Loot and plunder is the order of the day – but where is your outrage? asks Sucheta Dalal, the original scam-buster
Sucheta Dalal
Loot and plunder is the order of the day – but where is your outrage? asks Sucheta Dalal, the original scam-buster
Sucheta Dalal, renowned columnist, financial journalist and one who broke the story of the Harshad Mehta, C.R. Bhansali and other scams two decades ago, urged members at the last meeting to wake up, to speak out and to rage over the current situation in the country where probity had lost all meaning and where a scam a day seemed par for the course.
The financial regulators were either sleeping at their job or winking at wrongdoings under their noses; fly-by-night operators were duping gullible people of hundreds of crores of rupees; ponzi schemes had acquired a kind of halo and their promoters were playing with the life savings of lakhs of people.
Insurance schemes were rampantly mis-sold; mutual funds were unleashed on unsuspecting clients by hiding them under the guise of dubious “double your wealth” schemes; non-public sector banks were having a field day as their representatives went about cheating anyone who had saved something for a rainy day; the greed for commissions seemed to have overpowered all morals and morality.
In the midst of all this, the media appeared to be complicit because it allowed its hallowed space to be filled with dubious claims and did not bother about checking the antecedents of those whom it promoted – so long as the money kept flowing in.
It could be said that crime had been institutionalised. The Penal Code (IPC) was applicable to individuals who committed fraud, perjury or forgery, but all crimes were overlooked when an institution indulged in such nefarious practices.
Ms Dalal embellished her talk with several examples to back the allegations that she made in the course of her presentation. Even Amitabh Bachchan and Sachin Tendulkar were not spared for allowing themselves to become masks and to mouth the non-existent benefits of schemes that only deprived gullible people of their savings.
The guest speaker was introduced by Anil Harish who pointed out that she had been decorated with many awards, including Femina’s Women of Substance award, the Chameli Devi Award and the Padma Shri in 2006.
She served on the Narayana Murthy Committee on Corporate Governance, was a member of SEBI’s primary market advisory committee and of the investors’ education and protection fund of the Ministry of Corporate Affairs.
A trustee of the Consumer Education and Research Centre of Ahmedabad, she was a member of the Bank of Baroda Customer Service Committee and the Consumers Complaint Council of the Advertising Standards Council of India. She was on the committee for follow-up on investor-related issues of the Corporate Affairs Ministry.
Ms Dalal and her husband, Mr. Debashish Basu, had started a magazine called Moneylife and also the Moneylife Foundation, a trust that organised regular programmes for spreading information on subjects related to money and to other aspects of life.
Ms Dalal recalled that she last addressed the Club in 1993. In those tumultuous days, she had addressed about 55 Rotary Clubs in the city before fatigue had set in. However, she continued to appreciate the good work that Rotary Clubs did and was full of praise for them, such as in the area of eye camps and medical camps, rainwater harvesting and so on.
However, Rotarians showed little interest in her area of work, viz., the financial sector. This was a subject in which it was imperative for all citizens to get involved.
“I don’t think three people meet these days without discussing a new scam; you can’t switch on your television without hearing of a new scam. And when people are disheartened, they only say, ‘That’s the way it is, you can’t do a thing!’
“This is something I find hard to accept; therefore I thought I should explain my point of view and why, after 27 years in journalism, instead of being jaded or turning corrupt, I’m still plugging at it. This is because I think we can make a difference, at least a little bit… we can’t expect miracles in a big country like India; here, a 5% difference is a huge difference and it’s worth it.
“In 1992, the Harshad Mehta scam was worth Rs. 5,000 crores. You can extrapolate it to today’s numbers, but it’s not that big. I ask you, doesn’t it worry you?”
Today, said Ms Dalal, no scam was worth less than Rs. 50,000 crores or Rs. 1 lakh crores. The numbers were mind-boggling. Didn’t it bother people? It was the national wealth that was being ripped off, whether in the field of coal, gas or natural resources… Was this the kind of country that was going to be left for future generations?
“Doesn’t it worry you? It’s a record… In the UPA-II, there are so many Ministers who have had to resign. Does it bother you? Do you think there is nothing you can do about it? I don’t think so. There’s a lot you can do.”
For the last 20 years of economic liberalisation, people had done extremely well. But there was an amazing sense of apathy among most of them. They had money in their pockets and when they got dejected, they took off for Switzerland or elsewhere for a holiday; or they immersed themselves in one of three screens – an iphone, an ipad or a television.
“You’re entertaining yourself,you want to switch off and say, it doesn’t concern me. But it does! When these numbers start getting worse, it’s going to affect your wallet, too. So you have to wake up today. What are you doing about it?”
There were too many people doing nothing about the current situation and saying that there was nothing they could do. She met thousands of these people on social media, on twitter and at Moneylife seminars.
They said there was no use saying or doing anything. In fact, many people came up to her and asked why she was “still at it”. Most of those who said this were her journalist colleagues! And when they said, “Oh God, Sucheta! You’re still plugging away at it!” she countered by saying that yes, she was still plugging away at it, because the country was worth it.
Ms Dalal said she would focus on the media and the financial sector; there was a complete intersection of the two. Over the last three years, the CAG’s reports had unveiled the kind of loot that was going on for the many years of liberalisation. It had all come out in the open in the last four or five years, but the fact was that it was a systematic process that had been going on.
And yet the people had not heardabout it. The media had played a huge role in this, because it hadhidden facts from the public and the reason why it did so was that the media was on sale.
“We talk about ‘paid news’ and we snigger about it, but it’s not about paying and doing a deal for your IPO through private equity – it is about every single thing that affects your life. I’m not talking about the financial sector alone, please start reading the newspapers very carefully: you will find articles which day after day tell you that botox is a remedy for everything on earth, including cerebral palsy. You know it’s not true and you wonder, but you don’t do anything about it. You just sneer and put the paper away.
“You read and you are told that stomach stapling is the answer to everything, so whether you are a teenager who is still growing, or a pregnant woman, you can staple your stomach and you’re fine. And we don’t get outraged about it.
“We see a front page story about some kind of human farm (for surrogate motherhood), where someone’s got a flat with nine women who are all pregnant with somebody else’s child – and it doesn’t scandalise us. The news is on the front page because it is portrayed as though it’s a wonderful thing that’s happening, because you are helping people have children – and we don’t even wonder about the legalities.”
Ms Dalal said she was not talking only about the financial sector. Similar things were happening in almost every other sector. Things were happening and being reported that would normally outrage any person. People were being seriously misled on various issues. A certain kind of data were being fed and slowly the real data were switched off.
From 1992 to 2013, the Sensex had gone up, except for the dip in 2008 at the time of the global financial crisis. The Sensex remained up and the media kept reporting that half of the money was coming through FIIs or foreign institutional investors. But few people focused on the fact that most of this money was “round-trip Indian money” worth billions of dollars. And yet no one seemed seriously concerned.
Trading volumes at the stock exchanges had also gone up since 1992 which was a benchmark year because that was when SEBI was set up and, after the Harshad Mehta scam, many regulatory systems were put in place, along with automated trading systems and so on.
People continued to believe that foreign money was still pouring into India. Many called it a deluge. Any time one switched on a television set, there were anchors celebrating a new Sensex peak. One of the consequences of this should have been a huge surge in the country’s investor population.
But the fact was that India’s investor population had declined from 20 million in 1990 to 8 million now – these figures were as per government studies (the latter figure, of 8 million, came from the D. Swaroop Report).
“Why isn’t this the subject of a Joint Parliamentary Committee? Why is it that nobody is outraged about this? Why is this not making headlines in the newspapers? Go back to what I said about the ‘paid media’ – there is so much of money riding on pretending that everything is fantastic, that it is good and that there is no problem.
“You’re getting so much of advertisements based on that, that other than Moneylife which is flashing these numbers, nobody else talks about it. We have taken these numbers to heads of banks and we run them through the slides. They ask, where did you get these numbers from? I say that these are not my numbers, these are NCAER reports, the first two by SEBI and the third is the D. Swaroop Committee report on pensions.
“The next thing people say is, oh, maybe they’re all coming through mutual funds. But here is the state of the mutual fund industry – it’s in dire straits because of a lot of wrong policies and hare-brained regulatory decisions over the last four years. But was anyone concerned? No, people either lost money or took their money out.”
The next question, said Ms Dalal, was where were people putting their money if not in the market? A lot of the money that had gone out of the capital market had gone into bank deposits which had gone up from 39% to 42%, making it a sort of “flight to safety”.
In the five years before 2008, anyone who had his money in bank fixed deposits was laughed at and called financially illiterate because the income from FDs after accounting for the price rise did not beat the inflation figure. The bull-run of five years till 2008 was extremely ferocious.
But what happened after the bull-run? People lost large portions of their capital in 2008. Immediately after the crash, they returned to FDs, in the belief that even if they did not earn too much income, at least the principal amount was safe.
Why was all this happening? It was because the entire system was geared towards selling; everybody was selling something, everybody was out to put their hand in people’s wallet and people were not even aware of it.
