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Banking News dated 20th November 2018

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Banking News: November 20, 2018


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Reserve Bank of India - Press Release


Reserve Bank of India - Press Release

Press Release: 2018-2019/1165  Date: November 19, 2018


RBI Central Board meets at Mumbai

Mumbai: The Reserve Bank of India’s (RBI) Central Board met today in Mumbai and discussed the Basel regulatory capital framework, a restructuring scheme for stressed MSMEs, bank health under Prompt Corrective Action (PCA) framework and the Economic Capital Framework (ECF) of RBI.


The Board decided to constitute an expert committee to examine the ECF, the membership and terms of reference of which will be jointly determined by the Government of India and the RBI.

The Board also advised that the RBI should consider a scheme for restructuring of stressed standard assets of MSME borrowers with aggregate credit facilities of up to ₹ 250 million, subject to such conditions as are necessary for ensuring financial stability.

The Board, while deciding to retain the CRAR at 9%, agreed to extend the transition period for implementing the last tranche of 0.625% under the Capital Conservation Buffer (CCB), by one year, i.e., up to March 31, 2020.

With regard to banks under PCA, it was decided that the matter will be examined by the Board for Financial Supervision (BFS) of RBI.
Jose J. Kattoor
Chief General Manager
Reserve Bank of India

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RBI, Government Step Back
from the Edge after 9-hour Meet

Ira Dugal
The Bloomberg News
Published on November 19, 2018


New Delhi, November 19 (Bloomberg): Nearly a month worth of barbs exchanged through speeches and comments. A nine-hour meeting at the Mumbai headquarters of the Reserve Bank of India. Followed by a 175-word statement, which saw both the RBI and the government make an attempt to step back from the edge.

The carefully worded statement, which came late in the evening, helped put to rest the worst fears of a government raid on the central bank’s balance sheet and an exit from the top ranks of the RBI. Yet, it resolved none of the underlying issues, choosing to leave those for another day.

For now, the RBI board has pushed the regulator into making a few small concessions, decided to set up a few committees and examine some demands. The decisions announced by the central board on Monday include:

Ø  A committee to examine the central bank’s Economic Capital Framework. The members and terms of reference of the committee will be decided jointly by the RBI and the government.

Ø  “Advising” the RBI to consider a scheme for the restructuring of small accounts of upto Rs 25 crore.

Ø  Extending the full implementation of the Capital Conservation Buffer (CCB) under the Basel rules by one year, while maintaining the minimum capital requirement at 9 percent.

Ø  Referring a review of the RBI’s prompt corrective action to the Board for Financial Supervision (BFS) of RBI.

The board meet took place amidst intense scrutiny given the very public spat that had broken out between the RBI and the government after a speech by deputy governor Viral Acharya. In his speech, Acharya had cautioned against the implications of impinging on central bank independence. It later emerged that the speech had been prompted by the government’s threat to use a rare provision of the RBI Act to direct it to take actions in public interest. It is not clear whether that provision (Section 7 of the RBI Act) came up for discussion at Monday’s board meet.

“All in all, it is a very welcome move. The issues which had escalated so much are probably getting resolved in a professional way” said Mr.
CM Vasudev, Former Economic Affairs Secretary.

Economic Capital Framework

The most contentious of issues was that of the RBI’s balance sheet. On this, the two sides have decided to set up a committee to review the economic capital framework which governs the amount of capital that the central bank holds.

While no timeline has been announced the RBI board has agreed to constitute an expert committee to examine the ECF. The membership and terms of reference of the committee will be jointly determined by the Government of India and the RBI.

Some sections in the government have argued that the RBI is holding excess reserves, which should be transferred to the government. There are two material components to RBI’s reserves:

Ø  A Contingency Fund of Rs 2.5 lakh crore
Ø  A Currency and Gold Revaluation Reserve of Rs 6.91 lakh crore

Most economists agree that a transfer from the unrealised gains in the currency and gold revaluation reserve is not possible without a sale of gold or foreign currency assets. Hence, the debate is centred around whether the central bank is holding excess contingency reserves and whether it should transfer any more funds to it in the future.

