(This appeared in www.moneylife.in)
A big fund house recently announced the redemption of a three year real estate PMS scheme. The investors were happy as they got back a total of one hundred and three percent of the money they invested. Yes, a pathetic return, but the investors were happy to see their principal back. Of course, it is more psychological than logical. In real terms, probably each investor lost around thirty percent of his principal, if inflation or purchasing power is factored in! Not a very prudential investment.
Several interesting takeaways from this:
i) Though the scheme collected money in 2007 (property prices even today are around fifty percent higher than that period), the investment must have been so bad that the net return to the investor is so pathetic. Or it is likely that the fund manager/s has done sweetheart deals with investee companies and made good money on the side;
ii) There would have been some investment costs (brokerage, due diligence etc);
iii) The distributor made a total of around five percent upfront, when he sold the scheme to the investor; and
iv) The AMC or the investment manager charged a three percent entry load and an annual management fee of two percent. Totally, the AMC made around nine percent of which five percent was given to the distributor. In effect, the AMC made four, the distributor five and the investor three! All the investment was of the investor. So, for the distributor and the investment manager, the return is infinite and for the investor, it is less than one percent per annum!
Alas, even today PMS schemes continue to lure investors.
The latest among the PMS schemes are the ‘debt’ PMS schemes, with return promises of around twenty percent per annum for three to five years. The collected money is lent to investment companies belonging to industrialists who in turn pledge their holdings in listed companies. The money is used by the investment companies to either buy more shares or to manipulate the share prices. Not all the investment companies are actually disclosed to be promoter entities as per the official records. And since there are no investment limits etc on PMS schemes, often, the entire pool of money is lent to one entity! This is nothing but backdoor money lending!
For selling these funds, the distributor can get two to five percent commission, upfront.
I happened to see a PMS account statement of a gentleman who had invested money in to a scheme focused on ‘consumption’ theme. In one year since investment, the person was down eleven percent, in spite of keeping cash balance of close to 45%! In the same period, the sensex has given a positive return of twenty percent! I found the arithmetic difficult to digest. My guess is that what I saw was just the snapshot of the statement date. Perhaps there has been active churning and trading which would have eaten away most of the money. Investors never seem to learn!
It is rare that PMS schemes give returns higher than the mutual funds. In spite of that, people with too much money, seem to get easily conned by the sales folk who push the PMS schemes at them because the selling commission is much higher than a mutual fund. It is time SEBI raised the minimum ticket size for PMS to at least a few crores of rupees. Then, it is a case of the rich putting their money knowingly. Today, people with less than even a crore of investment portfolio, are being lured in to PMS. Of course, they too do not deserve any sympathy, but greed is a normal human tendency and if the regulator can curb it somewhat, the investor who keeps away from such rotten schemes, would be protected.
Thursday, December 30, 2010
2011- change is nothing. stock markets rule ok
2011 - Crystal Ball
(This was written for the Dalal Street Journal)
Returns
P/E Open Close
25.53 Jan-08 20,325.27
12.16 Dec-08 9,647.31 -52.54%
12.21 Jan-09 9,720.55
21.82 Dec-09 17,464.81 79.67%
21.99 Jan-10 17,473.45
22.85 dec 6 2010 19,981.31 14.35%
(Above numbers are based on the BSE Sensex)
The above table is self explanatory. Indian markets have given fantastic returns, unless you were caught with your money in the markets through 2008. If you have done that, hopefully you have bounced back. It is likely that if you were caught in fancy ‘growth’ stocks and still deep in the red.
From my experience of equities, I can clearly see that ‘value’ stocks have delivered superior returns as opposed to ‘growth’ chases. You have only to look at multinational stocks like HUL, Colgate, Castrol, Cummins etc to realise this. Many Indian ‘growth’ stocks have given nothing but heartaches. Perhaps you were lucky to catch an Infosys early, but it is more likely that you may have the ilk of Ispat in your portfolio.
