Wednesday, December 31, 2008

Happy New Year

Wow! 2008 is finally going to be over!!

An year like no other.
A historical year in our lifetime:

Whims of Money,

Winds of Change,
Flaming Icons,
Departing Morons,
Sporting Glories, and
despite all, the
Jingling Bells of Santa!

The year gone by has made us
Braver, Wiser and more Hope full than

An year that tested our patience,
Our humor and our determination,

Now makes way for a bright new

Here is wishing everyone a
Beautiful, Radiant, Twinkling 2009
With loads of luck, prosperity and

Celebrate a Great New Year

Tuesday, December 16, 2008

Quis custodiet ipsos custodes?

The Latin phrase above (saw it in an Alan Moore comic) means "Who will guard the guardians?". While this debate is timeless, over the years we have started to question less and less the powers of those that serve us. Politicians are one such breed; banks are another.

Before the recent collapse, it was blasphemous to even talk of an ICICI or a Citibank engaging in ethically and economically dubious practices. The bankers' greed is now well-documented in the rubble of Wall Street collapse. All of them have proven to be no better than an exploitative money-lender in the village.

Regulators and watchdogs (like the financial press) have failed us as much as the banks, by creating an exploitative and misleading banking environment for the uneducated, unorganized credit-seeker. Much has been written about their complex products causing global turmoil in 2008. I bring attention to their simpler products; they cause small but significant turmoil in the monthly budget of a common man.

My views on two such products that require immediate fixing:

1. Credit Cards
The onus of proving that one did not use a card lies with the user. Whether the card is stolen or someone uses the card details for online payments, the bank has no liability till the time user asks for the card to be blocked. The very fact that such a potent instrument comes with few, if any, safeguards is a slap in the face of consumer-rights.

The credit card business survives on default. The 36% interest per annum is such an enticing deal for banks that customers paying on-time are treated as liability. The system implicitly promotes insecure use of cards in collusion with merchant establishments. Merchants pretend to be doddering fools, as long as they are paid by the bank and end-user is held liable for payments on a stolen/lost card. What else can explain their immunity from prosecution as accessory to theft, even if they completely ignore security protocol while honoring explicitly "fake" cards (viz, the signature is obviously mismatch, the photo is different, sometimes the name does not match the gender of user, etc).

If the regulators place onus of proof on merchants and banks, it will automatically spur banks to spend on more robust, logical and convenient security mechanisms. Merchants will also become more careful before casually honoring cards they suspect may be stolen. It may even bring down instances of credit-card theft itself!

At the bank end, they can deploy further level of security, like in other instruments:

  • Make photo mandatory on credit-cards, like in all other important documents
  • For online payments, replace the 3 digit CVV joke with a PIN, not printed on card
  • Additionally, explore use of cards with at least one more proof of identity, and so on
Read more about this on Baba Jain's intelligent blog

2. Home Loans
It is no surprise that the recent collapse was triggered by faulty home loans. The fine print in home loans have become the latest "free money" mantra for banks.

Typical home loans are for 20 years or so. All the bank needs to do is offer a low enough rate, so that monthly EMI looks affordable to an undecided new user. Once the loan is given, the debtor has few options. On some pretext or another, rates will rise after 12-18 months. Loss on interest for 12-18 months is petty cash compared to the inflated sum he will be repaying for next 20 years!

Many recent examples expose the regulators snoring while the bankers brazenly feast.

Take the drop in home loan rates. Every time a drop is announced, it applies to new users only. On the other hand, an increase in rates applies immediately to existing users. This is equivalent to "offers" made by FMCG companies to increase sales in slow season. The difference being the commitment is for life in case of a home loan.

Similarly, banks promote the misnomer "fixed" and "floating" interest rates. Despite the fact that fixed rates are subject to upward revision as much as floating rates, this incorrect term is deliberately applied to entice undecided new users. In absence of highly-educated customers, such fine print allows bankers to laugh all the way to and from their banks.

The so-called interest free loans in US by Countrywide were just a more serious manifestation of the same scam. Looking at the poor savings profile of potential customers, Countrywide and others offered loans at next to nothing EMI during initial years. After a few years, once the user is hooked, the monthly repayment obligation zoomed to stratospheric levels (to pay for the "free" period). The stunned customers had no choice but to forgo the loans, lose their houses and destroy their credit rankings. At a macroeconomic level, it caused the housing collapse and opened a rotting Pandora's box.


The recent downturn resulted in a unique paradox where Governments of all nations are racing to offer billions and trillions of dollars to Banks, hoping this will save us from a bigger mess. The paradox, of course, is that it is these Banks that are responsible for the very mess we find ourselves in. This parallels the paradox in the title of this post, especially after reading about the aptly named Madoff. As ex-chief of NASDAQ and an adviser to SEC, Bernie Madoff commanded the trust and influence to run a swindle over many years. It was not until global institutions and trusting investors lost over $50 Billion and counting, that he even showed up on the radar.

It is no surprise when regulators, cops and politicians are "suspected" of using the system for personal gains in India; in fact, many of them are elected or nominated for this very quality (latest example being Mr.Raja's reliance on circular logic). However, when it happens in mighty USA, it is a wake-up call for those who believe that everything that has worked in America must unquestioningly be implemented here.

This recession and financial crisis is an opportunity for India to develop an indigenous regulatory mechanism. India's prescription for beating the downturn must include calling upon our own experience with village moneylenders to anticipate the greed and cunning of Big Money. Under the fading influence of large banks and multinational interests, India must build regulatory firewalls and people-friendly financial instruments to spur growth and protect the common man's interest (without vote-bank gimmicks like loan waiver). New mechanisms must be developed to regulate new instruments like credit cards, online banking and microfinance before they blow up in our face.

