Sunday, 30 November 2008


With lots of celebrated column writers/reporters and the 'learned blah blah' emanating from them on the recent "Mumbai Siege" , my opinion does not matter. Still, I can use the current celebrity overcast sky to, add a few drops from my side too - unnoticed.
First and formost, lets get a clear picture of ouselves. We are Indians. We were sitting ducks. We are and we will be. Having got our basics right, let us not be in a hurry to put things right.
Nothing is going to change.
Our endeavour hence shall be to take a stroll along the "Mumbai Siege" , making some unhurried and leisurely observations, here and there, and to enjoy ourselves while we happen to be still alive.
Any well trained soldier/personnel ( eg:NSG Commandos) can do the things that the terrorists did. Infact You and I can do it with the right kind of engineering of our psyches (to turn us into psychos), the physique anyhow may not matter as we will be heavily armed and also since we will be dying eventually. Stealth, political /logistic backing, wickedness, irresponsibility, a head strong ideology (right or wrong) and a long list of the so called "bad things" in this world shall add to the armoury. With the "nothing to lose" and "aggrieved" feelings to boot, the modern terrorist is made . They had all these and more.
"Yes in a way".
(Iam not in that band wagon who celebrate Chatrapathi Sivaji's violence and denounce that of the others. I also dont fall into that group which sings praises of Gandhiji's non-violence while wanting to attack Pakistan, though the second one rather appeals to me much. To sum it up, I dont know which group I fall into.)
Anyway, Yes they were brave - in a way. Brave in a blind way rather.
But they never wanted to opt(did they have an option?) out of the mission for all the biriyanis they might have been able eat if otherwise. The food, foreigners and freedom at the Leoplod cafe never swayed them. They never wanted to spent their time with their near and dear ones (may be they lost them) They never hesitated to give up their lives even after experiencing the 'goodie goodies' of our society. They were already free of the pleasures of life.
Their holding out to 200 or more NSG commandos for around 60 hours must certainly have given atleast some of us a feeling of awe. They also had the 'first mover' advantage and got the 'early bird prize' of taking many lives while giving up their own. They sacrificed their lives for a cause, though may be a wrong one.
I particulary like the 'sacrifice and freedom' part of their story. They were free men even before their death. Also, most importantly I appreciate all these because I was never a victim. (why "victim" only? - because, I could never have been a "hostage" as Taj and Trident are too far away from my society permitted style of living. Not that I will not go there if permitted and at CST all of them died ). My being far removed from being a hostage or a victim, allows me to take conceptual (arm chair philosophy) positions on the terrorist episode, the intellectaul that Iam.
We the Indians
We blundered as usual. But the blunder has not just burnt our asses but pierced our hearts. When the hundreds kept on being gunned down every now and then, it was just news for us about Kashmir. We along with our politicians washed our hands off by habitually condemning such incidents and then moving on to the latest test match scores. The local trains were waiting for us to take us to work and our family was there to recieve us back at home.
Bullets and death matter now afterall we may not reach our local trains at all in the evening. We may not be safe inside a posh south mumbai restaurant too. It matters now. Demonstrations and candle lights apart , we are truly 'shaken'(with a capital 'S').
What we could not achieve by way of countless dharnas, strikes or the different types of bandhs has been achieved. The entire administration is shaken up in a span of a few hours. We gained a lot but at an inconsolable loss.
Life can be quite deceiving. "200 gunned down in Rampur, UP" would have got less attention than "25 year old raped 5 times". But Taj, Oberoi (may not be CST) and the direct telecast kept our pulses racing. Why go for 20-20? The celebrated reporters working without sleep, probably were getting turned on secretly by the gory details of the unfolding story. Their husky - loud voices meant nothing else.
Two home ministers and a chief minister steps down. A few other ministers and dignitaries are in big time trouble. What with a few ministers resigning after every blast, you and I may get a chance - if we survive till then that is. But every place is not Mumbai. Not every man goes to the Taj.
Iam not grudging the attention Mumbai is getting. But I use it to emphasise the fact that we ignore a danger until it is right beside us. Had we taken an aggressive posture when J&K was attacked, the cancer would never have spread to Rajasthan and Bangalore. If we countered atleast then, the Taj and the Oberoi would still be standing in all their glory. All the good men,dead now, could still have been enjoying their life. We murdered all of them, right from Kashmir to Mumbai.
I strongly still believe that we may not attack Pakistan in any manner i.e until they declare war officially and hence we have no other go. But lets examine the so called options.
Option1) We attack them now. Officially war. We lose a lot and they lose less as they are less developed. Nifty will go to 1000 levels. Economy plunges. Chidambaram may leave home ministry and come back to economics. Thats good or bad for the Nifty? I dont know. A lot many people / soldiers will die than when anti terrorist measures are initiated. Civilian Zardari may be eliminated and Zia type general may take over - bad for us. Also half way through, the war may have to be called off due to pressures and we may be left with several unfinished agenda. A lot of POK like problems and a seething- revenge seeking neighbour with an army dictator at the helm may be the result.
Option 2) We learn from the attacks, stregthen our defences. Keep growing economically. But how far can we protect when some one is bent upon destroying us and sends trained suicidal teams to ruin everything in sight? We keep trying no matter what happens.
Option 3) We not only strengthen our defences but keep needling Pakistan by covert operations to wipe out terrorist camps inside pakistan, strike at Dawood inside Pakistan, carry out other strikes on random targets deep inside Pakistan naming them as terrorist hide outs, start occassional border skirmishes to draw the pakistan army from the western front ot their eastern front thus allowing Taliban to infiltrate into pakistan and thus heightening chaos and ruining their country. The ways are many. We too give them economic losses and most importatly head aches.No full fledged war.Use international clout to avoid it. Our economic losses are limited, we keep progressing on the economic front. Human losses are limited.
Actively train willing Indian terrorists/ er.. volunteers rather, to go head hunting among Pakistani citizens - develop a sort of Indian fidayeen (at the expense of global opinion, but then we have to educate the globe). See, needling is very important as they should also wish for peace. Only then peace can occur. Now its only we who want peace.
Are there any more oprtions? I dont know. May be we could talk to South Korea who will inturn attack Northern Peru, which will lead to Chechen unrest and then the Mongols will march to Pakistan and pulverise them.
Unless it can be managed that way, Iam afraid, we may have to take some harsh measures and do some hard work. If we start now atleast, we may gift ourselves a position of all round victory later on and if not we may ultimately be left fighting a lost war.

