashis Basu
Editor & Publisher
editor@moneylife.in
Sucheta Dalal
Managing Editor
sucheta@moneylife.in
Editorial Consultant
Dr Nita Mukherjee
nitamuk@gmail.com
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MONEYLIFE | 27 Apr-10 May 2018 | 8
Letters.indd 2
STRIKE DOWN AADHAAR IN TOTO!
This is with regard to a report in Your Money
column-“166 million PAN, 877 million Bank
accounts linked to Aadhaar”(Moneylife,
30 March-12 April 2018).The government
claims it is essential to have Aadhaar and is
Mutual Fund investments
giving absurd reasons even in the Supreme Court. are subject to market risks,
read all scheme related
One such rationale is that fake financial claims documents carefully.
are checked. Does the citizen’s privacy right prevail
over government finances? It is the duty of the
government to check financial irregularities and
malpractices without endangering citizens’ privacy Write to
rights. Aadhaar is being rammed down our throats the Editor!
at a gun point, while finances/ cash is looted by bad WIN
elements of the society. Naturally, out of fear, and a prize
government force, one surrenders, unwillingly one’s
fundamental rights and privacy rights.
The government just does not trust its citizens;
such thinking is dangerous and detrimental
to democracy. Once a citizen is a victim of
Aadhaar misuse, his life will be ruined. But the
government is imposing it on people citing
national security issues and to save finances.
Only when MPs (members of Parliament)
become victims of Aadhaar leakage, they
will realise that it endangers the lives of people. It is
much more harmful than Facebook data leakage; consequencesnseeq
eque
equuen
ences
ces
es ooff the
th
he
misuse of Aadhaar are worse in all respects. Facebook k is not
i n ott fforced;
orce
or ced;
but Aadhaar is forced by the government.
Now, Congress is blamed; tomorrow BJP may use it and no one would
ever know. In fact, no political party or politicians are trustworthy, as
they all have self-interest as the primary goal; they want of power and
position and are least bothered about the nation or people’s welfare.
The less said about manipulation, the better.
Any link based on Internet application is never safe. Once any data/
information are put to use on the Internet, it can never be 100% safe
and all security measures are of no use. All such data are open; these 
19-04-2018 11:40:01
 LETTERS

Emergence of Gold Bull

the
Best Market?
letter
T he trust of traditional
Indian households has been
re-entrenched in gold investments
Amid the US-China
trade war tensions,
Chinese government
Mutual Fund investments
are subject to market risks,
read all scheme related
documents carefully.
as the metal generated annualised has decided to issue
return of 13.66%, just below the
annualised return of the Sensex
the world’s first-ever
Yuan-denominated oil Congratulations
(13.97%). The value of gold has increased @9.6% contracts. This is an Rohit Dhalaria
annually; it witnessed its all-time high in 2011; since attempt at weakening
then, it has fallen only marginally. Over the past half the value of the dollar
YOU WIN A
PERSONALISED
a decade, a number of research firms have predicted by displacing it as the CLOCK
the emergence of the gold bull markets in the world’s reserve currency.
upcoming years. Their predictions are based mostly As it stands in this case,
on past performance of gold markets. However, in the Yuan is backed by
the present times of high market volatility, relying gold. This means that
just on the past data can prove risky. Yuan-denominated
I want to make a fresh case for the emergence of oil contracts allow
gold bull markets. The US-China trade war and the the trading countries
Rohit Dhalaria
upcoming gold-backed crypto-currencies are two to convert Yuan
major factors that can significantly increase the to gold and vice-
worldwide demand for gold. This upward thrust versa. If the
in the demand as well as the prices of gold is the Chinese trade
beginning of the long-term sustainable gold bull increases, Yuan and
market. gold will potentially 

 things never remain private. This is the basic principle
of Internet. The Supreme Court must strike down
Aadhaar in toto.
M Kumar, by email
ACCEPT POST-FREE RTI-
APPLICATIONS?
The Central government and some state-
governments have started accepting online
RTI (Right to Information) applications.
But most of the population, especially less
educated ones, and that too from rural
areas, are not Internet-users. For the benefit
of that majority section of public, post-
free RTI applications addressed to Central
public authorities should be accepted (in
all the about 160,000 post-offices in the
country rather than in just 4,500 post-offices,
presently). Even the smallest post-office sends
post-bags to the head post-office daily with registered
post articles, cash and other revenue-items like unsold
postage-stamps and postal-orders. This post-bag can
carry post-free RTI applications addressed to Central
public-authorities.
The department of posts should also accept repeated
recommendations of the Central Information
Commission (CIC) both, through verdicts and
administrative mechanisms, to introduce
special RTI stamps in denominations
of Rs2, Rs10 and Rs50, like they were
issued earlier, to collect licence fees for
radio and TV sets. It is now especially
required because of non-availability of
any mode of payment of copying charges
like Rs2, Rs4, Rs6 or Rs8 because of
postal-orders in denominations less than
Rs10 being discontinued. Otherwise
also, handling of a postal-order of Rs10
costs more than Rs40 to the postal
department alone. Attractively designed
RTI stamps can further be used to popularise the
transparency Act and to propagate important messages
of public interest.
Madhu Agrawal, by email 

9 | 27 Apr-10 May 2018 | MONEYLIFE

Letters.indd 4 19-04-2018 11:41:26

 LETTERS

 replace the dollar as the globally accepted currency.
China is, in effect, re-introducing the gold standard.
This could create an unprecedented demand for gold,
leading to a huge increase in its prices. The investors
are calling it the ‘petro-gold rush’ inspired from
Venezuelan gold-backed crypto-currency called petro-
gold, which was introduced in 2017 while fighting an
economic war against the United States.
When Sean Walsh, founder of crypto-asset investment
firm Redwood City Ventures, was asked about
physical-asset backed crypto-currency, he replied
“Rather than buying a crypto-currency backed by
gold, I’d just go and buy gold. Gold is a physical
thing that you want to be able to hold in your hands,
because that’s the point.” The fact that the first
gold-backed crypto-currency was launched in 1995
but failed to catch on until 2017, when suddenly
there was a huge hype for Bitcoin and its prices shot
through the roof, tells us that Sean Walsh is probably
right about the utility and fate of gold-backed crypto-
currencies.
Despite this, gold-backed crypto-currency is of
special interest to Islamic investors. Till date,
Islamic investors are barred from investing in
crypto-currencies, as they are not Shariah-compliant
investments. This is because financial speculation
is against the Islamic principles. However, a Dubai
start-up called OneGram is offering gold-backed
crypto-currencies as a solution to this issue of
religious permissibility. The company offers to store
at least a gram of gold for each unit of OneGram
crypto-currency. Backing crypto-currency by a
physical asset, such as gold, limits the speculation on
its price, and keeps the minimum value of the crypto-
currency at least equal to the price of the gold. The
limitation on speculation deems the investment
Shariah-compliant. The demand for gold-backed
crypto-currency is increasing amongst the Islamic
investors in the Gulf and South-East Asia. In January
2018, United Kingdom’s Royal Mint also launched
gold-backed crypto-currencies.
Increasing popularity of crypto-currency-backed by
gold only means that soon there is going to be a
massive worldwide demand for physical gold. Such
excess demand will, consequently, drive up the price
of gold.
The gold market has been forecasted to grow steadily
over the next decade. However, this sudden increase
in the demand of gold-backed crypto-currencies and
the petro-gold rush will act as strong catalysts in this
growth. It is the right time to make investments in
gold as the global markets prepare themselves for a
long-term gold bull market.
Rohit Dhalaria, by email

 PUSHING THINGS UNDER THE CARPET
This is with regard to “Bhushan Family’s Involvement
in Tax Evasion through LTCG Buried?” by Sucheta
Dalal (Moneylife, 13-26 April 2018). Let us face it. We,
as a country, are corrupt. The quid pro quo starts right
with our daily prayer to God... Grant me this and I
will give you that... Many Indians always assume that
businessmen, bureaucrats and politicians are corrupt,
and worse still, take it as a norm.
Under the circumstances, what is all the fuss about?
Could the Nirav Modis and, Mallyas have happened
without the involvement of government and
bureaucracy? SEBI (Securities and Exchange Board
of India) is clearly toothless; just take the case of
Sahara that is dragging on for years. Our regulatory
bodies, if at all they decide to take up a case just to
prove and justify their existence, appear to be able to
only destroy the underlying businesses and there is
loss of employment of those who work there. But the
regulatory bodies are never able to punish the guilty.
Things tend to get pushed under the carpet!
Mani Sriram, online comment

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emailed to editor@moneylife.
in or can be posted to: The Editor,
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MONEYLIFE | 27 Apr-10 May 2018 | 10

Letters.indd 5 19-04-2018 11:42:33

 Your Money
CONSUMER ISSUES
NCDRC Directs Air France To Pay
Compensation of Rs12 Lakh
T hree senior employees of the
Sahara group of companies were
travelling abroad for a business
meeting and they booked two-way
tickets on Air France—Delhi-Paris-
France Delhi Paris
Delhi—through Travel Wings of
Kanpur, according to a report in the
Business Standard. They
travelled to
Paris
and,
on their way
back, on 11 November 2002, they
missed the flight to Delhi, as there
was a case of denied boarding due
to overbooking on the part of the
airline. As they reached Delhi a day
later than planned, they missed an
important meeting with government
officials in India.
Food Items and Bottled Water Should Be Sold
at Regular Prices inside Multiplexes
T he Bombay High Court has ruled
that food items and bottled
water be sold at regular prices inside
multiplexes. The directive was issued
by a division bench in response to
a PIL (public interest litigation) filed
by Mumbai resident Jainendra Baxi.
He had challenged the prohibition
on carrying outside food in movie
theatres and multiplexes, across
Maharashtra.
The judges observed: “The price
Your Money.indd 1
part of the cause of action had
arisen in Uttar Pradesh. Hence,
the State Commission had the
jurisdiction to decide the dispute.
NCDRC observed that, although
the Sahara group had borne the
The three travellers filed a
complaint with the Uttar Pradesh
State Consumer Disputes Redressal
cost of travel, the tickets were
booked in individual names of the
complainants who were put to
Commission (State Commission) personal discomfort and mental
against Air France and Travel agony due to denied boarding.
Wings. Air France argued that Hence, the complaint was upheld.
it denied boarding
boa due NCDRC observed that, instead
to overbooking,
over an of indiscriminate overbooking
international
inte accepted resulting in hardship to fliers with
industry
in practice confirmed tickets, it would be better
and
an it offered the to impose stringent conditions for
complainants
com 300 cancellation of confirmed tickets.
Euros,
Euros besides free Hence, denied boarding was a
accommodation
accom with deficiency in service on the part of
meals,
meal two telephone Air France.
vouchers
vouc and nine NCDRC considered that the
phone
phon cards. compensation awarded by the State
The State Commission Commission was on the higher
held Air France liable
li to pay side, as there was no proof of
Rs6.30 lakh to each of the three financial loss caused. The NCDRC’s
complainants. Air France challenged order of 22 March 2018 reduced
the order in appeal at the NCDRC the compensation and ordered
(National Consumer Disputes Air France to pay a lump-sum
Redressal Commission). amount of Rs4 lakh to each of the
NCDRC noted that the airline Sahara group complainants (three
had sold the tickets at Kanpur complainants in all), totalling
through Travel Wings and, so, Rs12 lakh.
(multiplexes) should sell it at the regular
price.” The Court said that if multiplexes
were prohibiting people from bringing
outside food, there should be a total
prohibition on eatables. “Then you
(multiplexes) cannot have your
own vendors selling food and other
snacks inside,” said the judges.
The government pleader told
the Court that the state would
frame a policy on the issue within
the next six weeks, after taking into
consideration the suggestions of
of food and water bottles sold inside the petitioner and the Multiplex Owners’
movie theatres are, indeed, exorbitant. Association (MOA). The bench will now
We have ourselves experienced it. You hear the petition on 12th June.
11 | 27 Apr-10 May 2018 | MONEYLIFE
20-04-2018 13:45:37
 Your Money
MEDICLAIM REGULATION

CGHS Cover Applies Even to Stockbroker F6 Finserve

Defaults and Promoters
Hospitals Not on Government List Are Absconding

T he Supreme Court (SC) has

said that reimbursement cannot
be denied to retired government
employees and their families covered
under the Central Government Health
Scheme (CGHS),
even if they have
received treatment
in a hospital not
empanelled under
the Scheme.
The Court
passed the order
on a PIL filed by
former Indian
Revenue Service officer and advocate
Shiva Kant Jha who was treated
for a heart ailment at Fortis Escorts
Hospital (Delhi) and Jaslok Hospital
(Mumbai) in 2003. There were some
difficulties in reimbursement from
the government in this case. The
SC Bench said ‘no fetters’ could be
placed on the rights of a government
employee during his lifetime to get
the best medical treatment and it was
incorrect to reimburse bills only on
the basis of rates fixed under CGHS
if the employee got
treatment from a
hospital which is not
empanelled.
The Bench
said: “The right to
medical claim cannot
be denied merely
because the name of
the hospital is not
included in the government order...
The real test must be the factum of
treatment. Before any medical claim is
honoured, the authorities are bound to
ensure as to whether the claimant had
actually taken treatment. Once it is
established, the claim cannot be denied
on technical grounds.”
N ew Delhi-based F6 Finserve has
joined the list of stockbrokers that
have shut shop in the past couple of
years after defaulting on payments to
clients. The stockbroker shut shop in
April 2018 and has not repaid clients
more than Rs100 crore, amidst
allegations of misuse of clients’
money to speculate in the market. The
promoters of F6 Finserve, Pankaj and
Sumit Goel, have allegedly sold shares
of clients without their permission and
are absconding. Shares of ice cream-
maker Kwality plunged after F6 Finserve
sold a large chunk of Kwality shares
which belonged to the company’s
directors. In 2017, the Securities and
Exchange Board of India, in a move to
prevent brokers from misusing clients’
funds, made it mandatory to submit the
data on clients’ funds lying with them,
on the last trading day of every month
on or before the next trading day.

RETIREMENT CONSUMER ISSUES

Air Travellers May Be Entitled

EPS Pensioners Can Submit Life Certificate to Heftier Compensation
without Fingerprint Authentication, says EPFO
T he Employee Pension Scheme (EPS) pensioners can submit their life certificate
without Aadhaar. These pensioners had been facing problems in submitting
A ir travellers may soon be entitled
to heftier compensation for
deficiency in airline services leading to
life certificate digitally and non-submission of life certificate would have led to lost baggage or delayed and cancelled
stoppage of their pension, according to The Economic Times. flights. Cancellation charges may also
EPFO (Employees’ Provident Fund Organisation) has issued instructions to all be lowered. The aviation ministry has
pension disbursing banks and post-offices directing them to provide alternative proposed these relief measures in a
mechanisms, including acceptance of paper life certificate, for submission of passenger charter being prepared. At
proof of life for all pensioners facing problems in providing digital life certificate. present, airlines pay compensation for
Where fingerprint or IRIS authentication is not feasible for any reason, an delays beyond two hours due to reasons
entry should be made in the exception register with reasons and pension may attributable to them. The existing norms
be provided on the basis of paper life certificate and physical Aadhaar card or are likely to be changed with the ministry
E-Aadhaar card of the pensioner after due verification as deemed fit by the bank. proposing compensation of Rs3,000 to
The QR Code on E-Aadhaar card downloaded after 1 April 2018 has photograph Rs20,000 for missed flight connections.
and other demographic details which are digitally signed by UIDAI (Unique Denying boarding may lead to airlines
Identification Authority of India). paying at least Rs5,000 to passengers.

MONEYLIFE | 27 Apr-10 May 2018 | 12

Your Money.indd 2 20-04-2018 13:46:36

 BANKING “This is certainly not in line with RBI’s
advice. It’s a violation,” said AC Mahajan,

Bank Customers Are Being chairman at BCSBI, an independent

banking industry watchdog to protect
Charged for SMS Alerts consumers’ interest.
“Considering the technology available

W hile RBI told banks to send SMS

alerts for every transaction as a
means to fight frauds, the regulator
charge of Rs15 while customers actually
pay Rs17.7 including taxes at present.
with banks and the telecom service
providers, it should be possible for
banks to charge customers based on
also directed banks to levy charges on actual usage of SMS alerts,” said RBI,
actual usage basis. RBI said charges in a November 2013 circular. “With a
on actual usage basis would promote view to ensuring reasonableness and
reasonableness in customer dealings but equity in the charges levied by banks for
a majority of banks, including leaders sending SMS alerts to customers, banks
State Bank of India and ICICI Bank, do not are advised to leverage the technology
follow the norm. available with them and the telecom
A study of BCSBI (Banking Codes and service-providers to ensure that such
Standards Board of India) shows that 19 charges are levied on all customers on
out of 48 banks levy a fixed quarterly actual usage basis,” it said.

Moneylife

MONEYLIFE
Quiz no

283
QUIZ Answer
Correctly! Win
Another quiz to tease your brain. The answers are in a personalised
sed
this very issue. The winner will be chosen by a lucky clock with an Surya Dev

investmentnt
draw from correct entries and answers published in Mutual Fund
investments are quote!
the issue dated 7 June 2018. Send in your answers to subject to market risks,
read all scheme related
quiz@moneylife.in with the Quiz no., name, address & documents carefully.
telephone number before 16 May 2018.
1. In which year did the risk of investing a lump-sum in an 5. Which of the following is covered for deduction under
equity-linked savings scheme (ELSS) at the end of the Section 80C of the Income-Tax Act?
financial year double, due to high price-to-earnings ratio? a. Paying premium on life insurance policy
a. 2000 b. 2014 b. Selling equity shares after holding for 20 years
c. 2015 d. 2017 c. Buying equity shares for the first time
d. Selling a house for long-term capital gains
2. Who is the chairman of Secondary Market Advisory
Committee of the Securities and Exchange Board of India? 6. What has been labelled as the ‘eighth wonder of the world’?
a. Prof JR Varma b. Uday Kotak a. Taj Mahal b. Power of compounding
c. Ajay Tyagi d. UK Sinha c. Pyramid d. Value Averaging

3. What has been the five-year return of the top performing 7. On which date did the first television news report of an
ELSSs? acute shortage of cash in Indian cities appear?
a. 15.75% b. 23.27% a. 31 March 2018 b. 5 April 2018
c. 20.61% d. -12.50% c. 17 April 2018 d. 20 April 2018

4. What should be the normal blood pressure (BP) for 8. Who is the author of the book, Reforming the Indian Public
adults, according to the guidelines of the JNC -VIII on BP? Sector Banks: The Lessons and the Challenges?
a. 200 systolic, 150 diastolic b. 159 systolic, 99 diastolic a. Dr KC Chakrabarty b. Shikha Sharma
c. 150 systolic, 200 diastolic d. 99 systolic, 159 diastolic c. TR Bhat d. DN Ghosh

In all, 9 readers got all the answers right last time. The answers to Moneylife Quiz-281 are: • 1-d. 3 to 3.5 years
The winner of Quiz-281 is Surya Dev from Bhubaneswar. • 2-d. 20% • 3-b. AA • 4-c. Cardiologist • 5-d. Senior Citizens
Congrats! You win a personalised clock with an • 6-c. Bombay High Court • 7-b. Horse-breeder • 8-a. Renaissance
investment quote! Technologies

