Messages from RBI (1)

27-Mar-2022: Messages From the Reserve Bank of India (1)

RBI Releases Booklet on Modus Operandi of Financial Frauds

The Reserve Bank of India has published a booklet titled BE(A)WARE – Be Aware and Beware! To educate the customers on how to remain safe from fraudsters while carrying out financial transactions.

The Central bank in its booklet has written extensively about the common modus operandi used by fraudsters and precautions to be taken while carrying out various financial transactions. You can read the entire content of the RBI awareness booklet here: ( The Link is also given at the bottom ).

RBI claims that this booklet, which has been compiled from various incidents of frauds reported as also from complaints received at the offices of RBI Ombudsmen, provides information to those who are inexperienced, or not so experienced, in digital and electronic modes of financial transactions.

RBI’s Ombudsmen Offices and the Consumer Education and Protection Cells (CEPCs) also revealed that sharing of confidential information by the customers, knowingly or unknowingly, is one of the major causes leading to financial fraud.

The booklet gives information on the common modus operandi used by fraudsters and precautions to be taken while carrying out various financial transactions.

The book is further divided into three parts -- Part A provides information of commonly observed modus operandi; Part B suggests precautions to be taken against fraudulent transactions relating to banks and non-banking financial companies (NBFCs); and Part C explains the general precautions and digital hygiene to be followed by the public.

RBI’s booklet also emphasises one’s need for keeping their personal information confidential at all times and being mindful of unknown calls/emails/messages. It also outlines the due diligence measures to be followed while undertaking financial transactions.

It aims to enhance public awareness about various types of financial frauds perpetrated on gullible customers while carrying out digital payments and other financial transactions.

“The surge in the digital modes of payments witnessed in the past few years gained further momentum during the Covid-19 induced lockdowns. Digital payments enhance customer convenience by improving ease of doing financial transactions.

“They also contribute to promotion of financial inclusion. However, fraudsters are finding new ways to defraud the gullible public through various ingenious methods,” according to a RBI statement.

The booklet elaborates on safeguards against commonly used fraudulent techniques, such as, SIM swaps, vishing/phishing links, lottery, etc., including fake loan websites and digital apps.

It also gives details of the commonly observed modus operandi and precautions to be taken against fraudulent transactions relating to banks and non- banking financial companies (NBFCs), respectively.

“The booklet explains the general precautions and digital hygiene to be followed by the public…The booklet emphasises the need for keeping one’s personal information confidential at all times, being mindful of unknown calls / emails / messages, etc., and also outlines the due diligence measures to be followed while undertaking financial transactions,” RBI said.

Complete Text of the Booklet given in the next Blog- (2)

Life & Insurance (2)

07-Feb-2022: ABOUT INSURANCE

Insurance ensures protection of economic value of assets. Assets are insured against the risk of being destroyed or made non-functional due to any accidental occurrence. Risk is defined as the possibility of adverse results flowing from any occurrence. Insurance is used with reference to financial protection against a possibility, such as fire, accidental damage, theft, or medical expenses: motor insurance, household insurance, travel insurance, health insurance. 

Insurance reduces the impact of risk on the owner, and those who depend on the asset. Integral to the concept of insurance is the concept of risk. In insurance parlance, “RISK” is called “PERIL”. Only where risk prevails, is insurance applicable. Basically there are two types of Insurance : “LIFE” AND “NON-LIFE”. We are now concentrating on LIFE Insurance only.

LIFE INSURANCE

The economic value of a human life arises out of its relation to other lives. Whenever continuance of a life is financially valuable to others, either to family dependents, business associates, or educational and philanthropic situations, the necessity for life insurance is present. Human life is also considered as an income generating asset. This asset can be lost thru unexpected death or made non-functional thru sickness or disability caused by an accident. 

There is no certainty that an accident shall happen. Events that must occur at some time, such as death, are provided for by assurance. We all know that “DEATH” is the ultimate truth of life, but NOT its timing. Life Insurance exists because of this element of “UNCERTAINTY”. Life Insurance protects against loss of income of an individual. 

