This article was originally published in Postnoon on December 28, 2012. Co-author: Purvee Hetamsaria

http://postnoon.com/2012/12/28/rbi-keeps-us-guessing/98181

Prof. Nicky was strolling in the park when she heard a familiar voice calling out her name. She turned around to face a gasping Mr. Mukherjee. The face had a question mark.

Prof: Hello Mr. Mukherjee. What’s troubling you?

Mukherjee (trying to regain his breath): You got me! I was wondering if the Reserve Bank of India (RBI) will lower the interest rates in their upcoming policy review. The general view is that there is a strong possibility of a 75 basis points cut next year. With 50 bps being cut during the last quarter of the current fiscal year.

Prof. Nicky: Well. I cannot predict what RBI is going to do. But yes, it might be welcome by many sections of the industries and the common man.

Mukherjee: That is what I am not able to understand. How does it help the common man? Why should he worry about the matters of monetary policy? I am personally indifferent to it.

Nicky: So you feel! But it’s not true. Remember the time when you took a loan to buy that car of yours and you were complaining to me about the high interest rates?

Mukherjee: Yes. But what does that have to do with RBI and rate cuts?

Nicky: How do banks determine at what rate to lend? How are auto loan, home loan, personal loan, etc, their interest rates determined? It depends on the interest rates set by the RBI. The rate at which banks can borrow funds from the RBI is known as the Repo rate. When the repo rate goes down, banks get funds at a lower rate, which they can pass on to their customers in the form of cheaper loans.

Mukherjee: Hmmm…but since I have already taken the loan, it’s not going to help me.

Nicky: Its not going to help you if your loan has a fixed interest rate. If the loan has a floating interest rate, that is, it changes with the changes in the Prime Lending Rate (PLR), then your Equated Monthly Instalments (EMIs) will come down.

Mukherjee: PLR?

Nicky: It’s the rate at which banks lend to their most credit worthy customers. So for most of us, after taking our credit worthiness into account, the banks decide on an x percent to be added to the PLR, to determine the interest rate. For those who have floating rate loans, the banks generally quote the interest rate as PLR plus x percent. So when PLR comes down, EMI also comes down.

Mukherjee: Got it. But what about my deposits? Will the banks continue to pay me the same interest rates on them?

Nicky: For your existing Fixed Deposits, the answer is yes. For new fixed deposits, the banks may reduce the rates.

Mukherjee: Understood. Thank you.

Delhi.

The country’s capital, known for its rich history and heritage, is in the spotlight for all the wrong reasons. For the benefit of those who have not yet heard or read about this latest phenomenon, amplified thanks to the power of social media, here is a brief summary of events.

A medical student in her twenties, who was traveling with her male friend in a bus from Munirka to Uttam Nagar area in west Delhi, was gang-raped by a group of men inside the moving bus and thrown off the vehicle near Mahipalpur in south Delhi on the night of 16^th December 2012. I do not wish to dwell on the specifics of the incident or the police investigation thereafter, for the plain reason that you can read it elsewhere. In a country where sensationalism is the bread and butter, so to speak, of the big-wig media houses; it’s not hard to find gory details about this incident. What I find interesting, is the nation’s response to this shameful act. The whole country is up in arms, while calls for protests are flooding websites like Facebook and Twitter.

It does seem like we have had enough.

The amount of dissent has reached such proportions, that our politicians are now compelled to talk about the situation. Now that’s quite an achievement for our society as a whole. The Chief Minister, Home Minister and Police Commissioner to name a few, have faced full-fledged criticism and are now under the gun to initiate some sort of change. In a span of 3 days, since when the incident was reported, the amount of activity on social media websites related to this incident has garnered such tremendous response, that it can’t be ignored any further.

What strikes me as particularly disturbing; is the new-found zeal to debate regarding the best form of punishment for the accused.

Hang them? Parade them in public? Let the victim shoot them? Castrate them? These are some of the suggestions and ideas that I came across, while people were discussing vehemently.

Why is the ‘aam aadmi’ entertaining such macabre thoughts?
The present laws are not harsh enough of course! How can we deter rapists and eve-teasers if our laws are not a reflection of the severity of the crime?

So are we implying that, equating rape with murder will ensure more women do not get raped? Is it a fool-proof method of saving our women-folk? Will fear of prosecution/conviction actually decrease the frequency of these incidents? It seems more like wishful thinking coupled with old-school barbarianism if you ask me.

