A long time ago when I was in my first job as a trainee researcher in a magazine, I would take the chartered bus (a working people’s school bus that collects people from a residential area and drops them in an office hub) from home to office. The art of eavesdropping on conversations must be ingrained because I still remember some of the chatter around. One particular conversation thread was between two women in their 40s. They looked like junior bank staff. The women were discussing how their friends who married men who could support them financially made a better deal. “We now have two jobs—at work and at home.” Indian men, it seems, get so tired at work that they have no strength for housework in a double income home.
For the more than 25 crore policyholders of Life Insurance Corporation of India (LIC), the LIC-IDBI Bank headlines are very upsetting. LIC will use up to ₹ 13,000 crore of policyholder money to buy up to a 51% stake in IDBI Bank, an asset nobody wants to touch. With stressed assets of ₹ 55,588.26 crore and bad loans a huge 28% of the total loan book, IDBI Bank is probably the worst of the bad banks of India. With its own paid-up capital at just ₹ 100 crore as on 31 March 2017, LIC will use policyholder money entrusted to it to make this equity investment.
LIC has been the gilt-edged long-term safety net for most of post-Independence middle India. “LIC kara lo” is a refrain heard in Indian homes the minute the first salary of the young adult of a family begins to come in. There is public anger when this security of savings comes under threat. There are lots of reasons the policyholders are worried. They are worried about the safety of their money—what if the entire money goes down the drain. They are worried about this being a precedent to more such toxic asset purchases. They are worried about the haste with which the insurance regulator has interpreted a rule to allow this sale—insurance firms are not allowed to hold more than a 15% equity stake in a single firm to prevent concentration of risk.
Soft spoken and unhurried, Sandeep Bakhshi is probably the best placed today to calm the turbulent waters at ICICI Bank Ltd. More Warren Buffett than The Wolf of Wall Street, Bakhshi is a career banker who has now successfully run the insurance piece of the financial services empire of the ICICI Group of companies. He’s done this before—come into a bad situation and turned it around. Bakhshi was brought in to lead ICICI Prudential Life in 2010 at a difficult time. He inherited an aggressive sales-at-any-cost culture set in place by the firm’s first chief executive, Shikha Sharma. ICICI Prudential Life had been infamously in trouble over its “Operation Jehad” in 2005, when one of the branches used the name and images of Osama Bin Laden to motivate the sales force. Insurance policy sales were “kills”, and five ICICI Prudential Life employees were jailed over this episode. You can read more about this here.
The math does not add up. The real estate refugees from the builder excesses of the past are now stuck between a rock and a hard place. These are the people lucky enough to actually have a finished flat with possession and not a legal case with absconding builders. These are the people who bought the Delhi suburban dream thinking they were getting in on the ground floor to the next Gurgaon. These are the people who live in Delhi, on rent or in own homes, and bought for investment in the greater NCR region, particularly in Greater Noida. These are the people who don’t know if they should sell and take a loss on their investment or keep funding it and hope prices recover.
A typical story goes like this: you bought a 3-BHK flat with a fancy foreign sounding name with a pool, community center, Italian tiles and more bells and whistles for Rs 60 lakh. Took a loan of Rs 40 lakh that costs about Rs 35,000 a month in EMI. Rent where you live in Delhi is Rs 30,000 a month. Rent from your Noida flat is Rs 8,000 a month. Amount of loan left is Rs 30 lakh. Current market price of flat if you can find a buyer—Rs 50 lakh.
It always happens. An introduction to mutual funds results in a feeding frenzy. I’d introduced a childhood friend to mutual funds two years ago. At age 45, she had left money and its management too late, but once she on-boarded mutual funds, she really went all the way. And beyond. Two years later, I’m horrified to see her portfolio. From the three-scheme portfolio she had started out with two years ago, she now sits on some 10 mutual fund schemes without a thought on what problem they solved. From an FD Hugger, she turned into a Feeding Frenzy Funder. I find that investors I meet fall into some stereotypes. Here are eight investor types—who are you?
The Ostrich: You have no plan, your money lies in your savings deposit and you are known to proudly say that you have no money to invest. You push away all help that comes your way because you are convinced that the world is full of cheats and you are just safer not doing anything rather than making an error. Beneath the don’t care mask, you are actually quite petrified about the state of your finance. And maybe for that reason believe that “something” will happen to make that pot of gold that you are convinced will come your way. Dream on.
A doctor friend will occasionally send a desperate SMS asking for clarity on the Narendra Modi government’s track record. He says he can’t make sense of the truth, flooded as he is with WhatsApp forwards, news, views and chatter that is so polarized that it looks like the messages are talking about two different countries. The next 10 months will see this divide get sharper and nastier as we roll up to Elections 2019.
The first thing we need to do when we enter this debate is to discard evidence by anecdote. For every anecdote from one side of the debate, the other side can give two more. My anecdote will always be more real to me than your story. Let’s stay with numbers. But numbers can also be hotly debated—depending on whether the GDP number is up or down, the validity of the data has been discarded or accepted. While numbers like the GDP or inflation or even manufacturing growth or investment are subject to a methodology which can be open to debate, the one number we can’t either fix or ignore is the Sensex, the broad market index made up of 30 companies. The Sensex seems to like it when Modi Sarkar wins elections. Look how it rose and then fell as the Karnataka elections changed colour from saffron to a muddled something.
Two weeks back, on 4 May 2018, capital markets regulator Securities and Exchange Board of India (Sebi) uploaded a five-page document that I thought should have made more news. Titled Consultation Paper on Review of SEBI (Issue of Capital & Disclosure Requirements) Regulations, 2009, it is a call for public comments on a big rehaul of the Indian capital issue regulations. The document links to three annexures that read over 369 pages with details of regulations that were changed or deleted and the reason for it, the draft regulations and the schedules. Post public comments, the draft regulations will go to the Sebi board soon.