Commerce and technology linking new nationhood in India, says Fareed Zakaria

Writing for essay series, ‘Reimagining India’, Fareed Zakaria says Indians must embrace their common ambitions if the nation is to fulfil its tremendous potential

Fareed Zakaria, editor at Time magazine and host at CNN, while opining on India, feels that there is a birth of a new sense of nationhood in the country, drawn from the aspiring middle classes in its cities and towns, who are linked together by commerce and technology. “They have common aspirations and ambitions, a common Indian dream with rising standards of living, good government, and a celebration of India’s diversity. It is a powerful and durable base for a modern country that seeks to make its mark on the world,” he said, as a part of an essay series complied by McKinsey & Co under its ‘Reimagining India’ series.

Fareed Zakaria said, “Most of India’s wealth is generated from its cities and towns. Urban India accounts for almost 70% of the country’s GDP. But almost 70% of its people still live in rural India. Now, without central plan or direction, there are forces pushing India toward a greater sense of nationalism than before. Economic liberalization has created a national economy, and technology is creating a national culture. Technology is giving power to the people to make their voices heard, even when outnumbered by other interest groups. India is unusual in combining the growth of an emerging market with the openness of a freewheeling democracy.”

Giving an example of the states the host at CNN said, “State governments (in India) are aggressively promoting economic growth. Gujarat, the state of 60 million people has grown faster than China over the last two decades. India itself, for all its problems, has been one of the fastest-growing large economies in the world over that period.”

Fareed Zakaria said he believes that, “the country simply cannot reform at the pace necessary to fulfil its ambitions for growth and progress. Everything gets mired in political paralysis, and the governing class remains committed` to a politics of patronage and pandering. This is all true and deeply unfortunate. But it is a snapshot of today’s reality, not a moving picture of an evolving society.”

Continue reading…

Courtesy: McKinsey & Co, Reimagining India



Will SEBI deliver a landmark order on mis-selling by banks?

Sebi’s show-cause notice to HSBC for duping actor Suchitra Krishnamoorthi could set a great precedent

Ashow-cause notice to the Hong Kong and Shanghai Banking Corporation (HSBC) for duping well-known actor and singer Suchitra Krishnamoorthi could probably end the silence of our regulators over the way banks have been allowed to loot customers through dubiously run wealth and portfolio management schemes or selling them toxic insurance products. The stage is clearly set for path-breaking action and a landmark order, but whether it materialises or not depends on whether the Securities and Exchange Board of India (SEBI) is willing to pursue the issue with the same doggedness with which it has taken on the dubious Sahara business empire.

As I write this column, the 21-day period for HSBC to respond to SEBI’s strongly-worded show-cause notice comes to an end. The Bank has been charged with reckless churning of Ms Krishnamoorthi’s mutual fund portfolio. HSBC needlessly divided her funds into as many as 38 schemes, deliberately invested in under-performing funds and churned the portfolio relentlessly to generate fees and commissions in excess of Rs27.93 lakh, caused direct losses through bad investments and caused her to pay a tax penalty due to misinformation about short-term capital gains.

HSBC’s bad-faith actions were clear from the beginning. It made false promises of returns in excess of 24% (for mutual funds as well as insurance), listed an emotionally vulnerable woman as an ‘aggressive investor’ (allowing it to put 100% of her money into risky equity and no debt) and then churned mutual fund investments which, by their very nature, are meant for long-term investment. SEBI has correctly threatened the Bank with disgorgement of these dubious earnings but, more importantly, debarred it from acting as a mutual fund advisor and banned it from the capital market for an appropriate period of time.

HSBC, which has now earned notoriety globally, has chosen to ignore Ms Krishnamoorthi’s complaints from the very beginning and continues to maintain a surprising silence. But the situation this time is very interesting. Although the Reserve Bank of India (RBI) is HSBC’s primary regulator, there is no turf battle involved. On the contrary, RBI will most probably weigh in on behalf of the customer for several reasons.

Dr KC Chakrabarty, who holds the customer-services portfolio, has always maintained that he is against the sale of third-party products by banks, but has pleaded helplessness.

RBI and various banking ombudsmen have regularly taken the stand that they will not step on the turf of another regulator and have refused to rule in favour of depositors even when it involved the most brazen mis-selling of third-party products such as mutual funds and insurance. RBI had not even acted when ABN Amro and other banks aggressively marketed unregulated investment schemes like art funds (Osian) or realty investment deals.

