Money With Monika | RBI must signal danger: Lessons from Yes Bank AT1 Bonds
The writing down of Yes Bank’s AT1 bonds worth over Rs 8,400 crore in the aftermath of the scandal earlier this year had caused some alarm. But what seems to have heightened investor anxiety is the Reserve Bank of India’s stance to complaints filed against the write-off.
The central bank is treating the episode as investment gone bad, signalling to investors that they must pay closer attention to the product documents, and be ready to face the risk if they are opting for higher returns. While this may be justified in the case of high net worth individuals and corporates, is it fair to the retail investor?
I suggest some measures which the central bank can adopt to make investment contracts easier to understand for the retail investor, so that they don’t lose their hard-earned money due to advisors chasing targets.
The holders of Yes Bank AT1 bonds who saw their entire investment vanish a few months back were hoping for redress from the central bank, the regulator they thought should be looking after their interests. But they were bitterly disappointed when the Reserve Bank of India (RBI) said that the contract investors signed on clearly lays out the risks of investing in such products. RBI also said that investors should not reap higher returns when times are good and then complain about their losses when the risk comes home. Read about this here.
Some investors have gone to court saying that Yes Bank sold high-risk AT1 bonds to depositors without explicitly stating that the high interest came with the risk of wiping out the investment.
The pandemic has left the equity market in a bad shape. Data reveals that this is perhaps the worst decade for equities, with point-to-point returns showing them in a poor light. In such a situation, equity naysayers might be quick to point out how FDs are better than equities. But does that hold true in the long run? What is the ground reality? How should investors stay optimistic amid all the predictions?
Join us for a discussion, where experts decode the road ahead for equities. On the panel are A.Balasubramanian, MD & CEO, Aditya Birla Sun Life Mutual Fund, and Saurabh Mukherjea, Founder & Chief Investment Officer, Marcellus Investment Managers. Monika Halan, Consulting Editor, Mint, is the moderator. #mutualfundmantras
As you pass through a beautiful museum at an airport on the way to your flight, you would stop to admire the sculptures, the paintings, the wall art and murals that make for such compelling beauty and atmosphere. But a former Airports Authority head once stopped me midway in my appreciation of this wonder to burst the beauty bubble. When project costs are mapped closely, art is a great way to inflate costs. Who knows how to value art, he said succinctly. Then it is a matter of connecting dots to figure out what he really said. The cost of expensive infrastructure is paid by the users finally in different ways. One way is the “user development” fees, which ranges from a few hundred to a few thousand over the past years. The latest rates are here.
We know intuitively that we pay for corruption in many ways, but the cost of graft in anything linked to real estate has the potential to cost not just a few hundred rupees to those who have the capacity to afford a flight, but far more. The worst hit is the roof-over-the-head-seeking homeowner who gets priced out of the market or thrown to distant suburbs with poor amenities. The story of residential real estate can be summed up in three words: stuffed or starving. In the premium segment, there is an oversupply, and in the affordable housing segment, there is a demand overhang estimated to be about 10 million units in 2019 and a supply overhang of about 13 million units in the premium and luxury market. What people want they don’t build. What they build, people don’t want. The key to the story is the price.
The #Covid19 pandemic and the consequent economic crisis are forcing everyone to make tough financial choices. Should you switch from a debt fund to a bank deposit? Should you get out of the equity market? Watch #MoneyWithMonika with
The choices that the ongoing covid-19 pandemic is forcing us to make are not the ones we had ever thought we would need to make. Some countries in the West debated the human life value of the old versus the young and then decided to take the aged off ventilators to make way for those with a longer life runway ahead of them. India, luckily so far, has not been at that crossroad.
But there are a number of economic choices that we have been forced to make as incomes, jobs and livelihoods have been under stress. Last week, Adhil Shetty, CEO of Bankbazaar.com, spoke to me on the three toughest money choices during the covid-19 crisis during a live interview. Each question had two parts and as we moved from question one to three, the choices got harder and harder. These are questions that all of us need to face and then try and answer even if our backs are not yet against the wall. As I keep saying, we are far from done with this crisis, and it is best that we belt up for a rough ride for a while.
Money With Monika: How can India’s GDP get back on track? | Corona Conversations
The Covid-19 pandemic has dealt a severe blow to the Indian economy which was already grappling with a deepening slowdown. Now, India’s Gross Domestic Product is estimated to contract by around 5% in the current financial year. The economy will have to grow by 11% in order to get back to the FY20 level. While India has done better than many developed countries in the services sector, our manufacturing potential is yet to be adequately utilised. This is one avenue which can help India not just recover from the Covid-induced economic crisis, but also grow stronger in the long run. But how can the country achieve this? Watch Monika Halan explain the various changes that can help India become the world’s manufacturing hub. Monika Halan is consulting editor, Mint, and author of the book ‘Let’s Talk Money’.
If you are worried about your equity portfolio, you are not alone. Whether or not to continue SIPs and whether or not to get out of the market would have been the most asked questions in almost every webinar that I have been a part of since end March 2020. The fear is not just about the market crash in March, but also about the possibility of a global recession and the ability of India’s already slowing and now negative growth to recover from this shock. It is a valid fear and unless India is able to get its growth back on track, targeting at least 8%, if not more, the fruits of demography, of a geopolitical advantage today and of servicing a large domestic market will all be frittered away.
Economist and former Reserve Bank of India (RBI) deputy governor Rakesh Mohan wrote in a superb 2019 paper, titled Moving India to a new Growth Trajectory: Need for a Comprehensive Big Push (read it here), that to get to the needed 8-9% GDP growth, other than a push to financial savings, there is a need to “revive animal spirits in the private sector…particularly in internationally competitive manufacturing sector”. He wrote that there seems to be an acceptance of the fact that India has missed the bus in manufacturing but that there are plenty of buses still to board, if we make the needed changes in regulatory structures that impede enterprise, both Indian and foreign, from making investments in manufacturing.