The charm that the MNC companies offer us is that they seem to be in dull businesses. But in a country where domestic demand is going up in leaps and bounds, their businesses benefit enormously. Most of the companies I named enjoy incredible return on shareholder funds. They enjoy their share of India’s economic growth as well as stay focused on what they do.
Our economy has kind of moved on to a seven to nine percent growth despite the government’s utter paralyses in terms of doing anything proactive (other than individuals taking a toll for putting a rubber stamp). And for the righteous ones, who think that corruption and scams will matter, do not worry. Dishonesty is a way of life in India and merely because it is out in the print does not amount to a new discovery. Ignore it.
Industrial growth can be as high as fifteen percent, if supply catches up. In many areas, including service sectors, there is a clear shortage of skilled manpower. Rising wages are eating in to profitability as well as adding to inflationary pressures. I think that profit growth is going to be a party pooper. Inflation should continue at nine to ten percent in official terms, whilst on the ground inflation will be closer to twenty. This alone should keep some profit on the table for companies.
One worry is whether the last quarter will see some dip in rural spending as farm output is getting impacted by capricious weather in most parts of India. This is something that can upset the consumption story.
In this backdrop, I would like to look at keeping my money in to sectors like banking (private banks), pharmaceuticals, engineering and FMCG. Oil and petroleum can be looked at, but the sector has limited investment possibilities. Regulated sectors (fertilizers /sugar etc ) continue to remain politically threatened sectors and usual speculation around pre budget time could provide some quick bucks. With all the controversies surrounding telecom, it would be good to pick up market leaders at declines. The trouble is that one does not know which of these companies would be the next ‘discovery’ in a scam.
The government’s selling off of capital assets (shares in PSU) and treating the proceeds as revenue, will help to dress up the shoddy fiscal position. Analysts will shift focus from Trade deficit (increasing at nearly six billion dollars a month) to Current Account deficit (buffeted by capital market inflows) and say that ‘All Is Well’. The main plank for the bullishness is continuing foreign inflows in to this market. At some point, if they wake up and think that India is not all that hot or that some other global economies offer better opportunity, the flows will thin.
2011 is going to be a year of uncertain returns in this market. Whilst I do not see a market collapse (primarily due to corporate earnings rather than macro economics), earnings growth beyond fifteen percent or so is clearly not on. So, valuations are rich and stock picking is going to be key.
Gold and silver seem to be on a tear and so long as Europe and America continue to wallow in printed money, the gold run would continue. Perhaps gold and silver would give higher returns. If you ask me about whether they are at fair value, the answer is a resounding “NO”. Clearly, our stocks represent better value than the precious metals. The metal prices merely reflect the fear on global currencies.
One possibility is of regulatory whiplash which can bog down investments. These could be accompanied by exposure of accounting frauds also. 2011 is going to be a bumpy ride in the face of rich valuations, decent economy and strong funds flows.
R. Balakrishnan
December 7th, 2010.
(This was written for the Dalal Street Journal)
Returns
P/E Open Close
25.53 Jan-08 20,325.27
12.16 Dec-08 9,647.31 -52.54%
12.21 Jan-09 9,720.55
21.82 Dec-09 17,464.81 79.67%
21.99 Jan-10 17,473.45
22.85 dec 6 2010 19,981.31 14.35%
(Above numbers are based on the BSE Sensex)
The above table is self explanatory. Indian markets have given fantastic returns, unless you were caught with your money in the markets through 2008. If you have done that, hopefully you have bounced back. It is likely that if you were caught in fancy ‘growth’ stocks and still deep in the red.
From my experience of equities, I can clearly see that ‘value’ stocks have delivered superior returns as opposed to ‘growth’ chases. You have only to look at multinational stocks like HUL, Colgate, Castrol, Cummins etc to realise this. Many Indian ‘growth’ stocks have given nothing but heartaches. Perhaps you were lucky to catch an Infosys early, but it is more likely that you may have the ilk of Ispat in your portfolio.
