The modern thinking Indian

If you have ever stopped to look at the online credit usage you would have done (including reviewed the information you were asked to provide), it would seem extremely easy to use somebody's card and use it for buying stuff. What is it that you need to provide in terms of information when using your credit card online ? You go to a site, decide to buy something (maybe jewellery, maybe some electronics goods, or something that can be delivered instantaneously such as software) and are asked whether you need to pay through a credit card, using the much hyped secure card payment gateways (that use '128 bit encryption security', and are from well known banks).
Think for a minute about the information you provide online; you typically provide the following information:
- Name
- Date of birth (sometimes)
- Card Number
- 3 / 4 Digit security code at the back of the card
- Validity period of the card
Now, if you had gone to a restaurant, and paid by card, the person taking the billing (waiter, cashier) would already have all these details (except for Date of Birth), and for that, if they ask you to fill a card containing personal details such as DOB and anniversary, most of us would fill that already. That is enough for them to use that card details online, and in many cases, this goes undetected, or detected only at the end of the month. So why is nothing being done about this ?
Well, something is finally being done (link to article):

If you're an online shopaholic, make sure you have a personal identification number (PIN)/password for your credit or debit cards. Otherwise, forget about using them for internet shopping from August 1. A recent directive by the Reserve Bank of India makes it mandatory to have an additional authentication passcode verified by Visa or MSC (Mastercard Secure Code). This is in addition to the other information already on the card like name, card number, expiry date and CVV (card verification value) number
So how do you get this new password? Credit/debit card users have to register online with their banks, giving personal and card details. They will then be given a PIN or password to be be used as an additional layer of security at the checkout point before completion of the transaction.

So, if you did not know about this directive, and wonder as to why your card does not seem to work online anymore, now you know the reasons for the same. So, go ahead, and contact your bank for getting the confirmation. As to whether this is fool-proof, only time will tell.

Labels: Bank, Credit Card, Finance, Fraud, Money, Online Transaction, RBI, Safety, Security

You must have seen this all the time. You go to a fuel pump, and they ask you whether you want the premium fuel (whether it is petrol or diesel); in some cases, they will tell you that the premium fuel is better for your engine, as well as for the mileage of your vehicle. The fuel will have the name of 'Premium', 'Turbo', or 'Speed', all designed to make sure that you feel that you are taking a fuel much better than the traditional fuel. The television advertisements are all designed to project the same thing, with the fuel supposed to have additives that smoothen the engine, and deliver many other benefits.
Months back, when fuel prices were very high, the oil companies were actually forcing higher consumption of these branded fuel through greater marketing campaigns, as well as through actual constriction of supply of the non-branded fuel at the fuel pumps. So, what is the reality of these branded fuels ? Do their consistent campaigns have any real substance to them ? Does your vehicle benefit if you use such fuels ? Well, the MRTPC did a study, and found that there was no evidence to backup these claims (link to article):

Next time you pay Rs 2 extra per litre to tank up on branded petrol, you are probably being taken for a ride. For, the state-run oil marketing companies have failed to back up their claim of this fuel giving higher mileage and better engine performance before the Monopolies and Restrictive Trade Practices Commission (MRTPC). MRTPC had asked the companies to "clarify the quantitive difference between normal fuel and branded fuel alongwith supportive documents.''
The query, however, failed to get the companies to furnish anything more than letters from additive suppliers in support their claim. While the additive suppliers, the Singapore branch of Chevron and Oronite, have spoken about the benefits of branded fuel, it has failed to impress the Commission as it doesn't regard the suppliers as non-partial authority; on the contrary they are viewed as vested interests. The suppliers' certificates do not talk about any test having been carried out on branded petrol
.

So, the net result is that oil companies claim that these additives are being used the world over, and are from companies that provide these to fuels all over the world. However, in the absence of any proof, paying extra for these fuels is a risk that a person is taking; there is a good chance that you do not any benefit commensurate with the additional price.