In other words, business and industry were looking at sales and commissions, politicians were looking at their cut, media was focused on revenue; whether it was for editorial or advertising, every single column centimetre was for sale, anyone who paid could control what appeared in the media. Those who paid could decide television panels, they could decide the subjects to be discussed.
There was a time when people were not aware of all this. But the Nira Radiia tapes had brought the naked truth out into the open. Many in the mainstream media had not reported it, but today everybody had an idea about how the system worked. Thanks to the enormous money and power that they wielded, the two big industrial houses could control virtually everything. They even controlled who could keep a job in the mainline press and who couldn’t. Even anchors of TV channels lost their jobs – for a reason. It was necessary to think about this, too.
Even topics, the questions that were posed, the guests that were invited, were decided by a bunch of PR agencies with a fat advertising budget. This business of paying for news started harmlessly enough, with films and sports, when it was said that it didn’t really matter. But today, even news pertaining to health which could be downright harmful was dressed up to look as though it was the panacea for all ills.
This was true of not just the financial sector, but the financial sector had played an important role in this.
Ms Dalal said her foundation had done a lot of work and tried to analyse why all this happened and why people lost so much money. The reason was that they trusted other people. In the run-up to 2008, most people said, “You don’t understand the market, give me your money and I will make you rich”. And people parted with not lakhs but crores of rupees – and they lost huge amounts of money.
She recalled that two Chartered Accountants, both women, walked into her office. They were not financially illiterate women and yet, they said, a group of ten of them had lost Rs. 10 crores in 2007-08 because they had handed over their money to a sub-broker; the day the market collapsed, the systems were closed and their speculative positions were forcibly closed.
They wanted Ms Dalal to do something, but she had to tell them that there was absolutely nothing she could do because they had willingly given their money to that sub-broker. He himself was now out of the business, therefore, it was not as though he had become rich or run away with their money. It was a risk that they had taken and they had lost. But then there were some people who could be educated and some who could not.
For example, there was a news report about a doctor who actually believed someone who told him that the use of a chemical would help double his currency notes. He took Rs. 25 lakhs to Lonavala and lost it all to a confidence trickster. Such people were beyond redemption, but there was some hope for the rest.
When she asked the two women CAs to speak the truth, they admitted that it was greed that had driven them. Therefore, she was not particularly concerned about them. She was more concerned about the others, those who trusted or who were made to trust.
Global research conducted since 2008 had shown that there were two systems in India. One of these was caveat-emptor, which meant, “buyer beware! it’s your problem, if you’re going to invest money somewhere, you need to worry”.
The second system, the one common
in India, was the disclosure-based system. A person could launch an IPO as long as his prospectus mentioned somewhere that he had murdered two people and that he had 85 court cases against him; it was perfectly fine for such a person to go into the market to raise money, because he had made a disclosure! It was up to the investor to understand this and read the fine print.
Ms Dalal said Moneylife was lobbying
against this system. Many people were outraged over her stand, yet she and her foundation believed that India did not need the American disclosure-based system.
Recent research had shown that the human brain was not wired to understand
numbers. Her husband, Mr. Debashish Basu, had brought out studies
which showed that the eyes of 80% of people glazed over when they looked at numbers more complicated than 2+2. They just switched off. This was a fact and there was nothing to be embarrassed about it.
An artist, painter, singer, doctor, anyone… was supposed to understand the mechanics of complex financial instruments
simply by reading through the fine print of a 30-page document that some lawyers had created under the disclosure-based system. Almost every person simply signed on the documents placed before him and yet that person was responsible for the “mistakes” that occurred. This was unacceptable.
This was not the way things should be allowed to proceed. It was to prevent
such misdeeds that there were regulators and regulatory systems. It was their job to look at what was being waved in the faces of clients by the financial sector.
Another point to be noted was that the human mind was not configured to understand risk. Most people employed
their experience of buying consumer
durables in the financial world, too. If someone was buying a Tata Nano at a cost of Rs. 1 lakh, that person knew what he was going to get. When buying a Lamborghini, there was an even clearer notion of what one was going to get and one got it. But if one didn’t, then one would create a stink.
“However, in the financial sector it doesn’t matter whether you are with the Rupee Co-operative Bank, Citibank, HSBC or Barclay – each one of them is just as likely to cheat you in exactly the same way and they’ve got it all sanctified with a regulatory system which says that they are under the disclosure-based regime. So if you didn’t read those 45 pages of legalese and yet signed on it, it’s your problem. You’ve signed on it, haven’t you?”
It was a tragic situation. Every day, dozens of senior citizens, housewives, experts, people who were otherwise
extremely good at the work that they did but didn’t understandfinance, approached Moneylife to complain that they had been dupedof their money. The figure ranged from Rs. 30 lakhs to Rs. 50 lakhs and even more. And it was not justone or two people – “I am talking about hundreds of them.”
Ms Dalal said when someone robbed a bank, he went to jail; if someone committed perjury, it was treated as a non-bailable offence, so was forgery if committed by an individual. But the moment it was done by a bank or a bank’s relationship manager, nothing applied. “Have you thought about it?”
At the weekly seminars that Money-life organised, she always asked the people whether they had thought about it, but they had not realised the fact that banks and organisations got away with the worst kind of loot and yet it was not even considered an offence under the IPC. She then gave some recent examples to establish her point.
Singer Suchitra Krishnamurthy got a sum of Rs. 4 crores in her bank account after her divorce. She did not publicise this. But she could not hide it from the bank in which she had an account.
Her bankers noticed the big chunk of money in her account, called her up and offered to help her invest it. Two men in suits and ties landed at her house. She was impressed because she didn’t even have to go to the bank.
First, those men made her take a loan that she didn’t need; they also sold her an insurance product, saying that she would get a 35% return. They then told her to take a loan so that she could use the money she would get on the ULIP to pay back her EMIs.
The woman didn’t need a loan, she already had Rs. 4 crores in her bank with which she could have bought a flat, but the bankers persuaded her to do the transaction they suggested. Then they put her money in mutual funds – and churned the funds. Anybody who knew the basics of mutual funds would know about entry loads and exit loads for getting in and getting out.
“When a fund is being churned, you can imagine the amount of funds that they are ripping off. They ripped off Rs. 40 lakhs just by churning the mutual fund! And what did the bank do? Nothing. The CEO is strutting around – and yet we don’t get offended! She knew this woman personally but she hasn’t replied to a single e-mail. Suchitra came to us and we are trying to help her. We think we may get a part of the money back but not all of it.
“But we don’t get offended, we don’t say that that person is a thief because the normal rules, about who’s a thief and who’s not a thief, don’t apply the minute you institutionalise
it.”
Ms Dalal then came up with the example of the 79-year-old Mangelal Sharma. The managers of Indusind Bank went to his house and asked him to invest in a new fixed deposit that the bank had launched. They said it was the DWS (development of your wealth) scheme which was started by their bank.
The man was thrilled. This, in fact, was the ruse of all relationship managers, people were thrilled to see bankers visiting their home, getting them to sign the forms and cheques at their dining table and they didn’t even have to go to the bank.
All that they wanted of him was to write DWS on the cheque, sign it and sign the forms. They said they would fill the rest of the details in the form. When he got the receipt at the end of a month, he realised that they had sold him a mutual fund with a five-year lock-in period. The man said he had an ailing wife who needed a knee surgery, why would he, at the age of 79, lock his money in for five years?
Clearly, he had been mis-sold. He went through the system and complained to the bank, but nothing happened. He complained to the RBI Ombudsman, again nothing happened.
Then the old man decided to embarrass the bank. He printed a T-shirt reading “Indusind Bank is a cheat! They have cheated me, they could cheat you also”. He went to the bank every morning wearing that T-shirt and sang and danced there. He did this for two days when someone told Moneylife about it. She took up the story and it spread all over the internet because she tweeted it and put it on Facebook.
An attempt was made by the bank to browbeat them; it sent its PR team. But Moneylife also engaged the RBI and turned the heat on the bank. The next evening, at 11.30 pm, some men from the bank went to Mr. Sharma’s house and returned his cheque of Rs. 7 lakhs.
There were tens of thousands of people like Mr. Sharma. And all this was on account of rampant mis-selling,
and worse, said Ms Dalal.
Another man, a ticket-checker from Sholapur, although literate by Indian standards, knew nothing about financial
dealings. But he could understand what the ads were telling him, that if he took insurance he would be able to secure his family. As far as insurance was concerned, the only product or company that he knew about was LIC. So he came to Bombay and walked into a bank to buy “LIC” (insurance).
The bank found out about his provident fund balance and then managed to con him into buying policies for everybody,for all his children and his two wives. He ended up with six or seven policies – policies that gave the highest commission to the bank. The bankers even forged signatures and created PAN cards in the names of his two illiterate wives.
“This is what I mean, that the rules, the IPC, apply to you and me but not if you are doing it in an institutional set-up. We took up this case, we wrote to the company, but they only gave a standard one-line answer. Then we badgered the insurance regulator and said that we were going to help this man file a PIL.