The charm that the MNC companies offer us is that they seem to be in dull businesses. But in a country where domestic demand is going up in leaps and bounds, their businesses benefit enormously. Most of the companies I named enjoy incredible return on shareholder funds. They enjoy their share of India’s economic growth as well as stay focused on what they do.
Our economy has kind of moved on to a seven to nine percent growth despite the government’s utter paralyses in terms of doing anything proactive (other than individuals taking a toll for putting a rubber stamp). And for the righteous ones, who think that corruption and scams will matter, do not worry. Dishonesty is a way of life in India and merely because it is out in the print does not amount to a new discovery. Ignore it.
Industrial growth can be as high as fifteen percent, if supply catches up. In many areas, including service sectors, there is a clear shortage of skilled manpower. Rising wages are eating in to profitability as well as adding to inflationary pressures. I think that profit growth is going to be a party pooper. Inflation should continue at nine to ten percent in official terms, whilst on the ground inflation will be closer to twenty. This alone should keep some profit on the table for companies.
One worry is whether the last quarter will see some dip in rural spending as farm output is getting impacted by capricious weather in most parts of India. This is something that can upset the consumption story.
In this backdrop, I would like to look at keeping my money in to sectors like banking (private banks), pharmaceuticals, engineering and FMCG. Oil and petroleum can be looked at, but the sector has limited investment possibilities. Regulated sectors (fertilizers /sugar etc ) continue to remain politically threatened sectors and usual speculation around pre budget time could provide some quick bucks. With all the controversies surrounding telecom, it would be good to pick up market leaders at declines. The trouble is that one does not know which of these companies would be the next ‘discovery’ in a scam.
The government’s selling off of capital assets (shares in PSU) and treating the proceeds as revenue, will help to dress up the shoddy fiscal position. Analysts will shift focus from Trade deficit (increasing at nearly six billion dollars a month) to Current Account deficit (buffeted by capital market inflows) and say that ‘All Is Well’. The main plank for the bullishness is continuing foreign inflows in to this market. At some point, if they wake up and think that India is not all that hot or that some other global economies offer better opportunity, the flows will thin.
2011 is going to be a year of uncertain returns in this market. Whilst I do not see a market collapse (primarily due to corporate earnings rather than macro economics), earnings growth beyond fifteen percent or so is clearly not on. So, valuations are rich and stock picking is going to be key.
Gold and silver seem to be on a tear and so long as Europe and America continue to wallow in printed money, the gold run would continue. Perhaps gold and silver would give higher returns. If you ask me about whether they are at fair value, the answer is a resounding “NO”. Clearly, our stocks represent better value than the precious metals. The metal prices merely reflect the fear on global currencies.
One possibility is of regulatory whiplash which can bog down investments. These could be accompanied by exposure of accounting frauds also. 2011 is going to be a bumpy ride in the face of rich valuations, decent economy and strong funds flows.
R. Balakrishnan
December 7th, 2010.
Wednesday, December 15, 2010
Trust betrayed-
Today, the television channel, Headlines Today (belonging to the India Today group) had an expose on the Tata Group. In brief, land that belonged to Voltas, with a market value of Rs.250 crores was sold / transferred at Rs.25 cr to nominees of the Karunanidhi family (the family that rules the state of Tamil Nadu and is an important ally of the Congress ). According to the channel, this was the consideration paid to ensure that the Telecom portfolio was NOT given to Dayanidhi Maran.
In the same news capsule, there is mention of a shell co which links the Anil Ambani group, Swan Telecom, ETISALAT, ETASTAR and the DMK ruling family!
To all of those who have been saying that I am very negative and pessimistic, what more do you expect?
If Voltas has done it, Ratan Tata stands totally stripped of his high moral stance. That was supposed to be the last bastion of trust.
Now, let us turn to the important question. If the land deal is true, Voltas shareholders have been screwed. Voltas shares are held by institutional investors also. This is a fit case to sue the Board and recover the difference. The Board has gifted away the property of the shareholders.
