Leave Small Savings Rate Alone!
In the past few days, after the Reserve Bank of India (RBI) cut the repo rate, it is surprising to find banks blaming others for their inefficiency; it is shocking that the government buys—at least publicly—this argument, and tries to tinker with other instruments for investors. The entire banking community seems to operate as a consortium (‘cartel’ is undiplomatic) where they jointly decide the lending and savings rate of the whole system. It is very easy for them to hold the economy to ransom and they are successfully doing it with the help of government as well.
Just before the Budget, banks blamed the favourable taxation for debt mutual fund schemes as a reason for being unable to attract deposits; the government obliged, by bringing tax treatment of debt schemes on par with the bank FDs (fixed deposits), even for investors who were earlier invested in the debt schemes.
Now, banks blame the small savings rate for their inability to cut deposit rates and the government is more than willing to listen to banks, despite knowing it is irrational to do so. Although RBI has effected 1.25% rate cut in the past one year or so, banks have been able to pass only 0.6% to 0.7% cut to borrowers, despite the majority of loans now being lent at floating rates. 
Instead of rapping at least the nationalised banks to be more efficient, the government seems to be cunningly poised to lower its own liability of returns on small savings instruments by using the excuse of the outcry from the banks against these rates.
It is a foolish argument, if one looks at the facts logically. Bank FDs offer both liquidity and security, compared to debt schemes and PPF (public provident fund). One knows how risky it is to invest in debt schemes, especially after the Amtek fiasco, and banks slyly got the taxation changed to their advantage. Similarly, an instrument like PPF does not offer full liquidity till 15 years, a tenure for which most banks do not even offer FDs!
If the government has to change the PPF or other savings rates, they should also look at making those instruments completely liquid, like bank FDs, with a penalty rate. Else, it is clear that the government is least interested in protecting the interests of the middle class which voted for it to come to power.
Request Moneylife team to help us by publishing their analysis of this issue.
Tarun Agarwal, by email

Exposing Lapses In The System

Sucheta Dalal’s “Bhushan Steel’s Dubious Restructuring” is a good article that exposes the lapses in the system. Unless and until the lapses identified can be fixed by way of demonstrative punishment and the brains behind them totally exposed, these things can go on forever. There are several such cases in banking which go unnoticed. 
Write-off of loans, restructuring of loans, offering of concessions and reliefs, accommodating defaulters’ accounts and sanctioning fresh loans are common in our banking system; they seldom get reported or detected easily.
Knowingly, or unknowingly, the authorities—including Securities and Exchange Board of India (SEBI) and ministry of corporate affairs (MCA)—are parties in this, encouraging camouflaging of bad loans and committing irregularities. More the number of banks, the better they are at hoodwinking the authorities.  Likewise, the more the number of subsidiaries for any company, the better it is to fool the banks and authorities. There are several companies with an unbelievable number of subsidiaries enabling the companies to raise capital, bank loans and other funds from market; seldom do they declare any dividend or even a small profit. They continue to always provide encouraging news by fudging their balance sheets. False news is accepted by the authorities and gullible investors. It is a fact that when the companies have many subsidiaries and many lenders, exercising any control on them is difficult and the managements’ intention is only to loot. It is impossible to fix them when the authorities are relaxed and casual in their approach.
Good to note that Moneylife makes all possible attempts to expose some of the irregularities and lapses and keeps a vigilant eye.
Gopalakrishnan TV, by email 

Need For An App!

It is October and soon many people in corporates would start looking for investing in tax-saving instruments to meet the Rs1.5 lakh tax declaration they had given in April. I would request Moneylife to give some space in your upcoming issues educating us on investing and provide more information on tax-saving instruments.
In the past, I had suggested a mobile application for your website. The information provided in Moneylife is very valuable for middle-class people like me; but not everyone has the inclination to pick up a magazine and read it. A mobile application would help in reaching out to people who do not subscribe to the traditional way of gaining knowledge. These are days where ‘the well needs to go to the thirsty’.
With regard to the article by R Balakrishnan on Consumerism (Moneylife, 17 September 2015), the way he put it was very easy to understand. He rightly identified it as a disease where people spend hours on e-commerce websites doing nothing but gazing at products and rates.
Now that the earning capacity of Indians has increased, we should urge our young people to join the work stream and to spend their money judiciously. It is time to start investing at an early age.
Thanks and keep up the good work of bringing people out of financial illiteracy.
Shailender Singh, by email

Haggling With The Doctor?

