Archive for September, 2009

Did you watch “District 9”? My recommendation – do watch it. It’s one of those movies where you go in with some traditional expectation but have a wonderful experience of enjoying the movie with something unique to offer. What is the movie all about? Let me start with the technical details first:

Distributor: Sony Pictures Entertainment
Release Date:  14th August 2009
Starring: Sharlto Copley, Jason Cope, David James, Mandla Gaduka, Vanessa Haywood
Director: Neill Blomkamp
Producer: Peter Jackson
Blog Author’s Rating: 3.5/5District-9

So what is the movie all about? The storyline of District 9 is set in the town of Johannesburg, South Africa. The movie starts with telling that 20 years ago an alien spaceship came out of nowhere and just hung up in air. The humans decided to go inside the ship and there they found malnourished aliens which were rescued. These aliens were put up in an area which came to be known as District 9. Given the way these aliens look people started calling them “prawns”. For 20 years they have been surviving in District 9 and the area has now become a slum where Nigerian gangsters conduct their operations.

The actual fun begins now, that is 20 years since the arrival of aliens, when the government decides to relocate the aliens to a new place and Wikus Van De Merwe (Sharlto Copley) a bureaucrat from government agency MNU is given the responsibility to give eviction notice to the aliens. While serving eviction notices, Wikus comes in contact with an alien fluid which apparently starts transforming him into the alien. He becomes the first case of a successful human alien hybrid. Ironically, when the bosses at MNU find his condition they capture him and treat him as a subject for experiments. Somehow he manages to escape and finds shelter in the very same District 9, a place where no humans would go. He comes across an alien named Christopher and the movie then continues on the plot of Wikus and Christopher (the alien) teaming up to recover the fluid which apparently would help the aliens power up their ship and in turn Christopher would help Wikus get back to normal.

Excited about the movie? It’s worth watching for the uniqueness that it offers. Unlike traditional alien movies where there is huge animation and drama of a war on earth stuff, this movie actually shows aliens residing for 20 years on earth and it’s the aliens that fear the humans. What is even more worth seeing here is the alien-human emotional relationship that develops between Wikus and Christopher (the alien), a concept which is quite unheard of. The movie ventures into the traditional human trait of being selfish and even goes on to imagine the aliens as having the human trait of sentiments and emotions. The movie is visually appealing with the film using faux-documentary footage, news reports and security cameras combined with traditional photography to create its own kind of realism, giving the viewer the distinct feeling they are on the lam right next to Wikus. Although there is no heavy animation used, the alien characters look quite real.

Some things which I was curious and particularly confused when I watched the movie was firstly, the aliens spoke English. How did they know the human language? I can maybe stretch my imagination to say that since they are technologically way advanced than humans, they might have found some way to know our language before they decided to crash (hang up!) on earth. Another thing is why have the humans have not tried to torn apart the entire mother-ship of aliens while it has been hanging up in the space for 20 years. After all we do love to do experiments, rite!

All in all a good entertainment and a must watch. It did left me with the thought of how we humans might end up treating aliens if we ever get to interact with a weaker species out there.

The article expresses the personal views of the blog author. Comments and feedback is appreciated..

The recovery phase from the global turmoil is under progress. Although still shaky, the financial firms are stabilizing. It started out with plummeting interest rates to promote consumption in the US market which prompted the housing prices to go up. Irrational lending and plethora of new complex financial product which were overlooked by the regulators created a bomb which exploded the moment the string was loosened and defaults started happening. India although was quite isolated from the US mortgage market, still had to face shaky impacts through the financial channel, real channel and the confidence channel. The Indian Banks had little exposure to the US market couple with the sound and conservative pillars on which they lie, were able to save themselves from any catastrophe. But they were also swept in the booming economy spirit and went into a reckless lending mode. There may be a possibility of a financial bubble bursting in the Indian Retail Lending market if enough care is not taken. It is only prudent for Indian Banks to take a wise look at the recent crisis and incorporate the lessons for survival in the future.

Retail Lending in India basically consists of Mortgage/Home Equity Loans, Vehicle Loans, Loans against shares, Personal Loans & Credit Cards, with Mortgage Loans being the least risky as its secured by assets and Credit Cards being the most risky.