This is also a lesson to those who invest based on ‘asset’ values in Indian companies. The benefits rarely come to the shareholders.
Even if the Tatas restore the property to Voltas (a high probability due to the political stench that is happening), the Board of Voltas has to go. They have no bloody business being there or on any other Board of any Company. In fact there is a fit argument for suing them for breach of trust. This shows that the Boards are dummies and the promoters can do what they want. Look at the names on the Board:
Name Designation
Ishaat Hussain
Chairman / Chair Person
Nasser Munjee
Director
N N Tata
Director
N D Khurody
Director
Nani Javeri
Director
Sanjay Johri
Managing Director
S N Menon
Director
Ravi Kant
Director
Jimmy S Bilimoria
Director
How independent are any of the names above? Is any one of them fit to be trusted, if the land deal has been struck?
This is a fit case for SEBI, Co Law Board and shareholders to act upon.
In the same news capsule, there is mention of a shell co which links the Anil Ambani group, Swan Telecom, ETISALAT, ETASTAR and the DMK ruling family!
To all of those who have been saying that I am very negative and pessimistic, what more do you expect?
If Voltas has done it, Ratan Tata stands totally stripped of his high moral stance. That was supposed to be the last bastion of trust.
Now, let us turn to the important question. If the land deal is true, Voltas shareholders have been screwed. Voltas shares are held by institutional investors also. This is a fit case to sue the Board and recover the difference. The Board has gifted away the property of the shareholders.
This is also a lesson to those who invest based on ‘asset’ values in Indian companies. The benefits rarely come to the shareholders.
Even if the Tatas restore the property to Voltas (a high probability due to the political stench that is happening), the Board of Voltas has to go. They have no bloody business being there or on any other Board of any Company. In fact there is a fit argument for suing them for breach of trust. This shows that the Boards are dummies and the promoters can do what they want. Look at the names on the Board:
Name Designation
Ishaat Hussain
Chairman / Chair Person
Nasser Munjee
Director
N N Tata
Director
N D Khurody
Director
Nani Javeri
Director
Sanjay Johri
Managing Director
S N Menon
Director
Ravi Kant
Director
Jimmy S Bilimoria
Director
How independent are any of the names above? Is any one of them fit to be trusted, if the land deal has been struck?
This is a fit case for SEBI, Co Law Board and shareholders to act upon.
Hero Honda
Hero Honda Motors is a respected company.
Honda Motors, the Japanese technology and name provider, is exiting the joint venture.
The press reports indicate that the Japanese partner will sell its stake to the Indian promoter (or his nominee, I suspect). The interesting thing is that the papers report that the Jap is selling the stake that is currently valued at nearly two billion dollars, at around one billion dollars.
So, is this a windfall to the promoters? And in the process, the 'other' sucker shareholders get the middle finger?
Fairness would have it that the shares could be offered to the other shareholders as a rights at some price. Alternatively, Honda should dump its shares in the market at the best possible price. Surely, Honda Motors is a listed co and they too would have some shareholder accountability?
Or is it that the exit is as per some pre agreed formula of yesteryears which was put on paper when the JV was formed? In this case, no one will cry.
Hero Honda is a valuable company with an amazing track record.
The Munjals have some explaining to do on how the deal is being put through.
If the media reports that they are picking it up at well below market price is true, it is only fair that the rewards be shared. The media reports also say that this bought out stake will be placed with PE investors.
Why go through this convoluted route? A simple rights issue would be the perfect thing to do.
Will the Indian media (which gets huge advertising revenues from Hero group) keep mum?
Honda Motors, the Japanese technology and name provider, is exiting the joint venture.
The press reports indicate that the Japanese partner will sell its stake to the Indian promoter (or his nominee, I suspect). The interesting thing is that the papers report that the Jap is selling the stake that is currently valued at nearly two billion dollars, at around one billion dollars.
So, is this a windfall to the promoters? And in the process, the 'other' sucker shareholders get the middle finger?
