Tradable Fixed Deposits

The very thought of investment in India means a Fixed deposit in a Bank. They provide a secure way of returns. All the fixed deposits in banks are guranteed by a wing of RBI(Dont remember the name right now). So there is no risk like return of investments.

All the banks are free to price (rate of interest) their fixed deposits as per their liking and demand. Generally they are in the range of 7-10%.

But there are many flaws in these systems. One of them is the liquidity. All these FD's are not liquid. These FD's are not transferable. They dont have a market.

So if you need money now and not a year later, you cannot trade them. Also if another bank is offering better rates, you cannot switch. The person has to go to banks and sold these FD back to the bank at a penalty. The penalty is around 2% of the amount deposited.

This is also a problem if you have kept deposit as hedge against a loan. This is due to deposit being on fixed interest rate and loan on floating rate. When the RBI changes the key interest rates (mostly upwards due to inflation) the gap between both the rates also increases.
The other problem is tenure. You cannot get a Fixed deposit of the tenure you want. Suppose you have payout after 7 months and no bank is willing to offer the tenure you want. Either you have to keep the money in your safe or do multiple transactions.

Now whats the solution for this. One of them is to make these FD's transferable. other is to create a market for fixed deposits for trading. As all these deposits are secured there is no default risk. These FD's can be considered bonds with interest rate payments as its coupon. Based on the current market, the value of this FD's would fluctuate. For example, during the time of interest rate hardening, a bank issued 9% FD. That FD is now listed in market at 9% discount. Now with easing of market, the same bank is issuing 8% FD. Obviously the 9% FD would fetch higher value due to higher interest rate.

Advantages:
Depositor: Would not be paying penalty on breaking of FD. Switch easily to get better returns. Market available to depositor. Deposit of his tenure available.

Trader: Deposit of his tenure available. Easily turn to FD if equity markets are giving better returns. Market Makers.

Market: Keep track of who is holding the FD. Keep track of transactions.

Bank: Would not have to worry about early payment on FD's. Just have to pay interest to the person holding the coupon. No need to worry who is holding the FD.

Disadvantages:

Bank: They would loose the penalty.

What do you think of this concept. Give your concerns and queries in the comment section.

BSNL.....Keep it Simple Silly

There is a series of tv ads for Tata Docomo featuring Ranbir Kapoor doing just like Jerry Seinfeld, a stand up comedian...Given the proliferation of 3G operators, I was searching the best operator. Then I remembered our g(ood )old BSNL, which was the first operator to be given the first free 3G license (albeit they have to pay the money now). I visited their page. Here there are so many schemes and data, I feel like lost. Why there are so many tables on the page. Why can't they keep it simple. Why can't they revamp the website to something which looks like Web 2.0. See the websites of other operators. I think the problem with them, it is too much fragmented. What I think, the state-wide website like ap.bsnl.co.in or gujarat.bsnl.co.in are maintained by the regional BSNL office and not by a single office. Give it a toss and express your views.

Is Reliance reliable

Reliance has a very long history of taking "panga" with the law and the government. I suppose many of you must have read the polyester prince to know about the history of reliance. The latest one has been with KG D6 gas output. First the Directorate General of Hydrocarbons (DGH) accused Reliance of not carrying out the work program of drilling adequate wells. According to the Field Development plan (FDP), the production from KG D6 should be 61 million standard cubic metres per day (mmscmd), but the current output is 49 mmscmd in the first week of April. Then there is a priority sector in the gas allocation to sectors like fertilizer units, plants extracting LPG from natural gas, power firms and city gas distributing companies selling CNG to automobiles.

Currently Reliance is producing enough gas to meet priority sector demands.
But it has entered into stringent ship-or-pay contracts with all its customers, wherein it has committed to transport the contracted quantity failing which it has to pay the pipeline transportation cost.

Since July, last year, Reliance had implemented pro-rata cuts all across the contracts. But the ministry directive is supply gas to the priority sector and leaving non-priority sector like steel and refineries without gas. But Reliance has denied that order, saying the government should indemnify the company against financial cost.

My question, can the company enter into a contract for the distribution of a natural resource over which the Government should have first say. My other question, as a business owner can you believe Reliance (which had another contract with RNRL to supply gas at cheaper prices and later retracted).

Your Views????

PS For Readers a link of polyester prince is given below.