This is probably the first time that a customer has taken a bank to the appropriate regulator for mis-selling a third-party product, leading to a show-cause notice by the relevant regulator. So what happens next? HSBC is probably weighing several options to decide what will cause it the least financial damage or risk to its business operations. Let’s examine what these are.

    Loss of reputation does not seem to be a major concern for HSBC. It has settled a massive charge of laundering money for drug traffickers at one end of the spectrum and, at the other, got away by hard-selling the idea of hiding income from US revenue authorities in Indian bank accounts. Then, a leaked list of accounts showed that it has been stashing unaccounted wealth for Indians abroad. In both cases, RBI and other revenue and enforcement agencies have done nothing. The victims of its hard-sell have paid a price, so the Bank cannot be blamed for thinking it will ‘fix’ the Suchitra Krishnamoorthi problem too.

    Secondly, it has paid nearly $2 billion dollars to settle the money laundering charge in the US and several hundred million dollars in other jurisdictions to settle other charges. So paying back Ms Krishnamoorthi’s entire investment to stop the negative publicity was always an option for HSBC. Why has it chosen to maintain a thundering silence? Probably because it is not about Ms Krishnamoorthi. HSBC did not single out her account to churn mutual fund holdings to extract commissions and charges. That misdemeanour is its official business. Glance at Moneylife’s report on the Suchitra Krishnamoorthi case and you will find scores of others who say they have been similarly cheated—many of them are Indians living abroad who find it hard to pursue the Bank in India, especially when the regulators have not been receptive. So HSBC is probably worried about opening a Pandora’s Box of litigation and claims, if it admits any wrongdoing in one high-profile case.

    Thirdly, in every case, involving a high net worth person, the Bank gets away with downright cheating because the customer is unwilling to devote the time to pursue the case personally. Engaging a lawyer, especially for a celebrity, only means having the meter running on legal fees for several years which, for a sum of less than a crore of rupees, only means compounding losses. One of the big flaws with India’s legal system is that lawyers cannot accept briefs on contingency fees and have no incentive whatsoever to end litigation. HSBC probably did not bargain for the fact that Ms Krishnamoorthi would not hesitate to make endless trips to regulators, counsellors and to Moneylife Foundation (including our open house session with the RBI’s Dr KC Chakrabarty) to push her case to the point where a tough show-cause notice has been issued.

    Fourthly, HSBC probably hoped that turf issues between regulators would work in its favour and has failed to realise that, this time around, both regulators seem willing to bat for the customer. Again, if SEBI sticks to its guns and issues a tough order against HSBC, then RBI will probably have to follow it up with an investigation. In fact, we understand that RBI has already investigated the Bank. Tough, punitive action by SEBI and RBI will make this a landmark action of delivering justice to victims of mis-selling by banks. It is bound to send shockwaves through the banking industry, causing this powerful body to lobby hard against any action that affects lucrative earnings though sale of dodgy financial products.

    Finally, HSBC probably hopes that all this will amount to nothing because Indian regulators will not dare to act. HSBC’s $2 billion settlement caused global outrage, because as a US Federal Judge, Justice Rakoff, said recently, not a single high-level executive has been punished for the global financial crisis. And most large banks, despite the global outrage, got away with hefty civil settlements which allowed them to continue to do business as before. Public protests such as the ‘Occupy Wall Street’ movement were forcefully quelled, despite public support. Why should HSBC believe that it will not be able to browbeat Indian regulators, when banks have got away with massive, systematic fraud in 2008 leading to a global crisis?

The big debate in the US today is: Why haven’t any of the top bankers, responsible for shady policies, been prosecuted and punished? Well, who can blame HSBC for assuming it can get away with similar fraudulent sales? Let’s hope SEBI and the RBI gives us a reason to cheer.

Sucheta Dalal is the managing editor of Moneylife. She was awarded the Padma Shri in 2006 for her outstanding contribution to journalism. She can be reached at [email protected]




3 years ago




Amar Wadhwa

3 years ago

It is high time for SEBI to act tough.