The economic capital framework is likely to review these aspects. The current economic capital framework followed by the RBI is not in public domain. A committee in 1997 had recommended that contingency reserves be maintained at about 12 percent of total assets. At present, these reserves are at about 7 percent.

The government has argued it differently and is looking at the total capital on the RBI’s balance sheet, which it believes is excessive. According to one government calculation, the RBI may be sitting on Rs 3.6 lakh crore in excess capital.

India’s Version of Basel Rules

In what amounts to a marginal change to the capital norms applicable to banks, the RBI board, while deciding to retain the Risk-weighted Assets Ratio (CRAR) at 9 percent, agreed to extend the transition period for implementing the last tranche of 0.625 percent under the Capital Conservation Buffer (CCB), by one year, i.e., up to March 31, 2020.

Government representatives had argued that India has prescribed capital norms that are tougher than many other countries. The government had asked the RBI to bring down capital to risk (weighted) assets ratio to 8 percent, in line with Basel III norms, from 9 percent currently. This would have helped banks save Rs 55,000 crore in capital.

However, the RBI has not given in on this. Abizer Diwanji, Partner, EY
has said – “Clearly, the government does not have the capital, because of the budget deficit issues, and clearly, the banks need the capital. On extension of the timeline for the capital conservation buffer, I think it is better to defer it because that gives a lot more capital to the bank since we were anyway compliant with Basel.”

As per the Basel implementation plan put out by RBI in 2013, banks were asked to maintain a total minimum capital of 9 percent, with a core equity tier-1 (CET-1) capital of 5.5 percent. In addition, banks were asked to build a capital conversation buffer in stages, reaching 2.5 percent by March 2019. This process will now be completed by 2020.

Prompt Corrective Action Norms

No immediate change has been made regarding banks under PCA but the RBI board said in its statement on Monday that the matter will be examined by its Board for Financial Supervision (BFS).

Prompt corrective action as a tool to prevent weak banks from getting weaker has existed for some time now. Its implementation, though, was whimsical. So, in April 2017, the Reserve Bank of India issued a revised set of benchmarks, with an attempt to move towards a more rule-based framework.

At the time the framework was implemented, the government didn’t raise objections. However, it now feels that it’s hurting the flow of credit in the economy. The health of these banks remains weak, supporting the need for continuing with the corrective action, showed a recent BloombergQuint analysis.

Restructuring for Stressed MSMEs

In the face of government and industry demands that RBI enhance credit facilities to medium and small enterprises, the central bank’s board advised the RBI to “consider a scheme for restructuring of stressed standard assets of MSME borrowers with aggregate credit facilities of up to Rs 25 crore, subject to such conditions as are necessary for ensuring financial stability”.

The decision validates the stress that has been building up in the SME segment, said Saswata Guha of Fitch Ratings. “Restructuring as a tool is not unique to India. But in the past, Indian banks have used restructuring in a rather less prudent way, which forced RBI to eventually do away with (any forbearance for) restructuring,” he said.


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RBI board meet ends; PCA relaxation considered, Special liquidity window for NBFCs unlikely

The Moneycontrol News
Published on November 19, 2018


The government and the central bank have been at loggerheads over various issues, ranging from necessity for a special liquidity window for NBFCs to going easy on banks under Prompt Corrective Action (PCA).

Mumbai, November 19: The nine-hour marathon meeting of the Reserve Bank of India's central board saw mutual agreement being reached on several issues amid the ongoing rift between the government and the central bank.

According to reports, the RBI board discussed reserves and surplus issue and also agreed on the formation of committees, including the one to review capital transfer.

