The Big Brother is watching: The phrase from the famous George Orwell novel 1984 has finally arrived in India. Well fortunately we still do not have cameras installed to capture every aspect of our life but we are close.
Let me explain but first let me give you some real life incidences:
1. One young smart associate in my company ( let us call him Chatur) has moved to NCR from outside of Delhi. Within a year Mr. Chatur got 5 Credit cards and changed his cell phone number 3 times. In one year he bought a Color TV, and home theater,a microwave, and few top of the line sunglasses, jeans and sport shoes, he also watches movies and goes to pub every weekend, went on vacation to Goa with his gang and today owns more than 1.5 Lakhs to the Credit card companies. His plan of action: Cut the cards in half, change in cell phone number, change address and get new cards from other credit card companies.
2. Another young man, younger brother of one of my friends a very bright software engineer got his H1 about 5 years ago and just before moving to US he bought all kind of stuff specially gold on his credit card specailly jewellery and moved to US. He has given his permanent address as the address of his landlord.
3. A young lady in my team abruptly resigned mentioning that her parents have found a suitable match for her and she is in agreement with same and she needs to move back to her home town. Late on we came to know that she has also shopped on her Credit cards to the maximum limit and now the banks are looking for her.
Do we see a pattern here?
Let me try to give the same to you:
1. All of them are young
2. High paying BPO or IT jobs
3. Give their local address as the permanent address
4. Fund their lifestyle which is beyond their means even after high salaries with their credit cards.
5. Credit card companies are lousy in checking the credentials provided by applicants.
But things are changing now, in fact they have already changed:
1. Mr. Chatur changed companies and joined another company, like most BPO companies this company also opened his salary account. Every thing was ok for 2 months but after 3 months the bank froze his salary account and he could not operate the same, because Mr. Chatur's one of the defaulting cards was from this bank and they could corelate the two and are now asking for the money back. Mr. Chatur requested his company to issue him a salary check but the company is very clear that the salary is issued only through direct transfer to salary account and he should settle his problems with the bank directly.
2. The young software engineer had to come back to India due to slowdown and took an assignment with another company in India. He applied for a home loan but was refused because of the earlier defaults on his credit cards. Now in case he wants the home loan then the home loan company is demanding that he clears all his credit card dues.
3. The young lady who did shopping on her credit cards and moved to another town to be with her husband is being harrased by collections agent of the bank. Apparently they have been able to trace the young lady to another city as she applied for a personal loan to redo the bachelor pad of her husband and make it worthy of a lady.
These are not isolated cases but a regular phenomean in Indian Metros, banks in their competetion to have maximum number of retail customers using their products did not followed strict checks on the applications. It was common for the agents of banks the DSAs to guide the applicants on how to fudge on the applications e.g. Change the mothers maiden name, do not show your other credit cards, show a different address on the application e.g. do not show the black listed areas etc. etc.
The verification agents were suitably rewarded by the DSA. The DSAs are rewarded on basis of sucessfull applciations and not how these accounts perform in future ( that is what is my understanding)
But now things have changed when the banks were trying to get maximum share of the customer acquisition things were not very diligent in the reveiw of application but now with slow down and NPA ( non performing assets of the banks increasing with every passing days) Banks have become more stringent in doing a very thorough check on the same and helping them is the credit bueaue. Currently the most active and visible credit bureau in India CIBIL ( http://www.cibil.com/ )
Cibil is the first credit bureau in India. A credit bureau is a company that tracks your payment history on all your borrowings be it:
1. Credit Cards
2. Home Loans
3. Personal Loans
4. Automobile Loans
Net net any kind of borrowing that you take from a member of CIBIL ( which is almost everybody in Indian financial market)
the member will report to CIBIL any borrowing to CIBIL and then will also keep CIBIL informed about any payment defauts, and any delays in the payments. Then CIBIL creates a comprehensive database for the same and shares it with its member banks and finacial institutions.
So while it was earlier very easy to take loan from one bank and then go and repeat the same with another bank it will become more and more difficult with every passing day. Credit bureaus are not a new concept they have been around for some decades in developed markets like US.
