Over the past two years, Moneylife Foundation, our not-for-profit financial literacy organisation, has realised that a big problem with policy-making today is that nobody listens to the ordinary saver.Hence, frustrated savers are pulling money out of the market and mutual funds and putting in bank fixed deposits
Dr Veerappa Moily was in Mumbai on 22nd February on the last of a of 4-city seminar series titled “India Corporate and Investor Meet”. The title and the programme structure suggested that the ministry would actually listen to what industry and investors had to say. It began well enough; Dr Moily exhorted corporate India to follow better governance practices and aspire for global leadership. Apparently at a loss about how to ensure this, he even came up with the idea of patriotism awards for companies. Since Dr Moily promised that the ministry officials would stay the whole day, the auditorium was packed with professionals and management students. But neither the ministry nor the corporate honchos had any plans to listen. Soon after the minister’s speech, office-bearers of all industry associations and the ministry representatives trooped off to a closed-door meeting on corporate governance with the minister.
Ironically, in his speech Dr Moily had lamented the fact that stock trading in India is only restricted to 10 centres, while our ‘national’ stock exchanges have been boasting about their ability to reach over 1,000 centres. But did the minister want to listen to why investors stay away? Not at all. Over the past two years, Moneylife Foundation, our not-for-profit financial literacy organisation, has realised that a big problem with policy-making today is that nobody listens to the ordinary saver— neither ministers, nor bureaucrats, regulators, bankers, even heads of mutual fund companies. Yes, we do have endless seminars, but no two-way communication. Everybody speaks to the savers or blames them for being greedy and illiterate. Frustrated savers are pulling money out of the market and mutual funds and putting in bank fixed deposits. Evidence is in the fact that India’s investor population has shrunk from 20 million to 8 million in the past two decades of liberalisation (including mutual fund investors).
Consider the difference it would make if the ministry did listen. In one session, the joint secretary MCA, ‘heard’ an investor on the issue of unclaimed interest and dividends that goes into the Investor Education and Protection Fund (IEPF). Investors whose shares are locked in litigation end up as losers, because litigation in India is rarely settled in seven years and nobody seems to know the solution. The joint secretary immediately asked his officials about the processes and procedures and promised to put up details on the ministry’s website. In response to another issue, he said that it takes long enough to open a bank account these days, due to lengthy KYC (know your customer) procedures, but opening a demat account is extremely frustrating. If this is the experience of a senior bureaucrat, what happens to ordinary investors? It is clearly time for the government and its regulators to step out of their ivory towers and get into listening mode. It is not for nothing that the practice of ‘jan sunwai’ or public hearings is the norm with the police and even at district levels. Indira Gandhi used to hold public durbars to listen to grievances. And, despite the fact that telephones were in short supply and there was no 24X7 TV to provide information, people from all over India travelled to Delhi to speak out. Isn’t it an irony that a Congress government that kicked off reforms has stopped listening and now has the dubious distinction of slowing down growth (GDP growth is down to 6.1%) due to its poor governance and inability to win public confidence?