My thoughts and experiences about the nuances and hazards of dealing with money

Of all the factors that has divided and fragmented society, money has risen to top that list. Now money is not the same as wealth. It is commonly said that someone is wealthy and prosperous. Wealthy denotes someone who possesses wealth but there is no similar word to someone who possesses money. It is never mentioned as rich and prosperous and there is a reason to it. Wealth adds value to our lives in many different forms and that is how we become prosperous. Money only helps us to buy things and every one of those things are perishable. This is why money does not add value to our lives which in turn never makes our lives prosperous.

Back in 2008 when it was supposedly my “peak age” for marriage, my parents wanted me to buy an apartment in Bangalore where I was working at that time. I was aghast. There was no point in buying an apartment under the assumption that my marriage was going to happen. Then there was the demon of the housing loan to reckon with. I am bemused by how people queue up to take housing loans to buy apartments and houses, especially in burgeoning cities like Bangalore and in exhausted cities like Mumbai. Now let’s say I take up a housing loan for 20 years. I am effectively committing myself to paying back the EMIs every month without a break for 20 years. And how can I be so sure that I am going to be alive and healthy for the next 20 years? The funny part is, people look to reducing the monthly EMI amount by extending loan repayment period. Banks are all the more happy because they know they will end up getting back more money. The sinister thought behind it is, the longer the repayment period, the less likely it is of a proper full repayment which means when borrowers default, banks can easily take over the properties. The ideal way of repayment is to pay almost double of monthly EMIs and close the loan as quickly as possible. The advantage here is, even if we default on payments for a few months, banks will not proceed with any sort of action. But the catch here is, if we try to close off a loan faster, we have to pay some extra money as penalty on foreclosure. This is the best indicator that banks are more interested in what the borrowers have given as security to the bank than the money they have lent.

In cities, parking space for cars are available only in apartment buildings. This means to own a car, we need an apartment that costs may be 5-10 times or even more that of the car. This is how money lures us in into it’s honey trap. The education system trains us to become employees in the corporate world. Then everything that is associated with money takes over our lives. Then social status comes into the picture and social status rises when we start “owning” things. This perception pushes our needs to ridiculously high levels. Own a house, own a car, the list goes on and we embark on our Sindbad journey in the pursuit of more and more money, with little realization that we are being turned into money churning machines. We are simply working hard and enslaving ourselves to the banks to hold on to the things we have bought with money. Add to this the fact that everything we have bought is perishable and may need to be replaced anytime means even more money required.

Money never makes us prosperous because it does not allow us to add value to our lives and without adding value to our own lives, we cannot add value to other’s lives. How Antilla, the mansion of India’s business tycoon Anil Ambani stands out in the extremely crowded and tough living conditions of Mumbai is the shining example. Prosperity reflects on us only when our surroundings are also prosperous. Money keeps us locked to the extent that we actually stop noticing the value of everything else in the world. I was deep in my search for employment in 2013 after completing my MBA when my dad went down with a cardiac arrest. Because he is physically very strong, the experience did not shake him even though he had reached the brink of death. But taking the advice of reducing salt intake too seriously, he literally stopped taking salt. After a few days I noticed strange changes in his mannerism and behavior. On a Sunday evening I insisted and dragged the doctor into the hospital for dad’s check up and that was when we found out that his sodium level was fast declining and he would have had possibly gone into a coma in the next couple of days.

Now what if I had been employed at that time? First of all I would have had been working in a city away from my parents. My mom would have had never noticed the changes I saw in dad. He would have had most likely ended up in coma and I would have had spent almost all the money I was earning on his treatment and my travel. It was a massive learning curve. My keen sense and better understanding of human anatomy made sure I did not have to spend money when I was not earning. If there is a way to earn money there will always be ways to spend the money as well. We can never hold on to money. In a place like India with ever rising inflation and decreasing value of money, the concept of “owning” a house, having a “decent” bank balance and living a “retired” life has taken the biggest hit. We have evolved into a situation similar to that of animals and birds in the wild. They have to seek out their food each and every day regardless of all difficult situations or they will die. If they stop trying they will die. We have also reached that critical state where we have to find ways to earn money till we die. Ironically, as per the Bible, when the “Gods” created us, we were created as beings that were meant to lord over the animals and not live like them.

