Friday, July 21, 2017

Pappad and Pickles

Pappad or Papadum or Happala is a food item that comes in many shapes and sizes. It is made from several ingredients and is a supplementary dish used with lunch or dinner in many parts of the world, especially in the Indian subcontinent. Just as its variety, it also comes with many spellings. The picture given above may explain the item better than words. Pappad is typically made from gram flour with many ingredients added up depending on the seasonality, availability as well as taste requirements of users or makers. It is prepared, dried in the hot sun or shade, and stored until time of actual use. It is mostly fried in oil or cooking medium before being served hot. Some variants are also spread on burning charcoal. It should be consumed within a few minutes or hours of it being fried or heated. It is used as a side dish and very popular with children and aged alike. In tropical areas, it is prepared in summer for use throughout the year. Pappad making is a home industry in many parts of the world and provides employment as well to many workers in the unorganized sector.

Pickle is another item that is consumed with lunch or dinner. It has many variants like pappad and adds taste to other items. Its preparation and ingredients varies in different parts of the world. Lemon or raw mango pickles is very popular in Indian subcontinent. Cucumber or similar vegetables are used in some parts of the world. Serving pickles is easier than pappad as there is no processing required before serving. The ingredients are mixed with chilli powder and other spice powders and preserved in vinegar or brine (salt water). Properly packed item can be served directly from glass or plastic bottles. It adds variety to other cooked food items. Pickles are also good for spreading on bread of any type and can substitute fruit jams for diabetics. A small ball of butter is always a wonderful combination with pickles. One should not worry about cholesterol on such occasions. Forgetting unwanted issues while consuming these items is indeed a virtue, at least while consuming them.  
A close relative wanted to invest in gold recently. The galloping stock markets did not provide any comfort as a collapse may be round the corner at all times. Investing in gold appeared to be the best bet in present times. Notwithstanding eye catching advertisements by innumerable gold outlets, she preferred to buy gold coins. Making charges and wastage calculations were uncomfortable for her. Any appreciation in gold value was swallowed by these subtle disguises while selling the ornaments. I had tried to sell some gold coins to her while in service in the bank a decade ago. All banks were vying with one another for selling gold coins then. There was a time (some four decades ago) when friends and relatives were running away at the sight of a relative who worked as LIC (insurance) agent. Similarly, my friends and relatives were also trying their best to avoid me when gold coins were being sold by banks.

At the request of this relative I tried to find a bank that sold gold coins. To my utter surprise, none of the banks were having any stock. Some of the contacts confessed that they have stopped selling gold coins long ago. Even the websites of private banks which showed gold coins as a product indicated that they are not available at present.

Banking is known as a business of raising resources (deposits) and deploying them as loans and investment. Traditionally banks were concentrating on deposit mobilization. There was a time when a bank manager's most important work was procuring deposits. Lending was not a big task then as resources were scanty. Loan seekers were chasing bankers then. Credit squeeze and credit restrictions were in force. Banks had to obtain permission from RBI for disbursing their own funds sanctioned as loans to borrowers. This was called Credit Authorization. With the opening of the economy and globalization, movement of funds became easier and markets widened. Presently, deposits are pouring in and banks in India are finding it difficult to deploy their funds. Credit dispensation is not picking up. There is a mad race in retail lending now. Home loan takers never had this scenario before.

Banks made profit by charging more interest on loans than they paid on deposits. Central bank (RBI) prescribed and dictated interest rates for both deposits and advances. Interest rates in all banks was the same. Interest rates are deregulated now. Banks are free to fix their own interest rates for both deposits and advances subject some minimum restrictions. Banks make profits even now through the difference between lending and deposit rates. But there is pressure on margins. As spread (difference between interest rates on loans and deposits) became thinner, banks looked for earning from other services. There are concerted efforts to reduce burden (difference between non-interest expenditure and non-interest income) as the burden appears even more burdensome now. Traditional non-interest income sources like commission on fund transfers and agency functions like collection of bills have dried up like our water reservoirs. These conditions made banks jump into any business that gave additional non-interest income. While some business avenues like sale of gold coins have almost exited, selling third party products has taken center stage. Small Finance Banks, Payment Banks and non-banking players have further heightened the complexity of profit making by banks.