13 | 27 Apr-10 May 2018 | MONEYLIFE

Your Money.indd 3 20-04-2018 13:47:07

 Public Interest
Before You Close Your Loan Account
T
he duration of a loan, especially a mortgage, tends
to be so long that one tends to forget details about
what went into the process of procuring the loan.
This, sometimes, leads to carelessness in ensuring that
the loan is correctly closed.
Every Thursday, I guide people facing issues with
delinquent service across a range of consumer, banking,
insurance and credit issues. I have noticed that certain
queries come up repeatedly—the fortunate ones, seek
guidance before a problem occurs; the rest on how to
deal with it. One recurring query is about closing home
loans. So, here are some tips and precautions to take
while closing a mortgage—many of them apply to other
loans as well.
1) Return of Original Documents:
Ensure that you get back all the
original documents submitted to
the lender. Clause ‘p’ of Section
8.12.1.2 of the Code of Bank’s
Commitments to the Customers
(The Code) issued by the Banking
Codes and Standards Board of
India (BCSBI) says that the bank
undertakes to return all securities,
documents and title deeds to mortgaged property, within
15 working days of repayment of all the dues as per
the agreement or contract. Clause ‘q’ says that you are
entitled to compensation for delays beyond 15 working
days and clause ‘r’ promises compensation in case of
lost or misplaced documents. Since all loan documents
are centrally stored, it takes a few days for the bank to
retrieve them; they need to be collected physically, with
due acknowledgement.
2) Lifting Charges: In all home loans, the lender has a
charge (mortgage) on the property against which you
borrow. You must ensure that this charge is lifted by
the borrower and your property is freed in writing,
on repaying the loan. Remember, if you have obtained
other credit facilities from the bank against the charge
on your property, the lender will not part with the
documents until all dues are paid.
3) Loan Account Statement: Obtain a properly
authenticated statement of your entire loan account
which should show the closing balance as ZERO.
Remember, you are entitled to this under Clause ‘n’
of Section 8.12.1.2 of the BCSBI Code and the bank
undertakes to provide an annual statement of loan
account.
MONEYLIFE | 27 Apr-10 May 2018 | 14
Public Interest.indd 2
4) No Dues Letter: This is very important. Please obtain
a ‘No Dues Certificate’ from the bank, when you close
out your loan accounts. This will ensure that your credit
record remains clear and ensures a smooth process in
any future borrowing.
5) Check Credit Report/Record: Get a copy of your
credit score about a month after all your closing
documents and original papers are with you. Make
sure that your credit report correctly reflects the closing
of your loan. India has four credit bureaus, viz.,
TransUnion CIBIL, Experian, CRIF Highmark and
Equifax. Checking with any one of them is fine. If your
loan record is not correctly reflected, it is very important
for you to take up the matter and
have it resolved immediately. If
you have not paid your loan and
full interest, but entered into a
‘settlement’ or compromise with
the lender, this will be reflected
on your credit record as a default
and affect your future borrowing
ability. RBI circular no. DBR.CID.
BC.No.11/20.16.042/2016-17,
dated 1 September 2016, directs all
credit information bureaus to make available one free
full credit report to the borrower in each calendar year.
6) Property Insurance: Most banks insist on insurance
of the property against which a loan is obtained. This
is ‘general insurance’ and the policy is assigned in
favour of the bank. Get the policy reassigned in your
favour. You are then free either to discontinue or renew
the policy on its due date, or switch to an insurance
company offering better terms. It is in your best interest
to secure your property with an insurance whether or
not you have a loan outstanding.
7) Collateral Security: If you have provided a life
insurance policy or any other security in the form
of fixed deposit, or National Savings Certificate to
the bank as ‘collateral security’, please ensure the
assignment, or lien, as the case may be, on that
certificate is lifted when you close your loan.
8) Show Gratefulness: If you have had guarantors or
sureties for your loan, make sure you send them a thank
you note, ideal with the final loan statement closing out
your liability and their responsibility. — Abhay Datar 
(Abhay Datar is a former banker turned consumer activist; he
provides free guidance on consumer issues, banking and insurance
at Moneylife Foundation’s daily clinic.)
16-04-2018 19:28:27
Th
i sp
ag
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in
th
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pr
in
te
di
tio
n
ha
sa
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ad
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 CROSSHAIRs
Exclusive news, the stories behind the
headlines and the truth between the
lines by Sucheta Dalal

It Is Not about Cash, but Control, Stupid!

W
eeks before the famous midnight drama of information or the manner in which the data will
in parliament to roll out the Goods and be used and verified. When the formal legislation
Services Tax (GST) on 30 June 2017, a was finally passed to give UIDAI’s actions some legal
video recording of a Supreme Court advocate was sanctity, it was pushed through parliament as a money
going viral; it warned about the many dangers of a bill.
hasty rollout. The prime minister’s office called him The Supreme Court is, at last, hearing a few
for suggestions. His response was simple: “Don’t go dozen petitions against Aadhaar. But, even here, the
for a nationwide rollout. Start with a pilot project and government shamelessly uses its extensive financial
a small list of items under GST; iron out the glitches, muscle and influence to ensure that every newspaper,
stabilise the software and gradually expand the list.” website and television channel is bombarded with
What could be more obvious and full-page advertisements or
ful
sensible? He was told that the interviews and signed articles
int
launch date and the nationwide of UIDAI’s founder or CEO,
rollout were non-negotiable; any especially when the Supreme
es
other advice was welcome. Court hearings are on. Such a
C
The government claims brazen attempt to influence the
br
GST is a great success, though public and the judiciary has
pu
confusion over many issues been done only by the notorious
be
continues; the invoice matching Sahara group (ultimately, with
Sa
has been suspended; several disastrous results).
d
aspects of filing have been
postponed and it remains a huge Cash Crunch
C
work-in-progress. Nobody knows N
Now let’s look at the many
why a wonderful new initiative facets
f of the cash crunch, which
was forced on people without caused
c tremors of panic on
adequate preparation. As we have 1 th April. Moneylife has been
17
written elsewhere in this issue, rreporting how ATMs have been
MCA21, the mandatory online rregularly running dry ever since
corporate filing database, remains eearly 2017. Our sources at the
another source of continued RReserve Bank of India (RBI)
harassment with regular users clearly told us that RBI was
resorting to multiple strategies to refusing to pump more cash
get work done. into the system. They believed
The grandest of them all, the that this was being done as
Aadhaar programme of the UIDAI part of the government agenda
(Unique Identity Development to nudge, or force, people into
Authority of India), is the worst digital transactions.
of the lot, because it affects our No amount of writing
everyday life and our savings. to RBI
R or social media posts
UIDAI has expanded far beyond its original remit and about closed ATMs made any difference, until
is fast looking like a tool of control and surveillance. television channels appeared to be whipping up an
The government and UIDAI have refused to engage unstoppable panic that could have caused a run on
with citizens on issues of violation of privacy or misuse the banks. It is only then that the government went 

MONEYLIFE | 27 Apr-10 May 2018 | 18

Crosshair.indd 2 20-04-2018 18:02:28

  into an overdrive of denials, assurances and a promise
to crank up currency printing and ensure adequate
supply in the coming weeks. Its spokespersons trotted
out innumerable statistics which failed to answer one
basic question: Why was RBI sleeping on its job of
monitoring currency needs, cash management and
anticipating ‘increased demand’, if any?
None of the events of April indicates any reason
for ‘unusually large withdrawals’ either. The demand
for cash during Akshaya Tritiya happens every year (in
fact, jewellers say demand was lower this year), so does
the sowing season and the wedding season; multiple
state elections are as per plan and the central bank
has responded to these over the decades without cash
shortages. What was different this year? Why is the
central bank clueless about the reason for ‘unusually
large withdrawals’ when it has access to all the
currency supply numbers?
Some experts, using RBI’s own statistics, have
already disproved the theory of ‘unusually large
withdrawals’. Moneylife Foundation has also been
alerting RBI about acute currency shortage across
India, at least since March 2017. While the theory
‘unusual cash withdrawals’ seems doubtful, the panic
among people is real and the government is solely
responsible for it. People are feeling harassed about
several issues; deliberate cash shortage is only one of
them.
Many Indians supported demonetisation, despite
the hardship involved, in the expectation that it
would eliminate black money. But people’s faith has
been shaken by the rash of banking scams which
showed that large industrialists were looting banks
with impunity, each for a few thousand crore rupees,
while government misguidedly hunted for cash stashes.
Blaming the Opposition for fomenting panic and
unleashing tax raids again, instead of re-examining
its own policies and actions, is not enhancing the
government’s credibility. Here are some issues that need
consideration.
1. A growing number of educated people are seriously
asking if their bank deposits are safe or could be
appropriated to pay bad debts under the bail-
in clause of the ill-conceived FRDI (Financial
Resolution and Deposit Insurance) Bill. Not
everybody is convinced about our assurance that
there is no immediate danger; they believe the
government is capable of initiating any coercive
action overnight. Most people have begun to store
more cash for contingencies, despite the risks.
2. The threat of forced Aadhaar linkage of everything
from bank accounts to telephones is another
cause of stress, especially among senior citizens.
Many are finding that their biometrics fail to be
read by UIDAI’s scanners and are being forced to
repeatedly update their Aadhaar card with fresh
Crosshair.indd 3
biometrics. Their big fear is about bank accounts
being blocked or telephone services being cut off.
The bombardment of text messages has triggered
anxiety among people; especially since banks have,
indeed, blocked accounts for want of Aadhaar. This
harassment has tacit support of the government.
Only those who aggressively point to the Supreme
Court stay orders or submit them in writing are left
alone.
3. The government deliberately curtailed cash
circulation to force digital payments, leading to a
currency shortage, say our sources in the central
bank. RBI’s press release of 17th April, however,
says, “There is sufficient cash in the RBI vaults
and currency chests”; but it does not explain the
inadequate supply to banks and ATMs. If enough
currency is available, what is the need to ramp up
printing ‘at all the four note presses’? Or ensure a
five-fold increase in printing of Rs500 notes? Has
RBI forgotten its job of cash-management or was it
doing the government’s bidding in squeezing cash
supply to help digital payment companies?
4. Forcing people into digital transactions as part of a
controversial global exercise led by large payment
giants is a disastrous idea. Many older Indians are
simply not comfortable with digital transactions.
Grievance redress of such transactions remains poor
and regulators have no accountability or interest
in building public confidence. It is hard for most
people to figure out new scams where fraudsters
posing as bank or telecom officials con people to
part with their password and security details by
threatening to freeze accounts. The stress of dealing
with this is only understood by those in the affected
income or demographic group.
5. Finally, there is the Rs2,000-denomination currency
which is not a transactional currency at all and
tends to be saved by individuals and hoarders. This
was a lesson learnt during demonetisation itself
and printing was stopped to crank up the supply
of Rs500 notes. The newly introduced Rs200-
denomination note also remains scarce; the result
is that ATMs dispense Rs2,000 notes, which are
stashed, or smaller denominations that empty out
machines rather rapidly.
The bigger lesson here is that forcing people to do
things against their will and deal with faulty systems
is a disastrous strategy that cannot always be blamed
on the Opposition or on critics. With just a year to
go for the general elections, it is time the government
started listening to people and delivering on some
of its promises of ‘achche din’, instead of causing
stress and harassment. And making a mockery of
‘being responsive’ when forced into multiple course
corrections arising from poorly thought-out policies
and implementation. 
19 | 27 Apr-10 May 2018 | MONEYLIFE
20-04-2018 18:02:50
 DIFFERENT STROKES SUCHETA DALAL

SEBI’s Opaque Decisions about

Derivatives Settlement Market

O
n 28th March, the Securities & Exchange Board of in the derivatives section, in order to ‘facilitate greater
India (SEBI) made headlines for partly accepting alignment of the cash and derivative market’.
the Kotak committee’s recommendations on It changed the criteria for selecting stocks for the
corporate governance. However, its decision on “measures derivatives segment; revised the market-wide position
to strengthen the algorithmic trading framework” limit from Rs300 crore to Rs500 crore and the median
has apparently stirred up a hornets’ nest in its newly quarter-sigma order size from Rs10 lakh to Rs25 lakh.
reconstituted Secondary Market Advisory Committee Eligible stocks must also have an average daily deliverable
(SMAC). According to an anonymous letter, claimed to value in the cash market of Rs10 crore; this criterion needs
have been written by an SMAC member, the decisions on to be met continuously for six months. Stocks that are
algorithmic (algo) trading, announced by SEBI after its board currently in the derivatives segment but fail to meet such
meeting, are completely contrary to the recommendations enhanced criteria would be physically settled.
of the SMAC as well 95% of Any stock that fails to meet
the comments received by the the enhanced criteria within
regulator to the discussion one year or fails to meet any
paper published 18 months of the current existing criteria
ago. continuously for three months,
Algorithmic trading would exit the derivatives
(algo trades) is a high-speed segment. Stocks that are
automated trading that currently in derivatives and
generates large volumes and meet the enhanced criteria
uses complex mathematical would continue to be cash-
algorithms. The manipulation settled, as now. But, if any
of algo trading at the National stock fails to meet any one
Stock Exchange (NSE), of the enhanced criteria for
which was revealed to me in a continuous, three-month
another anonymous letter by a period, it will be moved from
whistleblower, had eventually It is ironic that the SMAC member cash settlement to physical
led to a detailed investigation should choose to copy his letter to settlement. If it still fails to
and forced a clean-up of the me and it is rather ridiculous that meet the existing criteria
NSE’s top management and the regulator, once again, chose to for three months, it would
marked the genesis of this remain silent exit from derivatives. After
discussion. a period of one year, only
Hence, it is ironic that the those stocks which meet the
SMAC member should choose to copy his letter to me enhanced criteria would remain in the derivatives segment.
and it is rather ridiculous that the regulator, once again, SEBI wants to limit trading in derivatives to individuals
chose to remain silent, despite repeated our efforts to get on the basis of a sum computed on their disclosed income-
its view. SEBI’s actions raise questions about how the tax returns. Intermediaries will be made to “undertake
regulator chooses to operate. rigorous due diligence and take appropriate documentation
Let’s start with SEBI’s announcements after its from the investor.” An anonymous whistleblower, claiming
board meeting on 28th March, on this issue. There were to be an SMAC member, says that SEBI’s decisions are
several excellent decisions taken that day to increase completely against the recommendations of SMAC, where
transparency in algo trading, including the testing of algos most members, including the chairman, were of the view
and publication of data. The contentious issue is physical that the measures announced by SEBI would, in fact, ‘kill
settlements for derivatives. SEBI announced a phased and the derivatives market’ and, at the same time, not help
calibrated switch to a physical settlement for all stocks improve the cash segment. 

MONEYLIFE | 27 Apr-10 May 2018 | 20

DIFFERENT STROKES.indd 2 19-04-2018 20:50:37

 DIFFERENT STROKES SUCHETA DALAL

 He says that Prof JR Varma, who chairs the committee, Will it drive away large, institutional algo traders, who
was not only against compulsory physical settlements, contribute to the bulk of frothy volumes generated by
but “scathing of the proposed income-based exposure in machines, to other geographies? What will be the impact
the derivatives trading by the retail traders.” He further on India’s standing among world markets? Is there any
says, the SMAC was told that ‘over 95% of the public plan to encourage margin funding or stock lending and
comments’ on the discussion paper were against the borrowing mechanisms? How exactly will SEBI’s actions
proposed measures. He points out that if SEBI ignores improve investor safety? We have no answers.
SMAC as well as public comments, why have the farce SEBI is certainly not bound to accept the
of conducting such an exercise at all? recommendations of the SMAC. However, it would have
According to the whistleblower, the move will result in been prudent for a regulator to have placed on record its
reducing the trading volumes at the Exchanges and impact reasons for rejecting the SMAC’s advice and to indicate
tax collection and fee income of the government, bourse and that it has taken into account the possible negative fallout
regulator (turnover fee, etc). He claims that Prof Varma was of its actions. One also has issues with SEBI’s attempt to
also against the ‘risk management framework proposed by dictate investor behaviour by attempting to restrict trading
SEBI’, on the grounds that ‘it would significantly increase to a formula based on tax payments.
cost for the small and large investors alike and would not Worse, its attempt to dump the task of monitoring
curb but increase fraud’. investor actions on brokers is not only unfair, but
Interestingly, the regulator’s press release on 28th March ludicrously impractical; it will increase costs and create
only said that the SEBI Board further barriers to investing
“took note of discussion in the capital market. Surely,
papers titled “Growth and SEBI’s job is not to restrict
Development of Equity and limit investment in the
Derivatives Market in India” capital market so that its job
and “Physical settlement in of regulation and supervision
stock derivatives”, public is made easier. It is high time
comments received thereon the SEBI chairman’s job
and also recommendations defined key result areas, with
of the SMAC. There was expanding and deepening
no comment on whether or capital markets right at the
not it has accepted SMAC’s top with investor protection.
recommendations or taken The manner in which
into account views in the SEBI’s meetings are conducted
public comments. is also open to question.
I wrote to the SEBI SEBI’s attempt to dump the task The Kotak committee on
chairman and all official of monitoring investor actions corporate governance drew
members on the SMAC to on brokers is not only unfair, but dissent notes from key
get details. SEBI, as usual, did ludicrously impractical members, after the report
not bother to reply. I emailed was ready for submission.
Prof JR Varma, who is on a This time, there are allegations
holiday and not accessing his email regularly. However, that the SMAC’s recommendations were ignored; the
discussions with people connected with the issue indicate whistleblower’s letter also has a long rant imputing
that the SMAC chairman and some members were, indeed, motives to a SEBI official; this raises questions about
against the proposals and blunt in their views. Nobody the kind of people who find representation on SEBI’s
would confirm whether SMAC has formally recorded its committees. In the past few years, SEBI chairmen have
objections. It is also a fact that SEBI’s action on the demand quietly dispensed with the token representation to investors
for physical settlement in derivatives is a long-pending (who are the largest stakeholders), on most committees.
one; but other issues are more complex. All this does little to inspire confidence about regulatory
SEBI’s decisions, while making the derivatives segment accountability. 
fairer for smaller retail investors, could lead to a drop
in derivatives’ turnover, especially on the NSE, which is Sucheta Dalal is the managing editor of Moneylife. She was
currently a near-monopoly. There may be a commensurate awarded the Padma Shri in 2006 for her outstanding contribution
reduction in tax collection too. How steep will the fall be? to journalism. She can be reached at sucheta@moneylife.in

21 | 27 Apr-10 May 2018 | MONEYLIFE

DIFFERENT STROKES.indd 3 19-04-2018 20:50:52

 SMART MONEY R BALAKRISHNAN

Stock Analysis: Focus on Debt and

Cash Flows, Not Just Profits

W
hen you see a recommendation for a stock, most
of the commentary will refer to ratios like EPS While Profit Looks Good...
(earnings per share), P/E (price-to-earnings), Year 1 (Rs Cr) Year 2 (Rs Cr)
earnings growth, price-to-book value, etc. Some will touch
Sales 1,567 2,709
on the RoCE (return on capital employed)/ RoE (return on
EBITDA 177 426
equity) but rarely use it in valuation. I do not see too much
emphasis being given to the indebtedness of a company Interest 46 62
or a serious analysis of cash flows. Cash Generated 131 364
I have come across scores of companies that were very Depreciation 12 20
attractive on the basis of conventional ‘ratios’ but were, PBT 119 344
ultimately, done in by the problems relating to high debt
Dividend 40 44
and low cash flows. Debt can be very debilitating. You
Equity 200 222
are seeing the banks under severe stress because of having
to write off amounts given to companies indiscriminately. EPS (Rs) 0.62 1.13
And shareholders and creditors are suffering losses as they
are forced to forgo or write off their claims. Both could profits have more than doubled; the equity has gone up
have avoided major pain, if they had bothered to look at marginally; but the EPS has grown. And look at the way
cash flows and the indebtedness of a company. the ‘cash’ generated is shown. It appears that the company’s
The main problem with ‘ratio’ analyses is that they business is booming. Most investment recommendations
are dependent, in some form or the other, on ‘accounting’ you see will, probably, go into many details of the costs and
practices followed by a company and the numbers which, future growth in the top-line, and every analyst believes that
in turn, are dependent on estimations, to some extent or the the profit margins (profits divided by sales) will increase
other. Most numbers we see in the profit & loss account are from the next quarter and keep getting better and better.
derived numbers. Depending on the industry and the nature So, there is a buy recommendation, with a lot of other
of business, even the sales number can be just an estimation. charts and graphs put together.
There are many accounting principles. Many of them are Now, let us also see the balance sheet of the company.
based on ‘estimations’, ‘certifications’, ‘opinions’, and We call it the balance sheet because there is perfect
something catch-all called ‘generally accepted accounting numerical balance between what the company owns and
principles’, etc. what the company owes. The company owns assets that
However, by no means can these be done away with. I are funded by a combination of own money and borrowed
am just saying that those by themselves are not sufficient to money. So, let me give you the summary.
take a long-term view on a company. When I am looking Now, we get a bit more information. Let us understand
for a long-term investment, I look beyond the profit & the basics of a ‘cash flow’. Every year, the company reports
loss account. I would like to look at the balance sheet a number that is called as ‘Profit after Tax’ (PAT). So, if we
for a few years together and make some notes. So let us take the ‘owned funds’ or ‘net worth’, it keeps changing
look at the cash flow. It is best if we construct the cash year after year. To the number at the beginning of the year,
flow ourselves and not use the one that is presented in we add the PAT. We have to do a small tweak here. We
the annual report. also have to deduct the dividend that is paid. Thus, the
I will not go into complicated mathematics or formulae. ‘net worth’ changes by that much. However, it does not tell
I will try and simplify the analysis as much as possible. us what all happened to the cash & bank balances. Now,
The main effort you will have to make is to carefully read let us take the various pieces to fit this jigsaw together.
an annual report and just put the numbers in some sort You take the balance sheet and make it into convenient
of an order that makes sense to you. Let us take a typical groupings. Here, I have just shown you ‘current’ assets.
profit & loss summary that you will see. It would have inventory, debtors, trade advances, etc. In
Does this not look like a good set of numbers? The addition, there could be amounts under ‘investments’ etc. 