3 years ago

Very well written and presented. The utter silence from the part of RBI and IRDA is very surprising and uncomfortable. Private sector banks who have floated insurance companies cheat innocent customers left right and center.7 years premium paying products being sold as single premium products and as a FD. Demand drafts are made out for payment of renewal premium is applied for issuing a new policy for some other customer. Ms Krishnamoorti's case is not even the tip of the iceberg. Rampant cheating by the employees of banks can put a professional thieves to shame. RBI and IRDA is snoring.


3 years ago

operational head india
singapore media and channel group
this is not only HSBC who is doing the shuffling of mutual funds all the fund managers and AMC who do this and this cheating is common in mutual fund and stock market infact we can say all the cpaital market related insitution this fraud or cheating is only way of income for them for which sebi and other capital market controlling authorities are hand in glow they support them because these insitution bribe the officials and where by instead of settling with the client and AMC or other they resort to either arbitration or court where the cost of the arbitration or court had to be borne by client and you know about our judical system in order to get justice the individual life time would end such is the case when they cheat they donot call court or other sorts and now aas an invetors the only option is seek the media and channel help and there should be separate channel to expose the fraud of capital market to investing public so they would find diffcult in getting client to cheat them and gradually they would be sreamlined and as such to our surmaise and and survey report all the capital market authority donot discharge their duty the sebi chairman everyday gives an report in media but the down below the chairman they are not executed and this is pethatic situation of our sebi chairman voice and once he announce any investor friendly decision immediately the down below staff in collaboration with stock bnroking house legal team interpret the words to their whims and fancies and try to tocheat infact qwe can say indian stock market is cheater pardise and easiest way of looting the customer like what earlier NBFC did they cheated the investors and ran away the RBI when there was first advt about luring the investors the RBI should have cautioned by giving public declaration that such institution is not legally and its the investors decision and its not binded by RBI should have been done its not so similarily the RBI Governor makes new amendments but the down below would not implement that is situation of indian administration because the chairmans are appointed by the Ruling Govt for their fims and fancies and the person who polish the shoes of the present Govt they are give the Governor post and that is caliber of our indian administration


3 years ago

Well written, and you are right this is not the first time I have read the news about this institution not keeping to its word and resorting to legal angle knowing fully well that this will take years and costs will be prohibitive. Refer to the HSBC Gilt Fund case where investors were cheater : ( or SAT order against HSBC Mutual fund (http://articles.economictimes.indiatimes... where HSBC were pulled up and told to compensate the investor. But what HSBC did was to move to Supreme Court and got a stay ( They can afford the legal costs but will not concede to the investors/ customers. Very sad but its true that these MNC bank are taking advantage of the legal system here and what is more disheartening is the way RBI and Government bending backwards to accomodate them in India.

Manasi Narvekar

4 years ago

Congratulations Moneylife Foundation you people are doing great job by publishing these stories. This will be helpful for everyone to take care before investing..


4 years ago

Congratulations Moneylife for bringing out this story. "That misdemeanour is its official business." One can't sum it up better!


4 years ago

What is this recharge company. for all pre paid, post paid DTH recharges are done by customers and get paid themselves. It is real??


4 years ago

Selling insurance through Banks is in an out a fraudulent activity. Some time back some officials of a public sector bank were given extremely expensive Tissot wrist watches.


4 years ago

An Indian story: Too many regulators, too little regulation. Will this case change this most Indian scenario? Too much Government but no governance. Too many laws, yet law less. I was rooked, myself, with the HSBC-Canara Bank Insurance rip off.

Milind Chitnis

4 years ago

Congratulations Moneylife Foundation & Ms Krishnamoorthy for pursuing this relentlessely over many months.

I just want to point out that if SEBI wants and if laws permit this can be converted into "class action suite"

It should be technically possible to analyse data of say past 10 years for HSBC bank's mutual fund clients and identify cases where say churn ratio was beyond threshold (of say 100%).


4 years ago

Fantastic and a path breaking article. I do hope that SEBI and RBI take some action against this bank whihc is known to have committed numerous crimes in the past. I disagree with the previous comment. I think the regulators need to be given the time they need to do their jobs.