With banks having a record of your payment history will be reluctant to make advances or give credit cards to a person with known credit history of default. Indian consumers are at a disadvantage compared to the borrowers in US because in US there is a system where you are eligible to get a free copy of your credit report every year from all the 3 major credit bureaus in US namely:
Equifax
Transunion
Experian
One is also entitled for a free credit report if you have been denied credit in last one year citing bad credit as one of the reasons.
The advantage of this system is that you can go back to the bank who has reported the problem in your payment and either get it corrected or dispute the same as wrong. Basically you have a authority to challeng any wrong doings that have been attributed to you. No such process exists in India so you are totally at mercy of CIBIL and its reporting which makes you totally dependent on the reporting of the banks and CIBIL. Hopefully it will change in future. Currently CIBIL webiste says that the borrower has to contact the reporting banks and get it rectified. The exact process is not mentioned clearly and one is also not sure what all can be reversed.
Any ways coming back to our original topic of big brother is watching the important thing to note is that you can no longer take your banks for granted and they are keeping a track of your payment history and reporting it to CIBIL.
Now you may wonder what disadvantages you may have if you do not make the payment on time or do not make the payment altogether:
1. Any delay in payment is considered as a delinquency and you are bound to recieve calls from collection agency, even personal visits ( not a very pleasant thing to happen to any body) And Indian collection agencies are notorious for their unprofessional conduct.
2. Your any future loan application will be rejected and this may be for some thing you really need and plan to make the payment on time e.g. a new home or that car that you have been eyeing for some time.
3. Even if your new loan application is approved the intereset rate will be so high that it will cost you much more than rate of interest charged to a person who has good credit history.
We will continue on this topic with some more examples.
Tuesday
Let the markets Crash
Let the markets Crash: Yes you read it right; I sincerely wish that the Indian stock market crashes further by another 3000 points and comes to the level of around 5000 points on the BSE Sensex. Before you jump to the conclusion that I have gone mad let me give you my thoughts on the same.
We wanted to buy a new fridge (not that the old fridge had gone kaput, but that is another story). So we went to different stores to compare the prices- we went to Reliance, Big bazaar, Spencer’s, 2 different independent shops close to our home, I even called my brother in Delhi to find out the price in Delhi if it is less than Gurgaon. Then my wife suggested that we should wait till Diwali to get a better deal. So around Diwali we repeated the whole exercise and finally we bought the fridge for 49000/ Rs against a MRP of 53000/- Pretty good deal, considering it is one of the latest models available in market and the Misses is happy.
Now let me tell you what we did with the old fridge, we have bought it in Kolkata for Rs 7000 in 2003 and it was in perfect condition, but was proving to be small for our growing needs. So when we checked for the new fridge we asked for exchange price for the old fridge. The maximum we were being offered was Rs 800/- by the dealers, that is true a princely sum of Rs 800/-. So we decided to use it as a clothes cabinet in our home. Then once we have brought the new fridge home we decided to call our friendly neighbor hood Kabariwallah just to find out if he will be willing to take the old fridge. Apparently the Misses did not like the idea of using a fridge as a clothes cabinet (so much for my innovative ideas). Guess what guys the friendly neighborhood kabariwallah was willing to give us 2000/- Rs in hard cash for the same on the spot. We decided to hold the sale for one more weekend and asked him to come next week as we want to take a call if we want to sell it or not. He immediately increased the offer to 2250/- It was too tempting to resist and I collected the cash and he with his 2 assistants took the fridge from us.
Now you must be wondering what is the logic of telling you all this mumbo jumbo about the story of 2 fridges? Let me now finally come to the point.
1. The fridge we wanted to buy we did a thorough research checked with 5 different stores and waited for Diwali sale and only then bought it at the cheapest possible rate.
2. The fridge that we wanted to sell we again checked with various sources and finally sold it for the highest possible price.
Got it? Elementary my dear Watson Elementary! When you want to buy some thing you wait for the prices to drop and then you buy it at the lowest possible price and when you want to sell ( even if it is an old fridge) you look for the highest possible price and only then sell it.
