A Call To My Bank- How KYC is actually used

Calling Mr. Banker

A few days ago I got an SMS from one of the NEW AGE banks, I have a credit card.

" We have upgraded your credit card, you will get the new one in a few days at your billing address"

Now my billing address is my  parents home, while I live in a different city. I was not planning to go to my parents home for some time. So I called the bank's call center, whose number is given is font about half this size, behind the credit card and I needed find my magnifying glass from my school days to read it.

In these days of paid caller tune the Bank was kind enough to make me listen to free music and lyrics, albeit singing Hosannas about how wonderful the bank and its products are. I was lost in the melodious lullaby and had almost fallen asleep when somebody woke me up to ask for my problem. I explained that would it be possible to deliver the card to my local address. 

"NO", I was told bluntly, as we need to follow RBI guidelines for KYC and if you  need a change in address you need to visit our nearest branch, fill a form and give an application.

Well OK, I thought who wants to take Panga with RBI, not me a struggling blogger, I thought, and would just call my parents to courier the card to me once received.

As I was about to keep the phone, the young man asked me if I am looking for any investments?  I said yes I do have plans for investing for my future but not sure where considering my limited knowledge on all financial matters.

Suddenly the tone of the young man on the phone changed.

" Nothing to worry sir, I will send our Investment manager to your address and  he will help you"

" But my address is of another town, would you send him  here or to my parents home?" I wanted to know.

Any where in country sir, wherever  you say, we can send him to your  office, or home as per your convenience.

" But will RBI not have a problem sending your consultant to my local address while my address in your records is for another city?"

"Nothing to worry Sir, our Manager will help you with all the formalities"

" But what about KYC?"

" Sir my Investment Manager will take care of that"

" OK, let me think about it, I said and hung up".

Since then I have received many calls from the Investment Manager seeking an appointment. It is clear that the poor call center chap and the Investment manager have a target to sell and their bosses ignore RBI norms as long as the money keeps on coming. Remember The Bankster by Ravi Subramanian ?

So here are a few questions I want to ask the new age modern banks, some of them who were recently slapped by RBI for not following the KYC Norms. 

What is clear is the moment somebody wants to invest money though a bank all the KYC norms are thrown out of window and the bankers are willing to bend to adjust customers with funds. For all other cases RBI is used as the Gabbar Singh.

I am all for following RBI norms, but both in letter and spirit, I wonder when our banks will follow the same.

What has been your experience with your bank? Let us hear it in comments.

Life Without Cash-Part II

Never to shy away from a challenge I started my first day without cash, with just 4 Rs 50 notes in my pocket for any emergencies.

Day 1.

• Went to petrol pump and got the tank filled, paid by my Credit Card (2900). As there is no surcharge on this credit card I was happy to pay by credit card.
• Wanted to get the air checked in the tires of the car. But did not have change in pocket to give to the pump boy, so skipped it. (Is this cheating on the challenge? I guess it is only postponing something not urgent)
• Went out for cup of T with my colleagues at the famous T stall. He accepts only cash and Sodexho coupons. So allowed my colleague to pay as I am on a cashless existence. I am sure he believes this is one of my cheap tricks and not a true experiment with life and money.

Day 2

• The maid’s salary was due. She accepts only cash. I tried to convince her to take check and promised to give her 100/- more if she takes check. But she informed me she does not have a bank account so will take only cash.
• Then came the car cleaning guy again cash only transaction. On my explaining to him that I do not have any cash today and may not have for a week. He looked at me with horror but offered to accept in form or some old T Shirts, and shoes provided he likes them. So I parted with some really nice barely worn T shirts which were too tight on my 80 kilo body, but are now hanging on his lean frame J. Long live the barter system. You clean my car and wear my T-Shirt in exchange. "Bloggers of the world Unite, you have nothing to loose but your Shirt"
• Took Sodexho coupons to the T Stall. (Technically they are not cash so I was ok with the same). The lady of the house thinks I am not taking the challenge in its true spirit.

Day 3

·         Bought some groceries using Credit Card, at the supermarket.

Day 4

·         Dinner with some visitors at a nice restaurant, wanted to add Tip in the Credit Card slip. But remembered what one of my friends in food business told me, a lot of staff do not receive tips given in this form. So reluctantly parted with 2 Fifty rupee notes. ( Hey I go there often and do not want to discover a roach in my soup)

Day 5

·         Princess wanted to buy some potato chips from the grocery store in the basement of the building and this guy is a cash only business, coming after office I just did not had energy to fight with a kid who can scream on need, with no regards to the gazals being played at full volume at our neighbor’s house. So parted with another Rs 50 note.

Day 6 and 7

·         “Hey did we not talked about the work week? Oh I did not mentioned that in the beginning?, well I am mentioning it now!… thus went the argument with Mrs. P. Never seen her grinning this wide not even on the day when her dad agreed for our marriage.

