Fixed-income Savers: Think Differently

When investors think of fixed-income products, they think mainly of bank fixed deposits. Of course, mutual fund companies make a relentless pitch for you to buy debt mutual funds. HDFC Mutual Fund even suggests that it is ideal for your daughter’s marriage, knowing fully that, post-inflation, such funds will get you nowhere near the estimated wedding expenditure.

Debt funds also suffer from volatility. This is because they invest in market-linked products. These products are of the fixed-income variety; so, they swing with the interest rate movements. If rates rise, investors will end up with negative returns—at least, over the short run. But there is a class of debt funds that is not as volatile. Such schemes invest in fixed-income products with shorter average maturity and are a good option for conservative savers who invest in bank fixed deposits. A couple of them have 99% of their investment in government banks’ certificates of deposit which is a safe option. Raj Pradhan’s Cover Story does a thorough analysis of these debt funds—once again, the first time that any publication has done this kind of research.  

In her Different Strokes section, Sucheta describes in detail the role played by the Reserve Bank of India (RBI), Securities & Exchange Board of India (SEBI) and Moneylife Foundation (MLF) to secure justice for Suchitra Krishnamoorthi who was looted by Hong Kong & Shanghai Banking Corporation. While MLF is willing to help anyone with a genuine case—whether a celebrity, or an average person—not everyone would be as lucky as Ms Krishnamoorthi to benefit from a combined effort of MLF, a deputy governor of RBI like Dr KC Chakrabarty and the support from senior officers at RBI and SEBI. Fittingly, in the Crosshairs section, Sucheta highlights the important role played by Dr Chakrabarty, one of the most effective RBI deputy governors in decades, who is leaving by the end of April.

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Mainstream media did not like the strong criticism unleashed by Arvind Kejriwal while speaking about the ‘Gujarat Development Model’ while electioneering in Bengaluru on 15 March 2014. Mr Kejriwal used strong words like: “Does the media have the courage to reveal the truth about Gujarat?” And he added that some sections of the media ‘lied’ about Gujarat’s development story. Naturally, this has fanned another controversy around the leader of the Aam Aaadmi Party (AAP) which perhaps suits AAP’s present need to attract publicity, positive or negative, to remain in the limelight. Media response, which was at a near black-out of Mr Kejriwal for sometime, might have surprised AAP leadership.

By a strange coincidence, there was a coming together of some eminent journalists on the same day (March 15) in New Delhi. The panel discussion that followed the release of journalist Sashi Kumar’s book Unmediate: Essays on Media, Culture, Cinema, took serious note of the development and made some balanced comments which call for a re-look at the self-regulation aspect of media houses in India.

There was near consensus that the media should be open to criticism that is ‘legitimate’. Sashi Kumar expressed the view that when Mr Kejriwal criticises the media, he does so with the knowledge that there is antagonism within the public towards media. N Ram of The Hindu was more open when he said, “Unfortunately when people outside the media criticise us, we have a very thin skin,” identifying hyper-commercialisation and trivialisation as some of the ills plaguing the media.

The panel concluded that there was a strong case for professionalism and codification of values and practices and felt that there was scope for further improvement in self-regulation, especially in the visual media. The Press Council of India, which has representation from the newspaper industry, should play a proactive role in improving self-regulation.

MG Warrier, by email


This is with regard to “The UBI Saga Exposes Many Warts” by Sucheta Dalal. Top assignments in PSBs (public sector banks) depend on the effectiveness of lobbying and not on performance. Once the persons reach the general manager level, the game starts. They start acquiescing to pressures to cling to the chair or to climb up.

If someone is at zero level and not much has been done to elevate him/her, it does not mean that others should be also allowed to remain at the same level. Why accuse the Securities and Exchange Board of India (SEBI) if it wants to impose corporate governance (CG) in the corporate sector more than in the banking sector that has multiple regulators. The Reserve Bank of India (RBI) and the finance ministry derive comfort in lazy boards. Their nominees endorse controversial board resolutions only to go back and raise issue through correspondence with them. Not even at the next board meeting do they raise those issues; nor do the chairpersons or other directors ask them why these questions were raised. If somebody thinks that there is CG in PSBs, it is his or her fault. The boards are only in name. This is one of the reasons, perhaps, why RBI governor set up a committee to look into CG in banks under the chairmanship of Dr PJ Nayak. When the report of a similar committee under Ashok Ganguly is gathering dust in the cupboards, it is doubtful whether the new committee would result in any action finally. PSBs are management-led and not board-led. RBI should act swiftly and not bow to the finance ministry.