“After enormous efforts, over two months, they returned his money. The man is happy, he has at least got his money back and he doesn’t want to get involved in anything else. We don’t know what they told him, they probably
said, we’re giving you the money, don’t take it up any further.
Sucheta Dalal, renowned columnist, financial journalist and one who broke the story of the Harshad Mehta, C.R. Bhansali and other scams two decades ago, urged members at the last meeting to wake up, to speak out and to rage over the current situation in the country where probity had lost all meaning and where a scam a day seemed par for the course.
The financial regulators were either sleeping at their job or winking at wrongdoings under their noses; fly-by-night operators were duping gullible people of hundreds of crores of rupees; ponzi schemes had acquired a kind of halo and their promoters were playing with the life savings of lakhs of people.
Insurance schemes were rampantly mis-sold; mutual funds were unleashed on unsuspecting clients by hiding them under the guise of dubious “double your wealth” schemes; non-public sector banks were having a field day as their representatives went about cheating anyone who had saved something for a rainy day; the greed for commissions seemed to have overpowered all morals and morality.
In the midst of all this, the media appeared to be complicit because it allowed its hallowed space to be filled with dubious claims and did not bother about checking the antecedents of those whom it promoted – so long as the money kept flowing in.
It could be said that crime had been institutionalised. The Penal Code (IPC) was applicable to individuals who committed fraud, perjury or forgery, but all crimes were overlooked when an institution indulged in such nefarious practices.
Ms Dalal embellished her talk with several examples to back the allegations that she made in the course of her presentation. Even Amitabh Bachchan and Sachin Tendulkar were not spared for allowing themselves to become masks and to mouth the non-existent benefits of schemes that only deprived gullible people of their savings.
The guest speaker was introduced by Anil Harish who pointed out that she had been decorated with many awards, including Femina’s Women of Substance award, the Chameli Devi Award and the Padma Shri in 2006.
She served on the Narayana Murthy Committee on Corporate Governance, was a member of SEBI’s primary market advisory committee and of the investors’ education and protection fund of the Ministry of Corporate Affairs.
A trustee of the Consumer Education and Research Centre of Ahmedabad, she was a member of the Bank of Baroda Customer Service Committee and the Consumers Complaint Council of the Advertising Standards Council of India. She was on the committee for follow-up on investor-related issues of the Corporate Affairs Ministry.
Ms Dalal and her husband, Mr. Debashish Basu, had started a magazine called Moneylife and also the Moneylife Foundation, a trust that organised regular programmes for spreading information on subjects related to money and to other aspects of life.
Ms Dalal recalled that she last addressed the Club in 1993. In those tumultuous days, she had addressed about 55 Rotary Clubs in the city before fatigue had set in. However, she continued to appreciate the good work that Rotary Clubs did and was full of praise for them, such as in the area of eye camps and medical camps, rainwater harvesting and so on.
However, Rotarians showed little interest in her area of work, viz., the financial sector. This was a subject in which it was imperative for all citizens to get involved.
“I don’t think three people meet these days without discussing a new scam; you can’t switch on your television without hearing of a new scam. And when people are disheartened, they only say, ‘That’s the way it is, you can’t do a thing!’
“This is something I find hard to accept; therefore I thought I should explain my point of view and why, after 27 years in journalism, instead of being jaded or turning corrupt, I’m still plugging at it. This is because I think we can make a difference, at least a little bit… we can’t expect miracles in a big country like India; here, a 5% difference is a huge difference and it’s worth it.
“In 1992, the Harshad Mehta scam was worth Rs. 5,000 crores. You can extrapolate it to today’s numbers, but it’s not that big. I ask you, doesn’t it worry you?”
Today, said Ms Dalal, no scam was worth less than Rs. 50,000 crores or Rs. 1 lakh crores. The numbers were mind-boggling. Didn’t it bother people? It was the national wealth that was being ripped off, whether in the field of coal, gas or natural resources… Was this the kind of country that was going to be left for future generations?
“Doesn’t it worry you? It’s a record… In the UPA-II, there are so many Ministers who have had to resign. Does it bother you? Do you think there is nothing you can do about it? I don’t think so. There’s a lot you can do.”
For the last 20 years of economic liberalisation, people had done extremely well. But there was an amazing sense of apathy among most of them. They had money in their pockets and when they got dejected, they took off for Switzerland or elsewhere for a holiday; or they immersed themselves in one of three screens – an iphone, an ipad or a television.
“You’re entertaining yourself,you want to switch off and say, it doesn’t concern me. But it does! When these numbers start getting worse, it’s going to affect your wallet, too. So you have to wake up today. What are you doing about it?”
There were too many people doing nothing about the current situation and saying that there was nothing they could do. She met thousands of these people on social media, on twitter and at Moneylife seminars.
They said there was no use saying or doing anything. In fact, many people came up to her and asked why she was “still at it”. Most of those who said this were her journalist colleagues! And when they said, “Oh God, Sucheta! You’re still plugging away at it!” she countered by saying that yes, she was still plugging away at it, because the country was worth it.
Ms Dalal said she would focus on the media and the financial sector; there was a complete intersection of the two. Over the last three years, the CAG’s reports had unveiled the kind of loot that was going on for the many years of liberalisation. It had all come out in the open in the last four or five years, but the fact was that it was a systematic process that had been going on.
And yet the people had not heardabout it. The media had played a huge role in this, because it hadhidden facts from the public and the reason why it did so was that the media was on sale.
“We talk about ‘paid news’ and we snigger about it, but it’s not about paying and doing a deal for your IPO through private equity – it is about every single thing that affects your life. I’m not talking about the financial sector alone, please start reading the newspapers very carefully: you will find articles which day after day tell you that botox is a remedy for everything on earth, including cerebral palsy. You know it’s not true and you wonder, but you don’t do anything about it. You just sneer and put the paper away.
“You read and you are told that stomach stapling is the answer to everything, so whether you are a teenager who is still growing, or a pregnant woman, you can staple your stomach and you’re fine. And we don’t get outraged about it.
“We see a front page story about some kind of human farm (for surrogate motherhood), where someone’s got a flat with nine women who are all pregnant with somebody else’s child – and it doesn’t scandalise us. The news is on the front page because it is portrayed as though it’s a wonderful thing that’s happening, because you are helping people have children – and we don’t even wonder about the legalities.”
Ms Dalal said she was not talking only about the financial sector. Similar things were happening in almost every other sector. Things were happening and being reported that would normally outrage any person. People were being seriously misled on various issues. A certain kind of data were being fed and slowly the real data were switched off.
From 1992 to 2013, the Sensex had gone up, except for the dip in 2008 at the time of the global financial crisis. The Sensex remained up and the media kept reporting that half of the money was coming through FIIs or foreign institutional investors. But few people focused on the fact that most of this money was “round-trip Indian money” worth billions of dollars. And yet no one seemed seriously concerned.
Trading volumes at the stock exchanges had also gone up since 1992 which was a benchmark year because that was when SEBI was set up and, after the Harshad Mehta scam, many regulatory systems were put in place, along with automated trading systems and so on.
People continued to believe that foreign money was still pouring into India. Many called it a deluge. Any time one switched on a television set, there were anchors celebrating a new Sensex peak. One of the consequences of this should have been a huge surge in the country’s investor population.
But the fact was that India’s investor population had declined from 20 million in 1990 to 8 million now – these figures were as per government studies (the latter figure, of 8 million, came from the D. Swaroop Report).
“Why isn’t this the subject of a Joint Parliamentary Committee? Why is it that nobody is outraged about this? Why is this not making headlines in the newspapers? Go back to what I said about the ‘paid media’ – there is so much of money riding on pretending that everything is fantastic, that it is good and that there is no problem.
“You’re getting so much of advertisements based on that, that other than Moneylife which is flashing these numbers, nobody else talks about it. We have taken these numbers to heads of banks and we run them through the slides. They ask, where did you get these numbers from? I say that these are not my numbers, these are NCAER reports, the first two by SEBI and the third is the D. Swaroop Committee report on pensions.
“The next thing people say is, oh, maybe they’re all coming through mutual funds. But here is the state of the mutual fund industry – it’s in dire straits because of a lot of wrong policies and hare-brained regulatory decisions over the last four years. But was anyone concerned? No, people either lost money or took their money out.”
The next question, said Ms Dalal, was where were people putting their money if not in the market? A lot of the money that had gone out of the capital market had gone into bank deposits which had gone up from 39% to 42%, making it a sort of “flight to safety”.
In the five years before 2008, anyone who had his money in bank fixed deposits was laughed at and called financially illiterate because the income from FDs after accounting for the price rise did not beat the inflation figure. The bull-run of five years till 2008 was extremely ferocious.
But what happened after the bull-run? People lost large portions of their capital in 2008. Immediately after the crash, they returned to FDs, in the belief that even if they did not earn too much income, at least the principal amount was safe.
Why was all this happening? It was because the entire system was geared towards selling; everybody was selling something, everybody was out to put their hand in people’s wallet and people were not even aware of it.