According to sources, these decisions were taken:
Ø  Restructuring MSME loans upto Rs 25 crore,
Ø  Relaxation of PCA norms
Ø  No special liquidity window for NBFCs
Ø  CAR of banks to stay at 9 percent.

Governor Urjit Patel said we should not send wrong message by watering down rules.

The board meeting ended on a 'cordial' note. RBI's next meeting will be held on December 14, said sources.

Sources also said that liquidity and governance issues will be discussed at the next meeting.

These committees may look to review the prompt corrective action (PCA) framework although the capital adequacy ratio (CAR) requirement is likely to stay at nine percent.

Governor Urjit Patel said we should not send wrong message by watering down rules

“Even if we accept that Basel-III norms are globally accepted, we feel that Basel-III norms are being a bit excessive. The same thing is with PCA bank. We cannot have a Hotel California approach regards to PCA banks. We need to have a plan on how these institutions should come out of PCA. There is no point in having this highly capitalised central bank and highly capitalised banking system, none of which supports the financial requirements of lower ring of economy,” said Sanjeev Sanyal, Principal Economic Advisor.

The 18-member board meet was attended by RBI Governor Urjit Patel, four deputy governors, government nominees-- Department of Economic Affairs Secretary Subhash Chandra Garg and Financial Services Secretary Rajiv Kumar, besides non-official directors, including S Gurumurthy and Satish Marathe.

Other directors on the board include Tata Sons N. Chandrasekharan and Sun Pharma chief Dilip Sanghvi.


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CAG report on demonetisation to
be ready before Budget Session

The Indo Asian News Service
Published on November 19, 2018


New Delhi, November 19 (IANS):  The Comptroller and Auditor General (CAG) is auditing the impact of the controversial demonetisation on the Indian economy and may complete its report on it before the budget session of Parliament early next year. 

However, sources said since it will not be a full-fledged Budget Session with 2019 being an election year, it is not clear if the government will table the report in Parliament.

Last week, 60 retired bureaucrats had written to the CAG, alleging that the report on demonetisation was being "deliberately" delayed to not "embarrass" the Central government till next year's Lok Sabha elections.

Calling it an "unconscionable and unwarranted delay", they said there was no sight of the audit report on demonetisation promised by the previous CAG Shashi Kant Sharma over 20 months ago.

Sources in the CAG office said that while it was outside the ambit of the CAG to audit the Reserve Bank of India (RBI) or even the public sector banks, it was looking at issues which had a bearing on demonetisation and on the impact that arose out of the disruptive action, executed on November 8, 2016.

"We don't audit RBI. That is out of the ambit of the audit. We don't have a mandate to audit RBI or even the public sector banks. Issues which have a bearing on demonetisation, those are being looked at and that comes in the report which is usually tabled in the Budget Session," a source said.

He said the findings will be a part of Report Number 1, which is always presented in the Budget Session.

"But there is no full-fledged Budget Session this time. We will send it when the report is due. Whether they (the government) lay it (on the table) or not, that is a different thing," the source said.

Former CAG Shashi Kant Sharma had told the media in March last year that while demonetisation, per se, was a banking and money supply issue outside the CAG's audit jurisdiction, but it was well within its rights to seek audit of the fiscal impact of demonetisation, especially its impact on tax revenues.

He said the audit report would cover linkages of demonetisation with the public exchequer, expenditure on printing of notes, RBI dividend to the Consolidated Fund, and the huge amount of data generated by banks and the Income-Tax Department in the wake of demonetisation.

"It is more than 20 months since the previous CAG made the above statement but there is no sight of the promised audit report on demonetisation," the former bureaucrats told the CAG in their letter.

"An impression is gaining ground that the CAG is deliberately delaying its audit reports on Demonetisation and the Rafale deal till after the May 2019 elections so as not to embarrass the present government," they said.

They added that the CAG's failure to present the audit reports on demonetisation and the Rafale deal in time may be seen as a partisan action and may create a crisis of credibility for the institution.