Fairness would have it that the shares could be offered to the other shareholders as a rights at some price. Alternatively, Honda should dump its shares in the market at the best possible price. Surely, Honda Motors is a listed co and they too would have some shareholder accountability?
Or is it that the exit is as per some pre agreed formula of yesteryears which was put on paper when the JV was formed? In this case, no one will cry.
Hero Honda is a valuable company with an amazing track record.
The Munjals have some explaining to do on how the deal is being put through.
If the media reports that they are picking it up at well below market price is true, it is only fair that the rewards be shared. The media reports also say that this bought out stake will be placed with PE investors.
Why go through this convoluted route? A simple rights issue would be the perfect thing to do.
Will the Indian media (which gets huge advertising revenues from Hero group) keep mum?
SCANDAL A DAY KEEPS NO ONE AWAKE
(This article appears in the latest issue of Moneylife- 'What me worry about corruption")
SCANDAL A DAY KEEPS NO ONE AWAKE
Another scam, another scandal. The sun again rises on nothing new, in India.
The one good thing the bribe exposure did was to show how shallow our stock markets are. It also shows the risks in the markets. Under normal circumstances, if one were to believe all the corporate governance speeches and talks that the foreign investors make, they should have totally ditched Indian markets. The fact that they choose to remain, shows that money and respect for ethics are two different things. Being unethical is no bar to making money. Tolerance is everything.
The breaking of the scandal perhaps gave the markets a good excuse to correct. Stocks of companies that had risen for no apparent reason fell with a thud. One hardly saw a good quality stock price take a big tumble. Yes, our markets need continuous doses of ‘grease’ to keep going. Most promoters and money managers fall in to the honey trap and create an environment which creates a make believe world of ‘all is well’. I am reasonably sure that this scandal will blow over. In fact the first two to three days have seen an enormous number of market participants appearing in the media and making light of the scandal. Corruption is accepted as a way of life. Getting caught does create some hiccups. Look back at 1991. So many got away scot-free, some got divine retribution and a few got punished. History will repeat itself.
Yes, we can question that the actual impact of the scandal on a LIC Housing or a Bank of India does not appear to be damaging. Most analysts came back saying that either the amounts are small or that the loan book is still healthy, so ‘what me worry’? This will be the sales pitch to ensure that these stock prices will recover sooner rather than later.
To me, the bigger issue is the management culture in the PSU’s. It is common knowledge that graft and grease take various forms and shapes in the public sector undertakings. I am not, for a moment, saying that only the public sector is greasy. Private sector is often more greasy. Unfortunately, the public sector also has the ownership in hands of a government which should not be in commerce. It uses the public sector as a part of its ‘currying favours’ kit. The private sector promoters, on the other hand, treat the companies as their personal properties and use the money first for self, then for family and residual is for all ‘other’ shareholders. In the private sector, personal ambition often creates a lot of incidental value for the other shareholders. On the other hand, the PSU bosses are not unduly worried about share prices. For them, wealth is what can be taken away from the company. In the private sector, the promoter is happy when the share prices rise. This is the big difference.
What keeps people invested in public sector companies? Is it a hope that someday, the government will exit the board room like they did in IPCL or BALCO or Modern Bakeries? Or is it a blind evaluation of published figures? Perhaps it is a combination of both. One fund manager friend mentioned that he prefers public sectors simply because the government will always stand by it. Look at the banks, he said. Some of the new gen private banks have vanished. But the dull public sector banks are still around, after having got several doses of oxygen.
Somewhere, there is also the fact that if we take the recent scandal, the private sector intermediary company share price is far less likely to recover than LIC Housing’s share price. Investors will not care unless it turns out that the company is filled with dud assets. The scandal will be taken as a small dent in the share price and in fact I know of some investors who have bought in to these shares when it fell sharply. So, the world of investors really gives a damn about corporate governance or honesty.
The real estate sector has also taken a hit. Here again, the take is that perhaps for a small time, the companies will find it tough to get loans. This will pass. They will find new intermediaries. This sector has never been known for its transparency, but still attracted the cream of foreign investors. It hardly matters whether they are straight or fit in to the shadow of a corkscrew. So long as they have land, can sell houses and offices, investors will flock to it.
