Sunday, April 27, 2008

Of lies and mis-selling

SBI Cards caught lying and mis-selling

I haven't had much luck with credit cards, despite being a cautious spender and paying all my bills on time. On account of a lack of credit scoring facilities in India, here typically there's not much reward to be had from the credit card community if your spending are in control and ensure timely bill settlements. Also, my pathetically low salary ruins whatever little chance I had to get a good credit card deal; an important criteria that credit card companies look while deciding what type of card (silver, gold, platinum, etc) should you get and the spending limit (higher your salary, higher your spending limit, and vice-versa).

Earlier this month, I was offered an SBI Platinum card; one of their call centre executives called me on my mobile to offer me one. I said yes, since i only use one credit card and there too I had a much lower spending limit - despite using the card for around five years - till i took my case to its CEO's doorstep and thus got it enhanced. SBI cards took my salary slip, completed its formalities and almost asked the entire world whether they know me - they came to my office and residence, made enquiries, etc.

I got my new SBI card's delivery today morning and much to my shock, i discovered that I was given an SBI Gold card. They had promised me an SBI Platinum card, instead. Also, instead of a spending limit of between Rs one and five lakh that SBI cards had offered and promised me, they gave me a spending limit of only Rs 30,000!

Not only did SBI cards approach me and not vice-versa, they also lied to me and deceived me into believing that I would get a product when they actually gave me something else. This is quite repugnant and unacceptable on two counts:
  • If SBI Card felt that my salary did not deserve a Platinum card, they had no rights to give me any other product, instead - like an SBI Gold card in this case. They should have the decency to ask my permission first.
  • They had promised me an SBI Platinum card and given me a clear, spoken and unmistakable impression that this is the product that they were offering. Instead, they gave me SBI Gold card, that also with a much lower spending limit. This is mis-selling and also a blatant lie.
Next time, a credit card company calls me and offers me one of their products, I will take it with a pinch of salt. Having said that, I do not intend to sit back and take this lying down. I will complain to SBI card and, if need be, also to RBI.

Is It Really Focussed?

ICICI Prudential Focused Equity Fund aims to limit its portfolio to around 20 stocks

You invest in a mutual fund (MF) scheme because apart from being unable to track direct equity investments, you also want diversification. So your MF that diversifies across 40 to 60, sometimes even more than 80, scrips, steps in. But too many scrips can also dampen your fund’s portfolio as a bunch of them should see their share prices appreciate to have any decent impact on your fund’s net asset value (NAV). ICICI Prudential aims to address this issue as it has launched a new scheme that will neither under nor over-diversify.

Called, ICICI Prudential Focused Equity Fund (IPFEF), this scheme will invest in around 20 scrips as that’s the ideal number of scrips the MF believes a scheme should have. IPFEF will choose from the top 200 companies as per their market capitalisation.

Should you invest?
While having a tight and an adequately diversified portfolio has its merits, there is no thumb rule on the number of stocks that a MF scheme should hold. Further, the number of stocks in a portfolio is just an approach to fund management; it does not guarantee performance.

Look closely at ICICI Prudential MF’s bouquet of schemes and you realise that the focused approach could just be an excuse to launch a new scheme, as typically all its schemes have a much higher number of stocks. Even its other large-cap oriented funds like ICICI Prudential Growth Fund and ICICI Prudential Power Fund hold more than 30 scrips. Ultimately, IPFEF’s offer document says it can diversify beyond 20 stocks if its assets cross Rs 1,000 crore. That is a low threshold to have for a large-cap oriented fund. With giants like ICICI Prudential having the marketing and financial muscle to woo distributors and investors alike, it doesn’t take time to either mop Rs 1,000 crore or come up to that level in case they mop up a lower amount.

Avoid IPFEF. Instead opt for some of JM’s well-performing equity funds if you want to get the most out of a tight portfolio.


As the country oldest mutual fund scheme, now US-64 Bonds, are set be redeemed, it’s tough to find an equally alternative investment. There are some that come close

The oldest mutual fund scheme in India, Unit Trust of India (UTI)’ Unit Scheme – 64 (US-64), will soon be no more. After more than 40 years of existence, curtains will fall on the US-64 bonds that mature on 31 May 2008. UTI has already sent out letters to all bond-holders about the redemption; investors are told to submit their original certificates, take their money back and leave.

For investors like Kolkata-based, Kumaresh Mukherjee, 72 it’s the end of an era. Soon after he retired from Philips India, he invested his provident fund corpus in fixed – return instruments like company fixed deposits. An electrical engineer by profession, in 1995 he also invested Rs 12 lakh or around one-third of his retirement corpus in the erstwhile US-64. After years of above-average returns, then trapped doors and turmoil that shook the Indian financial markets, and finally a repackage, the curtains are now set to fall on the ubiquitous run of US-64 scheme, now US-64 bonds. Like Mukherjee, if you’re invested in US-64 bonds and are about to get your principal money back, what to do?