"In the past, the CAG has been criticised for nit-picking and focusing on trivial issues on the one hand, and for audit over-reach on the other. But there was never any occasion to accuse the CAG of being influenced by the Government of India or having to remind it about the timely performance of its Constitutional duties," they said in the letter.

Apart from the audit report on demonetisation, the report on Goods and Services Tax is also due during the Budget Session.


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Urjit Patel vs Modi govt:
Is RBI really independent?

The Indian Today
Published on November 19, 2018


                                             Highlights:
·       Nehru advised then RBI governor Rau to keep in line with government
·       Former RBI chief YV Reddy said government sets limits for RBI
·       Manmohan Singh said RBI governor not superior to finance minister

New Delhi, November 19: Reserve Bank of India (RBI) and the Narendra Modi government have not been on the same page for quite some time. The differences had come out in the open during the tenure of Raghuram Rajan as the RBI governor. The fight, much against expectations, escalated under the incumbent RBI governor Urjit Patel.

Viral Acharya, one of the four deputies of Urjit Patel, last month took it to a new level when he compared the economic crisis of Argentina with the prevailing economic conditions in India. He claimed to have the backing of Urjit Patel in saying that the government interfered with the independence and autonomy of the RBI.

The question is, is the RBI really independent?

The answer to this question has always weighed in favour of the government. Tussle between the RBI and the government is as old as the RBI itself. The first RBI governor Osborne Smith (1935-37) had his differences with the then British Indian government.

The friction between the RBI and the government was there when Jawaharlal Nehru was the prime minister. Benegal Rama Rau remains the longest-serving RBI governor 1949-57 -- since Independence. He had a bitter confrontation with Nehru’s finance minister TT Krishnamachari.

Then PM Nehru threw his weight behind Krishnamachari and virtually dismissed the notion of an independent and autonomous RBI. Nehru wrote to Rau saying, [the Bank] has a high status and responsibility. It has to advise the government, but it also has to keep in line with the government.

Many years later, Nehru’s viewpoint was echoed by a celebrated RBI governor YV Reddy, who is credited with keeping India safe during 2008 global financial crisis which he recorded in his book, India and the Global Financial Crisis.

YV Reddy writes, "There is no such thing as blanket independence. RBI is independent within the limits set by government.

The RBI-government equation was explained in a biographical book on former RBI governor and former Prime Minister Manmohan Singh. He was the RBI governor between 1982 and 1985, and was the prime minister for 10 years between 2004 and 2014.

His daughter Daman Singh quotes Manmohan Singh in her book, Strictly Personal: Manmohan and Gursharan (2014) as saying, The governor of RBI is not superior to the finance minister in authority. And if the finance minister insists, I don’t see that the governor can really refuse unless he is willing to give up his job.

So, why is the current tug-of-war?

There are several issues over which the RBI and the government don’t agree. But the Prompt Corrective Action (PCA) framework put in place by the RBI in February this year became the flashpoint.

The RBI insisted on strict enforcement of the PCA calling it a necessary step to protect banking sector from crisis. The government, however, sought easing of lending norms for the micro, small and medium enterprises (MSME) sector.

The MSME sector is the biggest employment generation sector and contributes to about 40 per cent of exports and about 45 per cent in the gross domestic product. The PCA has made lending to MSME sector very difficult.

With this in background, Viral Acharya on October 26 said, Governments that don’t respect the independence of their central banks will sooner or later incur the wrath of financial markets, ignite economic fire and come to rue the day they undermined an important regulatory institution.

Acharya cited the example of Argentina saying that the country’s government meddled in its central bank's affairs in 2010 which led to a market revolt and a surge in bond yields.

The comparison came for sharp criticism and strong rebuttal. Critics called RBI deputy governor’s outbursts as misplaced pointing that while Argentina defaulted seven times on its international debt and five times on its domestic debt, India never defaulted on its debt.