Yerram Raju Behara, by email


This is with regard to “What Really Happened at United Bank of India?” by Sucheta Dalal. This shows that neither the government the owner of the Bank, nor RBI, the banking regulator, cared to run the Bank efficiently. They have knowingly allowed the Bank to face almost a run. The management, i.e., the board of directors and top management, have taken full advantage to accommodate the borrowers they wanted and allowed free loot, as if it is a permissible activity under the Banking Regulation Act, 1949. The only effective punishment would be to penalise the entire board and make the government and RBI accountable for lapses in the appointment of the chairman and for grant of loans throwing the basic principles of lending to the winds, violating RBI directives and regulatory prescriptions, etc. Such irregularities should never be repeated in future; this is what RBI, government and taxpayers have to ensure. Depositors and shareholders forums also have to fight for their losses because of total mismanagement of the Bank by the chairman and the directors. The chairman cannot be allowed to go scot-free just because she has solid political and bureaucratic backing to save her.

Gopalakrishnan TV, by email


Staggering office hours is no solution to the problem of unbearable overcrowding in suburban trains in Mumbai. The need of the hour is optimisation and rationalisation of suburban train operations. The Railways should not create artificial scarcity in running the total number of services as they now do.

They are withdrawing a large number of rakes from service from 10:00am onwards. All the available rakes should be in service by 6:00am and should not be withdrawn till midnight. Suburban shuttles should be run between Dadar and Kalyan on Central Railway; and Bandra/Mahalaxmi and Virar on Western Railway every 10 to 12 minutes from early morning till late at night. This should be done in both up and down directions, to clear heavy intra suburban traffic.

Further, suburban traffic should be cleared sector-wise—only one-sector traffic per service, to ensure limited loading on each rake, instead of packing two, three and even four sectors’ traffic on one service, as is being done now. Traffic of each suburban station has increased so much that it is beyond the capacity of nine- or even 12-car rakes to safely accommodate more than one-sector traffic at a time. In any case, there is no scope for staggering working hours at present since most services are overcrowded twice or thrice their optimum capacity from early morning till late night in both up & down directions. Post-MUTP I & II, there is so much improvement in suburban infrastructure and its rolling stock that the will to provide safer travel to all is what is urgently needed.

Dipak J Gandhi, by email


This is with regard to “Making Railways Accountable” by SD Israni. The persons responsible get away with increasing and continuing high-handedness because they personally have little to lose. Recently, a Bombay High Court order asked for payment to be made by deduction from salary to punish the miscreant. After all, if the Railways pay up, it is akin to robbing Peter to pay Paul. It’s public money that is used to pay the injured party.

Bapoo M Malcolm, by email


This is with regard to “Book Review: Kanga & Palkhivala’s ‘The Law & Practice of Income-Tax’ 10th Edition” by Soli Dastur. I’d like to suggest that Palkhivala’s Foreword to the very first edition is a must-read. It is a classic piece of English literature. He explains the distinction between ‘tax planning’ and ‘tax evasion’.

Nagesh Kini, by email


This is with regard to “Amravati’s Information Commissioner given charge of Pune that is 555kms away!” by Vinita Deshmukh. ‘Natural’ favours HAVE to be extended. Likewise, Sheila Dixit, the former chief minister of Delhi, who lost fair and square to AAP chief, Arvind Kejriwal, cannot remain in her vanquished territory. So what do the ‘big powers’ do? Well, make her the governor of Kerala and pack her off to the southern tip of India.

Our biggest tragedy is that of ‘accommodating’ our ‘well-wishers’ and chamchas, and sending them away from the battle scene! This is democracy at its worst. This kind of fooling must stop. But how?

Dr Anantha K Ramdas


This is with regard to “Solar power is the best & natural substitution for energy needs” by AK Ramdas. Solar power is, at best, a convenience energy source. To harness it, we need panels. These are not made by solar energy. These are made by industry fuelled by fossil fuel.

Can a solar panel, in its usable lifetime, generate electricity to make another solar panel? The laws of thermodynamics and entropy, in particular, will tell you otherwise. Secondly, the cost factor. Costs are externalised.

The true cost of industrial products will never see the light of day. How can you explain the cost of a radio at Rs45, when the individual cost of all the different parts in the radio is so much more, on any scale?

Also, there is the question of NIMB—‘not in my backyard’—syndrome. It is nice to see ‘nice looking’ solar panels connected to something in your house or some public utility. The problem is what we do not see, we do not care about.

However as a convenience, it will see the light of day (pun intended).

N Kanitkar


This is with regard to “Small Business, Big Troubles” by Sucheta Dalal. Yes, all of what has been said in this article is true. We all need to wake up and voice our concern about the changes we desire to help the country to operate on real problems.

Ajay Deshpande



Rakesh Dave

3 years ago

A nice cover story again this time.

However, it is true that small investors generally, do not know much, on " What is indexation, How it works, How to take benefits and How to reflect in Income Tax return"

If these can be covered in upcoming cover-story or article in magazine, then it will be a great aid to the money-life subscribers and readers.


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