MONEYLIFE | 27 Apr-10 May 2018 | 22

column_Balakrishnan.indd 2 14-04-2018 18:59:23

 SMART MONEY R BALAKRISHNAN

 So, list whatever details you think are important and put it sales realisations are stuck in debtors/inventories, etc, and
side by side. A minimum of two-year numbers are needed are not getting converted to cash. I will deduct this from
to get a single year’s cash flow. the reported PAT minus the dividend number. So, keep
In the above-mentioned example, you can see that doing this and, suddenly, we will find that the actual cash
the ‘current’ assets have grown exponentially, putting flows may not be as rosy as the research report or the
pressure on the cash that is available. This company has earnings report you will read.
also shown an increase in reserves that is far more than Every business has a different ‘cash’ cycle. An
engineering firm may have a long one; a construction
company may have a longer one; a food company would
... Money Is Stuck in Current Assets have a very short cash cycle; etc. Think about how long
Year 1 (Rs Cr) Year 2 (Rs Cr) it would take to convert the raw material to final cash.
Assets And the nature of competition and the market position
Net Fixed Assets 197 250 of a company will influence the ability to collect cash in
Advances etc 108 135 time. For instance, in the good old days, two-wheeler
Current Assets 1,201 2,226 companies would collect advances from customers and
there would be no credit. Then, competition changed the
Misc Assets 0 606
situation. A new entrant in a mature industry will have
Total Assets 1,506 3,217
nothing to offer, it so will be converting sales into cash
Capital 200 222 slowly. Some businesses are such that, to grow, they need
Reserves 228 1,170 more and more of cash.
Net Owned Funds 428 1,392 Companies in the infrastructure sector were done in
Borrowings 557 854 by poor cash flow. You keep on doing work, spending on
Current Liab 472 873
men and materials. And, when the government department
that placed the order does not pay you progressively, you
Other Liabilities 49 98
are in trouble. Infrastructure companies, by the nature of
Total 1,506 3,217 business, need more and more equipment if they have to
execute more and more orders in the same time-frame.
the profits of the first year. If you notice, the company’s And it may take five years or more to recover the costs of
share capital has gone up. Which means that there has the equipment. So, the cash flow needs could be several
been an issuance of fresh shares during the year and the times profits that are made! And, if the order flows dry
reserves have grown by the share premium collected. up, the companies would be left with issues of servicing
These details can be found, once you spot that the change debt. This is a common phenomenon and one of the
in ‘shareholders’ funds’ is not in line with the number of reasons why public sector banks, that have lent money
PAT minus dividends. to infrastructure companies, are in trouble. This is just an
Now, you will notice the change in each line of asset introduction to make you think beyond the profit & loss
and liability of the balance sheet. It is logical to presume account. Earnings are only one component of investment
that the change in debtors, inventory, etc, should not be analysis. 
more than the growth in sales. If it is not so, it means that The author can be reached at balakrishnanr@gmail.com

What’s Your Bahana for Not Subscribing?

I am not interested in honest & insightful advice on money matters

I never have any problems with banks, credit-cards or insurance companies

For subscription offers
I always invest on the basis of tips from friends and brokers that are a steal, look for
a form elsewhere in this
Finance bores me to tears
issue or our website at
I would rather spend two year’s of knowledge on one evening of eating out www.moneylife.in

23 | 27 Apr-10 May 2018 | MONEYLIFE

column_Balakrishnan.indd 3 14-04-2018 18:59:40

 MUTUAL FUNDS POINTERS

Do Not Wait until January To Save

Tax, Start ELSS SIP Now!
O
ften, we start putting money into tax-saving Past data of returns from equity schemes, when
investments nearer the end of the financial investing in periods when the broad-market index is
year. The problem with this approach is that hovering above P/E level of 25, showed that investors
investing lump-sum in the best tax-saving product, faced higher downsides and had to wait at least five
viz., equity-linked savings scheme (ELSS), if not done years to see positive returns. We discussed this in
at the right time, our Cover Story
will backfire. Yet, (Moneylife, 15-
higher inflows into 29 March 2018)
these schemes are pointing to the higher
witnessed in the last downsides in investing
four months of the when the market is
financial year (FY). at its peak. This is an
This indicates that a important lesson for
large part of the total investors who put a
inflows into equity- lump-sum amount in
oriented schemes ELSS in the last four
are investments as months of FY17-18
lump-sum rather than (see chart).
through staggered A prudent solution
contributions which is to this would be to
a better way to invest start investing in tax-
in market-linked saving investments
products. from the beginning of
Lump-sum investors had been on a safe wicket, until the FY. Additionally, it is better to estimate the rebate
2017, when the valuations P/E (price-to-earnings ratio) under Section 80C available to you for the current FY
of the broad-market indices were neither high nor low. before committing to an SIP in ELSS. Many investors
Entering during such phases, in the past, had generated do not know which expenses or investments to allocate
decent returns in a matter of three to five years; but toward Section 80C deductions. This is why it is normal
when the Nifty 50 and the S&P BSE Sensex valuations to find investors buying various tax-saving products,
soared past the P/E level of 25 in 2017, the risk of when they already hold other items eligible for Section
investing a lump-sum doubled. 80C deductions. Those paying home-loan EMIs
(equated monthly instalments) and paying premium on
life insurance policy are also seen purchasing tax-saving
ELSS Monthly Inflows and Nifty 50 P/E
products, when there is clearly no need to do so because
Inflows see sharp up-trend between December to March
Rs Cr P/E
the principal paid on a home loan and premium on life
4,500 50 insurance policy are covered under Section 80C (and
Niftyy 50 P/E
N
should suffice); thus, investing in tax-saving investments
EELSS Monthly Inflows
over and above it is redundant.
3,000 25
2
Forecasting the amount of investment required for
the deductions available under Section 80C is easy.
Contributions to Employee Provident Fund, premium
1,500 20
2
on life insurance policy in a year and home loan EMIs
are the most common Section 80C deductions. These
are easily calculable. Take the total of these and subtract
it from Rs1.50 lakh; this will indicate how much you
0 15
Apr-13 Sep-15 Mar-18 need to invest in ELSS in the current FY. Divide this
by 12 to get the monthly contribution as SIP to the 

MONEYLIFE | 27 Apr-10 May 2018 | 24

Fund Pointer.indd 2 19-04-2018 20:08:23

 MUTUAL FUNDS POINTERS

 ELSS, and you’ve done tax-saving correctly. All these over a minimum of five years, as it irons out short-term
expenses and investments are usually of fixed nature fluctuations and provides for correct comparison with
and can be forecast at the start of the FY. It takes lessbenchmarks and other schemes. Our aim is to find out
than an hour to approximate the Section 80C available how effective ELSSs are in comparison to fixed-income
after paying for these contributions. Doing so avoids tax-savers and whether there is any pay-off in taking
any unnecessary investments in tax-saving products and the efforts of tax-planning at the beginning of the FY.
this sum can be utilised toward other non-tax-saving If you had invested in any ELSS through monthly SIPs
investments. from April-March vs invested at year-end in March in a
fixed-income tax-saving product that yields 8% (such as
Why It Makes Sense to Start ELSS SIP Now NSCs or tax-saver FDs), the bar chart below shows how
There are several tax-saving products which aren’t most of the ELSSs have performed against fixed-income
market-linked and, thus, attract the most attention tax-savers.
(and money). We are, of course, talking about fixed- Until 2018, the investments made five years earlier
income products like public saw most ELSSs outperforming
provident fund (PPF), National NSCs or tax-saver FDs easily.
Savings Certificates (NSCs) and Even in a down phase, Moreover, returns above 15%pa
tax-saver fixed deposits. But when where exiting equities were quite common across many
you compare the post-tax returns schemes; except in the five years
generated from these products, would be the worst ending March 2016 which,
ELSS stands above all. Products decision, you’d still be incidentally, was a point when the
such as the 5-year tax-saver fixed sitting on gains higher broad-market index was down
deposit (FD) and NSCs are popular 20% since its last peak and had
because of the relatively shorter than what NSCs/FDs just begun to recover. Yet, even
maturity than other tax-saving would’ve delivered in this down phase, where exiting
products and, more importantly, equities would be the worst
the fixed-interest rate they offer. decision, you’d still be sitting on
This makes it a go-to product for last-minute tax-saving gains higher than what NSCs/FDs would’ve delivered.
decisions. But the post-tax return from both, especially That’s why, it is worth the effort to start tax-
for the higher tax bracket, is below 5.50%pa (per planning in April and not delay it until year-end.
annum) which is quite low. You end up with a low rate Moreover, the number of schemes that generated returns
only because of not spending an hour in April towards higher than 15%pa also shows the power of equities
correct tax-planning. as an asset class in generating wealth. Here are some of
Take the case of ELSS. Being a market-linked the best performing ELSSs in the past five years ending
product, its performance in the past decade has been 31 March 2018; we have only considered schemes with
nothing less than remarkable. At Moneylife, we consider asset size above Rs1,000 crore for performance review.
gauging the performance of any equity-oriented scheme Interestingly, the total assets managed by the top-5
performing schemes are equal to the assets of the 37
ELSS vs Tax-saver FDs & NSCs other ELSSs in operation. 
Majority of ELSSs Outperformed NSCs/FDs over 5 Years

100% Top-5 Performers

Scheme Fund Launch Returns*
80%
Size Date (%)
(Rs Cr)
60%
Axis Long Term Equity 15,898 29 Dec-09 23.27
40% Aditya Birla Sun Life Tax 5,523 06 Mar-08 22.62
Relief 96
20% Reliance Tax Saver (ELSS) 9,924 21 Sep-05 22.2
IDFC Tax Advantage (ELSS) 1,279 26 Dec-08 21.76
0%
Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 DSP BlackRock Tax Saver 4,039 18 Jan-07 20.61
Returns > NSC/FDs Returns > 15%pa * Annualised returns for 5 years ending 31 March 2018

25 | 27 Apr-10 May 2018 | MONEYLIFE

Fund Pointer.indd 3 19-04-2018 20:08:46

 MUTUAL FUNDS FUND FACTS

Hot and Cold Stocks of Mutual Funds in March 2018

In March 2018, Tata Consultancy Services and TI Financial Holdings were the most preferred stocks of Indian
mutual funds. The net purchases of Tata Consultancy Services were Rs1,583 crore, of which ICICI Prudential
Mutual Fund made net purchases worth Rs479 crore. Larsen & Toubro and Axis Bank were the most sold
stocks. The net sales of Larsen & Toubro was Rs499 crore and net sales of Axis Bank was Rs493 crore.

Top Buys Rs Crore Top Sales Rs Crore

Tata Consultancy Services 1,583.05 Larsen & Toubro (499.33)

TI Financial Holdings 544.77 Axis Bank (493.35)
Kotak Mahindra Bank 347.06 ICICI Lombard General Insurance Company (228.24)
Tata Steel 332.82 IndusInd Bank (212.87)
Arvind 294.42 Adani Ports and Special Economic Zone (195.23)
Jindal Steel and Power 289.18 Tube Investments of India (186.59)
ITC 280.46 HDFC Bank (178.34)
Dabur India 249.45 Tata Motors (158.60)
L&T Finance Holdings 235.86 UPL (143.23)
Bajaj Finance 223.68 Hindustan Unilever (138.17)

HDFC Mutual Fund

TI Financial Holdings 525.55 Axis Bank (400.11)
Tata Consultancy Services 255.67 Aurobindo Pharma (240.48)
Mahindra & Mahindra 146.95 Larsen & Toubro (215.60)
City Union Bank 139.78 Hindustan Petroleum Corporation (189.80)
Arvind 139.39 Tube Investments of India (187.66)

ICICI Prudential Mutual Fund

Tata Consultancy Services 478.89 Larsen & Toubro (345.91)
Kotak Mahindra Bank 258.50 HDFC Bank (284.86)
State Bank of India 134.13 IndusInd Bank (181.50)
Hindalco Industries 132.94 Housing Development Finance Corporation (134.15)
Cummins India 125.81 ICICI Lombard General Insurance Company (105.61)

Reliance Mutual Fund

HDFC Bank 336.69 Bharti Airtel (175.85)
Bajaj Finance 195.53 Amara Raja Batteries (86.30)
United Breweries 140.03 Bank of Baroda (77.90)
Kotak Mahindra Bank 107.06 Bombay Burmah Trading Corporation (73.44)
Vedanta 88.41 Ashok Leyland (68.15)

Franklin Templeton Mutual Fund

Axis Bank 114.32 Jubilant Foodworks (109.00)
Colgate-Palmolive 104.90 HDFC Bank (98.97)
Ambuja Cements 97.06 Tech Mahindra (59.44)
Arvind 81.77 Hindustan Unilever (55.52)
Bharti Airtel 78.59 Dr Lal PathLabs (44.70)

MONEYLIFE | 27 Apr-10 May 2018 | 26

Fund Facts.indd 2 20-04-2018 18:33:20

 TAX/ FIXED INCOME

ESAF, etc. Another option is

Corporate FD Offers for You bonds or NCDs (non-convertible
debentures). The recent issue of

B
ank fixed deposit (FD) rates
are slowly inching up. For a
three-year FD, State Bank of
India (SBI) has increased the rate
from 6.5% to 6.7%. Yes Bank
offers a rate of 7%; Axis is offering
6.9%; ICICI has a rate of 6.5%;
while HDFC Bank’s rate is the
lowest among its peers at 6%. Some
private banks are offering rates
lower than the largest public sector
bank—SBI. It is a sign of changing
times. In the past, private banks
used to offer equal to, or higher
than, SBI’s FD rates. Currently,
three-year FDs from banks can get a Muthoot Finance’s secured NCDs
rate of 6% to 7%. for 400-days to five-year tenure,
If you want a better with rating of AA (Stable) by ICRA
rate, you will need to and CRISIL, was offering 8% to
explore small finance 9%.
banks (SFBs) like Corporate FD is yet another
Suryoday, option. Mahindra Finance is
Utkarsh, offering 40-months online FD for
Equitas, 8.30%. Don’t rush in to book
Ujjivan, corporate FDs, as their risk level is
AU, higher than that of bank FDs. There
have been cases of corporates being
unable or unwilling to service their
deposits by way of return of the
principal and/or interest.

Interest Rate on Corporate FDs for Three-year Term

Mahindra Finance – Samriddhi
Shriram Transport - Unnati
Shriram City Union Finance
DHFL Aashray
Bajaj Finance
PNB Housing Finance
HDFC Ltd
Gruh Finance Ltd
FAAA (CRISIL)
FAAA (CRISIL) MAA (ICRA)
MAA+ (ICRA)
BWR FAAA/Care AAA
FAAA (CRISIL) MAAA (ICRA)
FAAA (CRISIL) Care AAA
FAAA (CRISIL) MAAA (ICRA)
FAAA (CRISIL) MAAA (ICRA)
8.05% (0.25% additional for senior citizens); 40-month online FD
will get 8.30%
8% (0.25% additional for senior citizens)
8% (0.25% additional for senior citizens)
7.90% (0.40% additional for senior citizens)
7.85% (0.35% additional for senior citizens)
7.45% (0.25% additional for senior citizens)
7.35% (0.25% additional for senior citizens)
7.25% (0.25% additional for senior citizens)

G-Sec Yields Up

T
Issuer Maturity Next Last Yield ISIN Rating
he 10-year benchmark G-Sec Date Coupon (%)
yield, which sets the tone of the
fixed-income market, has made a jump ICICI Bank 8.55% Perp 20 Sep-22 20 Sep-18 8.95 INE090A08TZ5 Care AA+
(unsecured,
in the last fortnight by 21 basis points subordinated)
(bps) to end at 7.49% on 16th April.
Nabard 8.20% 09 Mar-28 09 Sep-18 8.13 INE261F08AD8 CRISIL AA

HDFC Ltd 7.43% 20 Jun-22 20 Jun-18 8.05 INE001A07QT3 CRISIL AAA

G-Sec Maturity Yield to
Date Maturity NSE data as of last trade date of 13 April 2018