But it DOESN’T (1) protect the asset, (2) prevent its loss. Life insurance is designed to make an attempt to compensate a policyholder for a loss suffered, by the payment of money, repair, replacement, or reinstatement. In every case the policyholder is entitled to be put back in the same financial position as he or she was immediately before the event insured against occurred. There must be no element of profit or loss to the policyholder.

Most, but not all insurance policies are indemnity contracts. For example, personal accident and life assurance policies are not contracts of indemnity as it is impossible to calculate the value of a lost life or limb (whereas the value of a car or other property can be calculated). Insurance works on the principle of transferring risk from an individual to a group.

Life & Insurance (1)

02-Feb-2022: ABOUT LIFE

Life is an Excellent Gift of God to Mankind. But nothing in life is ever certain. Unexpected accidents, hospitalisations, business setbacks, ever decreasing work-force (resulting in retrenchments), terrorism can all mar our well-laid plans. In extreme cases we end up with loss of earning power. Thus the future may be uncertain. But one thing is certain. One needs to plan for it. It is a human tendency to postpone planning till retirement. But the later one starts saving the harder it is to do so. With longer life expectancy, rising inflation and declining interest rates, it is imperative that we start planning now.

• Conversely life is also full of opportunities for all of us to seize, like: 
• Financing our children's education (children are our biggest assets), 
• Buying our dream home (a place of protective roof on our head), 
• Taking a well-earned vacation (after all why we are earning – we need to enjoy life and need to recharge our energy for earning our livelihood), 
• To save for the time when we cannot earn sufficiently to sustain ourselves (saving for the rainy day, old age, retirement),
• We may wish we could safeguard our opportunities and protect against the uncertainties,
• And finally, for our sheer investment needs.

This is where “INSURANCE” comes in. This is explained in short in the following Part-2:

The Story of Insurance

There is an interesting story about how insurance works: Let’ say a class has 50 children, and they decide to go for a picnic. The teacher tells the children to keep Rs. 50 each for any expenses or emergency. During the picnic a student loses his entire Rs. 50 and he was crying as his parent may scold him. 

The teacher found a solution and asked each of the rest students to contribute Re 1 to the child who lost. Now each student has Rs. 49 including the one who lost. Everyone was happy as Re 1 loss is insignificant. This is how the Insurance works. Re 1 may be taken as premium. Chances of loss of life or property may be 1 in 50, as not everyone faces loss. Calculation / prediction of this chance is done by a highly accurate and sophisticated mathematical branch called Actuary Science.

Cost, Price & Value

15-Jan-2022: 

Cost, Price & Value: Explained in short in the Marketing parlance

Cost:

• The dictionary meanings are: the price paid to acquire, produce, accomplish, or maintain anything; an outlay or expenditure of money, time, labor, trouble, etc.
• Cost means a price that must be paid for something or a sacrifice.
• Cost most often refers to a specific amount of money that a seller wants for the item they are selling. However, cost is also used more generally to mean whatever the price of an item is.
• But in today’s world of Marketing, Cost is an objective term which generally refers to all types of expenses incurred to produce, procure, create or manufacture an item.
• Cost is of Objective nature. It remains constant under unchanged circumstances.

Price:

• The sum or amount of money or its equivalent for which anything is bought, sold, or offered for sale.
• Price is used mainly of single, concrete objects offered for sale; charge, of services:
• But in today’s world of Marketing, Price is an objective term which generally refers to Cost plus a margin amount which is called profit, which rewards the maker / producer / procurer / creator / manufacturer.
• Sometimes the Price may be less than the Cost under certain undesirable constraints.
• Price is of Objective nature. It may change on various different reasons for the same cost.

Value:

• Intrinsic worth, merit, or importance of an object;
• Monetary or material worth, as in commerce or trade.
• Value, worth imply intrinsic excellence or desirability.
• Value is that quality of anything which renders it desirable or useful:
• Value is of Subjective nature. It doesn’t change on its own.
• Sometimes the Value of an Object can be changed which is called the “Value Addition”, by undergoing certain processes.
• Value is sometimes divided into two types:
• Objective, Physical, Utility; which remains constant.
• Subjective, Emotional, Esteem; which varies from person to person, time to time, etc.