Yerram Raju Behara

4 years ago

In her inimitable style with candid observations demanded a regulatory action and I doubt whether the RBI would have the eyes to see and ears to listen. When Rs.1,16000cr of NPAs of corporates were written off by the Commercial Banks during the last 13 years going by what Dr K.C. Chakrabarthy admitted in a gathering of Bankers recently, where the regulator gets information on such write-offs in their periodical returns and yet no action had been taken for 13 years how can we expect it to take action now against even such scandalous practices of a foreign bank?
If you ask Tatas to sell Hindusthan product do you expect the product sale will be to the satisfaction of the buyer? At least this is what I told when even Bancassurance was introduced. It is time that the RBI wakes up from the slumber and allow banks do banking and sell banking products after observing all checks and balances.


4 years ago

A very good srticle-=--but i doubt if any heed will be paid to what has been pointed out in the article so convincingly--dont fotrget HSBC is a chronic dubious dealer in transactions
The bank belives that it will get away with its overbearing attitude and behavour-and it has succeded so far


4 years ago

Well researched article. These are happening in most of the financial institutions NBFCs who are selling Insurance policies, mutual funds and third party products

Moral Pressure by Media is required
This is a fervent appeal to the media to help in getting the consumer rights due to us.
Ashiana Builders and Developers, a big group active as ‘Ashiana Housing’. publicises itself for building and maintaining ‘Senior Quality Home Complexes’ called ‘Utsav’. One such Utsav complex has been built and is functioning at Jaipur. The complex is marketed with hype as ‘Quality Living Homes’ at affordable prices, equipped with all the necessary in-house amenities and facilities to aid quality care in living standards and medical emergencies. It is also promoting the slogan ‘Nurturing Smiles’.
However, in practice, Ashiana Housing has failed to deliver what it promised on paper and even in its ‘Sell and Maintenance Agreements’. Senior residents who experienced this failure have made complaints in writing but in vain; resulting in ‘Nurturing Tears’. This is nothing but depriving the seniors of their promised ‘rights’. Since the same builder group is also a service-provider, it is abdicating its responsibilities. I have given below a summary of the points where ‘illegality and non-delivery of promises’ have taken place and the required relief is not provided:
(a) Construction of flats is not up to the laid down quality standards. They are using low-quality material and equipment;
(b) It is against the law laid down by the Supreme Court. ‘Utsav’ residents are sold ‘common area open parking space’ at a hefty amount and without transparently notifying the policy of allotment of parking slots;
(c) The essential ‘emergency care facility’, like medically approved standard of ‘ambulance’ and working of ‘emergency alert buttons’, are not functioning.
(d) Café is not tuned to the nutritional needs of seniors; there are only a few items on the menu and the working hours are short. Therefore, a single male is more inconvenienced and deprived;
(e) Essential services, which are paid or a part of regular monthly maintenance charges (MMC), are erratic and are not available. This leads to deterioration in quality of survival of seniors and is depriving them of basic rights as a consumer;
(f) There is arbitrary and illogical/ unjustified enhancement in MMC bills, even for residents who were made to pay 18 months’ MMC in advance, without interest;
(g) Transparency and accountability is absent for which the service-provider has been paid;
(h) Neither is there any ‘Grievance Handling System’ in place nor are the residents made aware about the ‘Hierarchy of Accountability’. This results in grievances/ complaints being handled poorly. There is hardly any redress, reply or resolution
This NGO (Consumer Complaints Cell—CCCELL) had received detailed grievances /complaints from the senior residents. One amongst them is a senior citizen and consumer activist Mohan Siroya. He has also purchased a flat in the Senior Utsav Complex at Jaipur. He has endorsed the realities personally experienced by him, on the above-mentioned areas of non-deliverance. Being an activist, he could not remain silent and wrote to the builder, its service-provider arm and the social media. Needless to say, his grievances/complaints remain unresolved. Even CCCELL’s formal exhortation/ counselling mailed to all concerned to settle/ resolve the dispute with mutual discussions—bilateral or tripartite—has not been acknowledged.
If any of the media professionals would like to help the cause by putting ‘moral pressure’ on the builder by counselling them to resolve the grievances mutually or through arbitration, conciliation or mediation, we would welcome it. The last resort of litigation would be avoided.
Sunit Shah, honorary secretary—Consumer Complaints Cell, by email
Corporate Governance is at a low