So, don’t worry. Grease and graft changes nothing. It may change a few equations here and there, but the investment universe feeds on it.
SCANDAL A DAY KEEPS NO ONE AWAKE
Another scam, another scandal. The sun again rises on nothing new, in India.
The one good thing the bribe exposure did was to show how shallow our stock markets are. It also shows the risks in the markets. Under normal circumstances, if one were to believe all the corporate governance speeches and talks that the foreign investors make, they should have totally ditched Indian markets. The fact that they choose to remain, shows that money and respect for ethics are two different things. Being unethical is no bar to making money. Tolerance is everything.
The breaking of the scandal perhaps gave the markets a good excuse to correct. Stocks of companies that had risen for no apparent reason fell with a thud. One hardly saw a good quality stock price take a big tumble. Yes, our markets need continuous doses of ‘grease’ to keep going. Most promoters and money managers fall in to the honey trap and create an environment which creates a make believe world of ‘all is well’. I am reasonably sure that this scandal will blow over. In fact the first two to three days have seen an enormous number of market participants appearing in the media and making light of the scandal. Corruption is accepted as a way of life. Getting caught does create some hiccups. Look back at 1991. So many got away scot-free, some got divine retribution and a few got punished. History will repeat itself.
Yes, we can question that the actual impact of the scandal on a LIC Housing or a Bank of India does not appear to be damaging. Most analysts came back saying that either the amounts are small or that the loan book is still healthy, so ‘what me worry’? This will be the sales pitch to ensure that these stock prices will recover sooner rather than later.
To me, the bigger issue is the management culture in the PSU’s. It is common knowledge that graft and grease take various forms and shapes in the public sector undertakings. I am not, for a moment, saying that only the public sector is greasy. Private sector is often more greasy. Unfortunately, the public sector also has the ownership in hands of a government which should not be in commerce. It uses the public sector as a part of its ‘currying favours’ kit. The private sector promoters, on the other hand, treat the companies as their personal properties and use the money first for self, then for family and residual is for all ‘other’ shareholders. In the private sector, personal ambition often creates a lot of incidental value for the other shareholders. On the other hand, the PSU bosses are not unduly worried about share prices. For them, wealth is what can be taken away from the company. In the private sector, the promoter is happy when the share prices rise. This is the big difference.
What keeps people invested in public sector companies? Is it a hope that someday, the government will exit the board room like they did in IPCL or BALCO or Modern Bakeries? Or is it a blind evaluation of published figures? Perhaps it is a combination of both. One fund manager friend mentioned that he prefers public sectors simply because the government will always stand by it. Look at the banks, he said. Some of the new gen private banks have vanished. But the dull public sector banks are still around, after having got several doses of oxygen.
Somewhere, there is also the fact that if we take the recent scandal, the private sector intermediary company share price is far less likely to recover than LIC Housing’s share price. Investors will not care unless it turns out that the company is filled with dud assets. The scandal will be taken as a small dent in the share price and in fact I know of some investors who have bought in to these shares when it fell sharply. So, the world of investors really gives a damn about corporate governance or honesty.
The real estate sector has also taken a hit. Here again, the take is that perhaps for a small time, the companies will find it tough to get loans. This will pass. They will find new intermediaries. This sector has never been known for its transparency, but still attracted the cream of foreign investors. It hardly matters whether they are straight or fit in to the shadow of a corkscrew. So long as they have land, can sell houses and offices, investors will flock to it.
So, don’t worry. Grease and graft changes nothing. It may change a few equations here and there, but the investment universe feeds on it.
Monday, December 13, 2010
Lenders weepers, borrowers keepers....
Shortage of money should never come in the way of fulfilment of your basest desires. The RBI encourages you to do so. In the past, if you borrow from banks, there was a fear that some goons may come and harass you for repayment. They made it very difficult for you to miss EMI’s etc., Do not worry. All is now well, with the RBI having come to the rescue of people who love to live their life with OPM (Other People’s Money).