Now my question to you my friend is: How long you plan to be in Stock markets? 1 year, 2 year? 5 year ? or 15 years? ( same goes for Equity Mutual funds) If your answer is more than 5 years then you are going to be a net buyer for next 5-15 years? Right? So if you will be buying stocks and equity mutual funds for next 5-15 years why would you like the price for stocks to go up? You want to buy them as cheap as possible so you would want the markets to go down even further.
I am not getting here in a debate what is good for economy, and stock market being a barometer or thermometer or sphygmomanometer of the economy ( whatever the saying is). My only point is if you are a net buyer let the prices stay low for some more time so that you get a long opportunity to do bargain hunting at very low price.
Happy Investing.
We wanted to buy a new fridge (not that the old fridge had gone kaput, but that is another story). So we went to different stores to compare the prices- we went to Reliance, Big bazaar, Spencer’s, 2 different independent shops close to our home, I even called my brother in Delhi to find out the price in Delhi if it is less than Gurgaon. Then my wife suggested that we should wait till Diwali to get a better deal. So around Diwali we repeated the whole exercise and finally we bought the fridge for 49000/ Rs against a MRP of 53000/- Pretty good deal, considering it is one of the latest models available in market and the Misses is happy.
Now let me tell you what we did with the old fridge, we have bought it in Kolkata for Rs 7000 in 2003 and it was in perfect condition, but was proving to be small for our growing needs. So when we checked for the new fridge we asked for exchange price for the old fridge. The maximum we were being offered was Rs 800/- by the dealers, that is true a princely sum of Rs 800/-. So we decided to use it as a clothes cabinet in our home. Then once we have brought the new fridge home we decided to call our friendly neighbor hood Kabariwallah just to find out if he will be willing to take the old fridge. Apparently the Misses did not like the idea of using a fridge as a clothes cabinet (so much for my innovative ideas). Guess what guys the friendly neighborhood kabariwallah was willing to give us 2000/- Rs in hard cash for the same on the spot. We decided to hold the sale for one more weekend and asked him to come next week as we want to take a call if we want to sell it or not. He immediately increased the offer to 2250/- It was too tempting to resist and I collected the cash and he with his 2 assistants took the fridge from us.
Now you must be wondering what is the logic of telling you all this mumbo jumbo about the story of 2 fridges? Let me now finally come to the point.
1. The fridge we wanted to buy we did a thorough research checked with 5 different stores and waited for Diwali sale and only then bought it at the cheapest possible rate.
2. The fridge that we wanted to sell we again checked with various sources and finally sold it for the highest possible price.
Got it? Elementary my dear Watson Elementary! When you want to buy some thing you wait for the prices to drop and then you buy it at the lowest possible price and when you want to sell ( even if it is an old fridge) you look for the highest possible price and only then sell it.
Now my question to you my friend is: How long you plan to be in Stock markets? 1 year, 2 year? 5 year ? or 15 years? ( same goes for Equity Mutual funds) If your answer is more than 5 years then you are going to be a net buyer for next 5-15 years? Right? So if you will be buying stocks and equity mutual funds for next 5-15 years why would you like the price for stocks to go up? You want to buy them as cheap as possible so you would want the markets to go down even further.
I am not getting here in a debate what is good for economy, and stock market being a barometer or thermometer or sphygmomanometer of the economy ( whatever the saying is). My only point is if you are a net buyer let the prices stay low for some more time so that you get a long opportunity to do bargain hunting at very low price.
Happy Investing.
Wasting Money
Happy new year. Hopefully i will be able to keep some of my resolutions this year.
Let me give some examples for the same.
I believe one should keep a track of all the expenses one makes. I initially used to keep a track of all my expenses in a small spiral pad and then total them at the end of month which will give me an idea how much i have spent. Then I requested a friend who is very good with MS Excel to create a template for me in MS Excel where I will convert the data from paper to the spread sheet. I followed this habit also for a year. Then I some how stopped doing this. Then I spent about 29000 INR( $ 650 + on the date of purchase) to buy a smart phone. What a blunder. The lollypop i gave to myself was since the phone has editable MS Excel I need not first put the stuff on pad and then convert it in Excel. I can straight put the data in the phone and then send it to my laptop via email. Big mistake. There were multiple reasons for the same:
1. The screen on phone though more than 2 inch is still not user freindly to enter the data in MS Excel. You have to scroll up and down and left and right to reach the right cell. So it took more time.
