Friday, October 24, 2008

ICICI increases Home Loan rates

While RBI pumped 1000 Crores of liquidity into the banking system to prevent credit squeeze in the market, ICICI bank has quitely increased rates on home loans by 1% for old and new customers.

RBI's actions should have resulted in decrease in interest rates as key bank rates have been lowered to increase liquidity in the banking system. In effect banks have more money to lend now than before the rate cuts.

Some banks have lowered their home loan rates for loans less than 30 Lacs by 0.5%.

The question is Why is ICICI raising rates in a market where rates are headed in the other direction?

The answers (all speculations) could be;

ICICI wants to deliberately become less competitive thus pushing new customers to other banks in an environment where risks have increased due to imminent fall in real estate prices.

ICICI wants existing customers to close down their home loan accounts with them. This will serve multiple purposes.
One, it will make the bank earn money in foreclosure charges.

Second, the bank will get back it's money which is now at risk.

Third, falling property prices (estimated fall of 30 to 40%) will not hurt it's balance sheet in the mark-to-market norm of accounting.

All along ICICI bank has been saying that they are very liquid and people have no reason to fear of any problem. It's actions seem to suggest otherwise.

You be the judge.


Saturday, October 18, 2008

Stock markets tank

Stock markets all over the world have been falling. Investors (speculators) who were participating on the stock markets have booked huge losses or are sitting on equity that has little or no value.

How did this come about?

Mindless lending in US to the housing market created a housing bubble. Property prices rose as bankers and mortgage lenders offered money to just about anyone to buy a house. People with little or no capital bought houses (sub-prime borrowers) with the sole intention of selling them when the prices rose. Banks and Mortgage lenders lent money with holidays on principal payment and deferred payment plans. While the prices were rising, everyone made money.

Then suddenly prices stopped rising and payment holidays ended. People who had no income and no prospect of selling the house to the next fool walked away from them. Banks were left holding the property as most of the loans were no-recourse loans. With more people selling, property prices collapsed having a domino effect of all markets. Banks that had lent money were forced to book losses under the 'Mark to Market' accounting standards. Capital erosion was the order of the day and rating agencies down graded credit papers issued by investment banks and other banks thus reducing them to junk status.

Banks had no option but to raise money when none was available. Confidence has hit rock bottom and trust has got thrown out of the window. Banks stopped lending to each other as no one knew when the other party would collapse. In a concerted and coordinated manner Central banks pumped billions of dollars directly into banks, partially nationalizing them but to no avail.

Stock markets were hit because sellers could not find any buyers at any price. As need for money (liquid cash) increased markets had only one way to go, down.

Stock markets never reflect the true state of a company's health. In fear markets go down and in exuberance markets go up. On the way up any good news is magnified and on the way down even the smallest of bad news is magnified ten times.

Experts predict a 12 to 18 month period for the markets to remain in the grip of bears.

With the BSE Sensitive Index tanking below 10000 points yesterday, Indian investors, day traders, speculators have lost more than 50% of the value of their investment from the peak of 21,000 points touched in January 2008.

According to experts there is more to follow.

In such times if one wants to invest is stocks, one should look for companies with robust business models and Price to Earning ratios of 6 to 8. Otherwise it is safer to place your money in Fixed Deposit with some nationalized bank where you will be assured of both, Return of Capital and Return on Capital.

Sachin crosses another landmark

Sachin Tendulkar overhauled Brian Lara's record of highest scorer in Test Cricket.

For a person who has been on the field for 19 years this is no mean achievement.

Critics abound and have often questioned Sachin's abilities of delivering under pressure. What ever has been said or written will never be able to over shadow the fact that Sachin is indeed one of the greatest batsmen who have graced the sport.

An Indian holding the record makes all of us proud.

May Sachin go on to conquer all the milestones that remain in record book.

My heart swells with pride to have witnessed such a great sportsman.

Tuesday, October 07, 2008

Troubled times...

While the world goes through financial turmoil and banks fall like nine pins all around the globe, I found this interesting reference to a Rudyard Kipling poem.

Roger Cohen writing for NewYork Times refers to this interesting poem.

I reproduce the poem for your reading pleasure and also to take lesson from the same

The Gods of the Copybook Headings

AS I PASS through my incarnations in every age and race,
I make my proper prostrations to the Gods of the Market Place.
Peering through reverent fingers I watch them flourish and fall,
And the Gods of the Copybook Headings, I notice, outlast them all.

We were living in trees when they met us. They showed us each in turn
That Water would certainly wet us, as Fire would certainly burn:
But we found them lacking in Uplift, Vision and Breadth of Mind,
So we left them to teach the Gorillas while we followed the March of Mankind.

We moved as the Spirit listed. They never altered their pace,
Being neither cloud nor wind-borne like the Gods of the Market Place,
But they always caught up with our progress, and presently word would come
That a tribe had been wiped off its icefield, or the lights had gone out in Rome.