In other words, business and industry were looking at sales and commissions, politicians were looking at their cut, media was focused on revenue; whether it was for editorial or advertising, every single column centimetre was for sale, anyone who paid could control what appeared in the media. Those who paid could decide television panels, they could decide the subjects to be discussed.
There was a time when people were not aware of all this. But the Nira Radiia tapes had brought the naked truth out into the open. Many in the mainstream media had not reported it, but today everybody had an idea about how the system worked. Thanks to the enormous money and power that they wielded, the two big industrial houses could control virtually everything. They even controlled who could keep a job in the mainline press and who couldn’t. Even anchors of TV channels lost their jobs – for a reason. It was necessary to think about this, too.
Even topics, the questions that were posed, the guests that were invited, were decided by a bunch of PR agencies with a fat advertising budget. This business of paying for news started harmlessly enough, with films and sports, when it was said that it didn’t really matter. But today, even news pertaining to health which could be downright harmful was dressed up to look as though it was the panacea for all ills.
This was true of not just the financial sector, but the financial sector had played an important role in this.
Ms Dalal said her foundation had done a lot of work and tried to analyse why all this happened and why people lost so much money. The reason was that they trusted other people. In the run-up to 2008, most people said, “You don’t understand the market, give me your money and I will make you rich”. And people parted with not lakhs but crores of rupees – and they lost huge amounts of money.
She recalled that two Chartered Accountants, both women, walked into her office. They were not financially illiterate women and yet, they said, a group of ten of them had lost Rs. 10 crores in 2007-08 because they had handed over their money to a sub-broker; the day the market collapsed, the systems were closed and their speculative positions were forcibly closed.
They wanted Ms Dalal to do something, but she had to tell them that there was absolutely nothing she could do because they had willingly given their money to that sub-broker. He himself was now out of the business, therefore, it was not as though he had become rich or run away with their money. It was a risk that they had taken and they had lost. But then there were some people who could be educated and some who could not.
For example, there was a news report about a doctor who actually believed someone who told him that the use of a chemical would help double his currency notes. He took Rs. 25 lakhs to Lonavala and lost it all to a confidence trickster. Such people were beyond redemption, but there was some hope for the rest.
When she asked the two women CAs to speak the truth, they admitted that it was greed that had driven them. Therefore, she was not particularly concerned about them. She was more concerned about the others, those who trusted or who were made to trust.
Global research conducted since 2008 had shown that there were two systems in India. One of these was caveat-emptor, which meant, “buyer beware! it’s your problem, if you’re going to invest money somewhere, you need to worry”.
The second system, the one common
in India, was the disclosure-based system. A person could launch an IPO as long as his prospectus mentioned somewhere that he had murdered two people and that he had 85 court cases against him; it was perfectly fine for such a person to go into the market to raise money, because he had made a disclosure! It was up to the investor to understand this and read the fine print.
Ms Dalal said Moneylife was lobbying
against this system. Many people were outraged over her stand, yet she and her foundation believed that India did not need the American disclosure-based system.
Recent research had shown that the human brain was not wired to understand
numbers. Her husband, Mr. Debashish Basu, had brought out studies
which showed that the eyes of 80% of people glazed over when they looked at numbers more complicated than 2+2. They just switched off. This was a fact and there was nothing to be embarrassed about it.
An artist, painter, singer, doctor, anyone… was supposed to understand the mechanics of complex financial instruments
simply by reading through the fine print of a 30-page document that some lawyers had created under the disclosure-based system. Almost every person simply signed on the documents placed before him and yet that person was responsible for the “mistakes” that occurred. This was unacceptable.
This was not the way things should be allowed to proceed. It was to prevent
such misdeeds that there were regulators and regulatory systems. It was their job to look at what was being waved in the faces of clients by the financial sector.
Another point to be noted was that the human mind was not configured to understand risk. Most people employed
their experience of buying consumer
durables in the financial world, too. If someone was buying a Tata Nano at a cost of Rs. 1 lakh, that person knew what he was going to get. When buying a Lamborghini, there was an even clearer notion of what one was going to get and one got it. But if one didn’t, then one would create a stink.
“However, in the financial sector it doesn’t matter whether you are with the Rupee Co-operative Bank, Citibank, HSBC or Barclay – each one of them is just as likely to cheat you in exactly the same way and they’ve got it all sanctified with a regulatory system which says that they are under the disclosure-based regime. So if you didn’t read those 45 pages of legalese and yet signed on it, it’s your problem. You’ve signed on it, haven’t you?”
It was a tragic situation. Every day, dozens of senior citizens, housewives, experts, people who were otherwise
extremely good at the work that they did but didn’t understandfinance, approached Moneylife to complain that they had been dupedof their money. The figure ranged from Rs. 30 lakhs to Rs. 50 lakhs and even more. And it was not justone or two people – “I am talking about hundreds of them.”
Ms Dalal said when someone robbed a bank, he went to jail; if someone committed perjury, it was treated as a non-bailable offence, so was forgery if committed by an individual. But the moment it was done by a bank or a bank’s relationship manager, nothing applied. “Have you thought about it?”
At the weekly seminars that Money-life organised, she always asked the people whether they had thought about it, but they had not realised the fact that banks and organisations got away with the worst kind of loot and yet it was not even considered an offence under the IPC. She then gave some recent examples to establish her point.
Singer Suchitra Krishnamurthy got a sum of Rs. 4 crores in her bank account after her divorce. She did not publicise this. But she could not hide it from the bank in which she had an account.
Her bankers noticed the big chunk of money in her account, called her up and offered to help her invest it. Two men in suits and ties landed at her house. She was impressed because she didn’t even have to go to the bank.
First, those men made her take a loan that she didn’t need; they also sold her an insurance product, saying that she would get a 35% return. They then told her to take a loan so that she could use the money she would get on the ULIP to pay back her EMIs.
The woman didn’t need a loan, she already had Rs. 4 crores in her bank with which she could have bought a flat, but the bankers persuaded her to do the transaction they suggested. Then they put her money in mutual funds – and churned the funds. Anybody who knew the basics of mutual funds would know about entry loads and exit loads for getting in and getting out.
“When a fund is being churned, you can imagine the amount of funds that they are ripping off. They ripped off Rs. 40 lakhs just by churning the mutual fund! And what did the bank do? Nothing. The CEO is strutting around – and yet we don’t get offended! She knew this woman personally but she hasn’t replied to a single e-mail. Suchitra came to us and we are trying to help her. We think we may get a part of the money back but not all of it.
“But we don’t get offended, we don’t say that that person is a thief because the normal rules, about who’s a thief and who’s not a thief, don’t apply the minute you institutionalise
it.”
Ms Dalal then came up with the example of the 79-year-old Mangelal Sharma. The managers of Indusind Bank went to his house and asked him to invest in a new fixed deposit that the bank had launched. They said it was the DWS (development of your wealth) scheme which was started by their bank.
The man was thrilled. This, in fact, was the ruse of all relationship managers, people were thrilled to see bankers visiting their home, getting them to sign the forms and cheques at their dining table and they didn’t even have to go to the bank.
All that they wanted of him was to write DWS on the cheque, sign it and sign the forms. They said they would fill the rest of the details in the form. When he got the receipt at the end of a month, he realised that they had sold him a mutual fund with a five-year lock-in period. The man said he had an ailing wife who needed a knee surgery, why would he, at the age of 79, lock his money in for five years?
Clearly, he had been mis-sold. He went through the system and complained to the bank, but nothing happened. He complained to the RBI Ombudsman, again nothing happened.
Then the old man decided to embarrass the bank. He printed a T-shirt reading “Indusind Bank is a cheat! They have cheated me, they could cheat you also”. He went to the bank every morning wearing that T-shirt and sang and danced there. He did this for two days when someone told Moneylife about it. She took up the story and it spread all over the internet because she tweeted it and put it on Facebook.
An attempt was made by the bank to browbeat them; it sent its PR team. But Moneylife also engaged the RBI and turned the heat on the bank. The next evening, at 11.30 pm, some men from the bank went to Mr. Sharma’s house and returned his cheque of Rs. 7 lakhs.
There were tens of thousands of people like Mr. Sharma. And all this was on account of rampant mis-selling,
and worse, said Ms Dalal.
Another man, a ticket-checker from Sholapur, although literate by Indian standards, knew nothing about financial
dealings. But he could understand what the ads were telling him, that if he took insurance he would be able to secure his family. As far as insurance was concerned, the only product or company that he knew about was LIC. So he came to Bombay and walked into a bank to buy “LIC” (insurance).
The bank found out about his provident fund balance and then managed to con him into buying policies for everybody,for all his children and his two wives. He ended up with six or seven policies – policies that gave the highest commission to the bank. The bankers even forged signatures and created PAN cards in the names of his two illiterate wives.
“This is what I mean, that the rules, the IPC, apply to you and me but not if you are doing it in an institutional set-up. We took up this case, we wrote to the company, but they only gave a standard one-line answer. Then we badgered the insurance regulator and said that we were going to help this man file a PIL.
“After enormous efforts, over two months, they returned his money. The man is happy, he has at least got his money back and he doesn’t want to get involved in anything else. We don’t know what they told him, they probably
said, we’re giving you the money, don’t take it up any further.