The story so far
It was a red-letter day in the Indian financial markets on 2 July 2001 when India’s then-largest mutual fund the Unit Trust of India suspended the redemptions of its flagship scheme – US-64, for six months on account of its weak financials. All the skeletons came tumbling out of US-64’s closet.

For instance, up until then, US-64 could be bought or sold only at a fixed sale or repurchase price fixed by UTI and which was Rs 14.25 in May 2001; a month before the death knell was sounded. However, six months down the line on 2 January 2002 UTI disclosed its net asset value (NAV) for the first time in its history, under a huge public outcry, at Rs 6. All hell broke loose. After having used to its annual dividend – it rose from 16 per cent in 1987 to 26 per cent in 1993, where it stayed till 1995 – and therefore under an impression that US-64 was much like a assured-return scheme, investors felt trapped when UTI not only suspended redemption for six months, but also gave rise to aspersions whether investor money was safe or not. The difference between the scheme’s repurchase price of Rs 14.25 in May 2001 and its first-disclosed NAV was Rs 7.44 or 56 per cent, even after adjusting Re 1 dividend in the interim. In 2002, US-64 skipped its dividend – a first in 37 years of its history, up till then.

Then came the government of India’s bail-out package for US-64 investors. Apart from allowing investors to redeem up to a maximum of 5,000 units between August 2001 and May 2003 at an assured price between Rs 10 to Rs 12, UTI also gave a choice of US-64 bonds that paid an interest rate of 6.75 per cent to all the unitholders holding above 5,000 units. Investors were offered either that or redemptions at Rs 10 per unit. Not only did these bonds give 25 basis points more than what the Reserve Bank of India bonds yielded at that time, they were also completely tax-free at the hands of the unitholder. Around 75 per cent of investors, including Mukherjee, opted for the US-64 Bonds because of the assured returns and lack of attractive alternative options.

How to redeem your money?
The redemption process is pretty simple. If you hold up to 200 bonds, all you need to do is to give your bank account details, latest by 15 May 2008 to UTI if they do not already have it. If UTI has been sending you interest payments so far by Electronic Clearing Service or by cheques with your bank account details printed on them, it means that UTI already has your bank details. They’ll send your principal amount cheque in the first 10 days of June 2008. You need not surrender your bond certificates.

The key to look up the number of bonds is your customer identification number (ID). When the UTI letter says that its 200 bonds, it means 200 bonds per customer ID. So even if you have more than one folio but have less than 200 bonds in each of them, you do not need to submit your bond certificates.

If you have more than 200 bonds in a single folio, you need to send your bond certificates before 25 May 2008. Here too, bank account details are mandatory. Fill out the bank particulars form that UTI has sent you alongwith the redemption notice. Submit this form and bond certificates, if necessary, to the UTI Branch in your city (visit to know your nearest centre) or send them by courier or ordinary post.

Where to invest the redemption proceeds?
In the communication that UTI has sent you, it has suggested five of its existing schemes to invest your bond proceeds in. Although if you wish to invest in any other UTI MF scheme, you can do by just mentioning its name and the plan (dividend or growth) that you would like opt for.

We suggest you skip these schemes. Except for UTI Fixed Term Income Fund (UFTI), all other alternatives are diversified equity-oriented funds. UTI Infrastructure Fund (UIF) is a thematic fund and therefore riskier and we wouldn’t advise you increase the risk levels of your monthly income-yielding corpus by notches. And although UFTI is a fixed maturity plan where downside risk is minimal, it won’t pay you regular income.

Remember, you invested in US-64 bonds because you wanted some kind of regular income. Plus, it also offered tax efficiency like none other. For instance, if you are in the highest tax bracket, your effective tax rate works out to be 10.22 per cent. Ideally that is what you should get from your alternative instrument avenue where you will now park your redemption proceeds.

Presently, there are no instruments that pay you a tax free and assured return to the tune of 10.22 per cent. But if you are risk averse and like to avoid equities, your first priority should be Senior Citizens Savings Scheme (SCSS) if you haven’t already exhausted its upper limit of Rs 15 lakh. Mind the age requirement though.

The next best alternative is the Post Office Monthly Income Scheme (POMIS). The maximum limit has only recently been raised to Rs 4.5 lakh in a single account and Rs nine lakh in a joint account. If you have exhausted your SCSS limits, take advantage of the increased limit in POMIS. Both of the above carry the government of India’s guarantee.