15 February 2027 7.72 ECAP Equities Ltd 24 Mar-20 24 Mar-19 9.08 INE572O07BB4 ICRA AA

Reliance Industries 7% 31 Aug-22 31 Aug-18 7.82 INE002A08476 CRISIL AAA

09 July 2026 7.71
Bharat Petroleum Ltd
19 December 2034 7.70 16 Jan-23 16 Jan-19 7.67 INE029A08040 CRISIL AAA
7.69%

G-Sec yields on 16 April 2018 BSE data as of last trade date of 13 April 2018

27 | 27 Apr-10 May 2018 | MONEYLIFE

Fixed Income.indd 1 19-04-2018 20:46:43

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Moneylife. We are not afraid to call a spade a spade. We are India’s only media company to have
set up a non-profit trust, Moneylife Foundation, which is now the largest savers’ and investors’
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FIX YOUR FINANCES, FOREVER

advisor.moneylife.in

MSSN GB (Insurance 1-3 ).indd 3 16-12-2016 17:29:45


INSURANCE TRENDS
New products, regulations, features and options,
interpreted from your perspective
C a r I ns u r anc e
Tata AIG Denies
Car OD Cover
Renewal
A Moneylife subscriber wrote
to us: “I would need your
guidance with renewal of my
car insurance with Tata AIG.
They are refusing to renew my
comprehensive car policy stating
that my model Volkswagen Polo
has a lot of claims in the southern
region! They can only offer a
third-party (TP) coverage and not
comprehensive coverage. I have
been with Tata AIG from 2014
onwards and have made only
one claim in 2016 for a broken
windshield for which, subsequently,
the ‘No Claim Bonus’ amount
was not allowed. Could you guide
me on how to move forward, so
that I get my policy renewed with
Tata AIG for comprehensive car
insurance? My car is a 2012 model
Polo Highline.”
We contacted Tata AIG to seek
their response. But, after several
days of waiting, they have refused
to answer. It is unfortunate that a
reputed company like Tata AIG is
giving its customers a raw deal. In
the past four years, the policyholder
has made only one claim and that
too only for a broken windshield.
If there are a lot of claims in the
region, does it mean that the loyal
MONEYLIFE | 27 Apr-10 May 2018 | 30
Insurance.indd 2
policyholder should be rejected by
Tata AIG? What if other insurers
too don’t provide an insurance
cover? Insurance Regulatory and
Development Authority of India
(IRDAI) needs to ensure that an
existing insurance company does
not deny policy renewal of the
cover already purchased. Where
is consumer rights protection—a
mandated objective of IRDAI?
According to Devendra Rane,
founder and CTO of Coverfox, “An
insurance company is well within
its rights to decline the renewal of a
comprehensive car insurance policy.
An insurer derives the own damage
(OD) premium after taking into
consideration a number of factors
like the make and model of the
car, geographical location and loss
ratio (LR). Loss ratio is a measure
of losses arrived at by calculating
the premium collected vs the claim
amount paid.”
According to him, “While taking
a call on the renewal decision, an
insurer takes into account the LR of
that geographical location. The LR
is also influenced by a few major
factors like Excessive Claims and
At-fault Accidents. If a policyholder
makes a high number of claims or
if he is the cause and at fault for
causing more number of accidents
which makes the insurer pay for
damages, these can ultimately lead
to the insurance company marking
you up as a high-risk customer.”
Mr Rane feels that “to restrict
its losses and keep the LR within
check, the insurance company
often increases premiums to a very
high level or completely denies
renewal of a comprehensive policy
and offers only a third-party (TP)
liability insurance. Since a minimum
TP liability policy is mandatory
for a vehicle, IRDAI has mandated
all insurance companies to allow
customers to buy TP, without any
questions being asked. Alternately,
in order to safeguard himself
from OD and financial losses, a
customer can renew his existing
comprehensive car insurance policy
from another insurance company
which offers comprehensive
coverage in that geographical area
after taking into consideration all
the applicable factors.”
Health Insurance
Mediclaim Policy
Exclusions Can
Be an Excuse To
Reject Claim
C hronic alcoholism is excluded
from most mediclaim policies.
So, if there is a claim due to an
ailment which can be attributed
to chronic alcoholism, it will be
rejected by the insurance company.
But, was the ailment really the
outcome of alcoholism? If not, you
will need to prove it to challenge 
19-04-2018 20:47:32
 INSURANCE TRENDS
 the insurance company’s rejection.
In one case, the consumer got
a New India Assurance (NIA)
mediclaim policy after medical
examination. He was suffering from
high blood pressure and diabetes
at the time of policy inception.
The policy issued in 2008 was
renewed without any break. The
policyholder was hospitalised for
duodenal perforation in the third
year of the policy. He underwent
surgery but died in four days due to
multiple organ failure, septicaemia
and duodenal perforation.
The family filed a claim of
around Rs1.5 lakh which was
rejected by NIA under the garb of
“duodenal perforation was caused
due to chronic alcoholism along
with diabetes and hypertension.”
The family filed a complaint
with the South Mumbai District
Consumer Forum. The complainant
argued that duodenal ulcer could
occur due to a bacterial infection
or due to use of non-steroidal and
anti-inflammatory drugs such as
aspirin. Even smoking, stress and
drinking might have increased the
risk.
NIA, obviously, wanted to
make drinking as the main issue
for claims rejection. The District
Forum agreed with NIA and
dismissed the complaint. The family
appealed before the Maharashtra
State Consumer Dispute Redressal
Forum. They argued that NIA
did not have evidence on both,
alcoholism and causes for duodenal
Insurance.indd 3
perforation, to back its arguments.
The State Forum set aside the
District Forum’s order and directed
NIA to pay the claim within the
60 days. It relied on a previous
case decision which concluded that
linking cirrhosis of the liver claim
to be only due to alcoholism is not
always true.
C ar Insurance
Mandatory 3-year
and 5-year Third-
party Cover for
Cars and two-
wheelers?
T he Supreme Court’s (SC)
committee on road safety has
asked IRDAI to offer mandatory
three-year third-party (TP)
insurance policy for cars and
five-year policy for motorbikes at
the time of sale and registration.
It is due to concerns over poor
compliance of obtaining mandatory
TP cover that can result in accident
victims ending up getting no
financial aid.
IRDAI had allowed insurance
companies to offer three-year
insurance for two-wheelers, but
the product had not taken off.
Buyers prefer a one-year policy in
case they want to sell the vehicle in
near future and, so, don’t want to
be stuck with multi-year policies.
The SC’s committee has made it
clear that just offering three-year
insurance plans for two-wheelers
is not enough. It must be made
mandatory to increase compliance.
Buying multi-year TP policy
is better than not buying it at
all. It is estimated that only
65-70 million vehicles have TP
cover against approximately 180
million registered vehicles. A large
percentage of vehicles without
TP cover was two-wheelers. Even
though TP cover for two-wheelers
can cost around Rs720pa, owners
are taking a huge risk by skipping
it. It makes the owners responsible
for legal liability towards accident
victims.
To improve compliance, tough
punishment, including jail term, will
work. Vehicles without TP cover
pose a serious risk, as accident
victims cannot get compensation
from insurance company due to
lack of cover. Victims have to try to
get compensation from the vehicle-
owner who caused the loss, but
making the owners pay for their
deeds is not easy in India.
The TP liability cover, which
is mandatory in India, does not
provide any benefit to the insured;
however, it covers the insured’s legal
liability for death/disability of TP
loss or damage to TP property. 
31 | 27 Apr-10 May 2018 | MONEYLIFE
20-04-2018 18:17:23
 Jeevan Saral policy is an extraordinary case of mis-selling and, yet, 50 million
policies were sold. Raj Pradhan finds scores of senior citizens who have lost
massive amounts and LIC is fighting them at different forums. If you have
Jeevan Saral, find out how to make LIC pay for its mistakes

T
his year onwards, a large chunk of Jeevan
Saral policies, sold by the Life Insurance
Corporation of India (LIC), will mature and
policyholders in the higher age group who
bought these will get a rude shock. They
will find that they have been duped into getting half, or
less, of what they paid by way of premiums over 10 or
more years. At that juncture, they may decide to take
legal action. LIC, on the other hand, anticipates these
legal fi ghts and seems to be determined to save its skin
by doggedly fighting on and taking the cases to higher
courts, to avoid having to compensate the policyholders.
The government-backed insurance behemoth is not
interested in being fair to millions of Indians who have,
over generations, wholeheartedly trusted the brand.
Why do customers buy traditional life insurance
products other than term plans? They want to get some
returns on their investment; i.e., the premiums they pay.
They want the peace of mind of having a life cover; also,
they do not want to lose the premiums if there is no death
claim. Getting positive returns, even if meagre, satisfies
policy-buyers. Why do they prefer traditional products
(endowment, money-back and whole life)? Unlike unit-
linked insurance plans (ULIPs), customers of traditional
policies do not want to end up with losses on the
invested amount due to equity market risks. Traditional
products are supposed to give you back your premiums
paid (investment) along with some returns. The returns
may be low; but investors in traditional products expect
safety of their principal amount (investment). 

MONEYLIFE | 27 Apr-10 May 2018 | 32

Cover Story.indd 2 20-04-2018 18:13:34

 COVER STORY

 When LIC launches a traditional product, the entire
force of its agents is pumped up to push the product.
And customers invest blindly due to their faith in LIC.
The LIC brand invokes such loyalty that customers don’t
expect LIC to fool them. It gives LIC tremendous power
which can be misused to actually deliver a lemon to
customers while being a great revenue-earner for LIC.
Taking advantage of gullible Indians blindly buying
LIC’s products, the behemoth sold a toxic product, with
the misnomer Jeevan Saral (meaning ‘life simple’), which
became a hot-selling insurance product for agents, until
it was withdrawn in December 2013. The product gave
higher insurance cover which helped as a sales pitch.
People of age 50+ were attracted. But their expectations
are that the policy will give positive returns. They want
to get back their
investment (premium
paid) plus any returns
offered by LIC. The
product ran for nine
years selling almost
50 million policies.
LIC’s army of agents
has an easy motivation
to sell policies to earn
commissions. They
are always gung-ho
about LIC products.
Did the agents really
know what they were
selling or was it just
herd mentality of
selling policies thinking
that every LIC product
has to be good for
customers? Read on, to
know that even agents
did not know that Jeevan Saral could cause losses for
policyholders.
LIC has been the country’s most attractive brand in
the financial services segment for several years. Its Jeevan
Saral product seems to have taken advantage of this fact,
selling 50 million policies. People of age 50+ who bought
Jeevan Saral will end up with losses even though it was
not a ULIP. It also shows that even traditional products,
not just ULIPs, can give negative returns. Jeevan Saral
was marketed as ‘With Profit’ policy and, yet, caused
losses.
Traditional products have different premiums (based
on age) for the same sum assured (SA). For example,
endowment plans can have a premium of Rs4,800 for
Rs1 lakh SA. If the age is higher, the premium can be
Rs5,500 for the same cover. This happens due to higher
mortality charges for higher age. Jeevan Saral has a
twist. Its premium is the same for all ages for a given
death SA and policy term; this means that the maturity
amounts are different. The higher the age, the lower will
be maturity amount, to compensate for higher morality
charges. Jeevan Saral is supposed to give better surrender
and/or paid-up value. It was considered a good plan with
a lot of flexibility for young people. The main issue with
the product is for those in the higher age group.
Moneylife has received several complaints from
Jeevan Saral policyholders. The situation will get worse,
with policies completing 10-year term in the near future.
It may inflict a loss of 50%-60% of investment. The
pathetic maturity amount will jolt the policyholders who
trusted LIC to give
decent returns. The
shock of the loss will
leave a bad taste for
older customers. Will
Jeevan Saral dent the
public’s trust in LIC?
A 58-year-old
person (Mr Patil
—name changed),
had paid a total of
Rs97,824 as half-
yearly premium of
Rs4,076 for 12 years.
The maturity SA,
which was paid to him
after 12 years, was a
mere Rs24,575 plus
bonus, amounting
to Rs34,405. Even
though the maturity
amount was mentioned in the
policy document, it was missing in the proposal, which
only specified the ‘sum assured’ of Rs1.25 lakh. So, the
buyer would think that he will get at least Rs1.25 lakh
on maturity; but it is only paid on death. How can the
proposal have only one ‘sum assured’ field when the
product has two ‘sum assured’ (death and maturity). As
the proposal did not mention the pathetic maturity sum
assured, it tantamounts to gross mis-selling by LIC. The
policy was sold with inaccurate, faulty and misleading
proposal form!
While the death cover of 15 times the premium is
good, it leads to hefty negative returns due to higher
mortality charges for those in the higher age group.
Some policies even have 20 times the premium as cover
for these people which would mean even lower returns. 

33 | 27 Apr-10 May 2018 | MONEYLIFE

Cover Story.indd 3 20-04-2018 18:08:04

 MONEYLIFE
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 COVER STORY

Jeevan Saral = Wealth Destruction

Entry Age (Years) Policy Term (Years) Total Premium Paid (Rs) Maturity SA + Bonus (Rs) Death SA (Rs) Loss (%)
53 17 2,69,500 2,28,120 5,00,000 16%
58 12 97,824 34,405 1,25,000 65%
58 10 3,18,500 1,22,360 10,00,000 62%
59 11 3,11,272 94,776 6,00,000 70%
59 11 3,63,151 1,10,572 7,00,000 70%
Jeevan Saral losses increase with entry age

 Even a younger person may barely get the premiums
back at maturity or get minimal returns; hence, Jeevan
Saral was a terrible investment product.
How Jeevan Saral Tricked Customers
Maturity Sum Assured versus Death Sum Assured:
Jeevan Saral has two different figures for SA: death sum
assured and maturity sum assured. A layman would not
know the difference and would assume that he/she will
get the SA (death) plus bonus, on policy maturity. An
insurance product usually has only one SA and, hence,
the concept of two different SA (death and maturity) is
an unknown concept to even LIC’s loyal customer base.
Even a financially literate person may miss it, as the LIC
proposal form only has ONE field for ‘sum assured’
(paid only on death). So, paying close attention to the
policy document specifying the maturity SA is important
when it is different from the death SA.
Flawed Proposal Form: Jeevan Saral was sold to a couple
without informing them that the maturity amount will
be far lower than the total of the premiums they paid. It
is unfair disclosure, as the customer is usually not aware
of the maturity SA being at variance from the death SA.
The couple filled the proposal form which only had one
SA field. The maturity SA was not mentioned in the
proposal. This is not just misleading; it is a fraud. Many
policies sold between 2003 and 2006 did not print the
maturity SA; they only showed death SA.
It is a blunder on the part of LIC. Anyone having
Jeevan Saral policy bond without maturity SA or incorrect
maturity SA can sue LIC before the insurance ombudsman
or the consumer court. You will get justice when you
demand death SA be paid even if you don’t die. People have
got justice as the policy bond is a contract! If the maturity 

MP Dr Kirit Somaiya’s Letter to IRDAI Chairman

I f a well-known political leader’s letter to IRDAI’s

chairman made no difference, it shows that either
IRDAI is helpless or it does not want to help. In a letter
premium they paid in 10, 11 or 12 years. This has led
to a lot of annoyance and distrust not only in the mind
of the aggrieved policyholder but also in the mind of
addressed to IRDAI chairman dated 27 November the general public. This is just the beginning as the
2014, Dr Kirit Somaiya, wrote, “In the last 4 financial sales for the period from f 2004 to 2007 under this
years the sale under this is plan spurted all of the plan was low.
lo The real trouble will start
sudden. For the period from 2004 till 2007, the after 2018 if LIC continues to pay such
sales under this plan werere very less. 1st maturity low maturity
matu even after the year 2018
lace now for the 1stt time
of this policy has taken place for a 10-year
10 term plan. This is really
as minimum term of 10 0 years is over now. It going to t endanger to the goodwill
is very disheartening and d sad to inform you Sir and reputation
rep of LIC of India where
that in many cases the maturity amount for 10 government
governm of India are the owners.
years as well as 11 & 12 2 years term is very less Can we afford Sir to create doubt in
to the extent that the policyholder
licyholder has not even the mind
min of 35 crore policyholders
got the refund of the premium
mium of what they of LIC? Is it justified to play with the
paid in this period. In quite a few hard-earned
hard-earn money of such big masses?
cases, policyholders with h higher It will
w create a lot of havoc if the
age have not even got halff of the same
sa trend continues in future.”

MONEYLIFE | 27 Apr-10 May 2018 | 36

Cover Story.indd 4 20-04-2018 18:09:11

 COVER STORY
Branch Office Surprised with Negative Returns
T hat agents don’t know about product details is a
known fact; but how can even the heads of LIC’s
branch offices be clueless? The head of an LIC branch
wrote to the divisional office seeking the reasons for
a customer getting only one-third of the investment
amount.
He wrote: “People trust and have faith in LIC for
investments. If their savings are not protected, then
how can we market other products based on promises
of loyalty expected for LIC schemes?” A traditional
 SA was correctly specified in the policy document, LIC
will put up a fight. Most policyholders do not look at
the policy bond details which can be an expensive
mistake.
HRDesai
Cover Story.indd 5
policy may have losses if the policy is surrendered
prematurely or it is converted to ‘paid-up’; but, in the
case of Jeevan Saral, it has happened even at policy
maturity.
If the branch heads of the seller do not know about
product returns, what can be expected from a lay
customer? Is it that the sales force were so mesmerised
by GN Agarwal’s speeches that they followed him
without questioning the product? Only a genius can
design such a saral (easy) product.
Conceptualised by the Genius GN Agarwal?
GN (Gorakhnath) Agarwal was head of the actuarial
department of LIC when Jeevan Saral was launched.
Mr Agarwal had addressed LIC’s divisional officers and 
HRDesai
37 | 27 Apr-10 May 2018 | MONEYLIFE
20-04-2018 18:09:58
 COVER STORY

Letter of National Federation of Insurance Field Workers of

India to LIC
T his is the organisation of agents who also
feel cheated as they sold the policy without
even knowing that it can cause huge losses for the
policyholder. At the end of the day, even the agents
who mis-sell products may not really wish that their
customers should end up with such large losses.
Sure, they want to sell products to make a living for
themselves, but they don’t want to hear abuses from
their customers.
The letter dated 1 July 2014 from the National
Federation of Insurance Field Workers of India to
LIC states—“Please find enclosed herewith a maturity
discharge voucher for policy no.892713507 wherein it
is observed that the policyholder has paid Rs4,70,400
as premium during the 10 year policy term@ a yearly
premium of Rs47,040, whereas the total maturity value
offered to him is Rs1,65,186 only. The policyholder in
this case is getting Rs3,15,214 less than what he has
paid. Forget about any growth, he is, in fact, getting
nearly 75% less than the total premium paid by him.”
It must be a rare occasion when the organisation
of agents has complained to LIC about its dubious
product which they sold to earn curses from customers.
The goodwill of LIC has evaporated into thin air. It
also shows that agent mis-selling is not true for Jeevan
Saral; it is a case of LIC mis-selling.

 agents gatherings held in Mumbai, Vadodara and other hefty losses for those in the higher age group. A certain
places in India to pitch Jeevan Saral to the sales force. trainer Mr Patel is credited with creating pamphlets
How is it possible that even the sales force did not smell a claiming that Jeevan Saral can give 10%pa returns. 
rat with the goodies offered by LIC? Moneylife
has recordings of these LIC meetings. The main
points of his speech were as follows:
1. Surrender after three years without any
loss;
2. Policy is ‘saral’ as its name suggests;
3. Good returns, high returns, better returns,
better intention, better than private
investment;
4. Can earn interest/yield @9%;
5. No mention about loss any time during his
speech.
The proof of Mr Agarwal’s wrongdoing
is a letter from MP (member of Parliament)
Dr Kirit Somaiya to IRDAI chairman in
2014. He says, “It was for the first time in the
history of LIC that the Actuary of LIC (Shri
GN Agarwal), who launched this plan, directlyy
addressed the field force in big gatherings att
various places all across India at the time off
the launch of the plan to inform them that thiss
is a ‘With Profit’ Plan and, in fact, the maturity y
under this plan is going to be more than the otherr
traditional plan such as endowment and money--
back plans.”
A veteran ex-LIC agent, says, “Jeevan Saral al
was mis-sold with false promises of gettingg
10%pa (per annum) returns. Forget about 10%paa
returns for a non-ULIP product, you may not get et
any returns or even get losses. The product caused d

MONEYLIFE | 27 Apr-10 May 2018 | 38

Cover Story.indd 6 20-04-2018 18:10:27

 COVER STORY

RTI Information Denied by LIC

I t is not surprising that LIC has evaded questions put

to it under the RTI. The only information it gives
is what is publicly available—that almost 50 million
Jeevan Saral policies have been sold. Companies have
perfected the art of making excuses for why they cannot
give answers. An RTI query seeking information on
maturity claim payment of
Jeeval Saral policies and the
premium collected for these
policies was denied answers.
The reply gave excuses for
not being able to give such
data. LIC wrote:
“Information sought is
not maintained by this office
of the Public Authority,
hence, information sought is not available as provided
u/s 2(f) of RTI Act, 2005. Further, this information
is not required for the normal, routine and regular
administrative work. The information will have to be
collected only to meet the demand of the applicant.
Therefore, collecting and collating the information for
the purpose of providing the same to the applicant will
amount to creation of a new record and will result in
disproportionate diversion of the limited resources of
this Public Authority, as mentioned in Section 7(9) of
RTI Act, 2005. This would be definitely detrimental
to public interest because it would put to undue strain
the limited resources of this Public Authority.” The
first appellate authority
has disposed of the appeal
thereby upholding the
earlier order of public
information officer.
If LIC itself does not
keep track of maturity claim
payment versus premium
collected for the policies,
then how does it know how
much profit it made from the policy? How does LIC
know whether the product has been good for customers
or not? IRDAI needs to ask LIC for this data to know
how senior citizens were duped of their investments.
Not specifying the maturity amount in the policy bond
for most of policies sold in the first three years is a
serious matter. IRDAI needs to wake up.

