While the Reserve Bank of India (RBI) and the Telecom regulator have formulated rules and No Call Directories (NCD) to stop harassment of people through marketing calls, corporate India remains one jump ahead in dodging these rules. Over the past few weeks, there is a big and renewed spurt in telemarketers offering personal loans. These include telemarketers for Citi Financial, GE Money, Barclays Bank and ICICI Bank — most of these marketers speak in the regional language and seem to target sub-prime borrowers who would be willing to pay interest rates of 40 per cent or more on personal loans that ask no questions on use of money and require no collateral or guarantor. This aggressive round of marketing has been sparked off by the entry of new players (AIG, BNP Paribas, Fullerton India and Societe Generale are looking at this market) in the business with deep pockets that see big profits in the personal loan business. Ironically, personal loans are targeted at people who aren’t really welcome as savings account holders by these banks. The RBI is fully aware of the problem of usurious loan rates charged by finance companies and has even persuaded a couple of them to roll back the high rates, but it has yet to stir itself to cap the charges.
The Telecom Regulatory Authority of India (Trai) is finalising its No Calls Directory rules and even planning a Rs 1,000 fine for telemarketers. In a far-reaching move, it also plans to force all telemarketing companies to be registered, so that it has the power to discipline them for bad business practices. While Trai is focused on telemarketers, mobile phone companies are on to new tricks. Apart from badgering non-subscribers, there is a big resurgence in the old trick of offering a free services, which become chargeable at the end of 30 days through a negative consent —these includes call waiting, missed calls, downloads and answering services. In the last few days, Airtel’s pre-paid subscribers say that a song download facility costing Rs 30 a month was activated without their consent. Some subscribers found to their chagrin that a song was also downloaded (at Rs 15) on their phones without their permission. Trai will clearly have to work faster and harder to ensure that telecom companies follow fair business practices.
Meanwhile, there have been several new developments regarding the ongoing investigation into Stock Holding Corporation of India (SHCIL) and its former subsidiary SHCIL Services Ltd (SSL). The Company Law Board (CLB) heard the petition filed by SHCIL about the “fraudulent” dilution of its shareholding that we reported last week. Strangely enough, the matter has been posted for its next hearing in September without any interim relief. A rattled SHCIL board, comprising nominees of top banks and institutions such as IDBI, ICICI, IFCI, LIC, GIC and UTI, met in Mumbai on Saturday to chalk out the next course of action. We learn that the board was planning to seek police protection after SHCIL’s former chairman and managing director R Jayaraman Iyer (who was sent on compulsory leave on April 15) made two sudden and disruptive visits to the SHCIL office last week. Institutional source says that SHCIL is likely to call an Extraordinary General Meeting (EGM) to ratify some major corporate changes. This could include replacement of a couple of SHCIL directors, including a former bank chairman who has been sending out angry letters in defence of Iyer and S Ramanathan, CEO of SSL, whose activities are under investigation.
SSL vs SHCIL
The new team at SHCIL is discovering to its horror the extent to which it has been paying for SSL’s staff, resources, infrastructure and business development while SSL has quietly obtained permission from the Securities and Exchange Board of India (Sebi) to get into businesses that directly compete with it. Over the last six months, SSL has been registered as a broker (with the Bombay Stock Exchange), as a Portfolio Management Services advisor and a Depository Participant (DP). The last mentioned puts it in direct competition with SHCIL, which is the largest DP and custodian services company in the country with all large public sector institutions and banks as its clients. As reported earlier, SHCIL’s shareholding in SSL has been “fraudulently” diluted to 24 per cent and the matter is now before the CLB. Intriguingly, neither Sebi nor the BSE and the CDSL have made any attempt to conduct even a cursory inspection of SSL’s activities, although it is registered and regulated by them for multiple businesses. Market participants say that the SSL shareholding, including its big foreign ownership, is still not in the public domain, while Indian brokerage firms face serious interrogation by both exchanges for even tiny changes in their own shareholding. The BSE refuses to respond to queries on this issue.