With the Hopes that our World is built on they were utterly out of touch,
They denied that the Moon was Stilton; they denied she was even Dutch;
They denied that Wishes were Horses; they denied that a Pig had Wings;
So we worshipped the Gods of the Market Who promised these beautiful things.

When the Cambrian measures were forming, They promised perpetual peace.
They swore, if we gave them our weapons, that the wars of the tribes would cease.
But when we disarmed They sold us and delivered us bound to our foe,
And the Gods of the Copybook Headings said: "Stick to the Devil you know."

On the first Feminian Sandstones we were promised the Fuller Life
(Which started by loving our neighbour and ended by loving his wife)
Till our women had no more children and the men lost reason and faith,
And the Gods of the Copybook Headings said: "The Wages of Sin is Death."

In the Carboniferous Epoch we were promised abundance for all,
By robbing selected Peter to pay for collective Paul;
But, though we had plenty of money, there was nothing our money could buy,
And the Gods of the Copybook Headings said: "If you don't work you die."

Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four
And the Gods of the Copybook Headings limped up to explain it once more.

As it will be in the future, it was at the birth of Man
There are only four things certain since Social Progress began.
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool's bandaged finger goes wabbling back to the Fire;

And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins,
As surely as Water will wet us, as surely as Fire will burn,
The Gods of the Copybook Headings with terror and slaughter return!


Monday, October 06, 2008

Not a sexy story to tell

Revati Laul
Special Correspondent, NDTV
Thursday, September,25 2008 (New Delhi)

We live in such voyeuristic times that it's often difficult to feel anything
anymore. Blasts. Floods. Torture. Terror. Every news piece is a story of
victims of some sort or the other and after a point it's all deafeningly
similar. An endless stream of tears, loss, and above all of that, viewer and
reporter fatigue.

So when I went into Bihar to report on the floods, I was carrying the
enormous weight of that weariness with me. `Oh, you're going in three weeks
later...huh. ..,' said a colleague or two. `Well, there are stories to do
yaar, but it's no longer a headline. Not a sexy story.'

So it took a while for these layers to peel away and for the true horror of
what I was in; actually dawn on me. Realisation came nearly two weeks into
reporting in flood hit Bihar. Relief camp after camp. Tens of thousands of
people queuing in long lines to get food. But it seemed like the Nitish
Kumar government was doing the impossible. Moving a state machinery that had
become defunct through decades of misuse and getting large relief camps into
pretty decent shape.

Then, we drove down a stretch of national highway in Supaul. It was a sight
that suddenly changed everything. One never ending road...stretching far
beyond the horizon....miles and miles of people huddled into plastic
sheets...in what looked like the longest camp in the world. It wasn't even a
camp. It was a vast plastic slum. We measured it the next day. It was 6
kilometres of road...dotted by plastic tent after tent...at least 4 lakh
people on one stretch of road alone, all from just this one district. Lined
up like an army of ants. This was no flood.

It was I now realised, the largest displacement of people in India since the
partition. Perhaps the largest displacement of people anywhere in the world
in the last decade or more. We're talking about a river getting up and
moving 120 kilometres east. We're talking about 35 lakh people displaced.
Homeless overnight. 3.5 million people. That's nearly half the population of
Bihar. Out in plastic shanties. Homeless, penniless and struggling to
survive. Or nearly the whole population of Orissa, the neighbouring state
that's also flooded.

Imagine feeding 35 lakh marooned shelter less people everyday. Even if you
give them only two instead of three meals, and imagine that you can get one
meal for 10 rupees...that adds up to 7 crore rupees or 7 million in just one
day. Now know, that their villages are either completely submerged or at
best, floating in at least 3 feet of water. That's not receding yet. The
water may take another six months to find alternate routes and leave behind
vast tracts of ruined, bare land.

Imagine what it's going to be like to feed that many people out on the
streets for 6 months or more. Ok, let's pretend, we're going to be
optimistic and hope this will all somehow sort itself out in three months
and the villages, now unidentifiable tracts of land will be ready for these
people (if they survive until then) to move back to in three months.

It will still cost a minimum of 630 crores just to feed them for three
months. That's not factoring in the cost of transporting the food there. Or
the cost of cooking pans (that nobody has thought of transporting there so
far). Or fuel. Or tents. Or medicines. Or clothes.

And the Prime Minister's relief Fund is 1000 crores. Given the scale of this
disaster, that's nothing.

Now look at the picture already in front of us. A disaster on a scale India
hasn't seen since it's independence. But one that's somehow being reported
as `The Bihar Flood.'

And therefore a localised problem. Like a bad annual rash you may get on
your arm in the monsoon that some ointment will set right. Oh the annual
floods again! Something that should ideally make the central government push
panic buttons for on a war scale. That the national media should report on
as if we're in the grip of a war. And only then will these people have a
fighting chance at even receiving 10 rupees a day worth of rations.

