Rate cuts on course, but banks still need the Rajan push

An informal poll in the Mint newsroom in Delhi, moments before the credit policy announcement on 29 September, had a rare consensus—he’ll go for 50! We were predicting the quantum of the cut on the three rates announced by the central bank that are linked to each other. With the market expecting a 25-basis point cut, to have done a 25 would not have caused a ripple. So, gut feel said that to make an impact, Reserve Bank of India (RBI) governor Raghuram Rajan will go for 50. The RBI did cut the repo rate by 50 basis points to 6.75%, and this drags down the reverse repo (the rate at which banks lend to the RBI) down to 5.75% and the bank rate to 7.75%. One basis point is one-hundredth of a percentage point. For those not watching the tickers and wondering why the rate cut was national breaking news, here’s a quick snapshot of why the RBI rate announcement is important.

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Gold digger or an equal partner?

Popular jokes on divorce portray women as grasping, money-minded gold diggers who clean out the assets of the hard-working man. But look around you—how many such cases do you see? I see the woman who leaves her job to make a family, while the man goes out to work and achieve his career goals. Sometimes, he strikes it very rich, moves to another league of people, products and lifestyle. The wife is suddenly boring and un-classy. He has an affair. She finds out. He has the money and the might. Threatens to take away the kids. She says just let me have custody of the kids, and gives up on her share of the assets built over the life of the marriage. She walks away with no money, with bills to pay and children to bring up. This story has played out so often that it deters divorce in the super rich. The woman knows she will walk away with almost nothing and prefers to stay on.

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Death by the good doctor

The horrific tragedy of a young couple committing suicide as they could not save their only son from dengue has brought the role of corporate hospitals once more in the spotlight. The story is like this: a little boy contracted dengue and as his parents took him from hospital to hospital in south Delhi, he was refused a bed. By the time a hospital agreed to take him in, it was too late. He died. The distraught parents killed themselves in a suicide pact. The boy’s father had lamented that you need a ‘contact’ to get a hospital bed in Delhi. It is true. You need a ‘contact’ to get a bed in most private hospitals if you have a ‘low-earning’ medical condition. A knee replacement will earn the hospital upwards of Rs.3 lakh for the 6-8 days it takes, while a dengue bed will earn a tenth for the same period. Doctors who work in such hospitals do confess privately that there are verbal instructions to refuse dengue patients or those who don’t ‘earn’ that well.

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When chor pretends to be police

To play the policeman is the oldest trick in the fraudster’s book. Delhi’s residential areas have seen a spike in crimes where two policemen stop an old woman and admonish her for wearing gold jewellery when there is so much crime in the city. They get her to “keep it safely” in her bag in a piece of cloth they give her. In the process, they switch the bundle and leave her with bits of stone. Something similar is afoot in the financial sector. Many of us get mails in the name of the banking regulator inducing us to share our username and password of the Internet banking account or telling us that we have won a lottery. There are calls from people pretending to be from the insurance regulator promising a bonus if the customer buys a policy or getting people to switch from an existing policy to a new government-guaranteed one. And now there are stories of money being collected in the name of the pension regulator using the national emblem and the logo of Pension Fund Regulatory and Development Authority (PFRDA).

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Lean, clean financial products for the Indian investor

A dozen meetings that lasted more than a cumulative 60 hours over three-quarters of a year and much debate later, the Sumit Bose Committee Report was uploaded by the Ministry of Finance on 3 September (http://mintne.ws/1NeFMNj ). The committee was set up in November 2014 to recommend measures for curbing mis-selling and rationalizing distribution incentives in financial products. The report is now open for public comments. Disclosure: I was a member of this committee.

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