Now here is what I have learnt through these experiences. First of all, we need to find our balance with nature again. No living being has the ability to destroy nature for it’s own needs except us. We cannot cut the same branch of the tree we are sitting on. The branch will take us on it’s way down. More money is alarmingly proportionate to more destruction of nature now. Bangalore’s geography is dotted with numerous lakes. Almost all the small lakes have been covered up for construction and many of the bigger lakes are being openly used to drain human waste. Then people keep complaining about lack of drinking water. Why? Bangalore has been taken over by the migrant community from all over India who come in search of jobs in the IT industry. Now these people are in Bangalore to make a living and have no time to understand and solve environmental issues of the city. The result is, as per reports, Bangalore is set to become the first unlivable city in India very soon. When we make nature unstable for our needs, nature will take course corrective action to bring back it’s stability and the consequences can be disastrous as we found out with the recent floods in Kerala. More people move into cities like Bangalore every year, creating more need for living spaces and water further depleting the city’s already stretched and dwindling natural resources. We have to stop our war with nature because we can never win it and will only lead to our own destruction.

It is funny how so much is spoken about finding work-life balance without any proper understanding of it. We wake up in the morning at a particular time so that we can finish n number of chores and activities and leave for work at a particular time so that we can reach our work place at a particular time. In the night, we sleep at a particular time so that we can wake up at a particular time next morning. So essentially when we become corporate employees, the corporate takes possession of our lives and time. Our entire 24 hours gets sucked up into our jobs and we get paid only for 8 hours. The balance we need to find is not in work and life but in our need for money. If we learn to find contentment in what we have and look at our needs sensibly, our need for money will decrease considerably. This, in turn, will free our time and energy and help us to focus on creating value in our lives. IT industry in India is notorious for the fact that as employees gain more experience their value decreases. Plenty of IT professionals have become stagnant in their jobs or have lost jobs and are not able to find employment again because they simply do not know anything else to do and did not consider learning and mastering new skills.

It no longer makes sense to “own” anything. This has given rise to business opportunities like renting cars, bikes and even household items. The amount we spend on renting a house or apartment will invariably match up to the amount we spend on maintaining our own. Back in 2008, a colleague in the Netherlands was refusing to own a car because of traffic and parking space issues. Our population has only increased in 10 years. From owning a house the challenge has shifted to living in a decent neighborhood with the availability of drinking water and proximity to essential outlets and services. But paramount now is to not get stuck in a single source of income. Develop skills that would open up potential opportunities for several streams of money. Chasing money should be just like how our body reduces fat when we start working out. Our body instinctively knows how much fat we need based on our daily requirements and burns only what it understands is excess fat. Similarly, if we have a fine understanding of how to simplify our life, we will automatically seek only the money we need to live that life.

I never chase money because money destroys human values and relationships and maroons us in our own little islands. Money clouds our judgement and makes us take wrong decisions. I make sure not to judge anyone in terms of money. It only takes an hour of madness in the stock market for a millionaire to become a pauper. Not having to focus on the money I was earning was what helped me focus on my dad and save him. I seek skill development, self improvement and building good relationships with people. Money, wealth, prosperity, everything will come but there is one question that always keeps bothering me. When all of it comes, will I be ready to use it in the best possible ways? This is what keeps me on my toes and always alert to every potential opportunity. Understanding the nuances of money and it’s potential hazards is the only way to not get enslaved to it.


Educational loan defaults – How the Government of India is trying to help lenders and borrowers

The financial meltdown of 2008 had left every inch of the global market in tatters. The assumption was that like previous recession periods, markets would swing upward again after a few years. But this time, it never materialized. The world of technology underwent a complete makeover from 2011. New technologies like the Cloud, Analytics, Artificial Intelligence, Automation, IoT and a booming startup environment destroyed every existing business models. This had a cascading effect on every industry and affected the job market drastically.

One of the biggest impacts of all of this fell on the education industry, particularly on the ones who were and are aspiring for higher education. Incidents of borrowers turning defaulters and educational loans becoming Non-Performing Assets (NPAs) have risen exponentially. Weak market conditions have become the bane of job seekers after completing higher education. Once they step out of the job market, it has become impossible to step back in, forget getting better job opportunities even after more education and improving their skills themselves. This has also resulted in a considerable drop in educational loans being provided to future candidates. Financial institutions have traditionally faced recovery of educational loans for a long time and specifically from willful defaulters. In India, this is why recovery of educational loans was brought under the umbrella of Security Act in 2002. The objective of this was to help financial institutions recover loans from willful defaulters easily. As per definition, willful defaulters are those borrowers who either have the means to pay back loans but do not pay willfully or have taken loans citing one purpose and have diverted the amount for some other purpose, lost the money and are not repaying. But this has become draconian now that banks are using the Security Act to recover loans from every defaulters, even if they have defaulted because of macroeconomic conditions and reasons beyond their control.