If, however, you do not mind taking on some risk, try mutual fund schemes that invest zero to up to 40 per cent in equities. These are debt-oriented schemes that invest marginally into equities; we call them Equities – marginal exposure and Equities – significant exposure. <’Introducing the OLM 50’, 10-23 April 2008>

Or, if you to invest in equities the whole way, stick to exchange-traded funds. These are close cousins of index funds as they invest in all the scrips in the same proportion as they lie in their benchmark indices, like Nifty or Sensex. They are passively-managed and do not carry the fund manager’s risk. And due to their inherent structure, their expense ratios are lower than index funds.

Saturday, April 12, 2008

Delhi Metro rocks

One of the areas that Delhi scores over Bombay is quick implementation of infrastructure projects. Here in Bombay, infrastructure projects, partly due to lack of open space and partly due to political corruption, gets procrastinated for months and months. So this time, after more than a year of planning, I finally got to ride the Delhi Metro. So i went to Rajiv Chowk (the station at Cannaught Place) - this is an underground station - and took a train to Indraprastha - the last station on one of the three lines and one station after Pragati Maidan. Like the Calcutta Metro, the Delhi Metro is very systematic. You first buy your ticket - Delhi Metro calls it a token - and only then you pass through the barricades by punching the token. If you do not have token, the barricade does not open and you cannot step onto the platform. This way, you do not get any ticketless travellers on the Delhi Metro. Plus, spitting or chewing pan/gutka is strictly not allowed, unlike Bombay local train network where you have scores of people at any given square km of any platform, spitting, spitting and spitting. While a part of the line is underground, a significant chunk of the line runs over the ground on elevated tracks, on top of a viaduct in the middle of main roads of Delhi. The railway stations are also elevated.

There are indicators on all platform telling you exactly the time left for the next train to arrive. I wish I could have had the time to go all the way to Dwarka and back, but I had to meet my chicks in 1/2 hour, so a short ride was meant to be. I got into my train, took a seat next to one of the compartment's large windows, and watched the train speed away, underneath, passing stations like Mandi House, etc, the train resurfacing to the ground and onto elevated tracks, like on a bridge over the ground. Within minutes, I was passing Pragati Maidan and remains of what was India's first amusement park - Appu Ghar - which was recently shut down. At Indraprastha, I got off, went over the booking window after surrendering my token to the barricades - only then the barricades open and allow me to pass - took another ticket, this time all the way to Tagore Garden. But I got off at Patel Nagar because time was up. I enjoyed my ride on the Delhi metro and I wish Bombay too could soon have its own Metro that the city can be proud of.

Himalee joined me later and we went to this restaurant called 'Legends Of India'. A chic and upmarket place at Cannaught Place, Legends of India serves sumptuous and declicious Mughlai cuisine, like Copper Chimney of Bombay. The place was very clean and decent, service was great and above all, food was absolutely delicious. We had Murg Qorma Nizami, Meat Beli Ram and steamed rice. The place is steep and expensive, but totally worth it. Try it the next time you visit Delhi and then cross over to Nirula's and have their chocolate fudge. Later Juhi (not Chawla, Bahl) joined us and we went to watch a movie (Shurya) at a mall in Saket called Select City Walk. This mall was so large that it took us 10 minutes to drive out of that mall's underground parking, after the movie got over.
I bought tickets through the ATM-type ticket vending machine. Select your show, select your seats and then swipte your credit card and enter your CVV number and you get a printout of your tickets, instantly. Amazing mall that also had a large multiplex inside. By the way, Shaurya was decent and I would give 3/5 stars. End of a very enjoyable day. Oh and by the way, the next time girls asks you this question; "What & where do you want to eat?", they actually mean: "Chup. Quietly come where we take you." ;)

Should Aamir Khan Run For The Olympics Torch?

Is it right for Indian actor Aamir Khan to run the Olympics torch even as Tibetans have requested him to stay away and show his support to their cause?

It's a tricky and delicate issue. Tibetans in exile and living in India for years and decades have requested Bollywood superstars Aamir Khan and Saif Ali Khan to desist from running the Olympic torch and therefore show their support to the cause of Tibetans. China, one of the world's few communist regimes rules Tibet. Tibetans all over the world erupted in protests (demanding indepandance) in March 2008 and violent clashes between the two sides have resulted in over 200 (the actual figure could be multiples of this) Tibetans getting killed and many others captured and imprisoned by the oppressive and brutal dictatorship of the Chinese regime. Tibetans all over the world have boycotted the Beijing Olympics, scheduled to start in August 2008. So should the two Indian superstars also ban the Olympic torch running ceremony?

