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| January 06, 2017 |
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Impact 
Eating out at a moderately up-market restaurant has always been a costly affair. But, with every passing day, the menu has been getting expensive. To add to that, an extensive list of taxes inflate your bill; some hotels charge 'service charge' ranging from 5% to 20% at their discretion. Initially, many people misunderstood this for "service tax", however thanks to our digital age, information travels fast. Today, you have no option but to bear such unreasonable charges if you enjoy the food at a particular cafe or restaurant.
For reasons unknown, no State Government nor the Central Government bothered to nip this unfair practice in the bud. Now, the Central Government has realised that it’s totally unjust for consumers to pay such charges against their will. After all, these are being projected as a (compulsory) substitute to ‘tips’, which one may or may not pay for the service.
As a New Year gift, on January 2, 2017 the Ministry of Consumer Affairs, Food & Public Distribution circulated a press information note citing that the State Governments are asked to make sure hotels and restaurants don’t adopt any unfair or deceptive method to increase their collections. It also directed the National Restaurant Association of India (NRAI), to clarify how the practice is justified.
It’s still not clear why this press note couldn’t be released in the third week of December when many hotels hike their menu rates to cash in the ‘New Year’ party celebrations and vacationers. Generally, once hiked, hoteliers don’t slash prices in the New Year.
In response, NRAI has been stern and blatantly straight forward. It has referred to some case laws to justify how the levy of ‘service charge’ is entirely fair. It further clarified that it wasn’t mandatory for the consumers to pay a service charge if they are not satisfied with the services. If it’s not mandatory, why did restaurants add it in the bill in first place? The association remains silent about that.
In case, customers don’t want to pay a service charge at all, then they have an option of not eating at a hotel or a restaurant that levies such charge, NRAI stated.
In other words, NRAI has suggested that we don’t care about who has a problem with our practice. We are right. We have some case laws to justify our action and if you don’t want to pay service charge then don’t crib about it, simply don’t eat out—this is the real message.
Now it remains crucial to see what the state Governments do about it. Since the Central Government hasn’t explicitly asked restaurants not to levy a service charge, its message remains ambiguous and may give rise to varied interpretations. Hotels and restaurants have been misusing it already, but now even some consumers may also start taking undue advantage of the ambiguity caused by the comments of the Central Government.
Following this communication by the Central Government, many restaurant owners pointed out that taxes raise the bill amount more than the service charge does. While others have justifyed the levying of a service charge, catching attention on rising rents of properties and steady hikes in salaries.
But then consumers may feel aren’t these costs covered in the food prices? Many restaurants charge as high as Rs 300 for a bowlful soup. If rentals and salaries are not recovered fully, then what margins would hoteliers enjoy?
But one thing is sure, the Central Government has touched upon an issue very close to the heart of an every single person who shells out money on a service charge against their will, espcially if the service experience was unsatisfactory or/an unpleasant. However, the sad part is the Government hasn’t offered any concrete solution.
Surprisingly, there is one more angle to the story no one is talking about.
Corruption of babus.
If you speak to restaurateurs in private, on the condition of anonymity they would tell you how food inspectors, the local police, and other government officials loot them, demanding huge bribes? Where will restaurateurs recover this money from? This might be the real reason to levy the service charge, but they will be at a loss if they voice dissent.
Where is the ease of doing business? License Raj still haunts India and the common man is footing the bill of all corruption, bureaucratic lapses, and unscruplous monopolies. Many restaurateurs themselves are politicians who care little about laws.
The result is—the common man loses money. One shouldn’t underestimate the importance of saving every single paisa. Because every single Rupee saved can be invested towards productive purposes.
So the best approach would be to check the menu online before you walk into a restaurant, and contact the service desk of the hotel to check if they levy any service charge. Then you are free to take a call. Sounds logical, isn’t it?
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Impact
To become a mutual fund distributor, one has to acquire a National Institute of Securities Markets (NISM)-Series-V-A certification. As mentioned on the website of NISM, which is a SEBI established trust, the objective of the certification is to enhance the quality of sales, distribution and related support services in the mutual fund industry. It seems the syllabus of the course is insufficient for the candidate taking the exam to become a mutual fund advisor.
The capital market regulator has made it clear that only registered investment advisors can offer advice on mutual funds. In a discussion paper realised in October 2016, SEBI proposed to forbid mutual fund distributors from rendering any investment advice pertaining even to mutual funds. It also popped a question as to why not ban advising or offering trading tips on social media platforms or app-based massagers.
Now going one step ahead, SEBI is willing to create a new subcategory of the category of investment advisors—mutual fund investment advisors. The compliance requirements for such advisors would be less stringent.
Justifying the move, the SEBI official said, “Advising on the right mutual fund product is the job of a trained investment adviser, who does so against a fee from investors. Distributors are incentivized by the asset management companies or AMCs, which can lead to a conflict of interest.”
If the proposal becomes a norm, it will throw out about 50,000 mutual fund distributors out of business, unless they fulfil the certification criterion and register themselves as investment advisors with SEBI.
Many experts fear that instead of this, acting as a motivator for mutual fund distributors to register themselves as advisors, this may dampen their spirit and many of them may want rethink their profession.
To read more about this story and Personal FN's views over it, please click here..