Retail Banking

Traditionally banks have been lending to individuals based on their purchasing power, requirement and demographics. Retail banking was not very popular earlier and only caught speed in the mid 90s when due to liberalization, the purchasing power of consumers and standard of living started increasing. Since then it has been a fast growing market. Retail credit constitutes about 25% of the total credit and has grown by 28.0% to INR4,218.3 billion. During 2006-07, gross credit extended by Indian commercial banks grew by 34.83% to touch INR19,495 billion. Till 2010, retail banking is expected to grow at a CAGR of 28% to touch a figure of INR9,700 billion. It’s a sector which is going to be a profitable segment for the banks always. This charm coupled with the booming economy provoked banks to venture aggressively in it. Numerous loan schemes came out in India and it was pretty easy to get loans during 2007-08. This can be verified by the numerous calls from banks about loan and credit card offers that were on the rounds. Since income levels were rising banks perceived low risk in lending and often shifted towards reckless lending.

Now that a slowdown in there, bonuses and salary increments are on a decline, banks are fearing of defaults on the huge pile of loans that they have given out. Non-performing assets(NPA) for banks have increased from 2% to 4% and it is a cause for worry. The biggest worry is from the credit cards market. In a drive to provide each consumer with multiple credit cards, banks have ended up with a wide spread of low frequency card users. This is turning out to be non-profitable since the transactions costs involved are high. Moreover, the probability of defaults and frauds in credit card payments have been rising. Industry estimates showed that the default has increased by 50-70% over last year. Given the high interest rates that are being charged for credit cards, the risks of defaults are obviously higher.

Credit Cards scenario is just an example to show that despite the isolation of Indian Banks, the risks are there and lessons from the sub-prime crisis to avoid one in India. The first lesson is that multiple borrowings should be regulated and appropriate credit analysis needs to be done before lending in such cases. Banks should also opt out of high growth trajectories driven by debt-financed consumption and housing spending. Specifically for Indian scenario, Indian Public banks which have majority market share and can be easily regulated should be strengthened,so that during times of crisis the situation can be well managed through these banks. The strengthening should be in terms of a stronger top management and efficient risk profile. Banks and regulators have to ensure that frauds in housing loans and credit cards are strictly dealt with and reckless lending is avoided. Moreover, SPV and innovative financial products designed by banks and financial institutions should be reviewed for risk factors and released only after moderation. These products although heavily profitable during good times can act as disaster triggers during weak times as was seen in the recent global turmoil. More specifically from the banking side, banks need to ensure greater transparency and accountability in their operations. Customers need to be educated about all the hidden costs and such hidden costs should be included when evaluating the credit capability of the customer. Customers should also be advised on their financial needs and strengths so that a healthy relationship can be maintained from both sides.

Banks need to devise strategies and look at retail lending in the future from a structured and balanced viewpoint. Banks have to now focus on Strategic Retail Lending. This implied having well defined allocations for different segment of lending so that risk limits specified for each sector can be adhered to. Upper limits needs to be defined and strictly followed in accordance with the retail portfolio that the bank intends to have in accordance with its risk appetite. Banks could also look at implementing a Credit Appraisal System where a credit rating is given to individuals and it can be consistent across all banks. CIBIL can play a major role here with it already having started the process of forming a database of the credit history of individuals. These credit scores can also be used by banks to look at the possibility of risk based pricing where interest rates are charged based on the risk profile of the customer. This will also be beneficial for an individual with excellent credit history who can then negotiate for a lower interest rate. In the rural segment, where probability of defaults are high given high dependence on monsoons, the banks can act as facilitators. Given the increasing need for financial inclusion, apart from giving loans, banks can provide value based services like tie ups with farming equipment manufacturers and encouraging non-agricultural sources of income. This would not only ensure a better living standard for farmers but also ensure a constant source of cash flow for banks that have lent out, reducing default probabilities.

The future outlook for the Indian Retail Banking Industry looks good. Given the huge untapped market of semi-urban and rural areas, the opportunities are huge. The future will see Banks with well defined systems and procedures emerge as leaders. Learning lessons from every event at every step and moving with a well developed strategy would certainly be the key to success.

The article expresses personal views of the blog author. Comments are appreciated.