        

Thus my little experiment with Life and money ended. With Mrs. P smiling and telling me “ Told you So” .

But guys in all fairness if you see wherever I got stuck for cash was small transactions less than 500/- except for the salary of maid, and that poor women does not have a bank account, due to not having an ID proof. That topic needs a blog post of its own..

Thanks for reading, would love to hear from you.

Credit Report

Some time back I wrote about The Big Brother is watching referring to the CIBIL, which has started operating in India and how it is impacting and has slowly entered our life without most of us realizing it.

I would like to be candid here, I own stocks in banks and don’t like when the NPA for the bank that I own go up. So I am on the team of the bankers, but that does not mean that cease to be a responsible consumer. Bye the way if one takes a loan from a bank and does not pay up then after a time the bank has to classify these loans as NPAs or Non Performing Assets as per RBI guidelines.

In order to experience the services of CIBIL I decided to order my own credit report from it. Now CIBIL is giving the retail consumers their credit report on producing proof of identity and PAN Card. You can make the payment online ( Rs 142) or send a DD to their Bombay address ( I am old enough to remember the city being called Bombay instead of Mumbai! ).

So I went to CIBIL website, paid the fee and downloaded the form. Attached it with a self attested copy of my PAN card and Driving License and couriered it to the Mumbai address of CIBIL.

Then came the waiting, I had to call their office 3 times, but the experience was not bad, Each time I got to speak to Joann, and I wondered if every girl in CIBIL office is called Joann or they have only Joann answering the phone. Any ways this will remain one of the mysteries that I will never be able to solve unless she reads this blogs and replies.

What Joann told me each time in her sonorous voice is that the volume of request for credit reports from individuals is very high and I will receive it in another 10 days.

Finally I got the credit report about 15 day from my last call. I must confess I was not very happy on receiving it. Don’t get me wrong my report is fine (as if it is my X-Ray report), I was wondering that now I will have no reason to call and speak to Joann. (God for a change I wish my wife is not reading this).

Any ways before you guys think I am a lousy financial blogger and even lousier humor blogger and (let us not talk about a romantic blog) let me come back to the track of CIBIL report.

My Credit report came with clear instructions on how to read it and every single abbreviation was clearly explained in very simple terms.

What surprised me most was that it even had the first loan I took as a long time back in 1992 for a Bajaj Scooter. ( Will write about that experience in some other blog)

So from 1992 onwards every single personal loan, credit card, car loan and home loan was listed in the report.

It gives the following information:

• Date loan was sanctioned.
• Amount of original balance
• Current status (Open, over due, paid off etc.)
• For credit card it showed the highest amount of balance that was payable on the card in its history.

It even showed the unwanted credit cards that I received in mail when credit was easily available. Though I have never used these cards but they were showing on my credit report. Fortunately all of them were shown as closed accounts.

So here are the lessons learned from the credit report.

Cibil has the records at least as back as 1992, going by my credit report. ( I don’t think I had a PAN card back then but the records are there with CIBIL). Even if you have not applied for a credit card but you received on in mail you need to make sure that it has been deactivated.

So next time you want to apply for a loan it would be a good idea to proactively get your credit report and see if you have every thing in order.

Here are the advantages of getting your credit reports.

You will come to know if all the loans that you took and paid off are appearing as paid off. This becomes more important if you have closed some loans after reaching some kind of agreement with your bank. As the bank may have settled the loan with you but may still be showing the loan as open in CIBIL report.

In case you find any loan/cc that is not yours or is showing some wrong entry etc. then you need to get in touch with the concerned bank/financial institution and get it rectified citing the CIBIL report.

There is also a possibility that you may find a loan in your name that you have never taken. This would be a case of Identity theft and means some body else has taken a loan using your name. This is a serious crime and is common in countries like US etc. In India it is not that prevalent but I am afraid our criminals will catch up with US in this field also.

In countries like US even small items like parking tickets, utility bills etc are also reported to the credit bureaus. I am sure soon it may start happening in India also. Telecom companies have already started giving a dynamic credit limit on your SIM card in case of post paid customers. This is a first step towards monitoring the spending and payment habits of its customers.

The advantage of knowing your credit report and rectifying the same is that you can negotiate a better interest rate in case of big ticket loans like car loans and home loans if you have a clean credit report. If some small item is pending on your credit report it makes sense to take care of the same so that your record is clean and next time when you need a loan the banks will process your application quickly and give you a good deal. Just to give you an example for one of the personal loan I took from a leading bank I was able to negotiate the interest rate from 15% to 13.5 % per annum and processing fees from 2500 to only Rs. 500/-. That is the advantage of maintaining a good credit history.

Thanks for reading. Would love to hear from you.