But the RBI-government tussle and deputy governor’s public outburst may make the government more circumspect in appointing governors in future.

Some observers have already expressed fear that the government may prefer only yes-man as RBI governors to avoid public confrontations as it dampens the prevailing economic sentiments in the country.


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Jet Airways cancels 10 flights
from Mumbai, flyers stranded

The Press Trust of India
Published on November 19, 2018


Jet Airways says the flights were cancelled from the Chhatrapati Shivaji Maharaj International Airport due to “operational issues”

Mumbai, November 19 (PTI):  Hundreds of passengers of Jet Airways were left stranded at the city airport after the carrier cancelled 10 domestic flights from here on Sunday, an airline source said.

The Jet Airways said the flights were cancelled from the Chhatrapati Shivaji Maharaj International Airport (CSMIA) due to “operational issues”. However, the airline source claimed it was due to pilots’ scarcity.

“Jet Airways had to cancel a few domestic flights of date (November 18) due to operational reasons. Guests of the affected flights were duly informed about their flight status via SMS alerts.

In accordance with regulatory policy, guests have been re-accommodated and or compensated,” the airline said in a statement.

The airline said it regrets the inconvenience caused to its guests.

The airline source said the carrier has not been regular in paying salaries to pilots, engineers and senior management for quite some time now.

Facing cash crunch, the Naresh Goyal-controlled private carrier has lost a good number of pilots in the recent past and many a time they have to work overtime to make up for the shortage, the source said.

“The airline failed to operate as many as domestic 10 flights from Mumbai Sunday as it did not have required number of pilots.

“Due to the abrupt cancellations, passengers who had booked their journey on these flights were left stranded,” the source said.

He said the shortage of pilots at the airline has been going on for months together as it has not hired new ones to replace those who have quit the airline in this period due to financial issues.


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No Bail-Out for Jet Airways; Learn to
Run Airline Smoothly, Says Minister

The Indo Asian News Service
Published on November 19, 2018


New Delhi, November 19 (IANS):  The Central government today ruled out the possibility of providing any financial bail-out or leeway to cash-strapped Jet Airways, stating that it's the prerogative of the company's management to implement policies to ensure smooth functioning of the airline.

According to Civil Aviation Minister Suresh Prabhu, the government looks at sector-specific issues in the current de-regulated policy environment. Mr Prabhu was answering questions on a possible bail-out package for the airline at the launch event of the upgraded version of "AirSewa 2.0 web portal and mobile app".

Besides, Civil Aviation Secretary R N Choubey said that the airline wanted some time to pay charges of the airport operators. However, Mr Choubey said the issue has to be sort out between the airline and the airport operators and that the ministry has no role in such commercial deliberations.

Currently, the airline is facing financial troubles due to an increase in Brent fuel, along with a weak rupee and a mismatch between high fuel prices and low fares.

On November 16, Tata Sons, the holding company of the Tata Group firms, said discussions on acquiring a stake in the financially troubled airline are at a preliminary stage and that no such proposal has been made so far. Reports of Tata's interest in Jet Airways had boosted its market sentiments, though it had in mid-October termed such reports as mere speculation.


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Banks continue mis-selling financial products:
Here's what you must know to protect yourself

Narendra Nathan
The Economic Times
Published on November 19, 2018


Mumbai, November 19: ET Wealth went undercover and found that bank executives continue to mis-sell insurance and other financial products.

"Balanced funds can offer better returns of around 1% per month in the form of dividends,” said the immaculately dressed, senior bank official. I had told him that I wish to invest Rs 10 lakh in a fixed deposit with monthly interest pay-outs. I wanted a safe option that could offer me assured returns, but the bank official believed a market linked, risky product with no surety of monthly flows— dividends, after all, are not guaranteed—was better suited to a 55-year old than a fixed deposit.