Labels: Benefits, Consumer, False, Fraud, India, MRTPC, Oil Companies

Nowadays, there are a number of shops (primarily in the area of apparel and clothing) that seek to attract customers through offering huge discounts. So you have brands such as Priknit offering 80% sale on their jackets, Cantabil offering 80% discount on all clothes, Pepe Jeans branding a sale logo of Buy 2, get 2 free, Kouton's offering 50% + 50% and so on. I have been shopping in many of these, and realize that there is a huge amount of anti-consumer intent behind many of these. A lot of the numbers are inflated, and actual good quality is scarce. So let's take some specific examples, and see what goes on:

- Pepe Jeans: The store had this huge sales sign outside proclaiming that if you buy 2, then you get 2 free (and of course they had the '*', means that some conditions will apply). However, if you thought that this was a great bargain for getting 2 Pepe jeans, then think again. The offer was only for Pepe T-shirts, something that they forgot to put in the huge sign.

- Priknit: I was looking for some discounted jackets for the next season, and Priknit with it's 80% offer seemed fishy, but why not give it a try. So off I went to the Shipra Mall in Indirapuram in the NCR region, and entered the store over there. I looked at a jacket when inside, and speculated that such a jacket should not cost more than Rs. 2,000 at the most, and it looked impressive, and with 80% discount, could be considered for buying. Imagine the shock when the list price of the jacket was listed at Rs. 4,000, and on a closer look, some of the threads on the jacket seemed to be awry. And there were some better jackets that were listed at Rs. 6,000 - you could have knocked me down with a feather.

- Cantabil was the next one - Here also there was a 80% discount. Well, guess what, more of the same. Shirts (and nothing spectacular) were listed at Rs. 1600. I am pretty sure that people would not have even looked at the store again if these shirts were retailed at their full list price; I made a quick exit from the store. If I wanted to buy such shirts, would rather go to a much better place.

- Kouton was the first such brand that was offering these 75% kind of discounts on clothes, and I remember buying some pretty great looking shirts from at discounted prices of Rs. 400, and those shirts looked great, but when I had gone there recently, the quality and designs had degraded.

Final realization: What looks like a bargain may not be a bargain (there is this psychological thing where you end up buying something if it seems to be a great bargain, and you have to spend some effort in order to prevent yourself from falling under this spell), and a lot of these retailers are indulging in some pretty ugly anti-consumer practices. Please add more such issues you know about in comments.

Labels: Apparel, Clothes, Consumer, Customer, Discount, Extra Charge, Fraud, Retailer, Shop, Shopping

The scandal about Satyam just refuses to die down. There are so many questions that remain open, and there is the major feeling that even though the Central Government took quick action once Raju had come out with his confessional statement, the state Government of Andhra Pradesh is not being so open. Before Raju had made his statement, the Chief Minister, Rajshekhar Reddy had made a statement to the effect that the aborted merger was over, and people should get on with their lives. No reassurance about watching out for a company that was the star of Andhra Pradesh and employed 50,000 people. And just a few days after the Chief Minister dismissed all warnings, the Satyam Chief went ahead and wrote his confessional note. And after this, the Chief Minister had nothing to say.
Now, there are so many open questions that it seems that there are so many mysteries to resolve, and the former Satyam Chief is sitting in jail, with some police investigators getting access to him. For some arcane reason, SEBI investigators are unable to get access to Raju, currently in jail (The Andhra High Court has refused SEBI the permission to do so even though a huge amount of investor money went down the drain).
- How many employees does Satyam have ? There are multiple reports about whether it has 53,000 employees or it has a lower number of employees with contradicting statements from the board and from the public prosecutor
- How did Raju divert money away from Satyam to the extent that a software company that has a large margin is very low on money ?
- What are the exact details of the Andhra Government support to Maytas (a company also run by Raju and his family) ? It has a huge amount of Government contracts that are now in jeopardy. In fact, the contract for the Metro was so controversial that the head of Delhi Metro (Mr. Sreedharan) stepped away as a consultant with a talk about this being an unfair contract (and the Andhra Government threatened him with a defamation lawsuit).
- Why has the investigation into this huge fraud case not yet handed over to a central agency with the ability to do a financial and criminal investigation both ?
- Will the money that has been diverted away from Satyam ever be recovered ?
- What was the level of interaction between Raju and the Congress Government of Y Rajsekhar Reddy ?
- What was the exact role of the auditors given that they appear to be grossly incompetent, and maybe involved in a criminal conspiracy ?
There are so many other questions, and yet there are no good answers. The investigation is continuing, but already questions are emerging about whether this is a fair investigation, or whether this is an attempt to try and protect Raju. For a scandal that is India's largest and casts a negative impression on the overall positive India story, the investigations needs to be time-bound and very thorough.