Bad Sales Man

Dealing with Bad Salesmen

Every once in a while we are encountered in a situation when we have to deal with sales people with their sweeter than honey talk, and promises to be available round the clock in case you need them.

I encountered on such sales person who made a cold call to our apartment on a Saturday morning. Now since I started my career in sales I have a lot of respect for the front line sales people. Alas some of them do not deserve it.

Coming back to our Mr. Sales man, let us call him Mr. S. Mr. S had come to know that we are using 20 Liter water bottles for our drinking needs and wanted to help us save some money. He works for Eureka Forbes and wanted to help us pick the best water filter for our kitchen. Since I have heard a lot about the Reverse Osmosis water filter I wanted to buy one of those. But Mr. S being the good smartian he mentioned that since our building gets municipality water we need not spend money for the Reverse Osmosis water filter and we can go for a normal water filter which was only 9990 as compared to 16000/- for the RO model. He also promised that he will give us 2 discount coupons worth 600/- each that can be exchanged for the cartridge of the filter that will bring down the cost of the filter further to only Rs- 8790/- only. I thought this was a good deal and decided to buy the filter. But I wanted to think a little and asked Mr. S to come next week. I received 15 calls during this week from Mr. S informing me that if I do not purchase the filter within next 10 days the discount coupons and life time warranty offer from the filter will be withdrawn by the company.

Now since I like to keep a record of my purchases and get a bill I did not wanted to pay cash to Mr.S so he promised to come with the credit card machine and swipe the same.

As promised he came next day the filter was installed and the machine was swiped for Rs. 9990/-.

Now begins the bad part. Mr. S had no bill for the filter and no discount coupons. But he promised sweetly that the bill as well as the discount coupons will be delivered to my home within next 15 days. This was in middle of August. In first week of September I started to call Mr. S for the bill and the discount coupon. Initially for the first few days he picked up my phone and each time informed that he will call me in 15 minutes and update me of the status. After about a week he stopped picking my calls, once or twice he picked up the phone as I called from a land line and not from my mobile, on realizing it was me he started speaking in Telgu pretending to be some body else. This really pissed me off and I wrote an SMS to him that I expect a call from him otherwise I will escalate the matters. So much for the friendly man from Eureka Forbes as shown on TV.

Now I started calling the Eureka Forbes call center. I had to call about 7 times before I got the bill from Eureka Forbes in post. It had the name of sales person as some body else and not Mr. S. I am not sure if Mr. S gave me his correct name or not. Still there is no news on the discount coupons. To Eureka Forbes credit till date they have not denied giving me the discount coupons but they have not been delivered also.

As far as Mr. S goes I am sure he is making a fool of some body else but he will not be able to do in our building as I have informed the building security to not let him in and also informed the society members how he is making false promises and then vanishing so nobody in our building in entertaining him.

In hind site this is what I should have done:

1. Made the payment only on receipt of the bill and warranty card.
2. Checked his ID card and talked to a client of his where he has supplied the water filter.
3. Made him only part payment and withheld an amount equal to the discount coupon. This I should have asked him to pay from his pocket which I will give to him once the discount coupons are delivered. This would have kept him on toes and he would have been chasing me rather than me writing this blog.
4. Should have verified with the office of the sales man if this discount offer is a genuine one or the sales man is making a fool of me just to get the order.

Let me wait for some more time and then I will start writing emails to Eureka Forbes head office in Mumbai.

The learning in this whole episode is that if any freebies are being promised to you by any sales man please be careful and ensure that you do keep some payment pending so that you don’t have to chase him once the sales have been closed. I am wondering if he was a bad sales man or I am a bad customer who was not smart enough to protect himself?

Thanks for reading do leave a comment.

Now that we have worked on how to stream line the bills let us look at impact of non payment of some of the bills.

Bills can be divided mainly in 2 categories:

Loan Payments

Non Loan Payments

1. Loan Payments: CC, Car, Home loan, personal loan etc.
2. Non Loan Payments: Rent, insurance, utility bills etc.

Your first priority should always be paying the loans as non payment of loans can lead to serious implications. Now a days all lenders report about your payment habits to CIBIL which keeps a track of your payment habits. You can read more about the same here.

Some of the loans are very costly e.g. credit cards and personal loans. But still if you are tight on money and are going through a bad phase like job loss or some other financial problem and you have to take a call between say a credit card payment or a home loan payment you can look at it 2 ways:

1.Interest rate: Here Credit cards will win hands down as they charge almost 4 times per annum compared to a home loan. So if your aim is to save on interest payments then make the payment for your credit card first.

2. Security: You can also look at the loan whether it is secured loan or not, e.g your home loan and car loan would be secure loans and the lender is within his right to take possession of your house or car if you default on the same.