Clearly, he was hiding the truth. But so was I, because neither I am 55 and nor do I have any intention of investing in a fixed deposit. This was just a mystery shopping exercise to gauge the extent of mis-selling by bank executives. If someone makes a misleading or false statement about a product, it tantamount to mis-selling, as do omitting or concealing material facts and associated risks about an investment product.

I visited branches of several banks, including PSU outfits, foreign banks and new generation private banks. The good news is that mis-selling has reduced in recent years. It was far more rampant when ET Wealth conducted a similar exercise a few years ago.

However, the modus operandi has not changed. Bank officials still try to mislead people into buying products they don’t need. The bank manager continued pushing balanced funds, even after I pointed out the risks and the possibility of the funds stopping dividend pay-outs.

“These schemes have accumulated high profits and, therefore, there is very little chance of them stopping the dividends,” he asserted. The commission conscience manager carefully avoided mentioning that dividends come from the mutual fund’s NAV, and if the fund continues paying dividends when the NAV is falling, the investor is likely to end up with losses. He was probably doing so because banks set stiff sales targets for relationship managers, forcing them to push products that fetch higher commissions instead of investments that suit the investor’s needs.

Foreign and private banks are the worst offenders

Most of the mis-selling happens at foreign banks and new generation private sector banks. The relationship managers are trained to stonewall any question from the customer. When I wanted to invest Rs 5 lakh in a fixed deposit in a foreign bank, the salesperson started pushing FDs from NBFCs. “The interest rates offered by these deposits are much higher than what our bank offers,” she said. What about the risk, I asked. Without batting an eyelid she said the FDs she was offering were from ‘reputed’ NBFCs and there was little chance of default. This comes right after the IL&FS fiasco.

To be fair, not all bank employees are bad apples. I went to the local branch of a new generation private bank to invest Rs 1.5 lakh in a tax-saving fixed deposit. This was the same bank that had tried to push balanced funds as a substitute for fixed deposits with a monthly pay-out but the response was the polar opposite.

The relationship manager (RM) at the local branch immediately started the process to book my fixed deposit. When I told her that I need some time before making the actual investment, she showed me how to complete the process online on my own. The co-operative bank I visited next with the same request was also helpful.

But, when I visited a large PSU bank branch, instead of handing the FD form, the man at the counter took me to the RM. The RM started pushing for Ulips. Her reasoning:

“You need to invest Rs 1.5 lakh every year to get Section 80C benefits and, if you invest it in Ulips for five successive years, and stay put for the next five years, you will build a corpus of at least Rs 15 lakh.”

Not only will I be doubling my money, unlike FDs, where the interest is taxable, earnings from Ulips will be tax free, she pointed out. This was mis-selling at its worst.

Ulip is a market-linked product and oral assurances of guaranteed high returns are meant only to trick people—the RM refused to give the ‘high returns’ assurance in writing because rules bar insurers from guaranteeing returns.

Also, though this doubling of money argument looks enticing, investors should note that it will happen, if at all, after 10 years, so the real return (computed using IRR method) works out to be just 9%

Banks were found pushing sub-optimal, or risky products—most common was the push for Ulips—as a substitute to not just FDs but to the Senior Citizens’ Savings Scheme (SCSS), term insurance and gold bonds. Even granting bank lockers was subject to preconditions—investing in FDs, opening a savings bank account, buying insurance.

Here’s an account of what the banks pushed for when asked for specific products:

SCSS

After having introduced myself as a retired 55-year-old, I inquired about opening an SCSS account at a PSU bank. The staff gave the necessary information. The second PSU bank I visited, however, denied handing me the form, citing my age. “Only people above 60 can invest in the SCSS,” the official said. This was factually incorrect. People who are in the 55-60 age bracket and have retired can invest in SCSS. When I approached an old generation private sector bank, which has changed its name and become aggressive, aping new generation banks, the relationship manager said that SCSS is offered only by PSU banks. Again, this was factually incorrect. Private sector banks are allowed to offer the scheme. The RM said so because his bank did not offer SCSS. The alternative he suggested was quite outlandish to say the least: “Invest in a Ulip for five years and then invest the corpus after five years in SCSS. Ulip returns appear low now because of the recent stock correction, but will be much better
(compared to current historical returns) in the future.” I chose to leave.