But now, a month has gone by. The Delhi blasts have happened. India's
nuclear deal is on the verge of being pushed through parliament. The
financial world as we know it has crumbled and America is getting ready for
it's Presidential debate. Where's the space in all of that for The Bihar
Flood? Oh yes, wait a minute! There IS space. It's now clubbed together with
other flooding - Orissa, Nasik. It happens every year. It's the same story.
Poor people. They're used to it.

Try telling that to Rajender Sardar, living in a 8 x 6 feet plastic tent in
what I'm going to refer to here as the longest camp in the world. He's ill,
so is his wife. The top of the plastic sheet is so hot when the sun's
overhead that if your skin accidentally touches it, it will get singed (as
mine did).

Yes, he is poor. Yes he earned money before the flood as a daily wage
labourer. But go look at how daily wage labourers live in their villages.
Not in plastic. Mud walled huts covered by thatch and bamboo. One hut, with
mosquito nets in it is meant for sleeping. The hut next to it is meant for
cooking and a third serves as a cattle shelter. All of this near a hand pump
connected to a tube well that pumps sweet, clean groundwater. And located in
the midst of vast open fields.

Here, it is possible even for these subsistence level miserably poor workers
to get a good night's sleep. To stretch out under the mosquito net at night
and not be bitten by mosquitoes. To know that tomorrow, they may not get
much more than dry rotis to eat. But maybe the day after they may be able to
have two or three meals.

Contrast that with life under a plastic sheet. Six people lie here huddled.
No space to even lie down. And the heat is so unbearable, that in 5 minutes
you're drenched in sweat, your body demands water, more food, salts and
sugar that's drained out of you. You get no sleep and certainly not enough
to eat. You cook in a chullah made in front of your tent. That's on the
road.

You've lived in the same pair of clothes for a month. There's not always
water at hand to wash it, and what by the way will you wear if you wash the
only set of clothes you've got? If you're a woman, this means living through
your menstrual cycle in this state. Blood on your clothes.

An NGO told me horror stories of women who in these times, were used to
using many pieces of cloth, and changing their clothes, now have to live in
that one set of soiled clothes. Some, in desperation, use polythene bags to
stop the blood. Yes, this is a gory story but needs to be told. This NGO
provides sanitary napkins to women and they get used in a second. Oh, what
are you talking about, said some people I told this to. These women have
never used napkins in their lives before. True. They've also never had to
live in one pair of soiled clothes before.

In less than a month, from being extremely hot, it's going to be extremely
cold. Thirty-five lakh people are going to need blankets and shawls. But
Bihar is no longer a sexy story. Soon, it's going to disappear off the news
altogether. The relief trickling in now, will become a slow staccato drip.
Like the last drop from a stubborn tap you're trying to shut.

The thirty five lakh people also includes many who aren't in camps or
plastic slums I've described so far. They're wading through three feet of
water everyday in their villages. Staying on there for fear of losing their
only means of livelihood - their cattle. What do we call these people?

Stupid for staying on? Oh, how stupid you want to save your house and your
money. Get out, go live...erm, where......go live on the street like the
millions of others...Sleep piled up one on top of the other, wait your turn
for the handful of food. And for a fresh set of clothes; chucked from a
truck or tractor to many desperate, flailing anonymous hands. So that when
you return in a few months when the water clears, you see a neat little
piece of land. One small problem that might arise.

Where exactly on that vast stretch of mud is your village? And in it, your
piece of land. With all the recognizable markers washed away, how do you
tell one village or field from the next? So many say, no thank you. We'll
take our chances, live in semi submerged villages amid disease and carcasses
of cattle. But at least this is ours. Only, the Bihar story is no longer in
the news. Orissa is now flooded. The last few boats connecting these
floating villages to supplies of food grain are now going to retreat. The
army and central industrial reserve force boats are after all, meant for
rescue missions. Not suppliers of daily rations or ferry rides for pregnant
women cut off from hospitals.

If the boats stop, well...let's not imagine what will happen if they stop.

Let's look at the bright side. These people are after all mainly daily wage
labourers. Extreme poverty is all they've ever known. They're used to
starving. They'll survive.

Sounds good, sitting here in Delhi, where we haven't a clue what subsistence
level existence is or what starvation really means. We think India's poor
starving millions somehow have a different biological clock from the rest of
us. Somehow, they'll be able to take weeks and months of only one meal a day
(as opposed to intermittent days when they may miss the odd meal). They can
live under plastic. They can survive endless mosquito bites and acute
diarrhoea. Somehow the data on malaria deaths, on kala azar deaths and
people dying of starvation amongst these poor don't tell us anything about
this imagined resilience.

Or one very crucial fact. When you're at subsistence level, you are at
bottom rung. One rung lower means below subsistence. Death. But who's
listening. Right now, I'm back from Bihar with all these stories to tell.
But it's not on the news yet. Bihar floods every year yaar. Terror. The nuke
deal. Freddie and Fannie collapsing. Will our markets survive? Never mind
thirty five -lakh people. Bihar is always flooded at this time of the year.

Towards a just society....

Pure human greed is ruining our lives. We have become exploitative of our fellow human beings. Those who are involved in this game, cre...