Indian home loans float only in one direction—up. Successive Reserve Bank of India (RBI) governors have tried to use a mix of benchmarks, moral-suation and nudges to get the banks to be fair to a set of borrowers who now account for a large part of the banks’ loan books, but loan rates have remained sticky at higher levels. As borrowers, we know the pain of having a loan that gets very quickly revised upwards when the policy rate rises, but stays high when the policy rates fall. Banks have managed to manage all benchmarks tried out every few years by RBI. The BPLR, base rate and the MCLR are the various benchmarks (read about these here) tried out over the past. Each time a new benchmark was introduced, RBI expected banks to pass on the rate cuts, but each time it failed.
When a consumer goods firm says that it is finding five-rupee biscuit packs difficult to sell, you know the slowdown is not limited to white collar jobs and to people like us, but is biting down hard across the board. The signs of slowdown are everywhere—in the sudden job losses reported across the country, in the tiny increments that keep the income barely above inflation, in the stories that friends and family tell of small businesses struggling to stay alive, of poor sales off-take, of downgrading of stuff from premium to pure utility and then postponing purchases.
One way to understand this pain is to see it in the context of a larger change in the political narrative that wants to clean up the country—Swachh Bharat is not just about a physical clean-up but towards a cleaner way to do business and freedom from corruption. You can read more about this here.
Almost to the day, it was 10 years ago that Nandan Nilekani outlined how he would solve a problem in the retail finance space. I was consulting with the ministry of finance for a year and was assisting the Swarup committee. We were trying to solve the problem of mis-selling, consumer protection and financial literacy. On the committee’s invitation, Nilekani had come across to the chairman’s office in Vasant Kunj, New Delhi. He instantly picked a white board marker and drew a screen on the board. This was the one screen that would reflect a person’s entire financial life—all the products, taxes, savings, loans—everything was in tiny boxes in that screen. A one-screen image would give the investor a much better handle of various products and what they are doing for his financial life. But at that time, the fragmented regulatory system, lack of adequate machine-readable disclosure and the inability of entities like financial planners and wealth managers to access this information, made that screen look like science fiction. Ten years later, that idea is almost ready to roll out. But the idea has got deeper and wider, and is attempting to solve a much bigger problem.
The problem is of data ownership and its use. India is a poor country whose citizens are data rich and, therefore, the western solutions of a data protection framework are necessary, but insufficient. This data is better used for individual empowerment, based on consent and secure movement of data. India is the first country in the world to attempt putting in place a system to make data into something that will empower individuals rather than just stop at protection. Suppose I want my financial planning firm to build me a plan today. I will have to email all my bank statements, my insurance policy details, my mutual funds, my real estate holdings, my small savings deposits, all my loan details, my tax statements. Most of these are not in a machine-readable format—these will be PDFs or excel sheets with frozen cells making it useless for analytics. Not only is the information clunky, it is also excessive and perpetual—I cannot scrub off the data once mailed to my planner if I fall out with him.