Term insurance

The RM at a large, new-generation private sector bank began by explaining to me the details of a term plan, brought in Ulips in the discussion and then started pushing for them: “While you will lose money in the term plan, with Ulips you get your money along with good returns. Our Ulips have delivered 14-15% return and, there are instances where they have delivered returns up to 21%.” When I asked about their exposure to equities and the risk, they come with the response was: “Your dedicated RM will shift the investment between equity and debt (move out of equity when market falls and will come back to equity when market rises), so there is no risk involved here.”

That’s a patently false statement. No bank RM can switch funds between equity and debt and make Ulips risk-free. A foreign bank too attempted to sell me a Ulip when I had expressly asked for a term plan.

Gold bonds

I approached a large PSU bank to apply for an ongoing gold bond issue. However, the staff started pushing gold coins instead. “There is a lock-in period in gold bonds, sir. But with gold coins, you can sell or get ornaments whenever you want,” he said. Not correct. There is no lock-in in gold bonds. Though these gold bonds come with a specific time period—investors get the value of gold upon maturity— they are listed and traded in stock exchanges, so you can sell them whenever you want. However, these bonds are not traded actively, so it is best to buy them from the secondary market where they are available at a discount. Two new-generation private sector banks I approached also pushed gold coins. Don’t fall for banks pushing gold coins. Bonds are a better product for investors. While banks sell gold bars and coins, they don’t buy them back, forcing investors to sell them at lower prices to jewellers. The main advantage with gold bonds is that if you hold them till maturity, you will get back your invested sum. The interest of 2.5% from the bonds is an additional gain.

Bank locker

Since the demand for bank lockers is much more than their supply, most bank branches tie them up with some investment product even though the RBI has asked banks to stop this practice. The first co-operative bank I approached gave us the stock reply: “There aren’t any lockers available.” But then a bank official dangled a carrot: “We are planning to increase the locker capacity and you may get at that time. First you open savings account and then give us the application for a locker. We will give lockers based on first come first serve basis.” The PSU bank I approached demanded that I open an FD of Rs 2 lakh to be considered for locker allotment. “We have few lockers and will give them only to premium customers. Either you open a new FD with us or start a savings account with higher average balance,” the official said. A new generation private sector bank was even more demanding and wanted me to purchase a Ulip with annual premium of Rs 1 lakh to get a locker. The senior official wouldn’t even entertain my request to put money in FDs or invest in mutual funds to get a locker and insisted on Ulips.

How to secure yourself against product pushers?

You have no option but to deal with aggressive bank RMs. What makes matters worse is that if the RM is from a bank you deal with, he already has a lot of your financial details. This came out when I approached some of the banks, I have had transactions with. Even a bank branch I never had a transaction with had my credit card, home loan balance details, among other things. So, the first things is you don’t reveal any specific financial information, so long as you can avoid it. Second, understand that sophistication comes with higher mis-selling. So be very specific in what you want, don’t readily agree with anything they suggest and cross check any new suggestion coming from them. Take down notes of what they tell and also take the brochures from them, so that you can cross-check the information later. Take your own time to do the product analysis. And finally, if you get tricked into buying a wrong product, approach the banking ombudsman grievance redressal.


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Brexit challenge facing the UK – No deal
meant no movement of goods across the EU

Meghnad Desai
The Financial Express
Published on November 20, 2018


No deal meant no movement of goods across the EU. Delays would be endemic. Fruits, vegetables, vital medicines and fuel deliveries would all be delayed as checks would be required.