When one talks to young bankers today, there appears a confusion in their minds about real banking. Selling third party products has pushed traditional and core banking activities like deposit mobilization and lending to the background. Deceleration in economic activity and lack of demand for credit (loans) have made life difficult for bankers. 


Rice with Dal (or Sambar or Rasam) is the main food habit in South india. Roti-Subzi is main item for people in North India. Some use a combination of both. Pickles and Pappad are additions to the main food items. One can have a meal with only rice and dal. Similarly, there can be a meal with roti and subzi (vegetables), or dal and roti. They are consumed even without pappad and pickles. Pappad and pickles alone never make a meal. They add variety and taste to the main course served in a meal. They are not a substitute for dal roti or rice-sambar.

Banking is essentially an activity of raising resources and lending the funds to those needing it for their ventures. Selling third party products alone never makes banking. Non-interest income cannot replace interest income. It should always be augmenting interest income. 

This is not to put down the importance of selling third party products. It is only to emphasize the importance of the basic and core banking activities of raising resources, and lending and investment. Sense of proportion should not be lost and the cart should not be put before the horse.

Saturday, July 15, 2017

The First Mistake

Little Lakshmi returned home from her school in the afternoon. Her mother was busy inside the kitchen doing some work. It was a hot afternoon as the sun was blazing outside. After the short walk from the school on the burning day, Lakshmi was feeling very thirsty. The first thing she wanted was some water to drink. She saw the bottle of water kept on the table. She took it and drank from it urgently even as her mother came out to receive the daughter who had just arrived from school.

The little girl started screaming. It took a minute for the mother to realize what had happened. The liquid in the bottle kept on the table was not water, but the liquid used for cleaning the house. Mother had just finished cleaning the house but had not yet put the cleaning liquid in its place in the bathroom. The colorless liquid looked like water. The practice of keeping water in used plastic bottles made Lakshmi believe she was indeed drinking water.  The liquid contained dilute acid as an ingredient. However much dilute, acid is acid. Acid did not know that Lakshmi drank it by mistake. It did its job. It was mother's first mistake to keep it on the table. It was Lakshmi's first mistake to drink it. Neither knew that it was indeed a mistake. But the damage was done.

Raju, an electrician, was not available for a few months. When he was seen around later and asked about his absence, he narrated the case of his daughter Lakshmi. The girl was rushed to the hospital and given immediate treatment. Her gullet was burnt badly and had to stay in the hospital for months. Even now she is unable to speak properly due to damage to the throat. She may have to put up with it for the rest of her life. Her first mistake was not condoned by the acid. The financial burden of hospital expenses added to their misery. The first mistake turned out to be very costly for her and her family.

Ramesh was recently promoted as a Branch Manager in the bank. He was full of energy and wanted to prove his worth. As all first time branch managers, he wanted to be ahead of the rest of the pack and move up in the organization. There was a loan account in his branch which was due for annual renewal. The party had requested for enhancement of limits. The account was conducted well and enhancement was indeed justified. On his recommendation the enhanced limits were sanctioned by the higher authorities. The facility was duly released to the party.

There were some sticky loans in the branch. As per usual practice, an inspector came to the branch for investigating the causes for the loans turning sticky. The inspector made a thorough study of the loan accounts. He submitted his report in due course. The report had mentioned that two of these loan accounts were guaranteed by the Managing Partner of the firm for which recent enhancement in limits were given. The report also mentioned that while recommending enhancement, branch manager had not mentioned the fact that two other loan accounts in the branch, guaranteed by the Managing Partner of the firm, had turned bad. In the ensuing enquiry proceedings Ramesh pleaded that this was an oversight and he had no intention of concealing the information. The enquiry held him guilty and he lost two increments. His promotion ambitions were set back by at least four to five years. It was his first mistake and it did not matter.