Loot and plunder is the order of the day – but where is your outrage? asks Sucheta Dalal, the original scam-buster
Sucheta Dalal, renowned columnist, financial journalist and one who broke the story of the Harshad Mehta, C.R. Bhansali and other scams two decades ago, urged members at the last meeting to wake up, to speak out and to rage over the current situation in the country where probity had lost all meaning and where a scam a day seemed par for the course.
The financial regulators were either sleeping at their job or winking at wrongdoings under their noses; fly-by-night operators were duping gullible people of hundreds of crores of rupees; ponzi schemes had acquired a kind of halo and their promoters were playing with the life savings of lakhs of people.
Insurance schemes were rampantly mis-sold; mutual funds were unleashed on unsuspecting clients by hiding them under the guise of dubious “double your wealth” schemes; non-public sector banks were having a field day as their representatives went about cheating anyone who had saved something for a rainy day; the greed for commissions seemed to have overpowered all morals and morality.
In the midst of all this, the media appeared to be complicit because it allowed its hallowed space to be filled with dubious claims and did not bother about checking the antecedents of those whom it promoted – so long as the money kept flowing in.
It could be said that crime had been institutionalised. The Penal Code (IPC) was applicable to individuals who committed fraud, perjury or forgery, but all crimes were overlooked when an institution indulged in such nefarious practices.
Ms Dalal embellished her talk with several examples to back the allegations that she made in the course of her presentation. Even Amitabh Bachchan and Sachin Tendulkar were not spared for allowing themselves to become masks and to mouth the non-existent benefits of schemes that only deprived gullible people of their savings.
The guest speaker was introduced by Anil Harish who pointed out that she had been decorated with many awards, including Femina’s Women of Substance award, the Chameli Devi Award and the Padma Shri in 2006.
She served on the Narayana Murthy Committee on Corporate Governance, was a member of SEBI’s primary market advisory committee and of the investors’ education and protection fund of the Ministry of Corporate Affairs.
A trustee of the Consumer Education and Research Centre of Ahmedabad, she was a member of the Bank of Baroda Customer Service Committee and the Consumers Complaint Council of the Advertising Standards Council of India. She was on the committee for follow-up on investor-related issues of the Corporate Affairs Ministry.
Ms Dalal and her husband, Mr. Debashish Basu, had started a magazine called Moneylife and also the Moneylife Foundation, a trust that organised regular programmes for spreading information on subjects related to money and to other aspects of life.
Ms Dalal recalled that she last addressed the Club in 1993. In those tumultuous days, she had addressed about 55 Rotary Clubs in the city before fatigue had set in. However, she continued to appreciate the good work that Rotary Clubs did and was full of praise for them, such as in the area of eye camps and medical camps, rainwater harvesting and so on.
However, Rotarians showed little interest in her area of work, viz., the financial sector. This was a subject in which it was imperative for all citizens to get involved.
“I don’t think three people meet these days without discussing a new scam; you can’t switch on your television without hearing of a new scam. And when people are disheartened, they only say, ‘That’s the way it is, you can’t do a thing!’
“This is something I find hard to accept; therefore I thought I should explain my point of view and why, after 27 years in journalism, instead of being jaded or turning corrupt, I’m still plugging at it. This is because I think we can make a difference, at least a little bit… we can’t expect miracles in a big country like India; here, a 5% difference is a huge difference and it’s worth it.
“In 1992, the Harshad Mehta scam was worth Rs. 5,000 crores. You can extrapolate it to today’s numbers, but it’s not that big. I ask you, doesn’t it worry you?”
Today, said Ms Dalal, no scam was worth less than Rs. 50,000 crores or Rs. 1 lakh crores. The numbers were mind-boggling. Didn’t it bother people? It was the national wealth that was being ripped off, whether in the field of coal, gas or natural resources… Was this the kind of country that was going to be left for future generations?
“Doesn’t it worry you? It’s a record… In the UPA-II, there are so many Ministers who have had to resign. Does it bother you? Do you think there is nothing you can do about it? I don’t think so. There’s a lot you can do.”
For the last 20 years of economic liberalisation, people had done extremely well. But there was an amazing sense of apathy among most of them. They had money in their pockets and when they got dejected, they took off for Switzerland or elsewhere for a holiday; or they immersed themselves in one of three screens – an iphone, an ipad or a television.
“You’re entertaining yourself,you want to switch off and say, it doesn’t concern me. But it does! When these numbers start getting worse, it’s going to affect your wallet, too. So you have to wake up today. What are you doing about it?”
There were too many people doing nothing about the current situation and saying that there was nothing they could do. She met thousands of these people on social media, on twitter and at Moneylife seminars.
They said there was no use saying or doing anything. In fact, many people came up to her and asked why she was “still at it”. Most of those who said this were her journalist colleagues! And when they said, “Oh God, Sucheta! You’re still plugging away at it!” she countered by saying that yes, she was still plugging away at it, because the country was worth it.
Ms Dalal said she would focus on the media and the financial sector; there was a complete intersection of the two. Over the last three years, the CAG’s reports had unveiled the kind of loot that was going on for the many years of liberalisation. It had all come out in the open in the last four or five years, but the fact was that it was a systematic process that had been going on.
And yet the people had not heardabout it. The media had played a huge role in this, because it hadhidden facts from the public and the reason why it did so was that the media was on sale.
“We talk about ‘paid news’ and we snigger about it, but it’s not about paying and doing a deal for your IPO through private equity – it is about every single thing that affects your life. I’m not talking about the financial sector alone, please start reading the newspapers very carefully: you will find articles which day after day tell you that botox is a remedy for everything on earth, including cerebral palsy. You know it’s not true and you wonder, but you don’t do anything about it. You just sneer and put the paper away.
“You read and you are told that stomach stapling is the answer to everything, so whether you are a teenager who is still growing, or a pregnant woman, you can staple your stomach and you’re fine. And we don’t get outraged about it.
“We see a front page story about some kind of human farm (for surrogate motherhood), where someone’s got a flat with nine women who are all pregnant with somebody else’s child – and it doesn’t scandalise us. The news is on the front page because it is portrayed as though it’s a wonderful thing that’s happening, because you are helping people have children – and we don’t even wonder about the legalities.”
Ms Dalal said she was not talking only about the financial sector. Similar things were happening in almost every other sector. Things were happening and being reported that would normally outrage any person. People were being seriously misled on various issues. A certain kind of data were being fed and slowly the real data were switched off.
From 1992 to 2013, the Sensex had gone up, except for the dip in 2008 at the time of the global financial crisis. The Sensex remained up and the media kept reporting that half of the money was coming through FIIs or foreign institutional investors. But few people focused on the fact that most of this money was “round-trip Indian money” worth billions of dollars. And yet no one seemed seriously concerned.
Trading volumes at the stock exchanges had also gone up since 1992 which was a benchmark year because that was when SEBI was set up and, after the Harshad Mehta scam, many regulatory systems were put in place, along with automated trading systems and so on.
People continued to believe that foreign money was still pouring into India. Many called it a deluge. Any time one switched on a television set, there were anchors celebrating a new Sensex peak. One of the consequences of this should have been a huge surge in the country’s investor population.
But the fact was that India’s investor population had declined from 20 million in 1990 to 8 million now – these figures were as per government studies (the latter figure, of 8 million, came from the D. Swaroop Report).
“Why isn’t this the subject of a Joint Parliamentary Committee? Why is it that nobody is outraged about this? Why is this not making headlines in the newspapers? Go back to what I said about the ‘paid media’ – there is so much of money riding on pretending that everything is fantastic, that it is good and that there is no problem.
“You’re getting so much of advertisements based on that, that other than Moneylife which is flashing these numbers, nobody else talks about it. We have taken these numbers to heads of banks and we run them through the slides. They ask, where did you get these numbers from? I say that these are not my numbers, these are NCAER reports, the first two by SEBI and the third is the D. Swaroop Committee report on pensions.
“The next thing people say is, oh, maybe they’re all coming through mutual funds. But here is the state of the mutual fund industry – it’s in dire straits because of a lot of wrong policies and hare-brained regulatory decisions over the last four years. But was anyone concerned? No, people either lost money or took their money out.”
The next question, said Ms Dalal, was where were people putting their money if not in the market? A lot of the money that had gone out of the capital market had gone into bank deposits which had gone up from 39% to 42%, making it a sort of “flight to safety”.
In the five years before 2008, anyone who had his money in bank fixed deposits was laughed at and called financially illiterate because the income from FDs after accounting for the price rise did not beat the inflation figure. The bull-run of five years till 2008 was extremely ferocious.
But what happened after the bull-run? People lost large portions of their capital in 2008. Immediately after the crash, they returned to FDs, in the belief that even if they did not earn too much income, at least the principal amount was safe.
Why was all this happening? It was because the entire system was geared towards selling; everybody was selling something, everybody was out to put their hand in people’s wallet and people were not even aware of it.