India's experience with Microfinance is a start, a great beginning. A billion other such innovations lie latent within the billion dreams. It is not long before the Indian consumer will realize his own strength. On guard!

Thursday, December 11, 2008

Crazy little thing called "Love"

My take on Dil Kabaddi (2008); check out the Studio 18 logo before the movie. Delicious!

Dil Kabaddi is another "event" that fills the heart with joy. Just to see story-tellers (and not just star kids, diamond merchants, estate agents) get a chance to create real cinema in Bollywood is so heartening. We loved this movie and so did everyone in the half-empty PVR auditorium, median age 35, if the constant eruptions of gleeful laughter are any indication.

Maybe he has Woody Allen to thank for it, but this did not end up as the now-too-familiar montage of slick shots against Mumbai's backdrop. I was afraid it would be the typical stilted-Hindi, handy-cam movie (with a great premise but dud execution like Mithya or Woodstock Villa) by a new-age "main bhi Hollywood" director. Dil Kabaddi does not falter in the second half simply because the director had a STORY to tell. All the humor and all the "slice of life" shots culminated in a satisfying narrative. This is where the movie truly scores.

The other reason for its success, of course, is the excellent performances. Cast against type, watching Rahul Bose as a bumbling professor or the suave Rahul Khanna as a mushy pup was a delight. Each character was well-etched, including the secondary characters of ex-boyfriend, office hunk (Rahul Khanna's cameo) and Chirag the lech neighbor. The consistency in their body language and motivations reveal a strong screenplay, with well-written characters. Something so rare even in mainstream Bollywood cinema. That said, the "Kaaya" character could have been better etched.

The cream of the crop is, of course, Samit (Irrfan Khan) as the nouveau yuppie. The subtlety of his flawed yet acceptable English grammar and "over-the-top" dress sense was an excellent contrast to his earthy logic and basic decency. His pairing with an intellectual, stylish, smart Mita (Soha Ali, looking lovely) is not that surprising today-- a lot of very happy couples around have the woman more successful, educated and well-traveled than the man.

Perhaps the movie targets a very specific audience, the mid-30s Indian. Those that grew up on Karan Johar's bubble-gum romance in the 90s and have been "happily" married for 4-7 years now, like the characters in the movie. It documents their quest for love versus their 'fantasy' of love. It is possible that this crowd will laugh the loudest, while those older and younger may find less to identify with in this story. They may yet discover it on DVD a few years later and laugh hearty. At its core, it is nothing more than a story about looking for true love. Just that true love has different meanings for different people.

While some have panned the movie for its shameless copy of Husbands and Wives by Woody Allen, others have cringed at the barrage of sexual jokes and innuendo. In my opinion, it works where Mixed Doubles (the previous multiplex outing about infidelity) failed simply because it does not hold back or have any intellectual pretense. The movie keeps you laughing almost the entire time and yet makes an honest observation about modern Indian marriages. As for the sex-jokes-- they were much more tasteful than what is dished out in family-comedy "U" rated movies every week.

It has been 16 years since Woody Allen's 1992 original. The fact that we finally identify with the type of marriages shown here is a telling comment on Indian society playing catch-up with the West. For better or for worse...

Saturday, December 06, 2008

Change is Sweet

As any Bangalorean who has traveled by auto-rickshaw will tell you, we have been bothered about CHANGE long before Obama came on the scene. Like Obama said, we need to be (carrying) the change we seek. The Bangalore auto drivers have a rounding-off algorithm where Rs.62 = Rs.70 and Rs.68 = Rs.70 as well. During peak hours and after 8PM and before 7AM, this gets rounded off to the nearest 100. The only way to get change is to KNOW exactly how much a route costs and CARRY lots of Rs.2, Rs.5 and Rs.10 currency.

Now the change is creeping into other Bangalore businesses. Last evening, I rushed to the Cafe Coffee Day in the arrival hall of BIAL (the dud new aiport) for a bottle of water to support me through the two hour ride into the city (it took me less than 90 minutes to fly in). They have a "specially packed" bottle of 500ml for Rs.15. I gave the guy two ten buck notes and expected Rs.5 change.

He handed me the receipt and a candy. No change. Just the CANDY, ostensibly worth Rs.5. To say I was shocked is an understatement.

Indians learn to expect the neighborhood grocer to hand us a candy in lieu of 50 paise change. The amount here was also small, compared to the thousands I had just spent flying and eating. But it just didn’t FEEL right. Unless, CCD reciprocates by accepting raddi newspaper and old bottles adding up to Rs.15 as payment.

We talk of India Rising and “Enough is enough”. To see CCD, India’s earliest successes in F&B franchising, behave worse than a corner chaiwala evoked the same emotions. The airport is used by low-income fliers as well, who need facilities and F&B even if they cannot pay for them in dollar equivalent prices. We have often noticed the “we will over-charge you because we can” attitude permeate throughout the airport. For example, what justifies BIAL shops selling only "premium" water at Rs.30 for a litre, when the standard Kinley bottles sell for Rs.12 everywhere else? Just because there's all the chrome and glass and dollars?

It is more important that people who “have” protest on principle, because the “have nots” will not be heard. Singapore’s lovely Changi airport is much cheaper than BIAL, even after conversion. And their facilities are within reach of even the common laborer, who is coming back to meet his family in a Tamil Nadu village. It’s just an airport, after all. Why pretend to be a Las Vegas casino?

Update 08/12/08: CCD Area manager Mr.Sainath found this blog and called to reassure me that lots of change will be available at the counter next time I pass through the airport. I am glad to see the customer-service aura of CCD shine through with his prompt action. Good luck, Sai, in giving us back the CCD we love!