2. I lost the stylus of phone and since it was purchased in pre i-phone era so i could not do data entry by finger.
So now i had a costly phone instead of a Rs 10 pad and i could not do the data entry into it. And due to my lazyness I could not go back to the note pad entry and then conversion to file mode.
So I have hardly any records for my last 2 years of spending.
I intend to change that and keep the records for 2009 from today onwards. No I have not bought a phone where i can make data entry with help of fingers but I have bought my favorite Rs 10 Note pad. So I plan to stick to the same and then convert the entries into an MS Excel file at the end of the week. Thanks a lot Sudeep for creating the spread sheet for me, i still have got it.
Let me give some of the places where I have been literally wasting money and will try and not waste on these items:
1. Gym membership. I pay about 1500/month in gym membership but I do not go on an average for more than 10 days in a month to the gym. I will still continue with the same at least for next 3 months, but I plan to go there and burn some fat. As I cannot afford to buy another set of trousers due to expanding waistline. In 3 months time I hope to loose about 5 kg and then start going to the gym in the new apartement complex i will be moving. I will have access to the free gym their. Annual savings: 18K
2. Eating out: Imagine on one hand i am paying for gym membership and not going there, on the other hand i also go out and eat on the days i have missed the gym or even when I have gone to the gym. So you loose money on both counts and I am actually gaining weight instead of loosing it. I think the term for this phenomenon is called : Moron. Annual Savings: 15K ( only eating when in office, not including the weekend eating out)
3. Movies and Books: I love watching movies and reading books. The problem is more than watching and reading I love buying and collecting them. I have a whole lot of books and movies still in their original packing waiting for last few years to be opened. So I have deicided till I have read or watched each one of them I will not be buying any new books or movies. I think this should save me a neat bundle and the Misses will be happy. Annual Savings: 10K
4. Impulse Purchases: Books, movies, clothes, after shave lotions, shoes you name it and I have been buying them on the spur of the moment thanks to the credit cards that I have. No more sir. I have realized the importance of shopping with help of a list and only things that are in the list when we are leaving home will be coming to home. So no more trousers till the current ones give away ( some of them are in original packing bought in hope of losing weight). This is coming to an end immediately. Annual Savings: minimum 25K
5. Giving loans to Friends: I have been giving money to my friends for quiet some time typically sums of 10K+ per case. Now I like my friends and would like to continue to help them. But the challenge is nobody returns the money on time and I do not want to chase them for money although it is my own money. I some time wonder that I have taken money out of my MF or FD and given to a friend and he doesn't have the courtesy to return it on time? And even when the money comes back it is never the full amount in one go it typically comes in small instalments which means I can not use it for any thing substantial and tend to spend it all rather than putting it back to the investment it was in. Even if the money was not taken out from an investment it still is a lost oppurtunity for me. So from now onwards money will not be loaned to freinds and colleagues. End of story. I may be loosing some friends due to this, but hey if some body is friend only due to money then maybe I any way need to re-look at the relationship. Annual Savings: Not sure
Submit bills for reimbursement: I have to spend a lot of money for my official duties on travel, for buying gifts for clients, taking clients and my team out for dinners. Typically i forget to claim some of them specially if they are small amounts. But since i plan to keep records for all the expenses now onwards I will submit my expense report every month to get the money back. This should help in easing my work by not having to work on a big chunk of bills every few months, it will also make sure I do not end up spending money for offical expenses from my pocket. Annual Savings: 3-5K per annum
So hopefully by adhering to these points i will be saving a good amount of money. I also believe that i will be saving from other heads also once I become conscious of my spending patterns and keep a record for the same.
Happy saving money.
Let me give some examples for the same.
