I am an avid reader of the “Plain speaking” column ever since it began to appear in Mint. However, I was surprised to read the column on Monday, 19 November. This dealt with “The right tone in business communication”. Specifically, it was written that “it will be insulting to write a letter in schoolboy language to the executives at the top echelons of your company, though similar language may be appropriate when writing to your vendors.” I am a service provider to companies, which makes me their vendor. Are you suggesting that it is appropriate for my customers to write to me in schoolboy language or worse? Isn’t this tantamount to saying that vendors and suppliers are somehow “less equal” than the companies (and executives) they serve? Surely modern business communication should be simple, crisp and hierarchy-neutral.
The editorial “Wrong tree”, Mint, 20 November, gives the right advice to all financial services providers. The issue of Indian banks chasing unsuitable business models is very timely.
When we make use of products that are in vogue in Western financial markets, we must do so keeping in mind our requirements.
Making available pamphlets of other financial services at the counter does not make an entity a conglomerate or a one-stop shop. New generation banks face a shortage of knowledgeable and experienced hands at the front office.
Beyond what is available on the computer screen, the front office personnel of these banks cannot give any advice; everything is centralized. Building good relations is a long-drawn affair. Haggling over issues pertaining to passbooks by these new banks shows how difficult this is.
In this context, I want to point to two adverse developments in the life insurance sector, ones that have gone almost unnoticed and uncommented.
First, they want a customer to file an affidavit —an unheard of thing anywhere in the world—that he has understood the nitty-gritty of the product, quietly passing the agent’s responsibility to customers.
Second, the lessons of the Northern Rock scandal in Britain or the subprime securities mess in the US have been lost on them.
In spite of the Reserve Bank of India frequently warning about increasing home loan defaults, the life insurance industry wants to invest in mortgage-backed securities. If something goes wrong with such securities in the future, even if they are rated well now, which regulator would be accountable; the banking regulator or the housing finance regulator or the insurance regulator? Obviously, it will be the poor policy-holder who will bear the brunt.
Conglomerates are to be encouraged but should be tailored to our needs and conditions. At the same time, the government should not delay reforms in the regulatory bodies.
This refers to “Wrong tree”, Mint, 20 November. In India, a commercial bank has to cater to numerous market segments ranging from corporate clients to rural consumers. In addition, as the economy grows, the needs of customers in each segment will go beyond plain-vanilla banking requirements. It is, therefore, necessary that all financial requirements, from advice regarding derivatives to expanding financial literacy among rural folk be undertaken by commercial banks.
Moreover, a commercial bank has to evolve as a one-stop supermarket if the twin challenges of demanding urban and corporate customers and those of meeting financial inclusion are to be met. It is in the interests of major players in banking to move towards a conglomerate model.
By adopting the state-of-the-art banking processes and sophisticated risk management systems, they will be in a position to maintain financial discipline that is mandated by the regulators. This will also enable capital efficiency.