In a land where the female form has always led a life of duality, one of the pious mother/wife and the other of the evil witch/vixen, it is but evident that the problem is not with the law.
The problem lies way deeper, within the labyrinth of the male psyche. Conflicting ideologies would be my best guess for this sort of sociopathic behaviour. Conflict caused by an existing image of a ‘Mother figure’ who embodies love, trust and purity as opposed to the ‘Modern Temptress’ who is attributed as western above everything. Torn between these images we are witnessing the coming of age of a new breed of men, who are confused and insecure about their feelings towards the fairer sex and thus develop these twisted notions on how to deal with them.

But of course, I’m not a psychologist. And I do not intend to provide a profile of the ‘Indian rape victim’ or the ‘Indian Rapist’.

The one point I’m trying very hard to make is that, people are misguided. Our fears and feelings of angst are misguided.
Sitting on a desk and planning a protest on Facebook for the cruelty faced by women in our country is a fabulous idea. I wish you all good luck with your protests and calls for change.
However, I would not count on them to actually make a change.

On behalf of our society, I offer my condolences to the ladies. Again.

This article was originally published in Postnoon on December 14, 2012. Co-author: Purvee Hetamsaria

http://postnoon.com/2012/12/14/deeper-pf-cut-will-help-in-long-term/94547

There was urgency in Abhi’s voice when he called to ask me if he could see me. I immediately agreed. He was in my office before I could get myself a cup of coffee from the Cafe. What is it Abhi?, I asked. “You look disturbed”.

Abhi: Yes. I am disturbed. And who wouldn’t be? My salary just went down because of the Government’s action.

Nicky: Really? What did the Government do now?

Abhi: The Employees Provident Fund Organisation (EPFO) of India has come out with a notification which says that now we will have to contribute towards the provident fund on the basis of allowances as well. This will reduce my take home salary.

Nicky: Ah that! You should be happy. Don’t think short term. Think long term. You are forced to save more.

Abhi: What do you mean?

Nicky: See, earlier, you and your employer, both contributed 12% each, on your Basic plus Dearness Allowance (DA) only, towards the EPF. Now, suppose your Basic plus DA is ₹4,000. The contribution will amount to ₹480 from you and ₹480 from your employer. There is no contribution on the allowances that you receive. If your allowances total up to ₹2,000, your take home salary will be ₹4,000 minus ₹480 plus ₹2,000. That is ₹5,520. And your total contribution to EPFO is ₹960.

Abhi: Yes, this is exactly what happens in my case right now.

Nicky: But with the new circular, contribution will need to be made on Basic plus DA plus Allowances. This means, your contribution will be on ₹6,000. Hence, the total contribution to the EPFO by your employer (₹720) and you (₹720) will be ₹1440. This way, you take home only ₹5,280 but you save ₹480 more and your total income goes up by ₹240, the extra contribution made by the employer! So you should be happy.

Abhi: Hmmm…you are right, but I am still not happy about the lower take home salary. You know that I recently got married and have bought a flat too, which comes with a fat EMI.

Nicky (laughing): True Abhi. But saving for your old age is important too. And many employees structure their salary to increase allowances and decrease PF contributions. This means that they are not saving enough. Also, because of higher contributions to the PF account, you will be able to claim a higher amount as section 80c deductions in income tax.

Abhi: But the limit for section 80c is ₹1 lakh right?

Nicky: Yes. So it will be beneficial to you only if you are not able to meet the ₹1 lakh through your life insurance and existing PF contributions.

Abhi: So overall, you are saying, the government may not have done such a bad thing! Well, I am not happy, but I do understand the government’s point of view now. I’ll have to think of rationing certain expenditures though!

[This is second in a series of articles on business analytics. You can read the first one about What is Analytics?]

So you want to work with an IBM, HP, Accenture, Genpact etc. in the latest field of ‘Analytics’ or ‘Data Science’ and you want to be absolutely sure if this is the career for you ? Check out these 5 questions that you should answer to make this decision .( If you have a YES for 3 out of these 5 questions and an OK for 2, then Analytics is a viable the career option for you .)