Ramesh pleaded his case with authorities in person. He was told that the punishment was light because it was his first mistake and apparently there was no intention on his part to conceal the facts. Otherwise the punishment would have been even more severe. Condoning first mistakes would be very costly for the organizations as there would be a spate of first mistakes if all first mistakes were condoned.

There are many definitions of mistake. On-line dictionary defines a mistake as "an error in action, calculation, opinion, or judgement caused by poor reasoning, carelessness, insufficient knowledge etc". We all commit mistakes regularly and almost on a daily basis. Fortunately, most of them are harmless. We get away with those mistakes. But there are some mistakes that prove to be very costly. Some of them are deadly. What was the reason for the mistake does not count when the consequences arrive. Reasons do not alter outcomes.

There are many views on mistakes. People often quote Thomas Edison who said that he did not make mistakes but found 1000 different ways that did not work. Mistakes are stepping stones to learning, some say. Committing mistakes only shows that we are humans, goes another quote. These are all true when seen in proper perspective. In the context of research and invention, what Edison said is acceptable. Mistakes that happen in the course of learning are also acceptable. But mistakes that happen in the area of personal safety, compliance and following laid down rules and guidelines are on a different footing altogether. They extract their due and do not forgive even the first mistake. The price paid is often very heavy.

There is a tendency among some in the younger generation to commit mistakes and then plead that it has happened for the first time. There are also assurances that they will not repeat. Both these repeat with unfailing regularity. 

It is wise to remember that there may not be a second time for many mistakes in life. Respecting rules and regulations, compliance with the required guidelines is always a safer and better option.

Sunday, July 2, 2017

Executive Summary

We often hear people say "We have to take a decision" or "We are unable to take a decision". What is a "Decision"? Why decision is to be taken? What are the consequences of not taking a decision in time? How a decision is taken? What are the inputs for taking a decision? These questions do beg for an answer.

The word "Decision" is defined in many ways. One of such definitions is "the act or need for making up of one's mind". It is a mental process leading to some conclusion. This conclusion then leads to action or a set of actions. Decision making is an important requirement in any aspect of life. We are making several decisions everyday in our personal lives. Some are of not much impact on the future happenings. Some others may change the course of lives and communities. It is so even in organizations. There are defined processes in today's institutions and business enterprises for arriving at decisions. It is even said that "Not taking a decision is also a decision"!

Let us examine an example to understand the process of decision making. A loan application is received in a bank branch. This is the first set of papers that starts a file. As the application is processed at different levels in the bank, papers pile on the application. The size of the file grows. There is bio-data or information about the promoters. There can be information about the allied firms or group companies. There can be a bulky DPR (detailed project report) prepared by an expert. There would be an analysis of the DPR by another independent expert. A techno-economic feasibility study report would join these later on. Then there would be financial statements and their analysis reports. The file would arrive at the next level with a full-fledged proposal for sanction of credit facilities with the recommendations of the branch manager. Experienced experts would further add value to the file by adding some more papers. Clarifications may be called for and in reply some more papers would be added to the file. The proposal finally arrives at Head Office. Here we have some more super experts who dissect the entire file and come up with their own report and recommendations. The collective wisdom or foolishness of all these experts, super experts and ultra-experts has produced a big file with voluminous data and multiple analysis. The file is now sitting on the table of the big boss, who is the sanctioning authority. 

In respect of high value proposals, the file has one more hurdle before reaching the big boss. There would be a committee of experts to discuss and deliberate on the proposal. It has names such as "Executive Committee" or "Credit Committee" or "Committee of Experts" or some other similar fancy name. This committee vets the entire file (or it is so believed) and the big boss has one more set of papers for his perusal. Now a decision has to be taken unless the promoters have found someone else who has already sanctioned the loan or have abandoned the project by now. The ultimate result may be a simple two line letter stating that the proposal stands rejected (the second line may have been added as one line alone may appear to be curt or unprofessional) or it may be a sanction followed by a long list of terms and conditions. Of course, there would be another set of experts who analyze these terms and conditions in greater detail and come up with fully acceptable arguments as to why these conditions should not have been there in the first place. That is for another future day.