I believe one should keep a track of all the expenses one makes. I initially used to keep a track of all my expenses in a small spiral pad and then total them at the end of month which will give me an idea how much i have spent. Then I requested a friend who is very good with MS Excel to create a template for me in MS Excel where I will convert the data from paper to the spread sheet. I followed this habit also for a year. Then I some how stopped doing this. Then I spent about 29000 INR( $ 650 + on the date of purchase) to buy a smart phone. What a blunder. The lollypop i gave to myself was since the phone has editable MS Excel I need not first put the stuff on pad and then convert it in Excel. I can straight put the data in the phone and then send it to my laptop via email. Big mistake. There were multiple reasons for the same:
1. The screen on phone though more than 2 inch is still not user freindly to enter the data in MS Excel. You have to scroll up and down and left and right to reach the right cell. So it took more time.
2. I lost the stylus of phone and since it was purchased in pre i-phone era so i could not do data entry by finger.
So now i had a costly phone instead of a Rs 10 pad and i could not do the data entry into it. And due to my lazyness I could not go back to the note pad entry and then conversion to file mode.
So I have hardly any records for my last 2 years of spending.
I intend to change that and keep the records for 2009 from today onwards. No I have not bought a phone where i can make data entry with help of fingers but I have bought my favorite Rs 10 Note pad. So I plan to stick to the same and then convert the entries into an MS Excel file at the end of the week. Thanks a lot Sudeep for creating the spread sheet for me, i still have got it.
Let me give some of the places where I have been literally wasting money and will try and not waste on these items:
1. Gym membership. I pay about 1500/month in gym membership but I do not go on an average for more than 10 days in a month to the gym. I will still continue with the same at least for next 3 months, but I plan to go there and burn some fat. As I cannot afford to buy another set of trousers due to expanding waistline. In 3 months time I hope to loose about 5 kg and then start going to the gym in the new apartement complex i will be moving. I will have access to the free gym their. Annual savings: 18K
2. Eating out: Imagine on one hand i am paying for gym membership and not going there, on the other hand i also go out and eat on the days i have missed the gym or even when I have gone to the gym. So you loose money on both counts and I am actually gaining weight instead of loosing it. I think the term for this phenomenon is called : Moron. Annual Savings: 15K ( only eating when in office, not including the weekend eating out)
3. Movies and Books: I love watching movies and reading books. The problem is more than watching and reading I love buying and collecting them. I have a whole lot of books and movies still in their original packing waiting for last few years to be opened. So I have deicided till I have read or watched each one of them I will not be buying any new books or movies. I think this should save me a neat bundle and the Misses will be happy. Annual Savings: 10K
4. Impulse Purchases: Books, movies, clothes, after shave lotions, shoes you name it and I have been buying them on the spur of the moment thanks to the credit cards that I have. No more sir. I have realized the importance of shopping with help of a list and only things that are in the list when we are leaving home will be coming to home. So no more trousers till the current ones give away ( some of them are in original packing bought in hope of losing weight). This is coming to an end immediately. Annual Savings: minimum 25K
5. Giving loans to Friends: I have been giving money to my friends for quiet some time typically sums of 10K+ per case. Now I like my friends and would like to continue to help them. But the challenge is nobody returns the money on time and I do not want to chase them for money although it is my own money. I some time wonder that I have taken money out of my MF or FD and given to a friend and he doesn't have the courtesy to return it on time? And even when the money comes back it is never the full amount in one go it typically comes in small instalments which means I can not use it for any thing substantial and tend to spend it all rather than putting it back to the investment it was in. Even if the money was not taken out from an investment it still is a lost oppurtunity for me. So from now onwards money will not be loaned to freinds and colleagues. End of story. I may be loosing some friends due to this, but hey if some body is friend only due to money then maybe I any way need to re-look at the relationship. Annual Savings: Not sure
Submit bills for reimbursement: I have to spend a lot of money for my official duties on travel, for buying gifts for clients, taking clients and my team out for dinners. Typically i forget to claim some of them specially if they are small amounts. But since i plan to keep records for all the expenses now onwards I will submit my expense report every month to get the money back. This should help in easing my work by not having to work on a big chunk of bills every few months, it will also make sure I do not end up spending money for offical expenses from my pocket. Annual Savings: 3-5K per annum
So hopefully by adhering to these points i will be saving a good amount of money. I also believe that i will be saving from other heads also once I become conscious of my spending patterns and keep a record for the same.
Happy saving money.
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