This is with regard to “Our Beef with the Doctors” by Bapoo Malcolm. Two types of malpractice are described in this article. The first kind is where medical staff talks about the patient, imagining him to be unconscious, and then has to pay a hefty sum for causing mental anguish. In the United States, damages are awarded for non-quantifiable losses like pain and suffering; in most other countries, damages are based on actual loss to the patient like, say, loss of use of an arm or a leg.
The second incident quoted is fraud, where a doctor treats deliberately for a non-existent problem. This kind would be criminal offence, not just civil one.
About the author’s last comment, where will it end, I guess, that depends on the maturity of the insurance marketplace. There is no reason why a doctor should charge a patient three or four times as much, as soon as he finds out that the patient has insurance. This should be investigated and the insurance company should beat down the doctor’s charges. Or else, the patient should be told to go to another doctor whose charges are more reasonable. Unless patients revolt, doctors will continue to charge higher fees to those who have insurance. Insurance companies are too lazy to haggle with the doctor and will pass the charges on to customers as higher premiums.
The bottom line is that patients must stop treating doctors like gods, read up on their conditions on the Internet, ask pertinent questions and get a second opinion wherever feasible. I am a physician and I would much rather deal with a well-informed patient than one who has ‘faith’ but unrealistic expectations.
Meenal Mamdani, online comment

Is SEBI Asleep?

This is with regard to “Big Fines by SEBI, But No Funds” by Sucheta Dalal. Why has SEBI slept for all the years when the funds are being collected? It takes action too late and hardly recovers the fines that are imposed.
Anil Agashe

Am I Stingy?

This is with regard to “Buy stocks of consumer products companies, not their products” by R Balakrishnan. I have been speaking about this to a few people about this excellent article: some of them agreed; others did not. A friend said that I am ‘stingy’ because I don’t have fancy items like a car, a mobile phone, etc. Time will tell!
Mahesh Krishnamurthy

Group Bribing?

This is with regard to “Breath of Fresh Air” by Sucheta Dalal. Good initiative. Vested interests will have to be tackled. I know the case of an income-tax official in Mumbai I-T office who was caught red-handed while taking a bribe. More money was recovered from his desk drawers. It was surprising to find the officer at his desk again after about two years. Such a thing happens with ‘group bribing’.
Ravindra Shetye



Ezhilarasan M

12 months ago

Good one.

MG Warrier

12 months ago

This refers tothe response "Leave Small Savings RatesAlone". There are several inter-related issues affecting interest rates on deposits. When RBI cuts base rate, banks quickly act by passing on the impact of the rate cut by reducing deposit rates, though the hurry is not that evident in reducing lending rates at the ground level, as banks know how to maintain the level of interest income despite changes in prime lending rates. Going by the finance ministry announcement about the ‘review’ of rates on PPF and Small Savings, which according to the ministry, stands in the way of banks in reducing interest rates, the reduction in interest rates on PPF and Small Savings is imminent.

Those who are responsible to pay interest have every right to review the rates and bring it down to their advantage. But, those who have invested their savings with a long term perspective considering the security and liquidity concerns, should not be given a shock, just because there is a temporary change in the movement of wholesale prices.

Some analysts console savers that return on investments have become ‘positive’ these days with inflation getting tamed. May be true. But one is yet to come across a single household budget, which has come down because prices have come down in the recent past.

At present, interest paid by bigger banks on long term FDs is less than 8 per cent per annum, post office term deposits earn between 8.40(3 year Term Deposits) and 8.80 per cent (10 year National Savings Certificates) and Public Provident Fund Scheme fetches 8.70 per cent per annum. A revision of these rates downward will move savers from safe and secure investments to other riskier avenues which again will involve a social cost to the nation in the long run.

It is also worth pondering over whether government’s own market borrowings and resources mobilisation will be sustainable, if the rates are linked to RBI’s repo rates or deposit rates of banks and if SLR of banks and funds with EPFO, LIC etc no longer remain a captive source.

There is a social cost, if savers and borrowers are driven away from the mainstream financial system which is well regulated. Savers will start investing in unproductive, unsafe and illiquid assets including deposits with spurious players who offer high interest rates. Borrowers will try to trespass into territories where short term credit may come at a lesser cost and get into trouble when unexpected events interrupt prompt repayment. While RBI should be allowed to decide policy rates, government should manage rates on PPF and small savings keeping in view the long term nature of such savings instruments which are surviving on the trust reposed by savers who are dependent on the income from their investment for survival. Linking the rate of return on such investments with short-term fluctuations in ‘inflation’ can be disastrous.