 The blatantly false pamphlets may have triggered mass Hyderabad and Kochi Ombudsman’s Favourable
mis-selling.” Decision: The Hyderabad insurance ombudsman’s office
Currently, Mr Agarwal is the chief actuary with has given justice to a policyholder. The Deccan Herald
Future Generali Life Insurance. Actuaries are extremely newspaper, on 20 January 2016, had a news report of a
well-paid. Being a chief actuary decision given by the ombudsman
of a life insurance company can in the policyholder’s favour. The
mean earnings in crores of rupees. A veteran ex-LIC agent, policyholder had argued that
It is an irony that actuaries enjoy says, “Jeevan Saral was LIC had advertised Jeevan Saral
a fat package when customers can mis-sold with false in newspapers in 2002. The
even lose their lifetime’s savings in advertisement had claimed that
a toxic life insurance product. promises of getting the scheme offered higher returns
10%pa (per annum) to the insured. He paid Rs48,040
Grievance Redressal Options returns. Forget about as premium, while the maturity
Mumbai Ombudsman Rejection: amount was Rs34,894. He was
Mr Patil did not get justice at the 10%pa returns for a non- told that the SA was Rs1 lakh
Mumbai ombudsman, despite ULIP product, you may and, hence, was expecting that
getting a paltry one-third of not get any returns or amount. What worked in the
the premium at maturity. The favour of policyholder was that in
ombudsman’s decision states: “If even get losses the LIC policy bond the column of
the insurance company has paid maturity SA was ‘blank’.
the amount as per policy conditions, it is not possible The copy of the Hyderabad ombudsman’s order,
for us to entertain your complaint. However, you may procured under the Right to Information (RTI) Act
approach any other Forum/Court for the redressal of reveals that during the hearing, the LIC representative
your complaint.” stated that not specifying of the correct maturity benefit 

39 | 27 Apr-10 May 2018 | MONEYLIFE

Cover Story.indd 7 20-04-2018 18:10:48

 COVER STORY

Where Are the Consumer Protection Regulations?

Product Suitability: IRDAI’s Protection of
Policyholders’ Interests Draft Regulation (2017)
dropped the ‘suitability’ clause which was present in
the 2014 draft. It had said:
“The insurer, insurance agent
and the insurance intermediary
shall also ensure the suitability
of the product with relevance
to prospects’ income, personal
and family circumstances, life
stage, fi nancial goals and risk
appetite.” If such a regulation
is enforced, products like
Jeevan Saral will never be sold
to those in higher age group.
Protection of Policyholders’ Interest Draft Regulation:
Draft Regulation (2017) has dropped the key rights
that were present in the 2014 draft. The right to
professional diligence, right of fair disclosure, right to
receive suitable advice and right to protection against
unfair contract terms are
some of the rights that are
missing in the current draft. If
the pro-consumer clauses are
altered, who can be blamed if
the intermediaries mis-sell the
product? Indians in the higher
age group have invested in
the product to get positive
returns; they did not buy the
policy to lose 65%-70% of
premium paid. IRDAI should never have approved
Jeevan Saral product for sale to those above 50 years
of age.

 was a typographical mistake that occurred during the insured, the LIC divisional manager filed a writ petition
printing of the policy document. Does it also mean that in the HC. The Dharwad Bench of the Karnataka HC
not specifying the maturity amount in the proposal form imposed a fine of Rs10,000 on LIC for filing a writ
is also a mistake from LIC, as the proposal form does petition against an order of the ombudsman. The Bench’s
not have separate fields for maturity and death SA? The order, procured under RTI, states that the insured is at
ombudsman ordered LIC to pay Rs1 lakh to the insured. liberty to levy execution and attach the property of the
In a similar case, 54 year old person who purchased petitioner LIC, if LIC failed to pay the sum.
Jeevan Saral policy for 11 years So, there is hope for Jeevan
term was paid maturity amount Saral policyholders. IRDAI should
plus bonus of Rs39,894. The IRDAI should intervene intervene and help policyholders.
person was expecting to be paid SA After all, IRDAI is also to blame
of one lakh. The ombudsman order and help policyholders. for approving a toxic product,
states following—“If the insurer After all, IRDAI is knowing that senior citizens will
has made any error in printing the also to blame for end up losing their hard-earned
policy, it had eleven long years to money. Where does the buck stop?
rectify the same, which was not approving a toxic Will justice ever be served? Or
done. The policy document is the product, knowing that should senior citizens just give up,
basis of the contract and the insurer senior citizens will end thinking that their loss is due to
cannot at this point state that the indirect tax from the government
maturity sum assured will be much up losing their hard- levied via LIC?
lower.... The issue of policy cannot earned money Consumer Court: According to Mr
be treated as another routine Patil, “I have met the Ombudsman
matter. Obviously, some printing office staff. They agreed with me
error has been made in the policy document which the that LIC should have mentioned two sum assured, one
insurer has not till maturity informed the policyholder.... saying at the time of maturity and second at the time
In the result, an award is passed directing the respondent death during policy period, in the proposal form which
insurer to honour the contract and pay the maturity sum we signed at the time taking policy.There are so many
assured of Rs1 lakh as printed on the policy. No costs.” policyholders, mainly senior citizens, who are duped.
High Court (HC) Decision: After the Hyderabad Wrong information was given by LIC itself and their
ombudsman’s decision asking LIC to pay Rs1 lakh to the representatives all over India. LIC has lost the case in 

MONEYLIFE | 27 Apr-10 May 2018 | 40

Cover Story.indd 8 20-04-2018 18:11:15

 COVER STORY

Why Senior Citizens Should NEVER Buy Life Insurance

I deally, by the time you retire, your need for life

insurance should be zero. Senior citizens should
never buy a life insurance product; but they are the
perfect targets of insurance
companies for their investment
products. Most such products
offer low insurance cover for
those at higher age. The cover
may be only seven times for those
above the age of 45 years, making
the maturity amount taxable.
This is another good reason for
staying away from such products.
Many single-premium products
offer low life cover, of 1.25 times premium, for all
ages. It means that the maturity amount will be taxable
for everyone. LIC’s New Bima Bachat is an example of
a policy that has taxable maturity amount. And, Bima
Bachat has been an evergreen product for LIC, in the
words its own executive director.
Even if the life cover is 10 times or more to ensure
that maturity amount is tax-free,
those in the higher age group
should stay away as the returns
are low due to higher mortality
charges for life risk cover. The
higher the age and/or life cover,
the lower will be returns for
the investment component. The
returns can even be negative if
mortality charges take away a
big chunk. Customers of age 50+
years buying an insurance-cum-investment product
having cover of 15-20 times premium are taking a high
risk for their investment, as high mortality charges will
put a dent in the investment and end up making losses.

 consumer court in Kolhapur (Maharashtra). A senior even civil courts. The intention of LIC is clear. It does
citizen (Mr Runwal) took LIC to Kolhapur consumer not want to pay a single rupee and, hence, is taking
court. All three judges have given their decision against the cases to higher court even when the decision goes
LIC. One of LIC’s pamphlets was admitted by LIC against it in the lower court. But, ombudsman decision
as part of the marketing material. LIC deposited the is binding on them and hence LIC is trying to find a way
money in court and has taken the complainant to the out of its troubles. LIC knows it has lost such cases and
state commission. It may end up in will again lose in future. To pre-
Supreme Court (SC). My question empt it, LIC has issued periodic
is: To get our money from LIC, What LIC is trying circulars to its staff to intimate
should everyone approach the policyholders regarding correction
SC?” to do is sheepishly of discrepancies in policy bond.
hide its blunder of (Read the latest circular dated
If Maturity Amount Blank/ not specifying the 26 March 2018 on page 37).
Incorrect in Policy, You May WIN What LIC is trying to do is
against LIC maturity SA or having sheepishly hide its blunder of
The Jeevan Saral discrepancy in incorrect maturity SA not specifying the maturity SA
the policy bond showing blank in the policy bond... so or having incorrect maturity SA
maturity SA or incorrect SA is a in the policy bond. LIC wants to
reality. If you have Jeevan Saral that the policyholder update these policy bonds so that
with blank or incorrect maturity cannot cry foul the policyholder cannot cry foul
SA, you are lucky, as you may win of having policy bond discrepancy
if you take up the fight before the and, hence, demanding death SA
ombudsman, or a consumer or civil court. Many policies to be paid on policy maturity. If you are lucky to have
issued during the years 2003-04, 2004-05 and 2005- Jeevan Saral with blank or incorrect maturity SA, do not
06 did not show the maturity SA. The amount may be let LIC do the correction. Instead, immediately haul LIC
blank for policy bonds issued from 2006-07 onwards to ombudsman office to demand death SA to be paid
also. on policy maturity. Do not let LIC cover up its blunder.
LIC is fi ghting with agitated senior citizens who are Take the opportunity and demand justice for being sold
fi ling cases in ombudsman offices, consumer courts and a lemon by the behemoth. 

41 | 27 Apr-10 May 2018 | MONEYLIFE

Cover Story.indd 9 20-04-2018 18:12:10

 MONEY MANTRA MEHRAB IRANI

SIP: Systematic but Not Safe

Investment Plan
E
ither you control money or money controls you and benefit the investor? Read on.
then it controls your life, freedom, dreams, heart and Regularity of Investments: SIP regularises the investment
soul. And, to achieve financial freedom and fulfil process by making it mechanical. It removes human
your long-term goals, the best argument put forth by mutual judgement from the decision-making process. It instils
funds (MFs), their distributors and financial planners is SIP discipline in the investor and helps him/her stay focused,
or systematic investment plan. SIP is generally marketed as investing regularly for the long term.
a safe and sure route for investments in equities to create Power of Compounding: Compounding has been labelled
wealth over the long term. the ‘eighth wonder of the world’ and it really is. Very few
SIP is certainly safe for mutual funds and distributors people realise how powerful compounding is, over long
because they get periods– small amounts
committed continuous compounded regularly
money for the long term over longer periods
on which they can earn make a big difference
a fixed percentage of in the final results.
fees and commissions. For example, Rs5,000
It is also safe for invested monthly at
financial planners to 10%pa (per annum)
recommend because, if return over a 30-year
anything goes wrong, or a 35-year period
they can blame the SIP would accumulate to
concept. However, is Rs1.13 crore or Rs1.90
SIP safe for an investor? crore, respectively—a
This article attempts to massive difference of
examine and bisect SIP Rs77 lakh. Hence, just
in a manner probably by starting five years
never done before. earlier, a person would,
SIP is nothing but a regular investment plan, mostly ultimately, be able to accumulate Rs77 lakh or 70% more.
monthly or quarterly, of a particular amount in an MF That is the power of compounding.
scheme. It is similar to a recurring The first one, i.e., rupee cost
fixed deposit with a bank. It allows averaging is the general perceived
an investor to deposit a small amount SIP is certainly safe benefit of investing through the SIP
at regular intervals instead of a single route—the other two are advantages
one-time investment.
for mutual funds and of investing through any regular
distributors because investment method. Now, let us
Benefits of Investing through SIP they get committed consider that whether SIP is really
Rupee Cost Averaging: This is superior to lump-sum investments
supposed to be the primary benefit
continuous money for or not.
of investing through the SIP route the long term on which
which has made it so popular among they can earn a fixed Is SIP Really Superior to Lump-sum
investors. What is the cardinal Investment?
principle of buying anything in this
percentage of fees and Is SIP always superior to lump-sum
world? Buy when the price is low. commissions investment option? Not always.
Rupee cost averaging simply does Why? The Nifty is around 10,500
that by automatically buying more levels today and, if you know with
units when the price is low and purchasing less when the certainty that it is going to become 12,500 after one year,
price is high. This is the primary advantage of a SIP—one then you would, obviously, be better off buying your entire
on which it is being sold and marketed. But does this really investment quantity today at the lowest value rather than 

MONEYLIFE | 27 Apr-10 May 2018 | 42

Irani column.indd 2 20-04-2018 13:42:31

 MONEY MANTRA MEHRAB IRANI

 keep averaging upwards month after month through the average cost.
SIP route. On the other hand, if you know that the Nifty But does this mean that SIP works under all market
is likely to go down to 9,000 in the next one year, then conditions? Certainly not. So, let us now examine the
forget SIP or lump-sum, you would be richer not investing market conditions under which SIP would not work.
in equities. Therefore, SIP is not some magic that it will
outperform the lump-sum investing method or always give When SIP Does Not Work
positive returns, even over the long term. So, what are the Bear or Falling Market: SIP would not work and, in fact,
conditions under which SIP works? yield negative returns in a bear, or falling, market as every
new purchase, although made at
When SIP Works a lower cost, would eventually
Bull or Rising Market: SIP would SIP should perform well in be valued at an even lower price.
yield positive results in a bull, a volatile but, ultimately, In such a market scenario, SIP
or rising, market as every new might outperform lump-sum
purchase, although made at a rising, or bull, market. investments as the investor will
higher cost, is valued at an even This would be the market get the benefit of averaging
higher price, finally. However, in which the ‘rupee cost downwards but the investor
as seen earlier, in such a case, it will still lose money. I believe,
would be wiser to buy the entire averaging’ would work it should be the endeavour of
investment in one go rather than most favourably for the every investor to make money
keep ‘averaging upwards’ through investor, as volatility would by investing and not simply ‘lose
the SIP route. less’.
Volatile but Rising Market: SIP lead to the best possible Sideways Market: SIP would not
should perform well in a volatile average price work in a sideways market, as
but, ultimately, rising, or bull, you will not get the benefit of
market. This would be the market rupee cost averaging and the final
in which the ‘rupee cost averaging’ would work most value would be closer to the average cost. In a sideways
favourably for the investor, as volatility would lead to the market, the difference between the performance of SIP
best possible average price. The final rising or subsequent and lump-sum might not be significant.
bull market would ensure that the end price is higher than Market Moves Upwards and Then Moves Down: This would
the average price. be one more case in which SIP would not perform because
Market Corrects Downwards and Then Moves Up: This the investor will actually be hurt by the SIP as he would
would be another case in which SIP would perform well be ‘averaging northwards’ while the final value would
and, in all likelihood, be better than initial lump-sum be much lower due to the subsequent market correction.
investment. This is because the investor will get the In fact, in this scenario, lump-sum would perform much
advantage of the intermediate correction to lower his better than SIP, as it would not be subjected to the negative 

What Works Best, When?

Market Condition
Rising or Bull Market
Falling or Bear Market
Sideways Market
Market in Median Range, Corrects
Downwards and Then Moves Up
Market in Median Range, Moves
Upwards and Then Moves Down
Superior Investment Option Comments
Lump-sum Since the investor buys lump-sum at a lower price rather than
averaging upwards through the SIP route
Neither of the two Simply because, in a bear market, an investor is going to lose
money in equities—whether SIP or lump-sum
Indifferent between the two Both will lead to somewhat similar results, since there is neither any
benefit nor suffering, using either method
SIP SIP would, in most probabilities, perform well because the investor
will get the assistance of the intermediate correction to lower the
average cost
Lump-sum Lump-sum should, in most likelihood, perform better, since the
investor will not average higher

43 | 27 Apr-10 May 2018 | MONEYLIFE

Irani column.indd 3 20-04-2018 13:43:10

 MONEY MANTRA MEHRAB IRANI

 effects of higher rupee cost averaging. averaging actually works against the investor and vice versa.
Therefore, SIP might not always be the best investment SIP works on the principle of regular investments and
route. So, now let us examine when it would be ideal to brings the power of compounding. It removes emotions
invest through SIP or when as a lump-sum. and uncertainty from your investment plan by making it a
mechanical, boring process. It inculcates the habit of regular
Common Misconceptions about SIPs savings and does not encourage timing and speculation in
Misconception: SIPs generate higher return than lump- the markets. All these are correct and accepted facts. But,
sum investment. don’t forget that SIP is just another method of investing; it
Truth: As explained earlier, this is just a misconception is a vehicle not the final destination. It may pass through
disseminated by vested interests like MFs and their straight or bumpy roads; it may lead you to your destination
distributors. SIP can be in a lesser or higher time-
as good, or as bad, as frame; sometimes, it
lump-sum. It depends on may not even lead you
which market condition to your destination by
you are in. derailing your plan. SIP
Misconception: SIPs is just a method of getting
always generate positive on to the investment
return over the long term. vehicle to reach your
Truth: There can be destination. If the vehicle
nothing farther from the you choose is incorrect,
truth. This statement there is less likelihood
is made under the of you reaching your
assumption that equity destination. Therefore,
markets always go up the next time a mutual
over the long term. If, for fund or distributor or
whatever reasons, equity financial planner advises
markets don’t go up over the long term, there is no way you that SIPs are the safest route to invest in equities,
in which SIP would be able to generate positive return. remember that they are not lying. It is safest route—but
And if equity markets, indeed, always go up over the long not for you the investor; it is for their own selves. 
term, whether SIP or lump-sum, the investor will always
get positive return.
Misconception: SIP would always give positive return Mehrab Irani is the author of acclaimed
because of ’rupee cost averaging’. 10 Commandments for Financial
Truth: Rupee cost averaging can work in investor’s favour Freedom and best-seller Mad Money
or against, depending on the market condition prevailing Journey, India’s first finance thriller
at the time of investment. If it’s a bull market, rupee cost

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MONEYLIFE | 27 Apr-10 May 2018 | 44

Irani column.indd 4 20-04-2018 13:43:30

 StockWatch Stocks and sectors that catch our eye

K E C I nt e r n at ional The high growth in revenue was mainly contributed

by the T&D segment which grew by 20% during
Towering Growth the quarter and contributed approximately 63% of
the revenues. Another emerging segment is railway

K
EC International (KEC) is an EPC (engineering, business which is growing rapidly; railway business
procurement & construction) company almost doubled y-o-y during the quarter. On the back
focused on power transmission & distribution of strong order inflow, the management expects this
(T&D). But the company has also gone into other segment to generate a revenue in range of Rs1,500
business verticals, such as manufacturing of cables, crore to Rs1,600 crore during FY18-19. The total
civil construction and railway business and renewable order-book now stands at Rs17,148 crore. Again, the
energy (solar power projects). For the quarter ending railway segment has given a boost to the order-book
December 2017, the company reported excellent which now aggregatesRs3,600 crore. In the T&D
financial performance with revenue growing at 25.8% segment, the company is witnessing good traction
year-on-year (y-o-y) across geographies. In a
while operating profit media interview in March,
shot up 34.3% and Vimal Kejriwal, managing
net profit rocketed up director & chief executive
78.6% y-o-y. officer (MD&CEO)
Power T&D is the of KEC, said that the
largest segment of the company has received new
company in which it has orders worth Rs2,419
experience of project crore. This takes the total
implementation of of new orders received
several decades. It claims during FY17-18 to over
to be a global leader in Rs15,000 crore—20%
the power transmission more than in the previous
EPC and a fast growing financial year. The
company in substations, with operations spread over company will clock a growth rate of 10%-15% during
many countries and regions, viz., India, SAARC (South FY17-18 and the MD&CEO also gave guidance for a
Asia Association of Regional Cooperation) countries, growth rate of 15%-20% during FY18-19.
and countries of MENA (Middle East and North Historically, KEC’s sales had grown at a healthy
Africa), south-east Asia, Central Asia, North America rate, clocking a compounded annual growth rate
and Latin America. It manufactures low tension (LT) (CAGR) of 14.3% for the past 10 years. But growth
cables, high tension (HT) cables and extra high voltage has slowed down in recent years with sales CAGR
(EHV) cables, power cables, telecom cables, etc. The falling to 2.8% for the past three years. However, the
railways business division of the company undertakes company has reported exceptional performance during
railway EPC projects like railway electrification, track nine months FY17-18 (results for the quarter, and year,
laying, building railway station, etc. ending March 2018 have not yet been announced) and 

Disclaimer: None of the stock information presented constitutes a recommendation or a solicitation of any offer to buy or sell any securities. Information presented is general in nature that does not take into
account your individual circumstances, financial situation or needs Although information has been obtained from and is based on sources we believe to be reliable, we do not guarantee its accuracy and the
information may be incomplete or condensed. All opinions and estimates constitute our judgement as on the date of the report and are subject to change without notice. Past performance is no indication of future
results. Investors must do their own research before acting on them. Data Source: Centre for Monitoring Indian Economy’s Prowess database.