Labels: Corruption, Economy, Finance, Fraud, Investigation, Police, Politics, Punishment, Stock Market

India has seen corporate scandals in the past, but never one of this magnitude. A software company, touted as a success story, the 4th largest software company in India and one that services around 1/3rd of the Fortune 500 companies, the events of the past one month have been a total shock. They have called into question the entire range of issues related to ethics, corporate governance, fiduciary responsibilities, professional auditing, and so on. There will be a lot more soul-searching that will happen, a lot more inspection and suspicion of other companies, search for more skeletons in the cupboard, and so on.
What has Mr. Raju brought forward. Starting from the surprise news about Satyam trying to buyout the realty companies, Maytas (run by Mr. Raju's sons), this is almost like a film story. The news about Satyam using its huge estimated surplus of more than $1.2 billion to buy companies related to the promoter (especially when the promoter held only 8% shareholding in the company) was a huge blow to all norms of corporate governance and met with huge resistance. Seeing this resistance, the company decided to roll back this proposal, but things would not stop from that point onward.
The issue kept on snow-balling, and when a popular issue comes up in the press, they can push at all areas and get more secrets out. So, questions started being asked about respected board members such as Vinod Dham as to whether they asked the right questions and acted in the interests of the shareholders. Other news started disclosing that actually the promoters had already pledged all their shares and effectively could be actually holding no stake in the company. And then the World Bank announced that in continuance of an earlier investigation, Satyam has been found to have a great many security problems with their last work (including probable sniffer tools and a data hole), and hence Satyam has been banned from further World Bank contracts. By now the independent board members had started resigning.
There was a lot of news about how attractive Satyam could be because of its huge holdings of cash and high book value vs. the value of shares, and then there were even more reports questioning whether Satyam really did hold onto these reserves.
And now, finally the CEO of Satyam has revealed all. The company was cooking its books, and once started, there was no going back, and hence the company eventually has declared reserves to be $1.5 billion more than what they actually hold.
All this came as a huge shock to the people of the country; how can such respected promoters actually commit this huge fraud, can one really believe them now when they say that they did not benefit ? What were the independent auditors (Price Waterhouse Coopers) doing when they were doing audits since 2001 ? There are already too many jokes about lawyers and accountants, so maybe this was another reason why accountants cannot be trusted. Is it possible that only a few board members and CEO knew about this, and no one else ? This was money that was supposed to be coming into the company, how can senior management (besides the promoters) claim that they did not know ? There are too many questions, and one wonders as to whether all this will really become clear ?
Now what happens ? Well, it is not like Satyam is bankrupt - it still has a large number of clients (although some of them would want to bail out), it has a huge number of people on its rolls (50,000), it is a huge part of the reputation of Hyderabad as a big IT city, and there are still institutions who hold a huge amount of the company's shares. It is difficult to let such a company go out of business, and one expects that there will be pressure to ensure that while the investigation goes on, the company is retained as a going concern. However, the US has a law where auditors and the company's management are responsible for the accounts of the company, and this is a blatant violation.

Labels: Company, Economy, Finance, Fraud, Investigation, Software