In other words, business and industry were looking at sales and commissions, politicians were looking at their cut, media was focused on revenue; whether it was for editorial or advertising, every single column centimetre was for sale, anyone who paid could control what appeared in the media. Those who paid could decide television panels, they could decide the subjects to be discussed.
There was a time when people were not aware of all this. But the Nira Radiia tapes had brought the naked truth out into the open. Many in the mainstream media had not reported it, but today everybody had an idea about how the system worked. Thanks to the enormous money and power that they wielded, the two big industrial houses could control virtually everything. They even controlled who could keep a job in the mainline press and who couldn’t. Even anchors of TV channels lost their jobs – for a reason. It was necessary to think about this, too.
Even topics, the questions that were posed, the guests that were invited, were decided by a bunch of PR agencies with a fat advertising budget. This business of paying for news started harmlessly enough, with films and sports, when it was said that it didn’t really matter. But today, even news pertaining to health which could be downright harmful was dressed up to look as though it was the panacea for all ills.
This was true of not just the financial sector, but the financial sector had played an important role in this.
Ms Dalal said her foundation had done a lot of work and tried to analyse why all this happened and why people lost so much money. The reason was that they trusted other people. In the run-up to 2008, most people said, “You don’t understand the market, give me your money and I will make you rich”. And people parted with not lakhs but crores of rupees – and they lost huge amounts of money.
She recalled that two Chartered Accountants, both women, walked into her office. They were not financially illiterate women and yet, they said, a group of ten of them had lost Rs. 10 crores in 2007-08 because they had handed over their money to a sub-broker; the day the market collapsed, the systems were closed and their speculative positions were forcibly closed.
They wanted Ms Dalal to do something, but she had to tell them that there was absolutely nothing she could do because they had willingly given their money to that sub-broker. He himself was now out of the business, therefore, it was not as though he had become rich or run away with their money. It was a risk that they had taken and they had lost. But then there were some people who could be educated and some who could not.
For example, there was a news report about a doctor who actually believed someone who told him that the use of a chemical would help double his currency notes. He took Rs. 25 lakhs to Lonavala and lost it all to a confidence trickster. Such people were beyond redemption, but there was some hope for the rest.
When she asked the two women CAs to speak the truth, they admitted that it was greed that had driven them. Therefore, she was not particularly concerned about them. She was more concerned about the others, those who trusted or who were made to trust.
Global research conducted since 2008 had shown that there were two systems in India. One of these was caveat-emptor, which meant, “buyer beware! it’s your problem, if you’re going to invest money somewhere, you need to worry”.
The second system, the one common
in India, was the disclosure-based system. A person could launch an IPO as long as his prospectus mentioned somewhere that he had murdered two people and that he had 85 court cases against him; it was perfectly fine for such a person to go into the market to raise money, because he had made a disclosure! It was up to the investor to understand this and read the fine print.
Ms Dalal said Moneylife was lobbying
against this system. Many people were outraged over her stand, yet she and her foundation believed that India did not need the American disclosure-based system.
Recent research had shown that the human brain was not wired to understand
numbers. Her husband, Mr. Debashish Basu, had brought out studies
which showed that the eyes of 80% of people glazed over when they looked at numbers more complicated than 2+2. They just switched off. This was a fact and there was nothing to be embarrassed about it.
An artist, painter, singer, doctor, anyone… was supposed to understand the mechanics of complex financial instruments
simply by reading through the fine print of a 30-page document that some lawyers had created under the disclosure-based system. Almost every person simply signed on the documents placed before him and yet that person was responsible for the “mistakes” that occurred. This was unacceptable.
This was not the way things should be allowed to proceed. It was to prevent
such misdeeds that there were regulators and regulatory systems. It was their job to look at what was being waved in the faces of clients by the financial sector.
Another point to be noted was that the human mind was not configured to understand risk. Most people employed
their experience of buying consumer
durables in the financial world, too. If someone was buying a Tata Nano at a cost of Rs. 1 lakh, that person knew what he was going to get. When buying a Lamborghini, there was an even clearer notion of what one was going to get and one got it. But if one didn’t, then one would create a stink.
“However, in the financial sector it doesn’t matter whether you are with the Rupee Co-operative Bank, Citibank, HSBC or Barclay – each one of them is just as likely to cheat you in exactly the same way and they’ve got it all sanctified with a regulatory system which says that they are under the disclosure-based regime. So if you didn’t read those 45 pages of legalese and yet signed on it, it’s your problem. You’ve signed on it, haven’t you?”
It was a tragic situation. Every day, dozens of senior citizens, housewives, experts, people who were otherwise
extremely good at the work that they did but didn’t understandfinance, approached Moneylife to complain that they had been dupedof their money. The figure ranged from Rs. 30 lakhs to Rs. 50 lakhs and even more. And it was not justone or two people – “I am talking about hundreds of them.”
Ms Dalal said when someone robbed a bank, he went to jail; if someone committed perjury, it was treated as a non-bailable offence, so was forgery if committed by an individual. But the moment it was done by a bank or a bank’s relationship manager, nothing applied. “Have you thought about it?”
At the weekly seminars that Money-life organised, she always asked the people whether they had thought about it, but they had not realised the fact that banks and organisations got away with the worst kind of loot and yet it was not even considered an offence under the IPC. She then gave some recent examples to establish her point.
Singer Suchitra Krishnamurthy got a sum of Rs. 4 crores in her bank account after her divorce. She did not publicise this. But she could not hide it from the bank in which she had an account.
Her bankers noticed the big chunk of money in her account, called her up and offered to help her invest it. Two men in suits and ties landed at her house. She was impressed because she didn’t even have to go to the bank.
First, those men made her take a loan that she didn’t need; they also sold her an insurance product, saying that she would get a 35% return. They then told her to take a loan so that she could use the money she would get on the ULIP to pay back her EMIs.
The woman didn’t need a loan, she already had Rs. 4 crores in her bank with which she could have bought a flat, but the bankers persuaded her to do the transaction they suggested. Then they put her money in mutual funds – and churned the funds. Anybody who knew the basics of mutual funds would know about entry loads and exit loads for getting in and getting out.
“When a fund is being churned, you can imagine the amount of funds that they are ripping off. They ripped off Rs. 40 lakhs just by churning the mutual fund! And what did the bank do? Nothing. The CEO is strutting around – and yet we don’t get offended! She knew this woman personally but she hasn’t replied to a single e-mail. Suchitra came to us and we are trying to help her. We think we may get a part of the money back but not all of it.
“But we don’t get offended, we don’t say that that person is a thief because the normal rules, about who’s a thief and who’s not a thief, don’t apply the minute you institutionalise
it.”
Ms Dalal then came up with the example of the 79-year-old Mangelal Sharma. The managers of Indusind Bank went to his house and asked him to invest in a new fixed deposit that the bank had launched. They said it was the DWS (development of your wealth) scheme which was started by their bank.
The man was thrilled. This, in fact, was the ruse of all relationship managers, people were thrilled to see bankers visiting their home, getting them to sign the forms and cheques at their dining table and they didn’t even have to go to the bank.
All that they wanted of him was to write DWS on the cheque, sign it and sign the forms. They said they would fill the rest of the details in the form. When he got the receipt at the end of a month, he realised that they had sold him a mutual fund with a five-year lock-in period. The man said he had an ailing wife who needed a knee surgery, why would he, at the age of 79, lock his money in for five years?
Clearly, he had been mis-sold. He went through the system and complained to the bank, but nothing happened. He complained to the RBI Ombudsman, again nothing happened.
Then the old man decided to embarrass the bank. He printed a T-shirt reading “Indusind Bank is a cheat! They have cheated me, they could cheat you also”. He went to the bank every morning wearing that T-shirt and sang and danced there. He did this for two days when someone told Moneylife about it. She took up the story and it spread all over the internet because she tweeted it and put it on Facebook.
An attempt was made by the bank to browbeat them; it sent its PR team. But Moneylife also engaged the RBI and turned the heat on the bank. The next evening, at 11.30 pm, some men from the bank went to Mr. Sharma’s house and returned his cheque of Rs. 7 lakhs.
There were tens of thousands of people like Mr. Sharma. And all this was on account of rampant mis-selling,
and worse, said Ms Dalal.
Another man, a ticket-checker from Sholapur, although literate by Indian standards, knew nothing about financial
dealings. But he could understand what the ads were telling him, that if he took insurance he would be able to secure his family. As far as insurance was concerned, the only product or company that he knew about was LIC. So he came to Bombay and walked into a bank to buy “LIC” (insurance).
The bank found out about his provident fund balance and then managed to con him into buying policies for everybody,for all his children and his two wives. He ended up with six or seven policies – policies that gave the highest commission to the bank. The bankers even forged signatures and created PAN cards in the names of his two illiterate wives.
“This is what I mean, that the rules, the IPC, apply to you and me but not if you are doing it in an institutional set-up. We took up this case, we wrote to the company, but they only gave a standard one-line answer. Then we badgered the insurance regulator and said that we were going to help this man file a PIL.
“After enormous efforts, over two months, they returned his money. The man is happy, he has at least got his money back and he doesn’t want to get involved in anything else. We don’t know what they told him, they probably
said, we’re giving you the money, don’t take it up any further.