The United Kingdom is going through the most serious political decision-making crisis. The referendum to leave the EU was in June 2016. The result in favour of the EU’s exit caused the departure of David Cameron. Theresa May became leader unanimously in the conservative Parliamentary party. She famously said ‘Brexit is Brexit’. Good rhetoric, but what was Brexit? One fantasy was freedom from the EU with the right to strike free trade agreements with the rest of the world, no more immigration of people from Europe, freedom to decide British disputes without the interference of the European Court of Justice and no question of obeying EU rules and regulations.

The reality proved more challenging. Negotiating with the representatives of 27 EU countries, UK began to realise that its options were limited. A major obstacle not much discussed at the time of the referendum was the issue of the border between the two parts of Ireland. The Republic is independent and an eager member of the EU. If UK were to leave the EU, Northern Ireland would be outside the customs union. But then, trade would require border checks of all goods and people moving across. The border between the two parts was declared to be a free border in a previous international treaty and, thus, introducing controls was not possible. Nor could Northern Ireland be left in the customs union while mainland UK was out as that would be partitioning the United Kingdom.

The prospects were of a deal, however bad, or no deal. No deal meant no movement of goods across the EU. This meant no inputs for factories coming frictionless from the continent which are required at the last moment. Delays would be endemic. Fruits, vegetables, vital medicines and fuel deliveries would all be delayed as checks would be required. No deal became a nightmare possibility.

In the end, it was as predicted. Theresa May survived against all expectations while the negotiations were still ongoing. Everyone thought Theresa May was weak. Theresa May survived by leveraging her feigned weakness. She outwitted the big beasts in her Cabinet when, after getting their agreement on Chequers plan, she secured the resignation of David Davis and Boris Johnson. She carried on with Dominic Raab as Brexit Secretary but all the time she was in charge via her point man in the civil service—Olliver Robinson. No one had credited her with leadership.

Now that she has revealed her hand, all hell has broken loose. The ‘Brexiteers’ had fantasised about a clean and hard Brexit or even a no deal Brexit. No one had published an alternative strategy. Now that reality has struck, there is anger, confusion and bewilderment. The politicians realised that it could never have been better. Immigration from the EU has been stemmed except for highly skilled people. But the reality of manufacturing production with its delivery requiring a split second timing means that the UK has to stay in the customs union under one or the other euphemism. So the answer is, we have a transition period until we get a semblance of a free trade agreement when we can come out. How long would that be? How long is a piece of string? How long does it take to negotiate a free trade agreement? It took five years for the EU Canada agreement. That is, the sort of period the UK will be in ‘vassalage’, aka frictionless trade arrangement.

The immediate episode in the Brexit saga is the likelihood of a leadership challenge. It requires 15% of the number of conservative MOs to trigger a leadership challenge. At the time of writing this column, only 21 signatures have been received. It may not even happen. When push comes to shove, there is no credible rival. Theresa May is the best option against Jeremy Corbyn. The prospect of anyone else replacing her and coming back with a better deal is pure illusion. The prudent thing to do is to let her take the flak and wait till the ‘meaningful vote’ has taken place in the House of Commons. If her deal is accepted then that is the end of the matter. If the deal is rejected, then there is another crisis. Theresa May could resign but there is no necessity. She could be tested in a vote of confidence. Under the Fixed Term Parliament Act, it needs a substantial majority—two-thirds—against her to trigger a change of government.

Thus are cans kicked down the road. Theresa May may well survive. Soon, the penny will drop that the deal is an indicator of the much more humble position UK occupies in both economic and political power ranking. It is difficult to say what better deal the UK could have negotiated. In that, at least, if nothing else, the deal is reminiscent of Suez. Then, UK had no choice but to retreat. Now, all there is to do is to sign up and get back to making the best of a bad situation. Theresa May is much like the deal. Not to everyone’s liking but there is no better choice available.

(Author is a prominent economist and labour peer)

Source: Internet newspapers and anupsen articles

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