1. Do you believe that data should be the basis of all decisions? :- Take up Analytics only if your answer to this questions is an unequivocal YES . Analytics is the process of using and analysing large quantum of data (numbers, text, images etc.) to aggregate it , visualise / create dashboards  on it , check repetitive trends and create models on which decision scan be made . And only people who innately believe in the power of data will excel in this field. Incase some prediction / analysis is wrong , the attitude of a good analyst is that it is because the data was not appropriate for that analysis or the technique used was incorrect . He/ she will never doubt that a correct decision will be made if the relevant data and appropriate technique is used.
2. Do you like to constantly learn new stuff? Take up Analytics only if your answer to this questions is an unequivocal YES .Analytics is a new field . There is a constant increase in the avenues of data , currently w.r.t internet data , social networking information, mobile transaction data , near field communication devices . And there is a constant change in technology to store, process and analyse this data . Hadoop, Google updates etc. have become increasingly important. Cloud computing and data management is common now. Economic cycles have shortened and model building has become more frequent as older models get redundant. Eleven the humble excel has an Analysis Toolpak in Excel 2010 which has statistical functions. Be ready for change .
3. Do you like to interpret outcomes and then track it to see if your recommendations were right? :- Take up Analytics only if your answer to this questions is an unequivocal YES .A data analyst will work on a project . The implementation of the recommendations will generally be valid for a reasonably long period of time of perhaps a year or even 3-5 years. A good analyst should be interested to know how accurate has been his understanding of the outcomes and should want to track the performance periodically. HE/she should ideally also be the first person to be able to say when the analysis is not working and needs to be re-worked.
4. Are you ready to go back to a text book and brush up / pick up concepts of maths and statistics ? :- Take up Analytics only if your answer to this questions is an unequivocal YES . To accurately handle data and interpret results you will need to learn / brush up concepts of maths and statistics. It becomes very important to justify why you choose a particular path during analysis vs.  others. The business users do not accept your word blindly.
5. Do you like debating and logical thinking?:- Take up Analytics only if your answer to this questions is an unequivocal YES . As there is no one solution to all problems, an analyst has to choose the best way to handle the project / problem in hand. He has to be able to not only know the best way to analyse the data but also give the best way in the given time constraints and budget constraints. This sector generally has a very open culture where the analyst working on a project / problem will be required to give his inputs irrespective of his position in the hierarchy.

Do check your answers to the questions above . If you have a YES for 3 out of these 5 questions and an OK for 2, then Analytics is a viable the career option for you . Welcome to the world of Analytics !!

[Hi this is Shubhashini. I hope this has provided you some clarity on Analytics. Please feel free to contact me for any query or discussion at subhashinitripathi@yahoo.com , 9731107798.]

In my next articles I will cover:-

• How to get into Analytics
• Analytics as a career option for women
• The career paths in Analytics
• Salaries in Analytics

A large number of students / young professionals ask me this.

Especially when they see the articles from Mckinsey stating Analytics is the next big thing in business and that there is a substantial shortage of manpower. (www.mckinsey.com/~/…/McKinsey/…/MGI_big_data_full_report.ash )

Or when Harvard Business School takes out an article saying ,” Data Scientist: The Sexiest Job of the 21st Century” (http://hbr.org/2012/10/data-scientist-the-sexiest-job-of-the-21st-century/ar/1)

Analytics is simply the use of numbers to decide on business problems / situations.Thus, in a world where there are huge ERP systems, Internet information, Mobile apps etc.  there is a large volume of data that is created and stored by an organisation . The old way of work was – if you need to make a decision, call the person who has experience in that area and take his advice. Was it the best way? Perhaps not, because human beings develop biases basis the atmosphere / situations / education they have been subject to. Also, it has been found that though a human being can effectively judge the effect of one factor on an outcome, he /she finds it difficult when the number of factors are many and the data is huge. Better decisions are made with the use of statistical techniques which allow us to work on the data and come to a conclusion.

The next question often is – So what is the type of ‘use of numbers’ that we are talking about? Will I have to sit and do maths again?

The last decade has seen the advent of SaaS (Software as a service) in all walks of Information gathering and manipulation . Thus, Analytics systems now are button driven systems which do the calculations and throw up the results . An Analyst or Data Scientist has to look at these results and conclude / make recommendations for the business to implement. For example, an ICICI bank wants to sell loans in the market. It has data of all customers who have taken loans from it over the last 20 years . The portfolio is of , say , 1 crore loans . It now wants to understand which customers should it give a pre-approved loan offer.

The simplest answer may be – all the customers who paid up on time every time in the earlier loans. Let us call this set of customers Segment A .But on analysis you may find that customers who defaulted but paid up after default actually made more money for the bank because they paid Interest + Late payment charges. Let us call this set Segment B .