Well, the first part starts with getting money. Make sure that you approach as many banks as possible simultaneously. So long as you do not have a bad record as a past baggage, then no problems. Hit every bank for the maximum possible. Does not matter if the EMI’s total to more than you are ever likely to make in a month.
There is no way the banks know what you are going to borrow. If you have a job, it is fine. You can have a salary certificate. If not, go to the nearest printing press and get some done. Reference checks should be another breeze. Have a couple of prepaid mobile sim cards. Now with multiple sim cards in one phone, you can give one number as the referee’s so that when there is an attempt at verification, you can take care of it yourself. Verification is generally done by third parties, who are paid per completed verification, so play them along. It is rare that they will take a second or third attempt to complete the form. The third party will have targets from the lending bank, so they are very happy to complete the paperwork as soon as possible. They pay their employees ‘per case’ so the system works in your favour.
Having got the loan, now forget it. In order to make it easy, here are some tips:
i) Leave your house just around seven am and return just after seven pm. This way, your stay at home is peaceful. A recovery agent cannot come in to your house between seven pm and am;
ii) When there is a call for you, and it seems like it is the recovery agent, give them a bogus name. They cannot talk to anyone other than the borrower about the loan;
iii) If you are in a pooja, they cannot interrupt. This will come in handy;
iv) Even if the recovery agent calls you, you can put him off. He cannot call you more than once a day;
v) Per chance, if the agent finds you at home during ‘permitted hours’ organise an impromptu function or pooja. The agent cannot now bother you or enter your house. So, if he knocks, and you are foolishly caught unawares, tell him that there is a pooja going on and he can come next day after calling you;
vi) In case you have a vehicle pledged to them, do not worry. They have to give you a notice of repossession, give you time and then only they do it. Offer severe resistance physically whilst they come for repossession. They cannot retort since their code prohibits them from doing so. Alternately, keep some banned substance in the vehicle, which you can then pin on the agents;
vii) Even if they repossess your vehicle, they have to auction it to the highest bidder. You can always lodge a complaint with the consumer courts that they have not done their job diligently and that you could have got a higher price is a good plank to fight the lender. Who knows, you may get an out of court settlement offer;
viii) Inspite of all this, if the recovery agent manages to collar you, do not get intimidated. Tell him that you do not agree with the numbers given by him. Once this is settled, then till him that you will talk directly to the bank. If he still does not listen, tell him that you will lodge a complaint for harassment with RBI and the lending bank. It will be his word against yours and typically, courts will tend to support the ‘innocent’ and hapless borrower;
ix) Banks have been told to go to Lok Adalats for amounts up to Rs.10 lakh. Try and cross this limit. This will make sure that the matter goes to a court of law;
x) Once it goes to court, go to the bank and plead for a settlement. It is very likely that you may be able to settle for anything between thirty to fifty percent of your loan. You can keep this handy by placing a FD for around twenty percent of the loan you take, with a separate bank. This gives you the freedom to blow up eighty percent of the loan!
The Indian banking system is wonderful and is tailor made for defaults. So far, this privilege was available only to large borrowers (textile mills, steel mills etc) who could merrily default and thumb their nose at the banks. Now, there is a level playing field. Even if you are small, you can still default. If large borrowers and farmers can, so can you. Ditch Shakespeare (Neither a lender nor a borrower be...etc). Borrow and enjoy.
As regards the lenders.. God help them. The best way is to keep the legs crossed and not open the loan books to individuals for ‘personal’ loans, stock market loans, housing loans etc., In the US, even the distressed housing loans have become an issue, with the banks being virtually stalled from repossession!
(The central bankers and the media treat the borrowing scum with misplaced sympathy. This is the sole reason that crooks and criminals are able to siphon public money. If I had a choice, I would make sure that defaulters lose at least one limb and have a tattoo on their forehead. Defaulters are thieves who steal and should be shunned and boycotted by all decent human beings.)