Sucheta Dalal, renowned columnist, financial journalist and one who broke the story of the Harshad Mehta, C.R. Bhansali and other scams two decades ago, urged members at the last meeting to wake up, to speak out and to rage over the current situation in the country where probity had lost all meaning and where a scam a day seemed par for the course.
The financial regulators were either sleeping at their job or winking at wrongdoings under their noses; fly-by-night operators were duping gullible people of hundreds of crores of rupees; ponzi schemes had acquired a kind of halo and their promoters were playing with the life savings of lakhs of people.
Insurance schemes were rampantly mis-sold; mutual funds were unleashed on unsuspecting clients by hiding them under the guise of dubious “double your wealth” schemes; non-public sector banks were having a field day as their representatives went about cheating anyone who had saved something for a rainy day; the greed for commissions seemed to have overpowered all morals and morality.
In the midst of all this, the media appeared to be complicit because it allowed its hallowed space to be filled with dubious claims and did not bother about checking the antecedents of those whom it promoted – so long as the money kept flowing in.
It could be said that crime had been institutionalised. The Penal Code (IPC) was applicable to individuals who committed fraud, perjury or forgery, but all crimes were overlooked when an institution indulged in such nefarious practices.
Ms Dalal embellished her talk with several examples to back the allegations that she made in the course of her presentation. Even Amitabh Bachchan and Sachin Tendulkar were not spared for allowing themselves to become masks and to mouth the non-existent benefits of schemes that only deprived gullible people of their savings.
The guest speaker was introduced by Anil Harish who pointed out that she had been decorated with many awards, including Femina’s Women of Substance award, the Chameli Devi Award and the Padma Shri in 2006.
She served on the Narayana Murthy Committee on Corporate Governance, was a member of SEBI’s primary market advisory committee and of the investors’ education and protection fund of the Ministry of Corporate Affairs.
A trustee of the Consumer Education and Research Centre of Ahmedabad, she was a member of the Bank of Baroda Customer Service Committee and the Consumers Complaint Council of the Advertising Standards Council of India. She was on the committee for follow-up on investor-related issues of the Corporate Affairs Ministry.
Ms Dalal and her husband, Mr. Debashish Basu, had started a magazine called Moneylife and also the Moneylife Foundation, a trust that organised regular programmes for spreading information on subjects related to money and to other aspects of life.
Ms Dalal recalled that she last addressed the Club in 1993. In those tumultuous days, she had addressed about 55 Rotary Clubs in the city before fatigue had set in. However, she continued to appreciate the good work that Rotary Clubs did and was full of praise for them, such as in the area of eye camps and medical camps, rainwater harvesting and so on.
However, Rotarians showed little interest in her area of work, viz., the financial sector. This was a subject in which it was imperative for all citizens to get involved.
“I don’t think three people meet these days without discussing a new scam; you can’t switch on your television without hearing of a new scam. And when people are disheartened, they only say, ‘That’s the way it is, you can’t do a thing!’
“This is something I find hard to accept; therefore I thought I should explain my point of view and why, after 27 years in journalism, instead of being jaded or turning corrupt, I’m still plugging at it. This is because I think we can make a difference, at least a little bit… we can’t expect miracles in a big country like India; here, a 5% difference is a huge difference and it’s worth it.
“In 1992, the Harshad Mehta scam was worth Rs. 5,000 crores. You can extrapolate it to today’s numbers, but it’s not that big. I ask you, doesn’t it worry you?”
Today, said Ms Dalal, no scam was worth less than Rs. 50,000 crores or Rs. 1 lakh crores. The numbers were mind-boggling. Didn’t it bother people? It was the national wealth that was being ripped off, whether in the field of coal, gas or natural resources… Was this the kind of country that was going to be left for future generations?
“Doesn’t it worry you? It’s a record… In the UPA-II, there are so many Ministers who have had to resign. Does it bother you? Do you think there is nothing you can do about it? I don’t think so. There’s a lot you can do.”
For the last 20 years of economic liberalisation, people had done extremely well. But there was an amazing sense of apathy among most of them. They had money in their pockets and when they got dejected, they took off for Switzerland or elsewhere for a holiday; or they immersed themselves in one of three screens – an iphone, an ipad or a television.
“You’re entertaining yourself,you want to switch off and say, it doesn’t concern me. But it does! When these numbers start getting worse, it’s going to affect your wallet, too. So you have to wake up today. What are you doing about it?”
There were too many people doing nothing about the current situation and saying that there was nothing they could do. She met thousands of these people on social media, on twitter and at Moneylife seminars.
They said there was no use saying or doing anything. In fact, many people came up to her and asked why she was “still at it”. Most of those who said this were her journalist colleagues! And when they said, “Oh God, Sucheta! You’re still plugging away at it!” she countered by saying that yes, she was still plugging away at it, because the country was worth it.
Ms Dalal said she would focus on the media and the financial sector; there was a complete intersection of the two. Over the last three years, the CAG’s reports had unveiled the kind of loot that was going on for the many years of liberalisation. It had all come out in the open in the last four or five years, but the fact was that it was a systematic process that had been going on.
And yet the people had not heardabout it. The media had played a huge role in this, because it hadhidden facts from the public and the reason why it did so was that the media was on sale.
“We talk about ‘paid news’ and we snigger about it, but it’s not about paying and doing a deal for your IPO through private equity – it is about every single thing that affects your life. I’m not talking about the financial sector alone, please start reading the newspapers very carefully: you will find articles which day after day tell you that botox is a remedy for everything on earth, including cerebral palsy. You know it’s not true and you wonder, but you don’t do anything about it. You just sneer and put the paper away.
“You read and you are told that stomach stapling is the answer to everything, so whether you are a teenager who is still growing, or a pregnant woman, you can staple your stomach and you’re fine. And we don’t get outraged about it.
“We see a front page story about some kind of human farm (for surrogate motherhood), where someone’s got a flat with nine women who are all pregnant with somebody else’s child – and it doesn’t scandalise us. The news is on the front page because it is portrayed as though it’s a wonderful thing that’s happening, because you are helping people have children – and we don’t even wonder about the legalities.”
Ms Dalal said she was not talking only about the financial sector. Similar things were happening in almost every other sector. Things were happening and being reported that would normally outrage any person. People were being seriously misled on various issues. A certain kind of data were being fed and slowly the real data were switched off.
From 1992 to 2013, the Sensex had gone up, except for the dip in 2008 at the time of the global financial crisis. The Sensex remained up and the media kept reporting that half of the money was coming through FIIs or foreign institutional investors. But few people focused on the fact that most of this money was “round-trip Indian money” worth billions of dollars. And yet no one seemed seriously concerned.
Trading volumes at the stock exchanges had also gone up since 1992 which was a benchmark year because that was when SEBI was set up and, after the Harshad Mehta scam, many regulatory systems were put in place, along with automated trading systems and so on.
People continued to believe that foreign money was still pouring into India. Many called it a deluge. Any time one switched on a television set, there were anchors celebrating a new Sensex peak. One of the consequences of this should have been a huge surge in the country’s investor population.
But the fact was that India’s investor population had declined from 20 million in 1990 to 8 million now – these figures were as per government studies (the latter figure, of 8 million, came from the D. Swaroop Report).
“Why isn’t this the subject of a Joint Parliamentary Committee? Why is it that nobody is outraged about this? Why is this not making headlines in the newspapers? Go back to what I said about the ‘paid media’ – there is so much of money riding on pretending that everything is fantastic, that it is good and that there is no problem.
“You’re getting so much of advertisements based on that, that other than Moneylife which is flashing these numbers, nobody else talks about it. We have taken these numbers to heads of banks and we run them through the slides. They ask, where did you get these numbers from? I say that these are not my numbers, these are NCAER reports, the first two by SEBI and the third is the D. Swaroop Committee report on pensions.
“The next thing people say is, oh, maybe they’re all coming through mutual funds. But here is the state of the mutual fund industry – it’s in dire straits because of a lot of wrong policies and hare-brained regulatory decisions over the last four years. But was anyone concerned? No, people either lost money or took their money out.”
The next question, said Ms Dalal, was where were people putting their money if not in the market? A lot of the money that had gone out of the capital market had gone into bank deposits which had gone up from 39% to 42%, making it a sort of “flight to safety”.
In the five years before 2008, anyone who had his money in bank fixed deposits was laughed at and called financially illiterate because the income from FDs after accounting for the price rise did not beat the inflation figure. The bull-run of five years till 2008 was extremely ferocious.
But what happened after the bull-run? People lost large portions of their capital in 2008. Immediately after the crash, they returned to FDs, in the belief that even if they did not earn too much income, at least the principal amount was safe.
Why was all this happening? It was because the entire system was geared towards selling; everybody was selling something, everybody was out to put their hand in people’s wallet and people were not even aware of it.
In other words, business and industry were looking at sales and commissions, politicians were looking at their cut, media was focused on revenue; whether it was for editorial or advertising, every single column centimetre was for sale, anyone who paid could control what appeared in the media. Those who paid could decide television panels, they could decide the subjects to be discussed.