Fortunately the erstwhile Government of India and the Reserve Bank of India (RBI), the financial regulatory body of the country have taken cognizance of the problem and have come up with a smart and sensible solution. Three important changes have been made to the repayment policy of educational loans.

  1. The loan repayment period has been extended from 5 to 15 years.
  2. The possibility of borrowers undergoing periods of unemployment between employment because of weak market conditions has been factored in.
  3. The borrowers may not find employment with enough salary to pay the entire EMI amount initially so the borrowers could start repaying in smaller amounts and hike up repayment amount in due course of time.

To understand why this has been done, there are 2 scenarios to be considered.

  1. For loans above Rs. 7.5 lacs, financial institutions take collateral in the form of land or gold or anything of value equivalent to or above the total loan amount to be repaid. But this is not just a mere exchange between loan amount and an asset. Like every other loan, educational loans are also considered on the basis of the repaying capacity of the borrowers. First of all, borrowers are told to provide the confirmation of admission from the institution where they wish to study. Then the financial institutions check if the institution where the borrower wishes to study is in their list of approved colleges. After this, the borrower’s background is thoroughly checked which includes previous education history, work experience (if any), bank account details, financial credit score, etc. Borrowers are also asked to provide details of future job and salary expectations. This is done to ensure that financial institutions do not perceive any risk in repayment by the borrower. But now, financial institutions are using the Security Act to squeeze out repayment from every borrower without being sensitive to market conditions. When the loans becomes risky they are shifting the blame entirely on to the borrower.
  2. Broadly classified there are two types of assets. Tangible and Intangible assets. Examples of tangibles assets are house, gold, land, etc. Educational loans come under the category of intangible assets. Using a tangible asset to recover loan amount paid for obtaining an intangible asset is ideally a very tricky scenario. To do this, the ideal conditions are, either the degree has become worthless or the borrower has become incapable of repayment. When financial institutions themselves helped the borrower to obtain the degree, they cannot claim it to be worthless. If the borrower happens to be a defaulter because of reasons beyond his/her control such as macroeconomic issues and is able to prove this in a court of law, the financial institutions will never be able to recover the loan amounts.

It is this deadlock situation that the Government and RBI have decided to step in to try and ease the pressure on both the lenders and the borrowers.

First of all, by extending the loan repayment duration and dividing the repayment amount into equal EMIs over the entire duration, the EMI amount becomes considerably lower. Then the possibility of borrowers becoming unemployed in between employment has been considered. Finally but most importantly, no defaulter can survive for 15 years without earning an income. Everyone has to earn money to a minimum level to survive. So borrowers are given the opportunity to start with small payments and increase payment amounts during the life cycle of the loan repayment period.

There is a very important catch in the amendment that has been done. The amendment exercise was started in 2012 and completed in 2015 with further amendments in 2016. By default, financial institutions will consider the amended loan repayment scheme for new educational loans only. But the amendment has not been done under the assumption that future borrowers could become defaulters and those loans could become NPAs. The amendment has been done keeping in view the extreme distress the existing borrowers are undergoing. If this is the case, it could be argued that existing borrowers should benefit from the new repayment scheme. The question here is, why haven’t this been mentioned by the government and RBI?  Simply because financial institutions have more problems dealing with willful defaulters and providing the repayment extension period to all existing borrowers will benefit the willful defaulters as well. So if the borrowers have become defaulters due to genuine reasons such as market conditions, have done repayment in the past and have excellent relationship with the people they have been dealing with in the financial institutions, they can either approach the financial institutions and request for considering their loans under the new repayment scheme and if they are refused, they can approach the appropriate court with the request.

Ultimately, only excellent credibility of the borrower will come in handy here so it is very important to never lose focus from repayment of loans and more importantly maintaining excellent relationship with the financial institutions, communicating with them constantly and making them completely aware of the borrower’s plight.

Is the “Trump”et about to burst the Indian IT bubble?

When Mr. Trump blew his war horn on the outsourcing of jobs from the US, I believe it did not send any major tremors through the market and certainly did not surprise me one bit. I saw this coming way back in 2010 and the fact that it took 6 more years is quite a wonder. It wouldn’t be of any surprise to me either if the accumulated resentment of losing local jobs to foreign professionals start rearing it’s face in the coming times. It is easy to blame Mr. Trump but it is the same resentment that drove people to vote him to power and he has to uphold his poll promise to protect the job interests of fellow Americans.