Well, the first part starts with getting money. Make sure that you approach as many banks as possible simultaneously. So long as you do not have a bad record as a past baggage, then no problems. Hit every bank for the maximum possible. Does not matter if the EMI’s total to more than you are ever likely to make in a month.
There is no way the banks know what you are going to borrow. If you have a job, it is fine. You can have a salary certificate. If not, go to the nearest printing press and get some done. Reference checks should be another breeze. Have a couple of prepaid mobile sim cards. Now with multiple sim cards in one phone, you can give one number as the referee’s so that when there is an attempt at verification, you can take care of it yourself. Verification is generally done by third parties, who are paid per completed verification, so play them along. It is rare that they will take a second or third attempt to complete the form. The third party will have targets from the lending bank, so they are very happy to complete the paperwork as soon as possible. They pay their employees ‘per case’ so the system works in your favour.
Having got the loan, now forget it. In order to make it easy, here are some tips:
i) Leave your house just around seven am and return just after seven pm. This way, your stay at home is peaceful. A recovery agent cannot come in to your house between seven pm and am;
ii) When there is a call for you, and it seems like it is the recovery agent, give them a bogus name. They cannot talk to anyone other than the borrower about the loan;
iii) If you are in a pooja, they cannot interrupt. This will come in handy;
iv) Even if the recovery agent calls you, you can put him off. He cannot call you more than once a day;
v) Per chance, if the agent finds you at home during ‘permitted hours’ organise an impromptu function or pooja. The agent cannot now bother you or enter your house. So, if he knocks, and you are foolishly caught unawares, tell him that there is a pooja going on and he can come next day after calling you;
vi) In case you have a vehicle pledged to them, do not worry. They have to give you a notice of repossession, give you time and then only they do it. Offer severe resistance physically whilst they come for repossession. They cannot retort since their code prohibits them from doing so. Alternately, keep some banned substance in the vehicle, which you can then pin on the agents;
vii) Even if they repossess your vehicle, they have to auction it to the highest bidder. You can always lodge a complaint with the consumer courts that they have not done their job diligently and that you could have got a higher price is a good plank to fight the lender. Who knows, you may get an out of court settlement offer;
viii) Inspite of all this, if the recovery agent manages to collar you, do not get intimidated. Tell him that you do not agree with the numbers given by him. Once this is settled, then till him that you will talk directly to the bank. If he still does not listen, tell him that you will lodge a complaint for harassment with RBI and the lending bank. It will be his word against yours and typically, courts will tend to support the ‘innocent’ and hapless borrower;
ix) Banks have been told to go to Lok Adalats for amounts up to Rs.10 lakh. Try and cross this limit. This will make sure that the matter goes to a court of law;
x) Once it goes to court, go to the bank and plead for a settlement. It is very likely that you may be able to settle for anything between thirty to fifty percent of your loan. You can keep this handy by placing a FD for around twenty percent of the loan you take, with a separate bank. This gives you the freedom to blow up eighty percent of the loan!
The Indian banking system is wonderful and is tailor made for defaults. So far, this privilege was available only to large borrowers (textile mills, steel mills etc) who could merrily default and thumb their nose at the banks. Now, there is a level playing field. Even if you are small, you can still default. If large borrowers and farmers can, so can you. Ditch Shakespeare (Neither a lender nor a borrower be...etc). Borrow and enjoy.
As regards the lenders.. God help them. The best way is to keep the legs crossed and not open the loan books to individuals for ‘personal’ loans, stock market loans, housing loans etc., In the US, even the distressed housing loans have become an issue, with the banks being virtually stalled from repossession!
(The central bankers and the media treat the borrowing scum with misplaced sympathy. This is the sole reason that crooks and criminals are able to siphon public money. If I had a choice, I would make sure that defaulters lose at least one limb and have a tattoo on their forehead. Defaulters are thieves who steal and should be shunned and boycotted by all decent human beings.)
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