There was a time when people were not aware of all this. But the Nira Radiia tapes had brought the naked truth out into the open. Many in the mainstream media had not reported it, but today everybody had an idea about how the system worked. Thanks to the enormous money and power that they wielded, the two big industrial houses could control virtually everything. They even controlled who could keep a job in the mainline press and who couldn’t. Even anchors of TV channels lost their jobs – for a reason. It was necessary to think about this, too.
Even topics, the questions that were posed, the guests that were invited, were decided by a bunch of PR agencies with a fat advertising budget. This business of paying for news started harmlessly enough, with films and sports, when it was said that it didn’t really matter. But today, even news pertaining to health which could be downright harmful was dressed up to look as though it was the panacea for all ills.
This was true of not just the financial sector, but the financial sector had played an important role in this.
Ms Dalal said her foundation had done a lot of work and tried to analyse why all this happened and why people lost so much money. The reason was that they trusted other people. In the run-up to 2008, most people said, “You don’t understand the market, give me your money and I will make you rich”. And people parted with not lakhs but crores of rupees – and they lost huge amounts of money.
She recalled that two Chartered Accountants, both women, walked into her office. They were not financially illiterate women and yet, they said, a group of ten of them had lost Rs. 10 crores in 2007-08 because they had handed over their money to a sub-broker; the day the market collapsed, the systems were closed and their speculative positions were forcibly closed.
They wanted Ms Dalal to do something, but she had to tell them that there was absolutely nothing she could do because they had willingly given their money to that sub-broker. He himself was now out of the business, therefore, it was not as though he had become rich or run away with their money. It was a risk that they had taken and they had lost. But then there were some people who could be educated and some who could not.
For example, there was a news report about a doctor who actually believed someone who told him that the use of a chemical would help double his currency notes. He took Rs. 25 lakhs to Lonavala and lost it all to a confidence trickster. Such people were beyond redemption, but there was some hope for the rest.
When she asked the two women CAs to speak the truth, they admitted that it was greed that had driven them. Therefore, she was not particularly concerned about them. She was more concerned about the others, those who trusted or who were made to trust.
Global research conducted since 2008 had shown that there were two systems in India. One of these was caveat-emptor, which meant, “buyer beware! it’s your problem, if you’re going to invest money somewhere, you need to worry”.
The second system, the one common
in India, was the disclosure-based system. A person could launch an IPO as long as his prospectus mentioned somewhere that he had murdered two people and that he had 85 court cases against him; it was perfectly fine for such a person to go into the market to raise money, because he had made a disclosure! It was up to the investor to understand this and read the fine print.
Ms Dalal said Moneylife was lobbying
against this system. Many people were outraged over her stand, yet she and her foundation believed that India did not need the American disclosure-based system.
Recent research had shown that the human brain was not wired to understand
numbers. Her husband, Mr. Debashish Basu, had brought out studies
which showed that the eyes of 80% of people glazed over when they looked at numbers more complicated than 2+2. They just switched off. This was a fact and there was nothing to be embarrassed about it.
An artist, painter, singer, doctor, anyone… was supposed to understand the mechanics of complex financial instruments
simply by reading through the fine print of a 30-page document that some lawyers had created under the disclosure-based system. Almost every person simply signed on the documents placed before him and yet that person was responsible for the “mistakes” that occurred. This was unacceptable.
This was not the way things should be allowed to proceed. It was to prevent
such misdeeds that there were regulators and regulatory systems. It was their job to look at what was being waved in the faces of clients by the financial sector.
Another point to be noted was that the human mind was not configured to understand risk. Most people employed
their experience of buying consumer
durables in the financial world, too. If someone was buying a Tata Nano at a cost of Rs. 1 lakh, that person knew what he was going to get. When buying a Lamborghini, there was an even clearer notion of what one was going to get and one got it. But if one didn’t, then one would create a stink.
“However, in the financial sector it doesn’t matter whether you are with the Rupee Co-operative Bank, Citibank, HSBC or Barclay – each one of them is just as likely to cheat you in exactly the same way and they’ve got it all sanctified with a regulatory system which says that they are under the disclosure-based regime. So if you didn’t read those 45 pages of legalese and yet signed on it, it’s your problem. You’ve signed on it, haven’t you?”
It was a tragic situation. Every day, dozens of senior citizens, housewives, experts, people who were otherwise
extremely good at the work that they did but didn’t understandfinance, approached Moneylife to complain that they had been dupedof their money. The figure ranged from Rs. 30 lakhs to Rs. 50 lakhs and even more. And it was not justone or two people – “I am talking about hundreds of them.”
Ms Dalal said when someone robbed a bank, he went to jail; if someone committed perjury, it was treated as a non-bailable offence, so was forgery if committed by an individual. But the moment it was done by a bank or a bank’s relationship manager, nothing applied. “Have you thought about it?”
At the weekly seminars that Money-life organised, she always asked the people whether they had thought about it, but they had not realised the fact that banks and organisations got away with the worst kind of loot and yet it was not even considered an offence under the IPC. She then gave some recent examples to establish her point.
Singer Suchitra Krishnamurthy got a sum of Rs. 4 crores in her bank account after her divorce. She did not publicise this. But she could not hide it from the bank in which she had an account.
Her bankers noticed the big chunk of money in her account, called her up and offered to help her invest it. Two men in suits and ties landed at her house. She was impressed because she didn’t even have to go to the bank.
First, those men made her take a loan that she didn’t need; they also sold her an insurance product, saying that she would get a 35% return. They then told her to take a loan so that she could use the money she would get on the ULIP to pay back her EMIs.
The woman didn’t need a loan, she already had Rs. 4 crores in her bank with which she could have bought a flat, but the bankers persuaded her to do the transaction they suggested. Then they put her money in mutual funds – and churned the funds. Anybody who knew the basics of mutual funds would know about entry loads and exit loads for getting in and getting out.
“When a fund is being churned, you can imagine the amount of funds that they are ripping off. They ripped off Rs. 40 lakhs just by churning the mutual fund! And what did the bank do? Nothing. The CEO is strutting around – and yet we don’t get offended! She knew this woman personally but she hasn’t replied to a single e-mail. Suchitra came to us and we are trying to help her. We think we may get a part of the money back but not all of it.
“But we don’t get offended, we don’t say that that person is a thief because the normal rules, about who’s a thief and who’s not a thief, don’t apply the minute you institutionalise
it.”
Ms Dalal then came up with the example of the 79-year-old Mangelal Sharma. The managers of Indusind Bank went to his house and asked him to invest in a new fixed deposit that the bank had launched. They said it was the DWS (development of your wealth) scheme which was started by their bank.
The man was thrilled. This, in fact, was the ruse of all relationship managers, people were thrilled to see bankers visiting their home, getting them to sign the forms and cheques at their dining table and they didn’t even have to go to the bank.
All that they wanted of him was to write DWS on the cheque, sign it and sign the forms. They said they would fill the rest of the details in the form. When he got the receipt at the end of a month, he realised that they had sold him a mutual fund with a five-year lock-in period. The man said he had an ailing wife who needed a knee surgery, why would he, at the age of 79, lock his money in for five years?
Clearly, he had been mis-sold. He went through the system and complained to the bank, but nothing happened. He complained to the RBI Ombudsman, again nothing happened.
Then the old man decided to embarrass the bank. He printed a T-shirt reading “Indusind Bank is a cheat! They have cheated me, they could cheat you also”. He went to the bank every morning wearing that T-shirt and sang and danced there. He did this for two days when someone told Moneylife about it. She took up the story and it spread all over the internet because she tweeted it and put it on Facebook.
An attempt was made by the bank to browbeat them; it sent its PR team. But Moneylife also engaged the RBI and turned the heat on the bank. The next evening, at 11.30 pm, some men from the bank went to Mr. Sharma’s house and returned his cheque of Rs. 7 lakhs.
There were tens of thousands of people like Mr. Sharma. And all this was on account of rampant mis-selling,
and worse, said Ms Dalal.
Another man, a ticket-checker from Sholapur, although literate by Indian standards, knew nothing about financial
dealings. But he could understand what the ads were telling him, that if he took insurance he would be able to secure his family. As far as insurance was concerned, the only product or company that he knew about was LIC. So he came to Bombay and walked into a bank to buy “LIC” (insurance).
The bank found out about his provident fund balance and then managed to con him into buying policies for everybody,for all his children and his two wives. He ended up with six or seven policies – policies that gave the highest commission to the bank. The bankers even forged signatures and created PAN cards in the names of his two illiterate wives.
“This is what I mean, that the rules, the IPC, apply to you and me but not if you are doing it in an institutional set-up. We took up this case, we wrote to the company, but they only gave a standard one-line answer. Then we badgered the insurance regulator and said that we were going to help this man file a PIL.
“After enormous efforts, over two months, they returned his money. The man is happy, he has at least got his money back and he doesn’t want to get involved in anything else. We don’t know what they told him, they probably
said, we’re giving you the money, don’t take it up any further.