Polyester Prince-The Real Story of Dhirubhai Ambani(Banned in India)

India Pakistan League (IPL)

Recently Shahid Afridi called out BCCI for including Pakistani players back in cash rich IPL. According to him, they would have no problems playing in India as they easily played in the World Cup. And this will also result in good relationship between Pakistan and India. After the Mumbai attacks, every franchise considered Pakistan players untouchables and avoided taking them. In 2008, he was the costliest Pakistani player to be picked in IPL at $675,000 by Deccan Chargers.
Also Sohail Tanvir was the most successful bowler in the first season of IPL. In the third season, Pakistani players name were there, but no player was picked. This was the time when Pakistan won the T20 World Cup. Franchise said they avoided Pakistani players because they were doubtful of their availability and don't want to risk their money on them.
Do you suspect any politics involved in this. In the previous two seasons, security concerns related to Mumbai terror attacks were shown to avoid Pakistani players.
I think, IPL is a great medium where players can play their natural games, without the hype surrounding some classics matches like India-Pakistan and Australia-England. Its a fast paced game. I think they should be allowed to play in IPL. What do you think. Do you think Indian Government is pressurizing franchisees not to pick Pakistani players. Should they be allowed to play in IPL.
I have kept a poll just beside this post. Cast your vote in that

Lokpal Bill An(na)alysis

Recently Anna Saheb Hazare broke his fast for the Lokpal Bill to be introduced in Monsoon session of Parliament. The Government wanted it to be toothless organization. With so many people supporting and organizing marches, the government finally gave in. With so many people wondering what is the Lok pal bill. I thought of publishing an analysis of Lok Pal bill already there on Scribd.
Whats your view on this.

PS. Its not written by me.


Lok Pal Bill -- An Analysis

A single key is a key to success

When we were kids we often heard this proverb "Too many cooks spoil the broth". Here in India, we are experiencing the same situation. UPA is cooking broth (schemes) and adding many c(r)ooks (ministers) to make it. And they always spill it the wrong way. 2G scam, CWG scam and latest one Antrix scam and many other in making. God knows when they will stop. Lets see if Anna Saheb can make some changes.

There is no doubt that Manmohan Singh (MMS) is a honest minister, but a weak leader. He cannot take decision single handedly. He has to consult madamji (Soniaji) for every decision. And if she is away or anything, the decision gets delayed without any reason. But other ministers of his ministry are very fast in taking decision without even consulting him or madamji. The good example of them are A. Raja and S. Kalmadi. When so many people are involved, you always have to compromise on the work you want to do. Thats the reason I don't like multi party governments. A single person can make you change the decision in his favor.

I think the same fate our PSUs are suffering. They cannot take decision effectively. They are at the mercy of the respective ministers. Take the example of Air India. The ministry of civil aviation takes every decision on behalf of NACIL - the company behind Air India. And later these decision are shoved up NACIL's neck. Any decision regarding Air India takes months sometimes years to come. Till then, the problem has become much huge and large amount of money may be required to again solve it. As in the case of civil aviation, good lucrative routes were offered to other airlines and obligatory but less profitable routes were given to Air India. May be they should take some lessons from Idris Jala of Air Malaysia.

Same case can be observed in BSNL and MTNL. Their problems are further aggravated by the unions. Multiple unions are present in these PSU's. All these combined have multiple goals but not single objective of keeping the company profitable. This is because they are sure that whether the company is working or not, they will get their salary. Its like you drive the car, and if there is a problem, you will get another car and not liable for the damages you have done to the car.

Whats your view on this.
Idris Jala video follows

Flipkart Off(the)line strategy

For a regular web surfer, it is normal to see ads regarding deals and websites on the webpages they are surfing. And it is logical also. As they are related to the same domain. Google Adsense is the leader for displaying advertisements in various sources like webpages, online videos and RSS feeds.
Recently I saw the ads of snapdeal.com,flipkart.com and bigrock.in on TV and I was shocked. Bigrock ad was still ok, as it was targeting customers to start their websites. Do their target customers have changed. Or the ad rates on TV has decreased.
This tendency of spending huge bucks on advertising on alternative medium comes in when easy money comes in business.
Before targeting customers on TV, have they changed their way of working. Do they allow buying of books on phone and later cash on delivery. The answer is no. Then what is the purpose of showing ads on TV. If they think by showing ads they can manage good conversion. Well I don't think so. According to me this should be called spray advertising or simple carpet bombing. See the ads for yourself and decide. What do you think. Think as a person who is not connected to internet.

The worlds richest board given tax exemption by India

Recently one of the worlds richest sports board ICC was given 45 crores tax exemption by the Indian Government. This move has been questioned even by the members of the ruling party. The board has no shortage of funds. Given that Sharad Pawar was present in the Union Cabinet meeting and he is the current chairman of ICC, we can understand at whose behest this tax exemption has been given. The question is was it necessary to give this tax exemption. This was at a time, when the government is at shortage of funds and budget of Sports Ministry for various events is being slashed. Prafful Patel, a MP from the same party as of Sharad Pawar suggested that law provides for such an exemption. But if that is the case why tax these boards at all. Do we will always looks for the loopholes in laws. The democratic tax system always say that take taxes from those who are capable and give to those who are not taxable.
Also ICC recently banned journalists from the matches but after some backlash they allowed the journalists to cover the matches.
Do you think its such a good move.