India has been the chief recipient of most of the IT jobs from the US. In fact, US IT jobs have become the monopoly of Indian MNCs. Not only have these companies set up shops all over the US and are fiercely competing with one another, on the fringe, body shopping companies have sprung up in thousands that hire people and contract out to other companies. This has resulted in Indians swamping the US job market in every possible ways. The US themselves needs to take blame for creating this situation. For the jobs that Indians have been lapping up, a similarly skilled American worker costs 4-5 times what an Indian gets payed. The difference in currency value between the USD and the Indian Rupee has been the biggest reason why outsourcing to India went into overdrive. After recession brought the world market down on it’s knees in 2008 and the supposed turnaround never materialized, it was quite evident that Americans would want to have those jobs back at any cost someday. Just commonsense and matter of time.

Add to this has been the blatant misuse of US work visas by the Indian MNCs. The work visas were designed with the interests of the US MNCs in mind. The objective was to do “brain drain” from India, get the best talents from India and move them to the US with the promise of lucrative jobs, big money and the fancy American lifestyle. The strategy worked big time till the Indian MNCs and contractor companies entered the fray. It was through them that Indian workers started flooding the US market. The strategy of hiring the best Indian talent got lost in the melee. At its zenith, employing people using visas defying the US labour laws and using forged documents and fake experience to get jobs in the US were the common norm. Work permit requirements keep increasing exponentially but visa utilization has been decreasing significantly, primarily because the overhead cost of Indian visa holders who travel to the US are made to be borne by the clients and post the meltdown of 2008, clients are increasingly wary of bearing any additional or unwanted costs. Moreover with the advancement in technology, even knowledge transfer is possible over mediums like Skype. I had thought of joining the exodus to the US briefly, but the main reason that held me back was I did not want to get lost in the midst of average and below average workers and the scamsters.

All of this outsourcing frenzy created a bubble in India called the IT industry. It was the next big thing when I was finishing my engineering and got sucked into the gold rush. When I got into the first outsourced project, it looked a little crazy because after working in IT datacenters, it is difficult to understand how the same work could be done remotely. But lots of work, more money, there were enough reasons to enamor and entice people. It took me a while to remember that all that glitters is not gold. Long hours of work started taking it’s toll on my health. I realized that in the long run, I would have to spend a lot more money on my health that what I was earning. Then, it was the same as driving through heavy traffic. Growth became stagnant and even a crawl became possible only with begging, fighting and most importantly by getting into the good books of the managers and bosses. To top this off there is a huge hidden trap. Get married then take housing loans to buy apartments, car loans and every other possible types of loans, then keep going in circles for the next 20-30 years to pay off the debts. People end up being slaves to the banks and to their jobs and strangle themselves with the debts. Companies are aware of this and treat employees with disdain by paying demeaning salaries and making them do irrelevant jobs which negatively impacts their careers.

Lastly, there is a big underlying problem with the IT industry. IT is another business enabler, just like finance, sales, marketing and other aspects of an organization. The key differentiation is in the fact that IT can be used to improve the functionality of every other aspect of organizations. Financial softwares, CRMs, etc are examples. But IT was never intended to grow beyond the business needs of clients and become an independent industry and it never did. Indian MNCs quickly learned to make more money by extending project timelines and by thrusting improvements and new features to existing software applications and IT infrastructure on to the psyche and budget of clients. The strategy worked but every time a client goes into consolidation mode, spending on IT is the first investment to be stopped. After 2008, this has become increasingly pronounced.

Identifying business problems are like getting kicked on the shin. The shin hurts but the mouth cries out in pain. Business problems require smart, quick and effective solutions. IT cannot solve all business problems but that is how it has been made out to be. IT professionals believe they know how to solve business problems but they invariably speak the language of IT and think in terms of IT. This is what a life in IT does to people. I saw through this early but even after doing MBA, I am finding that some of the IT connections are still wired and are alive in my brain. One of the case studies I learned during MBA was about IT major Infosys trying to foresee their future. One of the strategies they came up with was to invest their huge cash reserve into India’s infrastructure. But ultimately, they chose not to and decided to focus on their existing clients and finding more clients from abroad. For me, this is akin to owning a farmland, not working on it, expecting to find work on the neighbour’s farmland and live off it my whole life. Times change and change is the only constant in the midst of all the chaos of the cosmos. Everyone questioned my logic in leaving the “lucrative” IT industry in 2010 to take up MBA. It has taken 6 years but none other than the President of the United States has answered to my detractors. Not bad at all. Is the Indian IT bubble about to go poof? Only time will tell, but one thing is for sure. Nothing lasts forever and what goes up has to come down sometime. Business needs will be perpetual but IT needs may wane because after all, the sum is always greater than the individual parts.