I have two observations on this issue. First, what is the connection between Olympics and China? And are Tibetans right in connecting the two? Olympics, as we all know, is a premier sporting event that takes place once in every four years. It's a gala event where various sports are played by sportsperson all over the world, who come together in one village for a period of almost a month, and represent their country and try and win medals - gold, silver and bronze. Representing one's own country at an event that's attended by millions of people from across the globe and watched on TV by a further trillion - the viewership could again be in multiples I can only hazard a guess - is a privilege that few sportsperson would want to miss. Plus, the elusivity of this event, as it's played only once in four years. It's like the Cricket or Football world cup. A gold medal on a sport-person's resume golds a lot of weight and prestige and he/she is forever known as an Olympics gold medalist. This is an honour that every sportsperson wants to have. Hence, expecting sportsperson to miss this event is not fair. Especially, considering the fact that a sportsperson plays in the Olympics to win a medal and not to show support to the host country in its day-to-day affairs.

Secondly, why is Aamir Khan chosen to run the Olympics torch? Is he a sportsperson? No. He's just a Bollywood actor. But Olympics is a sporting event and not a film event like Oscars or something. Where are our sportsperson and why were they not invited to run the torch?

Let's deal with the second issue first; Aamir Khan. While the whole country is debating on whether or not he should run and whose side is he really on when he runs with that torch in his hand, my moot objection is on Bollywood stars running the torch. Who the hell are they to lay their hands on the torch? If playing Olympics is privilege, then running the torch is one too; if not more, then almost. I am sure many sportsperson would give their one eye and one arm to hold that torch - a symbol of world peace and the spirit of sportsmanship. Web reports suggest that Khan is among the six people shortlisted to run the torch. Typically, sportsperson of repute of countries that lie in the torch's route are chosen to run the torch. But we Indians are just fixated with star power aren't we? We do not care about people from other professions, as long as you are from Bollywood, we are ready to sell our souls and even our bodies to your willing, aren't we? So be it a large and equally shameless section of the Indian media proclaiming SRK as the King Khan, Saif Ali Khan the Prince or even Amitabh Bacchan the superstar to fashion designers bending backwards to call upon Bollywood stars to walk the ramp with showstoppers and steal away the thunder from professional and credible models (both designers and models belong to the same fraternity, but still...) who work their asses off day & night to put together a successful show. The shameless media again rears its ugly head as the newspapers the next day are splashed with photos of, say, Shilpa Shetty walking the showstopper at Tarun Tahilliani's show or Ranbir Kapoor in a sherwani blowing kisses to the light of his life in the audience. We Indians are crazy after film stars. Coming back to Beijing Olympics, Coca-Cola seems to be one of the sponsors of the Beijing Olympics and since Aamir Khan is the brand ambassador of the soft drink giant, he seems to have been shortlisted to carry the torch. But according to me, Aamir Khan has NO place or the right to run the torch. Even though nine out of 10 Indian sportsperson suck, have few and far achievements to boast of and have very low performance standards, they still have the right - way over any Bollywood star - to run the torch.

Ultimately, are Tibetans right in persuading the world to ban the Olympics? while it is every sportsperson right and dream to participate in the Olympics, there's no denying the fact that China will earn a lot of goodwill and good press and relations from the world for staging such a massive event - that for over a month will be the cynosure of the world's eyes - if it turns to be successful. China's message will be clear - we are a strong nation, we are a perfect host and we have the money and the power to pull it off. If Australia and USA can do it, we can also do it, and even better. China already has a new, world-class airport in Beijing ready to be operational by the time Beijing Olympics start and is the world's largest airport. A web report says that China is expected to spend a staggering amount of more than $400 billion through 2010 on infrastructure projects. The 2008 Olympics will cost Beijing about $40 billion, compared to Athens' $12 billion spent on the 2004 Olympics. And the spending doesn't stop in '08, with Shanghai expected to drop $40 billion for the 2010 World Expo and Guangzhou estimating $27 billion for the 2010 Asian Games. China is sure to rake in a lot of moolah from these games and Tibetans would sure like to use this platform to earn the globe's sympathy to the cause of Tibetans who want Independence.

China may be a great country demographically, but it is NOT a democracy. It is a communist country where people don't have freedom of speech. It is repressive to any protests against its administration and everybody knows what happened at Tienanmen Square. It's occupation of Tibet is unlawful and illegal and human rights violation, though rampant in every country, is at its worst in communist countries, such as China. In my opinion, Tibet is absolutely justified in using this as a platform to intensify their agitation when the world is looking at Beijing. But let's also not deny the right of every sportsperson who deserves to play any Olympics and who has waited for four long years to earn a rightful place in the history books.

Meher Mahino, Ava Mahino and Adar Mahino: The holy trinity of Zoroastrian calender

Zoroastrians- or better knows as Parsis and Iranis of India- have a separate calendar. We look at the English calendar of course, but we al...