The very fact that Infosys agreed to pay $34 million in settlement implies that it had contravened the US immigration laws and was aware of it. This is another instance of corporates trying to short-circuit laws thinking that they can get away with murder. It speaks of the extent of corporate mal-governance practised at the topmost echelons.
Infosys needs to clarify whether it had provided for this penalty in its accounts. If not, is the company giving the information in the disclosures of ‘contingent liabilities’? Surely, the liability and the proceedings have been going on for quite sometime now. The actual amount of the liability could not have been quantified with accuracy earlier. But that it did exist is a fact and all the more reason that it needed to be properly accounted for somewhere down the years. Consequently, the profits for the respective years definitely stand overstated. It is for the audit committee to answer. How will the impact of this massive payment appear in the reporting of quarterly earnings?
It is a sad commentary that even the so-called most ethical of our corporates are prone to breaking the laws—they too have feet of clay! Even as the chairman of Hindalco was protesting to the finance minister, cash of Rs25 crore was said to have been found in the course of a raid at its Delhi office.
What was the need for the house of Tatas to retain a corporate lobbyist except to ostensibly channel money to the netas and babus? Where is the question of invasion of privacy that Ratan Tata alleges about his taped conversations—either he has said it or he hasn’t! All this smacks of corporate governance norms being thrown to the winds!
Nagesh Kini, by email
HUF bank account for NRIs
I am a subscriber of Moneylife magazine and I am facing a problem with regard to opening a bank account. I hope you can assist.
I am an NRI (non-resident Indian) and I had contacted Central Bank of India regarding the opening of an HUF account. But the manager declined to open the account saying, “According to our Bank’s practice, HUF accounts are not opened for NRIs.” I was also harassed and treated badly.
Please note that I am the HUF karta and all members of the HUF (including me) are NRIs. Is it possible for someone to please provide the RBI circular or any such government notice that says NRIs can maintain an HUF account? I can again go to the branch with this information. I tried searching for this on RBI’s website but could not get it. I hope you can help me with the relevant information.
Dr Jayaram Subramanian, by email
Sucheta Dalal replies:
Sorry to hear about your bad experience. You need to first exhaust the remedies provided by the Bank. Please go to the link below:
At the bottom of the page, without a clear hyperlink, there are two lines. Click on the words that say ‘click here.’ The first gives you the link I have provided above. Please write a detailed complaint.
You can also complain to the ombudsman whose address is given in another link—The Internal Ombudsman of Central Bank: Ulhas Sangekar, CCSO, Central Bank of India, Central Office, 2nd Floor, M.M.O. Building, M.G.Road, Fort, Mumbai-400023
You need to do the paperwork. Once you have done that, if the Bank still does not respond, you can go to the board services committee. Finally, you can approach  the Banking Ombudsman.
Milestone in bungling
This is with regard to “Moneylife Impact: SEBI issues show-cause notice to HSBC for cheating Suchitra Krishnamoorthi”. This adds another feather to the Moneylife cap in the service of investors and consumers. I am sure, getting positive results for Ms Krishnamoorthi, will establish a milestone for future bungling by the so-called ‘fund managers’.
Mohan Siroya
Make it easier for senior citizens!
This is with regard to “Relief for senior citizens on reverse mortgage but lots more needs to be done” by Sucheta Dalal. Very good article. Hopefully, the government will take note and put in a good structure to make it easier for senior citizens to live comfortably.
Weaker banks should be merged!
This is with regard to “Hapless depositors of urban cooperative banks” by Gurpur. The question really is whether UCBs (urban cooperative banks) are relevant. Good UCBs should be encouraged to convert themselves into private banks as Saraswat Bank is reportedly doing. Weaker banks should be merged wherever feasible. If after knowing the weakness of UCBs, people still wish to put their money in these banks, little can be done. Cooperative societies are thriving due to the higher interest rates offered by them. Educated, upper middle-class also invests money in these cooperative societies.
Anil Agashe
Stay frugal!
This is with regard to “If you allow people to borrow for nothing, they get a bit excessive” by William Gamble. Man’s propensity to earn more than he deserves and show more than he earns has always led him to untold miseries. This includes DEATH (suicides)! Staying frugal is never off fashion. Simple living, high thinking and fast acting are the secrets of success.
Mahesh S Bhatt
Protest against nationalisation?
This is with regard to “How Air India was destroyed” by Sucheta Dalal. So nationalisation was the original sin. Too late to understand, in a country where people look for government jobs. Why did the employees not protest against nationalisation plans?
Prabal Biswas 


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