Nationalized Banks - this is your time

It is a bank for the retired people who have nothing else to do but go wait there all day.

It is a lousy, government organization. It takes hours to get anything done there.

People come, eat lunch, chat, watch TV(!), take breaks & naps and go home. They are least bother about customer service.

While the above applies to any government controlled company in India, I am specifically talking about nationalized banks - like State Bank of India or Canara Bank. You can find the staff highly irritating, very bureaucratic, zero level of customer service, dont-care attitudes and everything that you can complain of. If this were any private company in any sector, the shutters would have been down, the management and staff would have been stoned. But being a nationalized bank, armed with very powerful unions the staff could care less about what management plans or customers think.

How else can you explain the fact that they didnt bother to bring in ATMs and Credit cards into Indian soil for decades until private banks and foriegn banks pushed for it. As much as people blame ICICI for what it has done, but for ICICI, none of the Indian nationalized banks would have even thought about improving customer service. Today a regular savings account in SBI comes with debit card, ATM accesses, Internet Banking and what not !!..

And I think there will be a no better oppurtune moment than now for the nationalized banks to win the faith & love of public. Customers who moved away from these nationalized banks, corporate youth who hate to stand in tellers queues for hours together and NRIs who want to be in control of their money have all now started to pull out their money from private banks like ICICI and are putting them into SBI & Canara & Indian banks. Never before has such a surge of new account openings taken place.

If SBI & others think that this is because of the great customer service that they have or attractive deposits that they offer, they are highly mistaken and awfully arrogant. People move the money into SBI because they think their deposits are insured by the Government of India. And that SBI wont fold and/or run away with their money. If & when the economy stabilizes and there is growth path again, it will be a matter of time the customers find out that making investment decisions with money stuck in a SBI safe is like waiting for a judgement in a Indian court. Customers will take the money and run. And SBI will find itself running to Finance ministry to issue a depositor confidence boosting statement.

So this is the right time for the nationalized banks to improve their service & image. Use all the incoming money to ensure that your operations are made better; hiring is better; services are good; you are more responsive to customer. Ensure that your customer will stay with you because he/she loves your service. Not because they are stuck with you. If SBI & other nationalized banks choose to sleep now and act as if they are kings of Indian banking system, it is a matter of time before mergers happen within them or they get divested and eventually bought out or closed. I know that the socialist circles of India will never let any of this happens, no matter how bad these banks perform, but there is something called as competitive sustainability and without efficiency improvements and innovations, no institution can survive- not even the government itself.

(As a side note, I walked into the newly opened SBI Kondapur @ Hyderabad the other day. It was 11:00 AM. An young chap in his mid twenties sat in one of the teller windows, reading a local newspaper, not bothering to answer the queries customers were asking him. I wonder whether they do a culture fit and actually try and hire the laziest irriating bums to work in these places!)

The IMF's usual dance

The IMF has done it yet again. Pakistan, not being able to gain support from former friends like US, China and not even from their brethren Saudi Arabia, has finally & reluctantly approached the IMF and got a $7+b bailout.

And the IMF as usual has attached its strings to the bailout and imposed all standard conditions to bring inflation down, even at the cost of development faltering. This is not the first or last time IMF has undermined the democracy of the nation it tries to support.

And yet, after all the recession, sub prime, economic meltdown, G-20, developed economies faltering and all that, there is ONE institution which will never mend its ways - the IMF. Isnt it just about time they wake up?

Rescuing Big Three of Detroit

Off late, the MoTown three have been spending money in pursuit of more money. If we to follow the Op-Eds of NYT or other leading dailies, we can see everyone from Michigan senators to right wing Nobel prize winning economist talk about why Detroit need to be rescued. And why this has to be done in spite of the fact that there has been no innovation, careless spending, wrong investments and arrogant/extravagant attitudes of the auto companies. We have been threatened that closure of even one of the auto companies, will start a downward spiral, bring all three down, bring their suppliers down followed by dumping of all their existing unsold cars - causing a further $400b loss. So bankrutcy is not an anwer because it will ultimately lead to liquidaiton unlike in airline sector.

This is all true. And yes. I am dead against rescuing the Detroit guys. After all, their irresponsibility, lack of care for climate change, arrogance in spending - even after Honda & Toyota started dominating - is simply mind boggling. But let me keep my prejudice aside for a moment. After all, these car companies were just serving American dream. It is not that they didnt innovate, but there werent that smart. And I believe that the bailout package given to them is not to just continue with their status quo, but to reorganize and re-energize their operations. If the Fed is willing to rescue Bankers with hundreds of billions of dollars, a $25b bailout for GM/Ford/Chrysler is not that bad at all, if it could save employment.

The bailout could come with very strict terms and in phases. Chrysler need to be sold to GM. And GM has to stop producing all the various models which the company itself is probably not aware of. Ford needs to given an ultimatum to return to profitability within a year or massive restructuring and downsizing by 50%.