Those who have subscribed to the stockletters should only follow the stocks recommended there.

45 | 27 Apr-10 May 2018 | MONEYLIFE

StockWatch.indd 2 20-04-2018 13:48:33

 STOCK WATCH

during FY16-17 which has brought down the leverage

Rising Trend ratio to 1.3x. Interest cost amounted for 3.8% of
35% sales during FY16-17; but, in past two quarters, it has
come down below 3% which is an indication that the
company has further reduced debt.
20% As the MD&CEO has indicated, the strong inflow
of orders should continue and, with the excellent
track record of order execution, KEC will be able to
5% meet the management’s growth targets in the coming
year with growth in profitability. KEC’s consistently
good performance has driven up the stock price from
-10%
just around Rs135 in December 2016 to over Rs400
Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17
now. KEC has reported a return on equity of 22%
SSales Growth y-o-y Operating Profit Growth y-o-y
O
and return on capital employed (net profit/capital
employed) of 13%.
 strong inflow of orders will help the company start The current market-capitalisation is approximately
a new round of growth. Moreover, with growth in Rs10,600 and the stock is trading a price-to-earnings
sales, the margins have improved to some extent in the (P/E) multiple of 26x. The company seems to be fairly
recent quarters which can be seen the chart. valued but the stock price will perform well, going
KEC is also operating with high debt on its balance forward, as the company executes the order-book
sheet. The company had a leverage ratio of 2.5x for along with consistent growth in new orders. If you are
FY15-16 but a major chunk of the debt was repaid buying, wait for a dip. 

N av i n F l u orine Int ernat ional hydrofluoric acid, among other inorganic fluorides.
These products are used in industries such as stainless
Power Chemistry steel, glass, oil & gas, abrasives, etc. These are usually
used in high volume in standardised processes. Under

N avin Fluorine International (NFI) has expertise

in manufacturing of various fluoro-chemicals.
Its business spans refrigeration, inorganic fluorides,
specialty chemicals, NFI manufactures niche fluorine-
based molecules which are used in pharmaceuticals,
agrochemicals and chemicals industries. CRAMS is a
specialty chemicals and CRAMS (contract research research and knowledge offering which the company
and manufacturing services). For the quarter had forayed into in 2010. This segment provides basic
ending December 2017, NFI reported exceptional research, laboratory synthesis, process developments,
performance again; revenues grew by 45.3% y-o-y scaling up to required batch size manufacturing,
(year-on-year), while etc, for innovator
operating profit shot pharmaceutical
up by 69.2% y-o-y and and agrochemicals
net profit rocketed by companies globally.
234.7% y-o-y. The huge The high growth
jump in net profit is not rate in the December
due to sudden margin 2017 quarter was
expansion but because contributed by CRAMS,
the December 2016 where revenues were
quarter was a bad one. up by a staggering
NFI is one of the 153% followed by
oldest manufacturers refrigerants which
of refrigerant gases in expanded by 49% while
India and has pioneered inorganic fluorides
its manufacturing process since 1967. NFI is also one grew by 25% and growth in specialty chemicals
of the largest manufacturers of inorganic fluorides, fell by 1%. An analysis of segment-wise revenue
viz., anhydrous hydrofluoric (AHF) and aqueous shows that the company is focusing on CRAMS and 

MONEYLIFE | 27 Apr-10 May 2018 | 46

StockWatch.indd 3 20-04-2018 13:49:00

 STOCK WATCH
Strong Revenue Growth
Rs Cr
240
200
160
120
Dec-15 Jun-16 Dec-16 Jun-17 Dec-17
 inorganic fluorides segments. The contribution of
CRAMS to revenue, compared on a y-o-y basis for
Q3FY17-18, has increased from 19% to 33%; while
the contribution of inorganic fluorides has increased
from 17.6% to 20.4%. Though the performance seems
impressive on a y-o-y basis, it has not been great on
a quarter-on-quarter (q-o-q) basis. In the refrigerant
segment, the company directly competes with Chinese
manufacturers; due to severe pollution problems in
China, Indian manufacturers have benefited; this
explains the growth. But the question whether this
growth can be sustained remains. There is a possibility
that Chinese manufacturers will come back with
predatory pricing.
The specialty chemicals business does not seem
to be picking up at all, due to global slowdown
in agrochemicals and a product-specific issues in
pharmaceuticals. NFI is transferring this business to a
new joint venture established with Piramal Enterprise.
This may be a positive sign for reviving this segment.
Since CRAMS is the fastest growing segment, the
company has planned to invest Rs115 crore in these
manufacturing facilities. The expansion will be funded
by internal accruals as well as debt. The capex is set to
be completed by June 2019.
NFI’s decision to foray into more value creating
businesses has shown good results. The company
has moved up from manufacturing of commodity-
like chemicals to specialty chemicals and CRAMS.
Sales have grown at a compounded annual growth
rate (CAGR) of16%. Meanwhile, operating as well
net margins have also improved continuously. The
company has generated highest margins in recent
quarters with operating profit margin in range of
24% to 26% and net profit margin of approximately
StockWatch.indd 4
Segment-wise Revenue
Q3 FY16-17 Q3 FY17-18
23% 25% 24%
38%
20% 18%
33%
19%
Refrigerant Inorganic Fluorides
CRAMS Specialty Chemicals
21%. This is high, keeping in mind the business and
different segments of the company. The management
has a good past track-record of execution and it may
be fair to assume that management’s decision to invest
in CRAMS business will grow the business, in the long
term. NFI, at present, is a debt-free company. The
company has generated a return on capital employed
(net profit/capital employed) of 30.5% and return on
fixed assets of 32.6%.
The current market-capitalisation of the company
is Rs3,800 crore while the stock is trading a price-to-
earnings (P/E) multiple of 22.7x. Given the flat q-o-q
performance, the high y-o-y growth rate will go south
and, hence, the stock price may also not perform well
over the medium term. But the prospects look good for
the long term. 
Talwalkars Better Value Fitness
Strength-training
Needed, Not Cosmetic
Changes
T alwalkars Better Value Fitness (Talwalkars) is
a well-known fitness brand in India but the
company was mismanaged. Now, the structure of
its demerger also raises questions on the company’s
corporate governance practices. The company classifies
its business into two segments, namely, gym and
lifestyle. It plans to demerge the two segments in
different entities. So, the current name of the company
is Talwalkars Better Value Fitness and the new 
47 | 27 Apr-10 May 2018 | MONEYLIFE
20-04-2018 13:49:55
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 STOCK WATCH

The assets of the gym business constitute 71% of

No Strength to Run the total assets; these are to be transferred to the new
Rs Cr entity. The remaining 29% will be retained by the
100
current entity. When the stock went ex-demerger (i.e.,
two days before record date), the price should have
80
been adjusted according to the assets being transferred.
60 The stock price on ex-date was approximately Rs240
and the adjusted price after the demerger should have
40 been approximately Rs70; instead, the stock price
opened at Rs192 and, since then, the stock was on
20 lower circuits, at least up to the time of writing this
article.
0
Sep-15 Jun-16 Mar-17 Dec-17
The stock price opened so high because of the
Sales Operating Profit
confusion among market participants about the
structure of the demerger. It makes little or no sense
why a company wants to demerge, as the gym and
 demerged company will be named Talwalkar Lifestyle. lifestyle facilities will operate together on the same
Surprisingly, the company has decided to spin off the property. The company has said in its FY16-17 annual
gym business to Talwalkar Lifestyle but, as the name report that the gym business entity will carry the
implies, it should have lifestyle business. The whole lifestyle services and payment to the lifestyle entity will
demerger is very confusing; hence, we have given a be made based on transfer pricing.
graphic below explaining the demerger. The quarterly revenue and operating profit have 

2 Business Segments

Gym Lifestyle

(To be (To be
Spun Off retained
to new by current
entity) entity)

New Entity: Old Entity:

Talwalkars Talwalkar Better
Lifestyle Value Fitness

(Company names will be exchanged after demereger)

MONEYLIFE | 27 Apr-10 May 2018 | 50

StockWatch.indd 5 20-04-2018 18:36:55

 STOCK WATCH
 been very volatile, as can be seen in the chart. There
is no clear trend. Net profit margins range from
10% to 37% which is strange for a consumer-facing
business. The return ratios of the new entity may look
higher, as the asset base and equity is lower, but is
it really worthwhile to go through all the hassles of
demerger when the revenue and profitability are highly
volatile? 
CESC
A Special Situations
Play
C ESC is the flagship company of RP Sanjiv
Goenka group. The main business of CESC is
power generation and transmission and distribution
(T&D); but the company has also used the cash flow
of the business to get into various other businesses,
viz., retail, BPO (business process outsourcing),
infrastructure, etc. CESC has recently announced a
plan for demerger to unlock value for shareholders,
since conglomerates always trade at a discount to the
sum of parts value of the company. Also, the non-core
businesses were draining profits of the core business;
hence, the demerger will be a good opportunity for
investors to exit any business segment they don’t want
to participate in. CESC will be demerged into four
companies and the businesses will be transferred as per
the segment. The demerger will be as follows:
1. CESC: It will have power distribution business for
Kolkata, Howrah, Greater Noida and distribution
franchisees for Kota, Bharatpur and Bikaner.
2. CESC Genco: It will have power generation
business which will include thermal, wind and solar
StockWatch.indd 6
power generation business.
3. Spencer’s Retail: It will have the retail and apparel
brand business of the company.
4. CESC Ventures: All other businesses, such as
BPO, shopping mall, real estate and FMCG (fast
moving consumer goods) will be transferred to this
company.
Distribution business generates more than 20%
return on equity which is among the highest in the
sector. It will be the only company to be a pure-
play distribution company. CESC has a total power
generation capacity of 2,530MW (megawatts)
comprising mainly thermal power plants plus wind
and solar generation. The power distribution business
has more than 3 million customers in Kolkata and
Howrah covering approximately 570sq km (square
kilometres) and also in Greater Noida covering another
approximately 330sq km.
The retail business, which is run under the brand
name Spencer’s, has more than 120 stores and 39
hypermarkets spread over 35+ cities. The company is
recording strong sales growth in this segment and has
plans to roll out more than 50 hypermarket stores over
the next four years.
CESC Ventures will have all the other businesses,
the major being the BPO, Firstsource Solutions
(FSS). FSS is a separately listed company but CESC
had acquired a major stake in FSS in FY12-13. FSS
provides business process management services to over
a dozen Fortune 500 companies. CESC Ventures will
have the shopping mall and real estate business too.
The company owns and operates the Quest shopping
mall in Kolkata built on three acres of land. It is also
developing a residential project in Haldia (West Bengal)
on 3.5 acres of land.
CESC, in its power segment, reported revenue of
Rs10,602 crore for FY16-17 and made an operating 
51 | 27 Apr-10 May 2018 | MONEYLIFE
20-04-2018 13:50:34
 STOCK WATCH

 profit of Rs2,292.7 crore. The retail business (Spencer)

reported revenue of Rs2,037.8 crore with an operating Expected Market-cap after Demerger (Rs Cr)
loss of Rs67.1 crore. BPO business reported revenue
of Rs3,558.8 crore and an operating profit of Rs380.1
crore. Retail business is a loss-making segment for the
17%2,000
company but the losses are coming down. Sales/square 900 35%
foot of the retail business is in an upward momentum, CESC

increasing from Rs1,060 to Rs1,576 in the past six 7,500

years. This business is expected to turn around and
become profitable soon. Such turnaround can create
a lot of value for shareholders, once the company is
demerged. Similarly, at present, the company considers
power generation and T&D as one segment. After the
demerger, power generation and T&D will be separate
which will allow the management to have a more clear
and focused strategy for business.
The current market-capitalisation of the company
is Rs13,600 crore and the price-to-earnings ratio
(P/E) is 15.7x. After the demerger, value unlocking is
expected and, according to market consensus, based
on current valuation, earnings and assets, distribution
CESC Genco
Spencer’s Retail
47%
6,000 CESC Ventures
business is expected to have a market-capitalisation
of approximately Rs7,500 crore; T&D business is
expected to be approximately Rs6,000 crore, retail
business is expected to be approximately Rs900 crore
and the remaining ventures are expected to be Rs2,000
crore. This bring the total to Rs16,400 crore. 

MARKET TREND

More Postives? about the sectors that are doing badly.

Mutual funds have continued to be

Wto be more like mock war exercise. The US imposed

hat seemed like the start of a trade war turned out net investors, though not foreign and
institutional investors. However, what
some tariffs on China; China retaliated. The story has remains a negative is market valuation
disappeared from the headlines and the US markets have
strongly recovered. I had suggested that while the US Mixed Picture
president Donald Trump is an unknown element—what (Rs Cr)
7,000
with his hard-edged tweets, personal attacks against
global leaders and boorish attitudes—he is a businessman 5,000
who is, perhaps, out to simply make a good deal and move 3,000
on. Guess he has done that, following some sabre-rattling
1,000
with China. When it seemed that Mr Trump was really
playing to the gallery, the global market put in a strong -1,000
rally. Indian markets have pushed higher, in sync. -3,000
Indeed, the two main Indian indices
ndices had 12 days of 9 Mar-18 28 Mar-18 19 Apr-18
Weekly Net FII Weekly Net DII
higher highs in succession, which iss extremely rare.
That makes it a strong rally. So far, in April, the
major indices have put in about 4.4% 4% of which is vulnerable to even the mild
gain. But it would be very surprising
ng shocks as we saw in the January-March
if the market gets back into the period.
pe The biggest threat to valuation, of
sharp upswing that we saw in course,
cou is interest rates; these are shooting
December and January. On the he positive
positi ve side,
tive sid
id
ide, up inexplicably. Low bond yield has been the
corporate results are turning out to o be better. Software justification for stock prices to be elevated.
just
companies are exhibiting growth; industrial companies government bond yield heads for 8%+ and
If go
are doing well; and consumer and banking
b ki companies i remains
i there,
h stocks have to correct. If not, we will see a
are on a steady track. There is no new nasty surprise steady rise again. — Debashis Basu 

MONEYLIFE | 27 Apr-10 May 2018 | 52

StockWatch.indd 7 20-04-2018 18:35:55

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MSSN - Unbiased.indd 1 15-12-2016 18:10:29

 LEGALLY SPEAKING SD ISRANI
Fraud or Negligence Can Scuttle
Your Insurance Claim
M
any people believe that once a general insurance
policy has been obtained then, in case of a
disaster / untoward incident resulting in loss of
assets, the policyholder will be automatically paid the claim
amount. One must realise that the real challenge starts when
a policyholder lodges a claim with the insurance company.
Firstly, in case of an accident, or theft, or fire or whatever
else, the policyholder should inform the insurance company
at the earliest. At times, even a one-day delay in intimating
the insurer leads to rejection. This usually happens when
the policy expires within a day or two after an incident
leading to a claim. Although courts have the power to
condone a delay, it only happens if the policyholder can
validly explain and justify
the failure to intimate
the insurer immediately.
Sometimes, the court
refuses to condone the
delay.
In P Khamar Pasha
versus Oriental Insurance
Co Ltd, the National
Consumer Disputes
Redressal Commission
(NCDRC), on 16 March,
2018 decided to uphold
the order of the state
consumer commission
and refused to condone a
delay of seven days in intimating the insurer. Here is what
happened. On 1 March 2011, a lorry that was insured
was found missing. A police complaint was lodged by
the owner on 8 March 2011 and the insurer was also
informed on the same day.
The insurance rejected the claim on the grounds of
a seven-day delay in intimating the theft which was in
contravention of the terms and conditions of the insurance
contract. Although the district forum had decided in
favour of the lorry-owner, the state commission overturned
the decision in appeal. The complainant approached
NCDRC seeking relief. NCDRC was not convinced by
the explanation offered by the policyholder for the seven-
day delay and upheld the lower forum’s order. Even the
Supreme Court has, in some cases, held that seven days
could amount to a long delay, especially when the policy
has expired, thereby raising doubts about the date on
which the incident actually took place. As a consequence,
MONEYLIFE | 27 Apr-10 May 2018 | 54
Legally Speaking.indd 2
someone who has held a valid insurance and paid the
premium could lose a claim for failing to renew the policy
in time or failing to file the insurance claim within the
specified time frame.
Policyholders also need to be careful about another
issue, namely, to maintain proper records of the insured
goods. For example, in case of a fire, the goods insured
could be totally lost or partially damaged. The surveyor
deputed by the insurance company will conduct a survey
and assess the damage caused by fire and send a report
to the insurance company.
However, the insurance company is not bound to
accept a surveyor’s report if it has doubts about its
veracity. Moreover, in case
of a claim involving a large
sum insured, the insurance
company could ask for
additional information
such as stock records,
purchase bills, turnover
details, etc, to assess the
correctness of the claim.
If the insurance company
concludes that the claim
is exaggerated or patently
false, it could repudiate the
entire claim.
Here is what happened
in the case of M/S Shree
Gulab Trading Co versus Oriental Insurance Co Ltd. The
judgement was delivered on 26 March 2018 by NCDRC.
The complainant, Shree Gulab Trading, was engaged in
trading and manufacturing of cotton and synthetic yarn.
It had an insurance policy covering Rs3.5 crore of stock
of grey cloth, yarn, spare parts, etc, and another Rs75
lakh to cover the finished goods stored at its godown at
Surat. The firm had also obtained an additional policy
for a sum insured of Rs2.55 crore for the same purpose.
According to the complainant, a fire broke out at his
godown on the night of 8 July 2010; the entire stock stored
in the godown was burnt and, consequently, damaged. The
complainant claimed that this included several crores of
rupees worth poly-yarn, grey man-made fabric, finished
cloth, machine parts, etc, which had been stored in the
godown. The complainant claimed that the stock and
documents had been verified during a site visit by the
branch manager of the insurance company a few days 
20-04-2018 13:41:27
 LEGALLY SPEAKING SD ISRANI

 earlier. His chartered accountant certified the closing stock examining the evidence placed before it, NCDRC concluded
of the godown at Rs6.74 crore. that the cash payments claimed to have been made by the
The insurance company rejected his claim through complainant to seven suppliers were not actually made and
a letter dated 23 May 2011. He then filed a complaint his claims were substantially false. NCDRC, in its order,
before NCDRC claiming Rs8.57 crore including interest. further held that “even if part of the claim submitted by
The insurance company alleged that the complainant had the complainant to the insurer was false, the insurer was
attached forged and fraudulent justified in repudiating the entire
documents to back his complaint. claim. The complainant therefore,
It further alleged that the The above cases should is not entitled to recover any
majority of the transactions amount from the opposite party.”
claimed by the complainant could
serve as eye-openers for The above cases should serve
not be verified since they were consumers who intend to as eye-openers for consumers who
stated to be cash transactions. depend on insurance as a intend to depend on insurance
The insurer further told the apex as a safety net—procrastination
consumer court that, despite
safety net—procrastination while lodging a claim, or trying to
repeated follow-up, no supplier while lodging a claim, cheat the insurer by filing a false
or third party had verified or or trying to cheat the or exaggerated claim, could lead
confirmed the transactions to the entire claim being rejected
claimed by the complainant. And,
insurer by filing a false or outright. NCDRC has stated that
finally, the insurance company exaggerated claim, could where forged or bogus documents
also pointed out that the quantity lead to the entire claim are submitted to hike the value
of damaged goods did not match of goods in an attempt to claim
with the claim made by the
being rejected outright a higher amount, the claimant
complainant. would be denied even a partial
NCDRC, on studying the documents placed before it, claim.
was shocked to find that, contrary to the income-tax rules, Consumers would do well to remember that insurance
the complainant claimed to have purchased crores of rupees is a contract based on good faith and any compromise
worth of goods from various suppliers but none of them on this score will defeat the very purpose of obtaining
would verify the genuineness of any of these transactions. insurance cover. 
The insurer further provided evidence to show that its
local manager had not visited the company or certified
the goods, as was wrongly claimed by the complainant.
In fact, the so-called ‘manager’s report’ also turned out SD Israni is a corporate lawyer & Fellow
to be a forged document. The complainant was unable of ICSI. Email: sdisrani@gmail.com
to rebut or disprove the insurance company’s allegations.
After hearing the counsel for both the parties and