Thursday, 20 November 2008


The skeletons from the cupboard marked “ sub-prime “ are tumbling out thick and fast. How many are still left is a question, to which even Barrack Obama would prefer to remain silent. Every morning brings with it the crunch faced by a Bank, Insurance Company or a Fund. The crunch some how, with sickening regularity, converts in to a write down before a bankruptcy filing. The “BIG” the “SMALL” are all the same. After all whats in a name? The only thing that seems to matter is a bail out which itself now has become selective and difficult to come by.

It all seems to have begun with the, ‘madness-on-hindsight-multi-layered leveraging’ created out of the housing mortgage market in the US, which at that time was booming. Ultimately as the housing collapse occurred the defaults at different levels made us aware that it was a bubble that had existed then and that it has given us busted feeling now.

The Global Sub-Prime and India

The first waves of sub-prime hit us in the form of FII withdrawal from the Indian equity markets with the simultaneous mad rush for the USD. The whispers about US banking failures appeared distant. We brushed the concern away with our belief in the resilience of the Indian economy and waited for the FIIs to return back, and aggressively too. Infact we still are hopeful of the ‘pull back’ as evident from the fact that the RBI in its policy review in October 2008 has only marginally lowered our GDP growth rate from 8% to between 7.5% to 8.00%.

As the sub-prime keeps unfolding we need to examine and estimate the impact it might have, on our banking and financial systems and the economy, on a continuous basis. Keeping in mind that it was a housing slow down that had triggered the sub-prime crisis it might be interesting and worthwhile to visualize possible heightened default scenario in the Indian housing finance market as well.

The Indian Housing Finance Market

The Indian Housing finance has had a phenomenal growth during the 21st century. From being around 3.5% of the GDP in 2001 it has grown to almost 8.5% to 9.00% of the GDP in 2007. The fact that the GDP itself has grown through these years accentuates the housing finance growth.

The aggressive lending of the Banks in the housing sector is evident from the quantum jump between 2001 and 2005 . A dissection of the retail portfolio of banks also helps in clarifying the position further.
As on 24th November 2008 (as quoted from RBI publications) the advances of scheduled commercial banks stood at around 26.15 lac crores.
Assuming a slightly higher proportion of 15% in 2008 (higher than 12.18% as in 2005) of housing loans in the total advances, the housing loans outstanding in the system accounts for around 4.00 lac crores currently, all repayments etc put together and adjusted for.

The subtle bubble

The housing loan outstanding has grown by around 300% from 1.35 lac crores in 2005 to reach an outstanding figure of 4.00 lac crores (as estimated above) in 2008. It may also be safe to assume that the real estate prices across the country and across different segments have appreciated by around 40% to 50% between the periods of 2005 to 2008.

With the boom going bust now, it may be expected that the real estate prices across the country are likely to correct downwards by around 25%-40% in the course of time. Of the 4.00 lac crores advanced by banks for housing loans, the margins may vary between 10% to 25% across banks and schemes. A margin of 15% can be assumed on an average.

It means that when the property prices corrects by around, say 30%, the original margins on the loans will shrink, not withstanding the fact that a part of the loan might already have been repaid. There might be cases, and may be a majority of them, wherein over financing can emerge.
Literally banks might end up having financed more than what the property actually costs now. Especially so in case where ballooning repayments have been sanctioned. Though the accounts are not technically classified as NPA as the repayments may happen regularly, on closer examination it may be seen that the shrinking value of the property in fact substitutes the effects of faulty repayment. This again gives rise to the fact that the dip in realty prices will give rise to unrecognized risks in the balance sheet for which provisions have not been made. A recognition of the same may result in a higher NPA. These are over and above the actual defaults in repayments, which might occur due to the melt down in the economy. These effects are perceived even currently, as an under current, as is evident for the fact that banks are demanding higher margins as also insisting that the only 45-50% of the take home pay can be considered for repayment currently as against 60-70% earlier. However the realty melt down crisis is not yet recognized at a policy level especially with regard to loans already disbursed where the effect are in a more subtle way.

What ought the banks be doing?

Banks are required to do periodical valuation of the mortgaged properties to ensure that proper security is available for the advances granted. Different banks may have different norms and different frequency of inspection and valuation. Considering the sudden melt down in the property prices it might be advisable for the bankers to do more frequent valuations of the property so as to realistically reflect the market prices on their appraisal forms.

The question however remains as to what to be done in case over valuations are identified. Do we raise the installments thus heightening the probability of default? Or do we reschedule by extending the period of repayment?

Also most importantly, should the banks be asked to recognize the uncovered portion of the housing loans and be asked to make a blanket provision for the excess financing in the housing sector? Remember even a 5% provision on the 4.00 lac crore outstanding will be Rs.20000 crore which is enough to wipe out the combined profits of many an Indian bank put together. Or are they to give the over-financing part a miss, thus allowing the over valued properties to continue in their balance sheets until they are bust by a bubble?