The bog boss has a tough task on his hands now. He has a voluminous file (or it could be a set of files) before him to take a decision. The issue is not different even in a computerized atmosphere. There are many files in soft form here even though the task itself is indeed hard. There are many similar sets of files before him and they all call for a decision expeditiously. How can he read and understand all this information and decide in a short time? There is no hard rule that a decision is to be taken after understanding the issues. But still the belief is that the issues are read and understood. Therefore there is a need for a tool to place on record that the sanctioning authority has indeed applied his mind on the issues involved. There is great deal of comfort in such understanding for all concerned, except those who are disappointed with the final decision. 

Hierarchies have invented a wonderful tool to answer this challenging issue. It is called an "Executive Summary".  An "Executive Summary" or "Management Summary" is a short document that summarizes a long report or proposal or file or set of files in such a way that the reader can understand the whole issue rapidly and become an expert instantly. This enables the user of the executive summary to grasp the entire gamut of underlying issues and come up with a quick decision. The executive summary has rendered decision making fast, easy and painless process, though preparing an executive summary itself may be a very painful process for those preparing it.

A senior bank executive was fed up with his high voltage banking activities day after day and desired a change from the monotonous routine. He decided to take up study of literature as a diversion measure and recoup his energies before resuming the banking activities once again. He took a month's leave and went to a library to start his literary pursuits. (He was surprised to find that a month long leave was sanctioned to him and wondered how the organization would work without him for that long. But others in the bank knew that his presence or absence did not really matter). He was astounded at the volumes of books everywhere and did not know where to start his mission. It also dawned on him that there was no way he could finish even a small part of his new found hobby in the one month period. He checked on the authors of the books on "GOOGLE" and found that sage "Veda Vyasa" was one of the oldest and biggest authors of all times. He sought an appointment with Veda Vyasa which was duly granted. He met the great sage on the appointed day at the Badarinath abode of the sage in Upper Himalayas. The conversation went on something like this:

"OH mighty sage! Thank you for granting me this appointment and more than that sticking to it without excuses to avoid it. I want to study literature but do not know where to start. As you are considered first among the authors, I thought I should consult you to find a solution to my problem" (The executive should have used the word "see" instead of "Consult". Fortunately, no consultancy charges were levied as the sage did not find any use for money and did not even have a Jan Dhan Zero Balance Account as no banker went to that cold place to open his account. The sage would have found it impossible to produce the required photo identity and address proof. He has no AADHAAR as well).

"Young executive, How can I help you?" (Though the executive was old and on the verge of retirement, he was young for the old sage whose real age is not known to us....)

"I am used to reading "Executive Summary" on files and understand the contents"

"I know that. What can I do for you?"

"Can you prepare and give me an executive summary of all your literary works? That helps me to save time and understand your literary productions"

"Dear young man, you indeed appear to be hard-pressed for time. What should be the size of the summary you desire?"

"Can it be in six or eight pages? If you can make it in four, it is even better"

"Do you want an executive summary only for my works or for the entire literature in the universe produced from eternity till now?"

"That is a perfect solution to my problem, but make it as brief as possible"

Sage Veda Vyasa smiled. "I do not need even four pages and I do not need time to prepare it. I will give you an executive summary of all the literature in this world in half a verse (Half stanza). In fact I have given it long long ago. For your benefit, I will repeat it now. Listen carefully"

श्लोकार्धेन प्रवक्ष्यामि यदुक्तं ग्रन्थ कोटिभिः |
परोपकारं पुण्याय पापाय परपीडनम् ||

Slokardhena pravakshyami yaduktam granthakotibihi
paropakaaram punyaya papaya parapeedanam

I am summarizing all that is said (written) in the millions of books in half a line. Whatever is done for the benefit of others is Punya (Good deed). Whatever done that harms others is Paapa (Sin).


Executive Summary is not a product of modren management schools. We can find its origin as well in Sage Veda Vyasa!