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55 | 27 Apr-10 May 2018 | MONEYLIFE

Legally Speaking.indd 3 20-04-2018 13:41:52

 HEALTH BM HEGDE
What Is the ‘Normal’ Blood Pressure Level?
A
nybody who has followed the frequent changes
in these guidelines in the recent few months is
bound to get confused. The 2013 guidelines of the
joint national committee-VIII (JNC-VIII) on prevention,
detection, evaluation and treatment of high blood pressure
(BP)comes from some of the best brains on the committee
which declared, after due consideration, that the normal
pressure levels should be at least 159 systolic and 99
diastolic for adults and 140/90 for a diabetic. This looks
very reasonable scientifically. For reasons best known
to them, they withheld this revelation for a good four
years and released them for public consumption only in
2017. Immediately after this came a rebuttal from a group
of super-intelligent American hypertensionologists who
argued that it would
be prudent to lower
the blood pressure to
130/80 for all.
Way back in
2005, when JNC-V
had suggested simple
diuretics as the first
line of treatment for
hypertension, there
was a huge hue
and cry saying that
diuretics are not
the ideal drugs and
the better drugs are
alpha blockers and
ACE (angiotensin
converting enzyme) inhibitors, by a group of self-declared
super specialists, although the JNC-V was headed by an
eminent specialist who is one of the best in the world. What
on earth is the scientific basis for this recent guideline of
130/80 as an ideal blood pressure? In the US, guidelines
are mandatory as the so-called modern medicine has got
legal monopoly on sickness-care.
There are no studies to support these varying claims at
different times. The recommendation is subjective personal
opinion, based on some statistical data which do not apply
to individual patients. Multiple Risk Factor Intervention
Trial (MRFIT) study did throw some indirect light on
the subject by showing that the lower the blood pressure
reading, the better are the mortality and morbidity rates.
But without any cut-off level, this statistic is not reliable.
Moreover, there is no evidence in the MRFIT data to show
the drug-induced lowering of blood pressure is good for
health. The data shows the normal blood pressure levels
MONEYLIFE | 27 Apr-10 May 2018 | 56
Health.indd 2
in the society and not drug-induced blood pressure levels.
So, this data does not give credence to the claims that we
should lower the blood pressure to 130/80 to get better
results than keeping them at 140/90. Now, it is clear, in
retrospect, that all these guidelines which keep changing
frequently, are based on individual opinions which have
no documented scientific basis.
Meanwhile, more and more drug companies have come
out with expensive new BP-lowering drugs without any
long-term experiential wisdom. Obviously, the various
changes in BP guidelines would have come because of drug
company pressures; it is now known that many ‘experts’
are under the influence of drug companies. As a researcher
in the area, for the past half a century, I fail to understand
any scientific basis
otherwise. May God
help our hapless
patients who swallow
these drugs faithfully!
An anecdotal
story will illustrate
the situation. Two
close friends who
were classmates
from school became
doctors. One settled in
America as a professor
and the other in
India as professor in
medical college. At the
of 50 years, both had
what is called elevated BP which some guideline thought
warranted drug therapy. While the Indian friend opted for
lifestyle change and yoga, the American friend opted for
drugs, as he believed in the American system. He was put on
powerful ACE inhibitors and ARBs (angiotensin receptor
blockers). Today, after nearly 30 years, the American friend
is on daily dialysis as he developed chronic kidney disease,
while his counterpart is still not on anti-hypertensive drugs.
Though this anecdote does not support any one view, it
gives us a better insight into how unreliable these linear
statistical data are, in real-life situations. 
Professor Dr BM Hegde, a Padma
Bhushan awardee in 2010, is an MD,
PhD, FRCP (London, Edinburgh,
Glasgow & Dublin), FACC and FAMS.
He can be reached at hegdebm@gmail.com
19-04-2018 20:45:32
 HEALTH
Drug Abuse: Campaign
against Unnecessary
Medication
D octors and academics are increasingly speaking
up against patients being given unnecessary
medication—such as statins, blood pressure pills and
glucose-lowering drugs for type-2 diabetics which have
no effect and burn holes in the pockets of the people.
They leave many people suffering further, due to side-
effects, or cause excess deaths. A Cambridge University
study found half of over-65s take at least five drugs a
day. Taking up to five drugs a day increased the dangers
of premature death by an estimated 47%, researchers
warned. Over-prescribing
Over-prescrib medications is now
the third most common cause of death,
heart disease and cancer.
after hear
The European Parliament,
Th
Brussels, heard experts talk
in Bru
about such cases of over-
prescriptions. Heading the
presc
panel was award-winning
celebrity British cardiologist
celebrit
accompanying him were:
Dr Assem Malhotra; accompa
Dr Richard Thompson, personal physician to Britain’s
Queen Elizabeth from 1984 to 2005 and past president
of the Royal College of Physicians; endocrinologist
Dr Carl Heneghan, Oxford University professor of
evidence-based medicine; and Dutch diabetes professor
at Leiden University Dr Hanno Pijl.
The panellists called for an urgent Europe-wide
campaign to reduce the amounts of drugs people
are taking. They discussed the need for an inquiry
into biased information being issued by Big Pharma
on medicines that is harming millions of patients.
Between 2009 and 2014, GlaxoSmithKline was charged
$13 billion in fines for criminal behaviour which
included hiding data on the side-effects of the drugs
and manipulating results. According to Dr Malhotra,
poor quality research, influenced by vested interests,
has resulted in an epidemic of misinformed doctors
and misinformed patients leading to poor clinical
outcome. Dr Malhotra further blames an ‘epidemic of
misinformation’ over dietary advice which he believes
has driven the consumption of refined carbohydrates
and added sugars.
Sir Richard Thompson has argued against the use
of statins, the cholesterol-lowering drug, which are
only effective in people who already have heart disease;
yet, millions of people who are not at risk take them.
According to a 2014 study of Imperial College, beta-
Health.indd 3
blockers have resulted in 800,000 excess patient deaths
in Europe over the past eight years.
Junk Food Advertising and
Children’s Health
C hildren are exposed to twice as much discretionary
(unhealthy) food advertising as healthy food
advertising, according to Lisa Smithers, associate
professor at the University of Adelaide. A new funded
research, led by Heart Foundation, shows that junk
food ads are shown more frequently on TV when
children are watching. The frequency and duration of
junk food advertisements is 2.3 times higher each hour
than for healthy foods. The research, published in the
Journal of Paediatrics and Child Health, also found that
children view more than 800 junk food ads each year, if
they watch 80 minutes of television per day.
Prof Smither’s team built a TV monitoring system
which was believed to be the first of its kind in the
world. The team was able to capture an entire year’s
worth of television and ads from one free-to-air
commercial TV network in South Australia. It is the
largest dataset ever used by health researchers for
examining food advertising in Australia and, probably,
the world. Most research in this area is based on only a
few days of data, says Prof Smithers.
Some countries, like Canada and Norway, have
banned junk food ads on children’s channels. In
France, advertisers are required to publish healthy
eating messages when unhealthy foods are advertised.
In Australia, all advertising during children’s TV
programmes is covered by the Children’s Television
Standards but there is also no routine, independent
monitoring of children’s exposure to food advertising.
According to the World Health Organization (WHO),
food marketing influences the types of foods that
children prefer to eat, ask their parents for and,
ultimately, consume. 
57 | 27 Apr-10 May 2018 | MONEYLIFE
20-04-2018 18:03:42
 ML FOUNDATION EVENTS
“To avoid mis-selling or overpaying,
bank customers need to be alert to
what they really need”
“B
anks offer a lot of services, some of them free.
As customers, we need to analyse the relevance
of these services to our specific needs and not
get carried away by a bank’s promise,” advised DG Kale,
who retired as customer services general manager at the
Reserve Bank of India (RBI). He was speaking at a special
seminar in Mumbai at Moneylife Foundation on “The
Many Bank Charges that We Pay”. The packed audience
heard Mr Kale in rapt attention. He worked in the customer
services department of RBI for many years and has long
experience of the handling customer grievances including
the complaint filing system with the banking ombudsman.
Mr Kale’s aim was to empower the average consumer
with knowledge about the relationship between a
consumer and banker, essentially explaining the reasons
for complaints/grievances. He did so with the use of several
easy-to-understand real-life examples. Starting with the
example of money transfer through RTGS (real time gross
settlement), he said that a particular bank may say “put
Rs1 lakh in your account and we’ll give you everything
for free. We’ll give you an interest rate of 3.5%.” In this
case, RTGS money transfer would be free; but has the
consumer considered how often he/she actually uses RTGS?
He went on to add, banks normally charge “Rs5-Rs25,
depending on the amount. Even if you used it only once,
you would’ve paid Rs25. But (for free RTGS) you’ve agreed
to put up Rs1 lakh at 3.5%.” Essentially, his point was
that no matter what the bank may have promised, it is the
MONEYLIFE | 27 Apr-10 May 2018 | 58
Event.indd 2
consumer’s responsibility to take a hard look at which of
these services he/she may actually need regularly.
Mr Kale said that “in terms of architecture and
infrastructure for financial sector consumer, India is
ranked very high in the world. India has a Consumer
Protection Act, a Banking Ombudsman Scheme and we
also have the Banking Codes & Standards of India. Here
it is important to note that the high ranking does not mean
that we also have a low number of consumer grievances.”
Mr Kale claims that the reason for these grievances
primarily stems from the basic misunderstanding of
the services they are being offered. Once again, it is the
consumers’ duty to understand and clarify what they are
paying for and what they are getting.
Mr Kale went on to define the word customer in
banking, as a “person visiting a place of business as a
matter of custom” and, additionally, a banker as one who
‘customises the solution for’ that customer. He said that,
today, both of these definitions have been lost. Elaborating
on infrastructure he said that “from class banking after
nationalisation we’ve moved onto mass banking, then onto
automated banking and now we’re moving to anonymous
banking.” He went on to distinguish between the mindset
of public sector banks (PSBs) and private sector banks
and, in his view, PSBs know banking very well but don’t
understand the technology while private sector banks know
technology but don’t understand banking.
Mr Kale stated that between 2000 and 2017, few 
20-04-2018 13:39:33
 ML FOUNDATION EVENTS
 new recruits have joined PSBs. This has affected banking
services. “People would go to banks and say that the quality
of customer service has gone down,” said Mr Kale. His
explanation to this problem has been in the substantial
increase in the number account-holders in India—roughly
2 billion deposit accounts and 400 million loan accounts.
To further add to this problem, a wide number of
products are available from any bank. He said that “today
a bank may have around 85-90 deposit products alone.”
How does one find out what is the most suitable banking
product for oneself? Mr Kale suggested that “most people
are guided very blindly by the difference in the interest rates
at the highest level of the interest group.” He also added
that the second qualifying factor for a consumer might
be the physical location of a bank from one’s residence
or place of work. “Once the customer has decided on
the service/product that he/she requires, does the banker
actually provide what is required or does he push something
else?” asked Mr Kale. He claimed that this is the starting
point of grievances—the
point when there is mis-
information and mis- DG Kale speaking
at the seminar
selling.
On the topic of credit
cards, Mr Kale pointed
out that, in India, credit
cards have been issued
at an average interest
rate of 2.5% on a 45-
day cycle. He also adds
that the usage of such
cards and the complaints
received for these cards
have steadily declined in
India. What is the reason for this decline? Mr Kale offers
an answer: “Banks have a very smart way of foxing you.
All of them have replaced it with personal unsecured
loans at 19% or 20%.” If the customer had done his
research, instead of blindly agreeing to a personal loan
at a much higher rate, he/she would have been much
happier financially. Mr Kale further emphasises his point
by saying that this is why so many people fall prey to
such SMSs—‘Your pre-approved loan is sanctioned and
ready for approval’.
Continuing with credit cards, he said that 90% of the
usage in India was either at petrol pumps, Indian Railways,
Airlines or eateries. Due to the large number of credit cards
that are available, it is, once again, the consumer’s duty
to decide on the type of card they require to make their
particular life simpler. Elaborating on this point with a
simple example, he added that a bank may offer a card
with a fee of Rs2,500. Among the features could be free
Event.indd 3
entry in the airport lounge. Now, at this point the consumer
should really consider, how many times are they actually
going to fly? Mr Kale said that “even if you fly 3-4 times
and pay for the lounge service, it will still be cheaper than
Rs2,500 and a person who can otherwise afford those
fees, need not worry about access to the airport lounge.”
Mr Kale made the attendees understand that the average
consumer usually gets carried away by these added ‘frills’
which they never use. He wanted the customers to be “very
clear on what frills we really require and are they really
frills or can you manage without the frills.” His main
focus was on encouraging consumers to be financially
aware, being responsible for deciding on what financial
products they require and not be fooled by a bank/banker’s
marketing ploys.
During the Q&A session, members brought up
several important questions regarding the process of
grievance redress. Mr Kale advised that consumers to
really understand the proper process of addressing their
grievances. If they don’t, they
will end up being dissatisfied.
His suggestion was that
to address any particular
grievance one should strictly
follow the process established
by RBI. Start with a written
complaint to your bank’s
nodal officer and if no
resolution has been offered
or on being dissatisfied
with the resolution, you can
escalate it to the bank’s higher
authorities (the various levels
and contact details are
available on the bank’s website). After this, they should
approach the bank’s internal ombudsman (CCSO—chief
customer services officer). He also stated that the number
of banks that have a banking ombudsman were very few
at the moment.
When asked whether a bank is obliged to publish the
contact details of a CCSO for the benefit of the consumer,
Mr Kale was not able to confirm such an obligation.
Instead, he insisted that the banking ombudsman would,
if necessary, contact the bank or consumer regarding
the complaint and provide any recommendation for a
resolution. He also explained that within 30 days of
receiving an answer to a grievance, the consumer has the
right to appeal to the nodal officer or to RBI ombudsman.
Finally, he added ombudsman is only available for
scheduled banks. A consumer with a grievance against a
cooperative bank should go through the department of
cooperative bank supervision (DCBS). — Akshay Naik 
59 | 27 Apr-10 May 2018 | MONEYLIFE
20-04-2018 18:01:53
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to register for DND with your operator/service-provider,
to avoid unsolicited commercial communication (UCC)/
telemarketing calls / SMSs. It’s a simple process which not
only blocks spam but also allows
specific transactional messages to
come through; for example, you
can allow banking (or several
other category) messages to come
through.
Apart from allowing you to
activate DND on your phone, the
app also helps you file complaints for any message that
may slip through and follow through on your complaint.
This is a must-have app on all mobile phones in this era
of spam! Android: https://goo.gl/8WEgLa
Google Opinion: Share
Opinion, Get Play Credit
A nswer quick surveys and earn Google Play credit
with Google Opinion Rewards, an app created by
the Google surveys team.
Getting started is easy. Download the app and answer
MONEYLIFE | 27 Apr-10 May 2018 | 60
Tantra - column.indd 1
basic questions about yourself. You will then get surveys
approximately once a week, although it may be more
or less frequent. You’ll get a notification on your phone
when a short and relevant survey is ready
for you and can receive up to Rs50 50
in Play credit for completing each h
survey. Questions can range from,,
“Which logo is best?” and “Which h
promotion is most compelling?” ”
to “When do you plan on travelling ng
next?” Of course, Google uses the survey
to target specific ads to you. But, overall, the surveys are
simple and non-intrusive—you can even skip a survey
and, if you find it too irritating, just uninstall the app!
Android: https://goo.gl/dCgzT1
Microsoft Launcher:
Personalise Your Android
Device
W ith Microsoft Launcher, you can personalise
your Android device to match your style with
wallpapers, theme colours, icon packs and more. With a
Microsoft account, or work/school account, you can access
your calendar, documents and recent activities in your
personalised feed. Open photos, docs and Web pages on
your Windows PC to be productive across all your devices.
Pin contacts to your home screen and place them
anywhere on the home screen,
dock or in folders. You can even
click a picture on your phone and
see it instantly on your Windows
PC or continue editing an Office
365 document on your PC by
linking your phone with your
Windows PC. Search is a breeze—you can search the
Web and your phone in one place. Search the Web or your
contacts, files, apps, docs, messages and Web results—all
on the Microsoft Launcher’s universal search bar. One
of the quickest, lightest and most popular launchers on
Android. Android: https://goo.gl/bKFqAN 
Yazdi Tantra is a chartered accountant
by training, computer consultant by
profession, entrepreneur-developer by
hobby and trainer in his leisure time.
He is currently the vice-chairman of
Zoroastrian Co-operative Bank Ltd
and has been running a medium-sized computer
company ON-LYNE for the past 24 years.
20-04-2018 13:37:11
 TECHNOLOGY
Cyber Insurance, Anyone?
As with other insurance products, rejection of claims on flimsy grounds would be biggest hurdle
for cyber insurance, says Yogesh Sapkale
N
ew cybercrimes are taking place at a rapid pace
and causing heavy losses. Where there is risk,
insurers can’t be far behind. However, before
taking the cover of cyber insurance, we, as average
users of Internet, need to understand whether this
would really help in reducing the loss. Cyber-attacks are
becoming more sophisticated, from distributed denial of
service (DDoS) attacks to ‘man-in-the-middle’ attacks.
In addition, the popularity of virtual currencies and
its characteristics offer protection from backtracking
or tracing to hackers or attackers. This will only fuel
further ransomware attacks in the future. Remember,
in several recent ransomware attacks, the victims were
asked to make payment in virtual currencies like Bitcoin.
According to a
recent report from
McAfee, the total cost
of cybercrime globally
is about $600 billion,
or 0.8% of global
gross domestic product
(GDP). No wonder,
insurers are eyeing this
lucrative business. They
feel that the increasing
frequency of breaches
and the associated costs
highlights the need for
cyber insurance.
According to Sanjay
Datta, chief for underwriting, claims and re-insurance
at ICICI Lombard General Insurance, cyber insurance
will not help a company or entity to prevent a cyber
breach, but it could help them survive one. “A typical
breach would require the company to hire forensic
experts to investigate into the breach and recover its
lost data, appoint lawyers to communicate the breach to
the regulators, customers and other stakeholders as per
regulations. Service of a public relations expert may also
be required to handle the press and other media. All of
these expenses can make a huge dent in the company’s
bottom-line, especially small and medium enterprises.
A standard cyber insurance policy would provide cover
for all these costs, and further covers, such as cover
for business interruption and fraudulent fund transfer;
payment card industry data security standard (PCI DSS)
Technology.indd 1
may be purchased depending upon the risk profile and
needs of the customer,” he says.
What is important in cyber insurance is that there
cannot be a product that fits all. Every product needs
to be designed, or customised, to suit the requirement
of each customer. Add to this, the ever-evolving nature
of cyber risk which poses an even bigger challenge for
insurers, as they need to work towards providing a
wholesome risk mitigation product to customers every
time. Insurers have been trying to do so since the past
almost 20 years.
Noted security expert Bruce Schneier, who is also
chief technology officer at IBM Resilient, has explained
the issues faced by cyber insurers in his upcoming
book, Click Here to
Kill Everybody: Peril
and Promise on a
Hyperconnected Planet.
He says, “Internet plus
insurance is complicated
because it follows
neither of the basic
models (fire and flood)
but instead has aspects
of both: individuals are
hacked at a steady (albeit
increasing) rate, while
class breaks and massive
data breaches affect lots
of people at once. Also,
the constantly changing technology landscape makes
it difficult to gather and analyse the historical data
necessary to calculate premiums.”
This brings us to the most important question:
Should an individual buy a cyber insurance policy?
In my opinion, individuals need not buy an expensive
cyber insurance policy, if they follow certain basic
rules. Use only authentic software; update it regularly;
do not leak personal information in public domain;
share information only on a ‘need to know’ basis with
anyone—be it the government or any private entity. In
addition, follow simple rules like not engaging with
strangers and not being enticed by ‘attractive’ offers.
If you follow these, you will not need cyber insurance
and if you don’t, even the insurance policy may not save
you. 
61 | 27 Apr-10 May 2018 | MONEYLIFE
20-04-2018 13:38:30
 BOOKS