M G Warrier, Mumbai

How Not To Fall Victim to Cyber Fraud
There is no escape from cyberspace and risks associated with it. Therefore, we need strategies to minimise our risks, says Dr Anupam Saraph
Who is the custodian of your digital assets? Do you have a strategy to de-risk and protect yourself from the modern messiahs promising the wonders of the digital age? Is it really worth the risk to have your smartphone run your life? These were some of the questions raised, and answered, by Dr Anupam Saraph at a seminar organised by Moneylife Foundation in Mumbai on “Don’t Become a Victim of Cyber Fraud: Protect Yourself Now”.
Dr Saraph, former IT advisor to the chief minister of Goa, Manohar Parrikar, and former CIO of Pune city, said one needs to understand the risks associated with transactions in cyberspace, implications of data leaks and privacy breaches through social media or email transactions and the remedies.
“There is no escape from the cyberspace and risks associated with it. Therefore, we need to have a strategy to minimise our risks. This includes, protection from obsolescence, protection from unfair practices, protecting identity and digital assets,” he said. He urged people to think for themselves, rather than offering them ready solutions. 
“Today every transaction is technology-to-technology without any interaction with humans; so it lacks the trust factor. Even in the digital era, it is important to develop trust with the people behind the technology. Remember, you are there to interact with people and not machines,” said Dr Saraph. He also explained terms such as net-neutrality, privacy policies, laws relating to terms of use and the need for ‘audit-ability’ of data and systems. For many in the audience this was their first exposure to these concepts. 
Talking about net-neutrality, he said, when the net-neutrality was threatened in the United States, president Barack Obama himself took a stand and did all he could to ensure that net-neutrality was not compromised. Net-neutrality allows fair, just, unrestricted and non-monopolised access to the Internet; access is agnostic to the media and content consumed by its customers across the network. Explaining why net-neutrality is worth fighting for, he said that it will force all other entities, services and publications, which were not part of the select ‘free’ access sites, to pay to be on the free Internet platform. 
Making representations of ‘free’ or ‘zero’ Internet plans, when providing a bouquet of websites, are unfair trade practice. Providing a few websites while creating misleading representations of providing Internet access, or about the utility of the free plans, is also an unfair trade practice. Ultimately, this will limit the unlimited access to the worldwide web that we enjoy today or increase costs dramatically.
Talking about privacy policy and other legal terms of use, he said, there needs to be a right to opt out and the user should be able to prevent sharing her data with third parties. Dr Saraph said, “Users need to be provided with the right to be forgotten besides policies to safeguard them from unauthorised access.” 
“The systems or websites should have audit-ability, which will have ability to track back a transaction to a person. This will also ensure transacting parties does not deny transaction,” he added.
Dr Saraph, who had worked with Malcolm Slesser, et al, in Edinburgh in the late-1990s to develop the ECCO (Evolution, Complexity and Cognition) modelling paradigm for assessing the economic and energy potential of nations and regions, said, “To protect yourself from obsolescence, you need to use open source formats to store digital assets, upgrade back-ups to current media and avoid using digital platforms that evolve fast.”
“Protection from unfair practices can be achieved by choosing to opt out of sharing data whenever possible, and avoiding digital platforms that lack privacy protection and have unfair terms of use,” he added.  One safety mechanism was to have multiple IDs and not link multiple important databases to a single ID. He also told people that it was best to avoid digital platforms that lack privacy and have no human help and, most importantly, use a two-step authentication, whenever possible.
Cyber-crime and privacy breach in India has been growing exponentially. Dr Saraph concluded with the advice: “In this scenario, remember your identity, assets and existence are at stake and you only are responsible for your security. So, the next time you are online, be vigilant and try to minimise your risks.”
ECCO: Evolution, Complexity and Cognition
The Supreme Court of India, in response to a clutch of public interest petitions, has made it clear, for the sixth time, that the Aadhaar number cannot be made mandatory by the government for any benefits or services; it is voluntary. 
Answering queries on the issue, Dr Saraph clarified that Aadhaar is just a number which has not been verified and authenticated by any government authority. He said, the Unique Identification Authority of India (UIDAI) had disclosed this in response to Right to Information (RTI) queries. Unfortunately, several government departments are violating the Supreme Court’s orders and making it mandatory. Asked what could be done in such cases, Dr Saraph’s suggestion was that people should lodge grievance on the government complaints portal at this link http://www.pgportal.gov.in/GrievanceNew.aspx
With the Aadhaar numbers being widely copied and distributed across the country, there is no way to tell where your Aadhaar number was used by whom through what API (application programme interface), exposing your digital assets to the possibility of being completely siphoned off. Like most of us, the government neither knows nor has an inventory of its digital assets. Certifying or appostiling digital assets are unheard of. 
Whether it is survey of maps of India, passports, birth certificates—or even Aadhaar numbers—the government knows no way to certify, verify and audit its digital assets, he said.


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