Hence, you can now say that you want to send out the offer to Customer A + B.

However, within Segment B there was a set of customers who you had to send Collections teams to their house to collect the money. So they paid Interest + Late payment charges- Collection cost . This set is Segment C.

So you may then decide to target Customers A+B –C.

You could do this exercise using Decision Tree software which cut your data into segments for you.

The last question that we will tackle in this article is – What does the work day of an Analytics professional look like ?

A typical work day may look like the following :-

• He will walk into the office and be told about the problem that the business needs his inputs on
• He will determine which is the best way to solve the problem
• He will then gather the relevant data from the large datasets stored in the server
• Next, he will import the data into the analytics system
• He will run the technique thru the software (SAS, SPSS, XLSTAT etc.)
• The software will produce the relevant output
• He will study the output and prepare a report with his recommendations
• This will be discussed with the business

The companies which recruit large teams in Analytics include TCS, Accenture (Mumbai), McKinsey Knowledge Centre (Gurgaon) , Genpact (Bangalore and Gurgaon) , Novartis (Hyderabad) ,  Dell (Bangalore), Capital One (Bangalore ), Capgemini (Mumbai) etc. It is expected that there will be a shortage of Analytics resources in the world (and India) in the next decade.

You can read the next article in this series Is Analytics the right career choice for you?

[Hi this is Shubhashini. I hope this has provided you some clarity on Analytics. Please feel free to contact me for any query or discussion at subhashinitripathi@yahoo.com , 9731107798.]

Next, I will cover,

• How to get into Analytics
• Analytics as a career option for women

This article was originally published in Postnoon on December 7, 2012

http://postnoon.com/2012/12/07/for-investors-or-govt/92810

“So Life Insurance Corporation (LIC) of India is launching a new Unit Linked Insurance Plan (ULIP)?” asked Srikanth.

“Yes. So the newspapers and news channels have reported”, I replied.

Srikanth: I remember, ULIPs were really popular a couple of years back. Everyone was talking about it, investing in it. Then suddenly, they disappeared from the investments arena. Why? What happened?

Me: Well, as the regulations stood way back in 2010, the costs to the investors were huge in the case of ULIPs. The distributors and agents got large selling commissions, as high as 40% of the first year premium, and hence many of them pushed the product, mis-informed and mis-sold it to the investors.

Srikanth: Wow…isn’t that wrong?

Me: It is. Hence the investors protested, once they realized that they had a product which was a sure way to lose money. Following the protests and a legal battle with the capital markets’ regulator, SEBI, the Insurance Regulatory and Development Authority (IRDA), brought in new regulations regarding the costs and losses in the event an investor fails to pay subsequent premium installments. After this, ULIPs did not remain as lucrative for the agents as they were earlier. Hence they stopped pushing it to the investors. And the sheen faded.

Srikanth: Legal battle with SEBI?

Me: Yeah, SEBI claimed that ULIPs were Mutual Funds being sold as Insurance and hence they should have jurisdiction over ULIPs. Anyways, the result was a set of new regulations, which brought down the charges for the investors and increased the minimum lock-in period of ULIPS from three years to five years.

Earlier, most of the insurers charged higher during the initial years of the plan. But now, the charges have to be distributed evenly over all the years of the lock-in period. IRDA also mandated a minimum mortality cover and a minimum guaranteed return. The charges are capped between 2.25% to 4%.

Srikanth: That’s good for the investors. But not for the insurers and the distributors.

Me: That’s the reason the share of ULIPs has only gone downhill since 2010. LIC is now coming out with a ULIP product after almost two years. And even that may not be with the investors’ in mind. As Vivek Kaul points out in his article on www.firstpost.com, it could just be a ploy to help the government raise money through divestment. Since the investor’s may not be willing to pick up stocks in PSUs, LIC will bail out the government by picking up stake in those companies.

Srikanth: But why launch a ULIP product for it?

Me: That’s because the premiums collected through traditional plans cannot be invested in the Equity markets completely. There is a cap of 15% on equity exposure for the traditional plans, according to the Insurance Act. However, in the case of ULIPs, the entire premium can be invested in equities.

Srikanth: Ah, so basically LIC may be hoodwinking the investors, in order to help the government.

Me: Hmmm…I did not think in that direction earlier. But after reading Vive Kaul’s article, I feel that may be the real story! Ultimately, the investors must do their homework before making any investment decision!