Reforming the Indian Public Sector Banks

An Insider’s View of the Real Problems of PSBs

I
t has been raining memoirs by governors of the Reserve of bank nationalisation without commenting on how it
Bank of India (RBI) in the past year or two. Three has eventually turned out.
immediate predecessors of RBI governor Urjit Patel Bhat’s is a dispassionate, insider’s assessment of
have published books in quick succession, each skirting how government policies affected PSBs ignoring their
the big elephant in the room—the gigantic bad debts of failures and shortcomings, including worryingly high
public sector banks (PSBs), estimated at anywhere between incidents of fraud and corruption at PSBs. Bhat has led
Rs8 lakh crore (officially) and Rs20 lakh crore (according the Corporation Bank Officers’ Organisation (CBOO)
to a former RBI deputy governor Dr KC Chakrabarty).
The spate of banking scams, including Nirav Modi-
Gitanjali Gems, Rotomac
Interestingly, the
and others, have exposed book contains a
the ease with which the sharp rebuttal to
PSBs were swindled; these
had also turned the spotlight
governor Urjit Patel’s
on the need for change, claim that RBI has
with a chorus of voices in no powers over
government insisting that
privatisation is the answer.
PSBs, although it was
Simultaneously, the Urjit Patel, RBI Governor
already in print when
government is forcing a Dr Patel made his
sale of companies whose
promoters are the biggest
startling claims at a speech in March 2018
wilful defaulters—each
in excess of a stupendous with distinction and has served as an officer director on
Rs25,000 crore. its board. More importantly, he pioneered whistle-blowing
REFORMING THE INDIAN
Then there is the by the Corporation Bank’s Union to safeguard the Bank
PUBLIC SECTOR BANKS
controversy over ICICI from rapacious chairmen colluding with industrialists to
TR BHAT
Bank’s CEO, Chanda dole out loans to already defaulting companies.
Gyan Books
Kochhar, and Axis Bank’s As an investigative journalist, I have personal knowledge
Pages: 346; Rs1,150
Shikha Sharma, where RBI of how the Union has worked to protect the Bank’s interests.
has turned down the Bank’s The present state of the Bank’s finances only reflects how
proposal to appoint her for another term. the system eventually defeated their efforts.
All this has brought back into focus some core issues The book is a must-read for members of this government
like whether bank nationalisation has served any purpose; and its advisors whose public statements display a worrying
the impact of economic reforms on banks; the role of the intention to ram through global cookie-cutter solutions
central bank and the finance ministry; and the contribution without investing the time and effort to find specific
of the political class in bringing PSBs to such a sorry mess. remedies to a uniquely Indian economic environment and
Reforming the Indian Public Sector Banks: The Lessons savings culture.
and the Challenges, which was released on 9th April in The attempt to pass the Financial Resolution
Delhi, is an extremely important book that throws light and Deposit Insurance Bill and the demand for bank
on all these issues with a unique perspective. privatisation (which has been slightly muted since the
The author, TR Bhat’s, is a refreshingly different surfacing of issues at Axis Bank and ICICI Bank) are just
voice from the usual policy wonks, bureaucrats and two examples.
academics who have usually had a hard stand in support Bhat covers four issues: a) nationalised banks have acted
of nationalisation or for privatisation, depending on their as shock-absorbers for the economy, by taking over failed
ideological perspective. private banks after every major scam; b) nationalised banks
Even DN Ghosh’s memoir gave us only a ringside view have been exploited by every government for its political 

MONEYLIFE | 27 Apr-10 May 2018 | 62

Book Review.indd 2 19-04-2018 20:10:56

 BOOKS
 agenda, while never putting in place proper human resource
policies and investing in training and skill development;
c) every crisis led to the formation of a committee which
painstakingly identified issues and offered solutions which
were ignored (of special significance is the report of the
independent commission headed by SP Shukla and backed
by bank unions); d) failure of supervision by RBI was
responsible for most of the scams as well as protecting
large defaulters by refusing to name and shame them
almost until the bankruptcy proceedings began.
Bhat also analyses the problem of the government as
the owner of PSBs on five fronts—appointment of top
executives, the appointment of directors to their boards,
the working of the board, the internal working of the
banks and failure to fix accountability.
Interestingly, the book contains a sharp rebuttal to
governor Urjit Patel’s claim that RBI has no powers over
PSBs, although it was already in print when Dr Patel
made his startling claims at a speech in March 2018. It
The forced-mergers
of failed private
banks with PSBs
have allowed RBI to
avoid accountability
for its failed
supervision over the
Dr YV Reddy, Former RBI decades. Most of us
Governor
recall the merger of
Global Trust Bank with Oriental
Bank of Commerce (which hurt the
latter’s performance for two to three
years), but forget other mergers of that
time such as Nedungadi Bank with Punjab
National Bank and Benares State Bank
with Bank of Baroda
outlines four ways in which RBI engages with banks. Some
interesting nuggets that provide a timely recollection in
today’s turmoil are:
• Bad debts have been papered over, for decades, by
RBI and the government and economic liberalisation
provided only a temporary palliative by allowing
banks to increase capital by going public and make
them profitable for a short interval.
• The scandal of loan write-offs ends up protecting wilful
Book Review.indd 3
defaulters by wiping the slate clean. Bhat writes that
after the loans were written off, the same industrialists
would be granted fresh loans in other names. Such
write-offs increased even as ‘loan overdues were
surging’, he says. Interestingly, this government has
falsely defended in Parliament the Rs2.4 lakh crore
loan write-off between April 2014 and September
2017, claiming that it was a tax-saving device to
clean up bank balance sheets and did not let off the
borrowers. Dr Chakrabarty, has called such write-offs
the biggest scandal of the century. It is important for us
to remember that we, the people, have paid for these
write-offs though regular bailouts and re-capitalisation
of PSBs by the exchequer.
• There is a lack of accountability of the PSB chiefs
and the absence of any yardstick to evaluate their
performance. The worst that has happened to PSB
chairmen is that they have been asked to leave. Many
such appointments have been political. There has been
a failure of internal and external audits, lack of action
on RBI’s own inspection reports.
• The forced-mergers of failed private banks with PSBs
have allowed RBI to avoid accountability for its failed
supervision over the decades. Most of us recall the
merger of Global Trust Bank with Oriental Bank of
Commerce (which hurt the latter’s performance for
two to three years), but forget other mergers of that
time such as Nedungadi Bank with Punjab National
Bank and Benares State Bank with Bank of Baroda.
• How a taskforce of the Confederation of Indian Industry
(CII) had suggested the closure of three banks that had
turned sick—Indian Bank, United Commercial Bank
and United Bank of India. It led to a sharp reaction
from trade unions that exposed how the banks’ losses
were almost entirely due to defaults by CII members.
The move was abandoned and the banks even turned
around for a while. Indian Bank is by far the best PSB
now.
The book stops just short of the current turmoil in
banks as they struggle to deal with new provisioning
norms and bankruptcy proceedings as well as frequent
government diktats that force banks off track (as in the
pressure of demonetisation, opening Jan Dhan accounts,
taking responsibility of Aadhaar enrolment, etc) from their
core banking functions.
However, the sweep of issues covered right from
nationalisation to the present day allows us to understand
exactly why the present debate on bank privatisation or
what to do with PSBs, will not resolve the problem. At
the very least, 3/4th of the newly constituted Bank Board
Bureau will have a lot to learn from the 300-odd pages
of this important book. — Sucheta Dalal 
63 | 27 Apr-10 May 2018 | MONEYLIFE
19-04-2018 20:11:13
 MONEY FACTS STOCKS

INDIAN MARKET TRENDS FUND FLOWS

The Sensex and the Nifty gained 2% each during the Foreigners: Foreign institutional investors were
fortnight ended 18th April. ML Mid-cap Index, ML Mega-cap net sellers of equities (Rs3,829.54 crore). They sold
Index and ML Large-cap Index rose 1% each, while shares worth Rs38,894.90 crore. 
ML Micro-cap Index ended flat. 
390

Share Prices Index, October 2017=100 50

130
-290

-630 FII Net Investments

(Rs Crore)
115
-970

-1,310
9 Apr-18 18 Apr-18
100
Indians: Domestic institutional investors were net
buyers of equities (Rs2,379.60 crore). They bought
shares worth Rs26,843.33 crore. 
85 875
Oct-17 Jan-18 Apr-18

575 DII Net Investments

ML Large-cap ML Small-cap Nifty ML Micro-cap (Rs Crore)
ML Mid-cap ML Mega-cap Sensex
275

-25
Index 06 Apr 18 Apr +/-
ML Small-cap Index 99.40 102.41 3% -325
Sensex 33,626.97 34,331.68 2%
-625
Nifty 10,331.60 10,526.20 2% 9 Apr-18 18 Apr-18
ML Mid-cap Index 107.64 109.23 1%
ML Mega-cap Index 111.26 112.85 1% GLOBAL MARKET TRENDS
7,570
ML Large-cap Index 109.51 110.30 1%
NASDAQ Composite
ML Micro-cap Index 97.73 97.40 0% 7,340

Mega-cap Gainers/Losers 06 Apr 18 Apr Change 7,110

Indiabulls Ventures 284.25 390.5 37%

6,880

Vakrangee 171.4 125.8 -27%

6,650

Large-cap Gainers/Losers 06 Apr 18 Apr Change

6,420
Sudarshan Chemical Inds 462.65 592.65 28% Oct-17 Jan-18 Apr-18

Reliance Communications 24.35 21.05 -14% NASDAQ Composite, S&P 50 and Nikkei advanced
5%, 4% and 3%, respectively. Korean Composite
Mid-cap Gainers/Losers 06 Apr 18 Apr Change
and the FTSE rose 2% each. 
Responsive Industries 49.8 72.8 46%
Index 06 Apr 18 Apr + / (-)
Jaypee Infratech 9.25 7.05 -24% NASDAQ Composite 6,915 7,295 5%
Small-cap Gainers/Losers 06 Apr 18 Apr Change S&P 500 2,604 2,709 4%
Nikkei 21,568 22,158 3%
Syncom Formulations (India) 0.93 1.33 43%
Korean Composite 2,430 2,480 2%
Talwalkars Better Value Fitness 140.55 79.45 -43%
FTSE 7,184 7,317 2%
Micro-cap Gainers/Losers 06 Apr 18 Apr Change Hang Seng 29,845 30,284 1%

Zenith Exports 48.45 104.35 115% Bovespa 84,820 85,776 1%

Taiwan Weighted 10,822* 10,848 0%
Servalakshmi Paper 1.59 0.75 -53%
Shanghai Composite 3,131# 3,091 -1%
(All Prices in Rs) *3 Apr 2018 4 Apr 2018
#

MONEYLIFE | 27 Apr-10 May 2018 | 64

Money Fact.indd 2 20-04-2018 18:34:00

 MONEY FACTS STOCKS

What’s H T ML SECTORAL TRENDS


Hotel companies were in demand during the fortnight. Taj GVK Hotels,
Asian Hotels (East), EIH Associated Hotels, Royal Orchid Hotels and Oriental
Shares of hotels companies, non-
ferrous metals companies and retail
companies advanced 14%, 6% and
Hotels soared 33%, 31%, 27%, 26% and 22%, respectively.  5%, respectively. Stocks of trading
companies and sugar companies
Companies 06 Apr 18 Apr +/- declined 6% and 4%, respectively.
ML Hotel Index Stocks of printing & publishing
Taj GVK Hotels 175.65 233.10 33%
companies and office equipment
Asian Hotels (East) 277.20 363.30 31%
130 companies fell 3% each. 
EIH Associated Hotels 501.65 637.05 27%

Royal Orchid Hotels 174.30 219.50 26% ML Sectoral Trends

120 Hotels 14% Trading -6%
Oriental Hotels 44.90 54.80 22%

Advani Hotels 59.10 71.80 21% Non-ferrous Metals 6% Sugar -4%

Retail 5% Office Equipment -3%

110 EIH 166.05 198.25 19%
Foods & Beverages 4% Printing & Publishing -3%
Kamat Hotels (India) 97.40 116.20 19%
Software & IT Services 4% Business Services -2%
Benares Hotels 1,150.10 1,308.20 14%
100
Viceroy Hotels 12.85 14.55 13%
Oct-17 Jan-18 Apr-18
All Prices in Rs
URBAN INFLATION


Combined food inflation fell

What’s N T to 3.01% in March 2018 from
3.46% in February 2018. For
Sugar companies were punished. Dhampur Sugar Mills, Dharani Sugars & rural areas and urban areas, food
Chemicals, Ugar Sugar Works, Triveni Engineering and Dhampure Specialty inflation was 3.75% and 1.74%,
Sugars declined 21%, 20%, 13%, 10% and 9%, respectively.  respectively, in March 2018,
while it was 3.82% and 2.65%,
Companies 06 Apr 18 Apr +/- respectively, in February 2018.
Dhampur Sugar Mills 137.20 108.55 -21% ML Sugar Index For rural areas, inflation for milk
and milk products rose to 3.28%
Dharani Sugars 22.70 18.05 -20% 120
in March 2018 from 3.13% in
Ugar Sugar Works 18.45 16.10 -13%

Triveni Engineering 43.90 39.60 -10%

100 Drooping?
Dhampure Specialty 15.70 14.30 -9%
4.95%
Balrampur Chini Mills 76.70 70.45 -8%

Bajaj Hindusthan 9.62 8.97 -7% 80

2.80%
Thiru Arooran Sugars 34.50 32.30 -6%

Mawana Sugars 49.95 46.80 -6%

60 0.65%
Uttam Sugar Mills 99.25 93.25 -6%
Oct-17 Jan-18 Apr-18
All Prices in Rs
-1.50%
BULK DEALS Mar-17 Sep-17 Mar-18

Date Company Buyer Seller Rs Cr

February 2018. For urban areas,
12 Apr-18 Dish TV India World Crest Advisors LLP Catalyst Trusteeship 668.87 milk and milk products inflation
17 Apr-18 Ajmera Realty Infra India Ariil Trust Rajnikant Shamalji Ajmera 14.13 fell to 3.93% in March 2018 from
4.79% in February 2018. For rural
16 Apr-18 Shyam Century Ferrous Omprakash Sanjiv Kuckian Prem Kumar Bhajanka 6.33
areas, vegetables inflation fell
09 Apr-18 Yasho Industries Aryaman Broking Devendra Vijay Darda 1.02 to 15.48% in March 2018 from
19.56% in February 2018. For
09 Apr-18 Marathwada Refractories Alka Ratan Lath Mugdiya Agencies 0.43
urban areas, vegetables inflation
10 Apr-18 Ridings Consulting Elite Accfin Solutions Pvt Bijal Mukesh Shah-HUF 0.30 fell to 4.83% in March 2018 from
16 Apr-18 Maximus International Optimus Finance Aryaman Broking 0.30
13.89% in February 2018. 

65 | 27 Apr-10 May 2018 | MONEYLIFE

Money Fact.indd 3 20-04-2018 18:34:30

 PS
Man-made Cash Shortage However, after a positive meeting
and assurance that action will

A fter months of silence,

mainstream media, especially
television, erupted on 17th April with the implications of a national panic
reports of an acute cash shortage.
That there is a cash shortage
is, indeed, true. It is also a fact
that Rs2,000 notes have been
scarce for months, especially
in non-metropolitan cities.
Sources say that printing of
these notes, which was stopped
during the demonetisation itself,
has never been resumed. So,
stocking ATMs is a problem
and the central bank hasn’t
bothered to ensure a proper
supply. When ATMs ran dry
at Hyderabad, Pune, Surat or
other commercially important
locations, there was no response
from the Reserve Bank of India
(RBI) which manages currency for
the government.
However, when the problem hit
Delhi and the media head-quartered proliferation of soiled notes too.
in the capital went into an overdrive, follow, RBI deputy governor
the government finally woke up to
cash Moneylife stirs itself
over the shortage of cash.
has been writing to RBI since
October 2017 about the massive
BP Kanungo lapsed into silence.
This time, the finance minister
tweeted
tw about having ‘reviewed
the
th currency situation in
the
th country’, to declare that
there
th is ‘adequate currency
in circulation’ and that the
‘temporary
‘t shortage’, caused
by
b ‘sudden and unusual
increase’
in in some areas, is being
tackled
t quickly. But the scare
scenario
s clearly worked in the
interest
i of people, because the
secretary
s economic affairs,
also
a on Twitter, said that a
three-member
t committee
has
h been set up. As always,
writing to RBI, reminding it
and providing information
didn’t work. The system
it into action only when
faced with a crisis and pushed by a
panicky government. How long can
this continue? 

No Standardisation of Browsers under Digital India

D igital India is an ambitious programme
of the government of India to “transform
India into a digitally empowered society
use IE and only with so and so versions; the site
will not work well with other browsers and even
with other versions of IE.
has enormously expanded the scope of
e-governance.
g
In 2006, the government
and knowledge economy.” The key pillars of Maharashtra had
ha launched National
Digital India are e-governance initiatives in Value Added Tax portal e-Governance
e- Plan (NeGP)
all citizen-centric services. One of the earliest works well only with with
w 31 Mission Mode
such projects was filing tax returns online and Firefox. And we are not projects
p covering various
filing and accessing corporate information even discussing mobile domains.
do After the Modi
online. However, it appears that Digital India, browsers and their government
g came to power,
the renamed project of e-governance, has been versions. One accounting the
th thrust was expanded
shabbily implemented. and tax expert says that from
f e-governance to
Different websites are optimised for he does not upgrade his inclusive
i growth that
different browsers and that too for different browsers to their newer covers
c electronic services,
versions of different browsers. Goods and version for fear that some products,
p devices and job
Services Tax works in Chrome but not so well site or the other will stop opportunities.
o The initiative
in Internet Explorer (IE); for corporate filing (on working. Testing is an was
w given a new name—
MCA21, the ministry of corporate affairs’ site), essential part of deploying Digital India. Unfortunately,
only IE is useful. Regular users of MCA21 tell us software. But this does not the
t people, organisations
that if there is an issue with the site and users seem to be in place even and systems have
contact the helpdesk, they are told first, please though the government remained the same. 

MONEYLIFE | 27 Apr-10 May 2018 | 66

PS.indd 1 18-04-2018 20:10:02

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CHANNEL SORTING OFFICE, MUMBAI 400001. Date of Publishing 20 April 2018. Date of Posting Alternate Tuesday & Wednesday.

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