Yes, socializing losses is harmful. But the car companies are more of victims right now as their death has been hastened, though it was imminent. It is not the time to treat them different from the bad Bankers, who have brought about this meltdown with unnecessary innovation.

Will the IIMs please stand up

If one were to look abroad, most of the macroeconomic think tank is populated by Professors from various Universities. This is more true in the case of US. Harvard, Columbia (where Prof. Sachs sits), Princeton (home of Prof. Krugman), Michigan (Prof. Prahalad), Chicago (Prof. Rajan) and several top notch Universities house these think tanks, draw from the wealth of their experience and are ready to provide advise to various institutions including Fed and Treasury and even to the Office of the President on economic affairs. While the MBAs from these schools do make millions and at some point contribute to the meltdown directly or otherwise, the teachers do stand up to provide advise and support or at least make their voices heard.

In India, we have the IIMs - quasi-government controlled age old institutions. The IIMs, particularly A, B & C are guilty of identifying some of the smartest brains in India, arm them with business skills and help fast track their careers by providing opportunities via placement cells and excellent pay packets running to crores of rupees. All this for a paltry fee. Obviously the immediate RoI for someone who walks into IIMs is a gazillion times more than doing a similar course in US Universities. And yeah, these smart IIM grads have grown to greater heights and as said before contributed one way or other to meltdown.

But contrary to US, where are the IIM professors advising the nation at the time of the need? These are guys who educate the smart brains of the country. Where are their opinions? Why is it that they make a rare apperance in Economic Times or any other leading public daily advising or giving opinions to Indian government and Indian citizens. Is the government controlling their views too? Are they not being allowed to express opinions through blogs & columns? Does the IIM institution prevent its staff from talking about real world problems? IIMs continue to make news only regarding CAT, placements/internships, director appointments or OBC quotas.

While I do understand that this comparison comes with its own bunch of flaws, the core question of why are the IIM Professors absent in a Indian think tank still remains. Come on IIMs, you have a duty to this nation. We have serious problems and we need smarter and serious people to solve them.

Savings wont save us!

Given today's grim scenario, one thing that definitely wont save us is savings!. When economy is on a downward spiral, companies stop producing, stop making profits, start firing people.. Now people stop spending, that leads to lower demand and companies stop producing ... this is the vicious circle. We have been through this in an earlier post.

Now what governments need to do, as advocated by the reinstated master Keynes is to put money in people's pockets. This is to ensure that people spend more. No matter how the government does it - by slashing interest rates, by creating new projects (read jobs), by cutting sales taxes - success will come only when that money is being spent by public. Spending will create demand that will boost supply, increase profits, create jobs and go on..

So if we start tightening our purse strings to spend on a rainy day, well.. this IS the rainy day. As governments start doing their job to support the falling economy, public has to do its part by spending enough. This is not a time to listen to old middle-class tales of how savings will save us eventually - it is in fact the right opposite. It is time to break piggy banks and buy that stuff you have always wanted. Buy a house, dress, stocks, chocolates, gift items, jewelery. Tour the nation. Stay/Eat in hotels. USE THE MONEY. Our recovery is dependent on our spending no matter what the government does or intends to do.

Maybe the FM should tax people who save more and boost spending. Lets spend and save the economy!

Bullish Market!

And so why should I talk about Bullish market when we pass Life in the time of Bears.

I am referring to the Indian IT Service companies. Almost all of them - TCS, Wipro, Infosys, Satyam, CTS, HCL and even smaller players like MindTree, Patni are all sitting on excess reserves of cash. A quick glance would tell you that the range is between $250m - $2b!! This is the time to strategize, target and buy over troubled companies in Europe or US so that the toplines can be impacted positively as the meltdown melts down.

Almost all companies are now gung-ho for M&As. However the aggressive purchases could well determine who will be in the forefront for next 5 to 7 years. This is an opportunity in a platter.

I have been against the Indian IT Service companies sitting on cash pile, neither utilizing it on investments nor returning it to shareholders. But now these companies are offered with a golden opportunity to make hay with this cash pile. And those companies which keep sitting on the pile without realising value for it, might as well be clear that they would be left behind.

Buy, buy, buy!! It is bullish market to buy IT Service companies in EU/US!

Predictions and Investment Analysts

Economists are much better. They don't claim to predict future. They study different scenarios, conjure interesting theories and see if they can help the world grow.

Investment analysts on the other hand - no one knows what they do. They have complicated formulas, jazzy excel spreadsheets, floating tickers and they issue some advise. Most often arbitrarily is my guess.

Look at this Merrill Lynch statement. We all know that the markets are down and future is uncertain. So what is so great about ML making a comment about a gloomy future?

Why is that these overpaid highly greedy super egoistic investment analysts not able to predict the bubble bursting? Or the fact that their loans and their own instruments will go under?

Why is that Merill, which is predicting grave market scenario for next 12 months, not able to predict that it itself was en route to its grave?

Stop it Merill. You got Lynched.