Home / Opinion / The year that put aam-aadmi money concerns centre stage

Not much had been expected of 2013, the penultimate year before an eagerly awaited general election. The year dawned in the backdrop of burning inflation, within earshot of chilling sounds of an economy slowly grinding down and an overall policy paralysis that did not give the year much to feed on. But as babies born in tough times have proved so often, these are the battle axes, the no-hope beings that end with a roar rather than die in genteel middle class hubris. As the lean, mean team at Mint Money began filing stories for the special package on your money in 2013, I was quite amazed at the work that had got done over the year. I will call 2013 the year in which aam-aadmi concerns got centre stage even though the steps to the spotlight may have begun several years before.

2013 is proud to be the year in which the Companies Bill finally became an Act, replacing the Companies Act of 1956, four years after it was born. Indian investors can not only look forward to a more transparent and accountable system that lays down the rules of the game for companies to function, but also will finally have recourse to class action suits as a legal weapon to demand compensation for corporate fraud. It was the year in which the Pension Fund Regulatory and Development Authority finally got legal status when the Bill was passed in September, 10 years after it was set up. Much work remains to get the National Pension Scheme (NPS) to the aam aadmi for whom it was constructed so well, but the passage of the Bill says that this work can now begin. 2013 will be remembered forever as the year in which the Financial Sector Legislative Reforms Commission (FSLRC) Report was tabled, not just with extensive recommendations, but with the draft Indian Financial Code (IFC). Every consumer of financial products and services must celebrate this and hope that the draft becomes law because this is the first time that the consumer has been given her due and has been put at the heart of the financial system. The IFC envisages a world where the financial system moves from making buyers responsible for decoding complex financial products to getting the manufacturers and sellers to make and sell suitable products.

The capital markets regulator continued its work on getting advisers and agents to decide whether they are sellers or advisers through the Investment Advisers Regulations 2013. The full impact of these regulations will be felt once sellers and advisers from other parts of the retail financial sector too begin to abide by the same rules.

The Reserve Bank of India (RBI) woke up from its long slumber and has finally accepted that banks need to treat customers fairly when they sell them third-party products such as mutual funds and insurance. But what has really set the cat among the pigeons is an RBI circular that suggests a brokerage model for banks wanting to sell insurance products of more than one insurer. A finance ministry direction to public sector banks nudging them towards a broker model shows the intention of the government to finally put a stop to banks mis-selling financial products.

2013 was also the year in which the elephantine Employees’ Provident Fund Organisation (EPFO) stirred its mass and finally got the EPF account online, allowing subscribers to transfer money between organizations and track balance in the PF accounts online. Small potatoes given the level of service the mutual fund industry gives online, but at least it is a beginning. 2013 saw continuing work to get insurance products better constructed, with incentives more aligned to getting the manufacturers and sellers to do the right thing by the consumers. Life insurance policy reform continued with the focus shifting to cleaning up the traditional plans, after getting the unit-linked insurance plans (Ulips) right in 2010. The result was mixed and further work is pending to remove product design glitches that still remain. Further work is needed to stop insurance companies from making obviously misleading promises, as in the case of guaranteed return pension plans. Medical insurance policies got a much-needed makeover that give them a lifelong tenor and have rules against arbitrary raising of premium for existing policy holders after a claim.

In terms of product innovations, I will single out two to discuss. One, the much-awaited Consumer Price Inflation-indexed bonds are finally here. I have a large laundry list of problems with the product that has not been designed keeping in mind the final investor, but have one good thing to say: all you fixed deposit investors who are still afraid of equity facing products, line up and buy the inflation-indexed bond. Two, we’re seeing innovation happen on the right side of life insurance finally that aims to ensure not just a lump sum, but continuing substantial income at reasonable cost for a defined period if the insured dies. I hope to see many more such products in 2014.

So, get ready to take a quick ride back over the various events that had an impact on your money in 2013 and some that will impact it in the next couple of decades. Over the next 8 days, these pages will bring you the regulatory and product changes across the areas of capital markets, life and health insurance, mutual funds and pension. Keep reading.

Monika Halan works in the area of financial literacy and financial intermediation policy and is a certified financial planner. She is editor Mint Money, and Yale World Fellow 2011 and is on the board of FPSB India. She can be reached at expenseaccount@livemint.com

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