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Impact
The unprecedented inflows to equity-oriented schemes helped mutual fund houses grow their Assets Under Management (AUM) impressively in 2016. Rising AUM and greater participation indicate that investing in mutual fund schemes gained popularity. Participation of investors in the Initial Public Offers (IPOs) rose as well. About 26 companies managed to raise Rs 26,000 crore from the market in 2016.
The pleasant aspect of this growth story has been the maturity of investors revealed by the fact that, more money has flown into mutual funds by way of Systematic Investment Plans (SIPs).
Higher investors' participation in IPOs and mutual fund schemes suggests that they have been upbeat on the market at a time when the going got tougher. While this indicates the maturity of investors to withstand tough times, it also raises doubts about receiving adequate information about the market.
This brings us back to the fundamental question of why Indian markets have been struggling so long to attract a large number of investors. Less than 5% of Indian population invests in capital markets currently. The Securities and Exchange Board of India (SEBI), being aware of this, took many steps to protect investors' interest and educate them appropriately. They are as follows: - The capital market regulator shortened the IPO listing time to half from T+12 days to T+6 days. The regulator made it compulsory for companies raising capital through primary markets to use ASBA (Applications Supported by Blocked Amount) facility.
- It asked top 500 listed companies by market cap to chalk out and announce the dividend policies, which, the regulator thinks will help investors make well-informed decisions.
- SEBI simplified the demat account opening procedure
- Intermediaries play a vital role in ensuring the smooth functioning of the market, the SEBI allowed a permanent registration facility to various categories of intermediaries that included investment advisors, research analysts, merchant bankers, depository participants and 7 others.
- Portfolio Manager regulations were also rationalised.
- SEBI tightened the delisting norms to protect minority shareholders.
- In another move, the regulations for angel investors were also relaxed with the aim of supporting start-ups.
- It also prohibited wilful defaulters from raising capital through public offers and assuming positions of contro in listed companies. This move potentially would work in favour of investors by safeguarding them against getting tricked into offers floated by wilful defaulters. This will also encourage good governance practices.
- SEBI also loosened up norms for Real Estate and Infrastructure Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) to increase their acceptance in the market.
- The PM recently inaugurated the new campus of National Institute of Securities Markets (NISM), a public trust established by the SEBI, at Patalganga near Mumbai. The capital market has spent over Rs 400 crore on setting up this facility. The addition of such a large scale infrastructure would help in meeting the high market demands for qualified market professionals.
To read more about this story and Personal FN's views over it, please click here.
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Impact
Many citizens held their breath before the "Mitron" speech began at 7.30 pm on New Year eve. No party may have started before 8.30; any untoward surprise in Mr Modi's address would have cured their hangover even before the celebrations begun. However, Prime Minister, Mr Modi offered some goodies to eager Indians, one positive in the aftermath of national demonetisation. To add to that, the Government has displayed more flip flops on policy decisions—for good reasons though this time. Overall, the Government seems to have set the perfect tone for the entire year.
A few changes in the demonetisation ordinance...
To restrict RBI's liability and that of the Government on Scrapped Bank Notes (SBN), the Government had issued an ordinance. The ordinance not only made holding SBN over 10 pieces after March 31, 2017, a criminal offence but also put a restriction on who can exchange notes between January 01, 2017 and March 31, 2017, at select offices of RBI. The Government has released more clarification on this topic.
It has extended the timeline for NRIs to June 30, 2017. However, there would be a limit of Rs 25,000 per person as per Foreign Exchange Management Act (FEMA) guidelines. This limit won't apply to resident Indians, who can exchange their SBN only until March 31.
Unlike determined earlier, there won't be any four-year jail term for holding SBN over 10 pieces. The Government has also clarified that the minimum penalty for those holding old SBN would be Rs 10,000. The maximum penalty can go upto 5 times the contested amount. Further, furnishing wrong information while depositing money between January 01, 2017 and March 31, 2017, would also attract a fine of Rs 5,000 or 5 times the amount exchanged, whichever is higher. It's noteworthy that the research scholars can hold upto 25 pieces of SBN without being asked any question
To read more about this story and Personal FN's views over it, please click here.
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With a few days to go from its launch, nearly 30 lakh mobile users have downloaded the Bharat Interface for Money (BHIM) App—digital payment application supported by Android cell phones. The app has reported more than 5 lakh transactions so far, as tweeted by Mr Amitabh Kant, CEO of Niti Aayog.
National Payment Corporation of India (NPCI) has developed this App to promote the cashless payments in the economy and take Unified Payment Platform to the next level. The primary advantage of using BHIM is it functions without the internet and allows the user to transfer money to people who don’t have the App.
One has to be cautious while downloading the App. Several app developers claim to offer BHIM App. For example, if you type “BHIM App” in the Playstore, *99# BHIM UPI App developed by Tasmai also appears. There are many more such Apps, some of them call “Guide For BHIM”. You should be wary of downloading them, as all of them ask permissions to access almost everything on your mobile. Be sure to download the App developed by NPCI.
While you use digital payment systems, it’s important to be wary of cyber security threats.
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Book Building: Book building is the process by which an underwriter attempts to determine at what price to offer an initial public offering (IPO) based on demand from institutional investors. An underwriter builds a book by accepting orders from fund managers, indicating the number of shares they desire and the price they are willing to pay.
(Source: Investopedia)
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Quote: "Investors must keep in mind that there's a difference between a good company and a good stock. After all, you can buy a good car but pay too much for it.
"- Richard Thaler
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