Sucheta Dalal :Battle lines
Sucheta Dalal

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Battle lines  

Oct 29, 2006



UTI Bank's move to register its name seems set for a face off between the two institutions. When the parent Unit Trust of India (UTI) was broken up, the bank got the right to use the UTI name until 2008, but it decided to register it only recently. UTI Mutual Fund (UTIMF) has now written to the bank stating its discomfort with the registration move; it seems perturbed at the bank’s plan to set up an Asset Management Company (AMC), even if it is a private equity fund for infrastructure. UTIMF is not convinced when UTI Bank says it has no plans to compete with it in the mutual fund space, as it was totally unaware of the bank\'s AMC. We learn UTIMF is itself planning an infrastructure fund. LIC, a major shareholder of UTI Bank, is also rattled at the bank’s plan to distribute pension products for its private sector rivals. The worries about fresh competition are understandable, but to expect UTI Bank to stay away from opportunities not in direct competition with those of its shareholders is unrealistic and gives a different dimension to the brand battle. Some of this could have been avoided if UTI had been allowed to set up a holding company, as suggested by M. Damodaran, its former chairman. Had that happened, the holding company would own the brand and cash in on the equity even if the ultimate custodian of the UTI name was uncertain.

 

More brand confusion

 

While on brand tussles, HDFC Bank and Housing Development Finance Corporation (HDFC) cause confusion among investors and journalists to elicit several media apologies. Here too, the bank benefited from the brand equity of the mortgage finance company conceived by H.T. Parekh. Over time, it built on that equity and emerged a darling of the markets. It is now as much a custodian of the brand name as the parent. However, this brand confusion may soon be at an end. Despite denials, we learn there is substance to the market buzz about a merger between the two entities if the RBI grants the several concessions they seek. Meanwhile, Citibank\'s strategic investment and interest in the HDFC entities may become more significant in the run up to 2008-09 when India moves towards capital account convertibility.

 

Getting tough

 

Sebi is quietly tightening the rules to stop companies from making tall claims about corporate performance in the run up to their IPOs. The regulatory action follows investigations that revealed how companies were using paid editorial space and media interviews to \'plant\' exaggerated claims. Sometimes, newspaper managements were so deeply involved that they bartered pre-IPO share allotment as payment for media space. Sebi has empowered itself to initiate action against such violation. Ironically, the very media group that has been the biggest beneficiary of such paid-plants has been among the first to welcome Sebi\'s regulation to protect investors from such mischief. Sebi also plans to end the practice of doling out investment advice on TV without any fiduciary responsibility. It will soon seek approval for the registration of financial advisors and rules framing their duties and obligations. Together, these measures will go a long way in blocking misinformation.

 

Mastercard rules

 

Some weeks ago we pointed out that credit card issuers cross check individual credit histories from two sources — the Credit Information Bureau of India (CIBIL) and what is known as the \'Satyam negative list\'. CIBIL was set up under a specific statute, but the origin of the Satyam list is more shadowy. However, it is just as effective in sealing the fate of a person reported a defaulter even by mistake. While CIBIL is at least influenced by RBI’s suasion, little is known about the \'satyam\' list. Some sleuthing by RBI officials helped discover that Satyam is only a service provider — the negative list is actually kept by the multinational Mastercard, which is not under RBI supervision. Some facts: In 1989, the local credit card company set up the Indian Co-operation Committee (ICC), a forum piloted by 25 member banks of MasterCard International. The ICC Negative File project was launched in 1999 as the first initiative to create a record of delinquent credit cardholders. It was managed by Satyam Credit Information Services, but Mastercard is responsible for all acts of omission and commission.

 

http://www.indianexpress.com/sunday/story/15597.html

 


-- Sucheta Dalal



 



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