So if your aim is to save interest then this will be your priority to pay:

1. CC
2. Car
3. Home Loan
4. PL
5. Others

But if you want to save your house this will be your priority:

1. HL
2. CC
3. Car loan
4. Personal loan

I keep cc loans above car loans is because if you can not afford to pay your credit cards you better sell your car and start taking auto/local transport. As this way you will get some cash and will be able to pay the costly credit card loans.

Personal loans are not secured and the lender can not take any of your possessions due to your default on your loan. (This does not mean they will not try to threaten you with goons etc.)

But we should not forget that each one of ours situation and priorities will be different and we may choose to pay different bills first in times of hardships. The above points mentioned by me are only indicative and should be thoroughly researched and debated considering your own personal situation before taking any step during time of hardships.

Please remember the prioritization of bill payments is only in times of hardships like job loss or medical emergency when a lot of money needs to be diverted towards hospitalization ( assuming one is uninsured or underinsured for health).

In all other times when you have adequate money you should not forget to pay your bills and keep a hawks eye on them for their due date and always make the payment on time.

Thanks for reading. Do leave a comment.

Making Life Simple- Part I

Last Friday I overheard my colleague screaming on his phone regarding some over charging by his credit card company. He was extremely mad and loud and forgot that he was in his office and not in a fish market. I do Know that it is very rude to listen to somebody’s conversation but he was screaming so loud that the guy on the other side of phone would have heard him even if the connection dropped. ( OK I exaggerate but you understand J). The problem was that the poor guy has forgotten his credit card due date and next month he was charged a hefty fee and interest.

Each one of have a hundred and one things to do every day. We have commitments towards our job our family, kids, friends, and in some cases society also. Over and above the same we have a lot of bills to keep a track of. Just look a sample list for me:

1. Mobile phone
2. Mobile phone for spouse
3. Credit cards ( 4)
4. Monthly Rent
5. Home loan ( I live in a different city from where our apartment is)
6. Personal loan
7. Electricity bill
8. Internet Bill
9. Kids School fees
10. Insurance payments ( 6)
11. Car loan

May be a few others in your specific case. Well it is very difficult to remember each one of the dates with some payments available with grace period and some not. Let us work on making things a little simple by trying to categorizing the same.

First let us categorize them in broad categories:

1. Loans: This will include credit cards, home loan, personal loan, car loan and any other loan like student loan etc. If you don't pay them collection agents will hound you till you pay up.
2. Insurance Payments. If your policy lapses and something happens to you your family will get exactly zero rupees.
3. Utility payments. (Electricity, water, internet etc.): You don't want to live in dark without your TV?
4. Kids school fees. Now don't tell me we want to be that irresponsible to not pay kids fee on time.

Now let us look at trying to reduce the work for these payments. As a first step go back to previous bills for various items like credit cards, insurance reminders, etc and note down the monthly payment due date from each of the bill. Put these dates along with the name of the bill in a spread sheet and sort them out by date going from 1^st to 31^st of the month. This exercise should not take more than 15 minutes once you have all the bills in your hand.

Now let us see of these bills what all can be assigned to automatic payments. Most of the new age banks like ICICI, HDFC, Axis, Yes etc. and some of the PSU banks like SBI, BOB, Corporation Bank etc also have internet banking facility with an option to make the payment to third party. These services are for 2 kinds of payments.

Regular bills like insurance, utility etc where the bank electronically receives bill and posts on the website the amount that you need to pay along with the payment due day. You can either choose to make the payment automatic as and when it is presented or you can choose to make the payment manually on or before the due date of the bill. I prefer the automatic route for most of the payments. What I have done is I have only 3 active accounts let us say the 3 are:

a) Salary Account

b) Bill payment account

c) Investment account

1. Salary account is my zero balance salary account opened by my employer. My salary comes in this account. First thing I do is transfer a fixed amount to the investment account on the very first day.
2. Bill payment account: This is again a zero balance account opened by my previous employer and I use the same for making payments of all kind of bills online, writing checks, and withdrawing cash from ATMs.
3. Investment account: This is the account I use for making all my investments in stocks, mutual funds, or any thing else. The aim is that any money that enters this account is only used for investments for future and this account is not to be used for consumption or for purchases. This account also holds my emergency fund in form or fixed deposits.

Needless to say most of the services that I need are available online with the 3 banks and I have rarely visited the banks for anything.

Whatever can be paid online I make the payment online and through a single account. This helps me in keeping a track of all the expenses in one place and also helps in preparing my tax return at the end of the financial year.

Currently the only amounts I pay by check are the school fees for my daughter and to the housing society where we live, rest every thing is online for many years now. Actually for most of my routine payments I make money by using my credit card. ( this is a double edged sword if you are not careful). More on this in some future blog. I will write a few more tips that have worked for me in past on bill payments in the next blog in the same series.

Thanks for reading, do leave a comment.