It is almost as if the seething Indian aam admi is finding one more thing to get furious about—there has been a string of financial sector failures in the past few years that have directly affected the wallets of the average Indian. While the telecom and the VIP helicopter scandals add to the widely held belief that people in positions of power or those who have access to them, are corrupt, these are still far away from directly affecting the everyday finances of the household. But the institutional theft from the wallets of the average Indian is something that hurts real time. And we’ve had plenty of these in the past few years. Speak Asia, a multi-level marketing company, lost more than Rs.2,400 crore of retail money. StockGuru lost Rs.500 crore and mis-sold life insurance products cost Indian investors more than Rs.1.5 trillion. The latest is the collapse of the Kolkata-based Saradha Group where more than Rs.20,000 crore is at risk.
I must admit I’m a bit surprised by the kind of debate that the Financial Sector Legislative Reforms Commission (FSLRC) Report (http://finmin.nic.in/fslrc/fslrc_report_vol1.pdf) has generated. The 439-page report has made recommendations to re-haul the Indian financial system to facilitate the journey of the $2 trillion Indian economy to becoming a $15 trillion one by 2026. The Justice Srikrishna Commission did not stop at recommendations, but went ahead and drafted law that that will make this happen. The draft Indian Financial Code (http://finmin.nic.in/fslrc/fslrc_report_vol2.pdf) has in it the blueprint of a principles-based, goals-oriented, democratic set of rules that, for the first time, have given consumers their place in the sun. Some of the debate trashes the entire report and calls for a total rethink. I believe this is based on either reading just the dissent notes or a very thin reading of the executive summary. But the conclusions these views come to are quite sweeping. While there may be merit in the argument against some parts of the report or draft law, it does seem a bit odd that instead of trying to correct what is wrong, some would rather throw it all out.
How would you react if you are told that you will go on a tight health plan that builds in one hour of tough physical exercise every day and cuts out most of the things you love to eat and drink? You may do it if you were facing a health crisis and this was the doctor’s order. You may begin doing it if motivated enough. But most people won’t stick to it unless, literally, their life depends on it. Managing money is very similar—you plan to do it, but sometime in the future and when they do begin, they begin with many large goals that mean fairly drastic changes in their current way of living. But this soon fizzles out, leaving them with not more money but a mild sense of guilt. Just the way it takes a health crisis like a heart attack or diabetes to shock a person into initiating and staying with a diet and physical activity plan, it takes a life crisis, like a job loss, the death of the main breadwinner or a large loss in business to get a family to begin and stay with financial fitness.