Financial Awareness & Certain Relationships can impact financially - Be Aware

 Financial Awareness & Certain Relationships can impact financially - Be Aware.

Dinesh Kumar Kapila

Why this thought or piece. The trigger is a case at major private sector bank (the world revolves on its) in a rural area where a Branch Head duped account holders by simply taking their cash and assuring the deposit and then running a scam around it. Or at another bank branch (had many ladies heading it once) where the branch staff was siphoning cash and a blackmailer was doing it to them !! It’s actually not just banks or NBFCs or the like. Frauds and leakages do happen at many financial institutions but could there be any precautions on our part in some cases. To minimise a loss of capital or the chance of it happening. Fundamental errors of judgement are made which lead to it or too much trust is vested in a relationship. Could be a friend or middleman or agent or just an acquaintance from one’s community.

We live in an increasingly digitised frenetic world. The first and essential basic rule to ride out this world smoothly is to be financially aware. The second and third rules of building up knowledge and having the ability to slow down the pace consciously can wait, the first rule is too important. And then the fourth rule, be careful about mixing your perceived relationship with your money or wealth. Relationship as defined above, as there is no other word to explain it.

What is being financially aware imply. Simply, Financial awareness allows individuals to decipher the complexities of financial products, such as mortgages, retirement plans, stocks, bonds, fixed deposits and insurance policies, enabling them to choose the best options to suit their needs. Now with an increasingly educated population, we should be rightfully educated about the fundamentals of making deposits including the mode of receiving SMS alerts. We can discuss any number of movies or social media posts, but being aware on this crucial aspect eludes us. Simply saying it’s complex is a lame excuse, even silly. It’s simply about taking the pains to read up and then deciding what suits your risk profile, it’s better than trusting an informal middleman or the like. Or some perceived relationship of trust.

That brings us to the second aspect. Relationships or feeling connected and then trust and then a possible negative impact on financial investments. A relationship could be the way in which two or more people or things are connected, or the state of being connected. Or a cause and effect relationship as in

"the study will assess the relationship between unemployment and political attitudes" and it could be the state of being connected by blood or marriage. Such as ‘they can trace their relationship to a common ancestor" and then the way in which two or more people or groups regard and behave towards each other. Such as the "the landlord–tenant relationship".

Now this piece reflects more on the human element of trust without understanding the nuances of the relationship or the depth of it. Or without assessing it. It is actually strange as to how people, educated aware people, have at times reposed faith, specially in financial matters, a casual link or relationship.

At the Branch in question, the individuals affected are now complaining about losing deposits in quite a few lakhs. This would imply a basic knowledge of the need to save and deposit and also safety plus in the ownership of a smartphone. SMS alerts are compulsory but when the alerts were not there, it seems the relationship and it’s strength by way of assurances were enough to allay any fears. Cheating customers from rural areas, where trust in officials could be higher is a possibility but that is precisely where we need to be aware. And careful. I know of a person earning just reasonably, he had opened a recurring deposit at a post office. In his own locality. The lady at the counter was from his community and to put it straight caste, the person or his wife would hand over the monthly deposit to her faithfully and the lady kept their passbook too. Now after a fraud he is at sea and pushing for payment but without any proof. I am trying to help but it can be upto a point only.

I just have to add a few more. Defence personnel are seemingly or let us say quite a few are seemingly ready to trust a fellow officer (maybe post retirement or whatever) with sums they would not trust their children with. All on the assurances of returns. And at times without a record of the terms and conditions or on the basis of poorly drafted agreements or assurances. Some incidents are often in the news., In another altogether different socio economic segment, I once had a servant cum cook, who managed a guest house plus a few other houses with another guy. Faithful and hardworking. He was going on leave and I told him to remit his cash home digitally but he preferred to carry it home as the branch was located at some distance. He went one Monday and was back on Thursday a broken man. He knew someone from his caste and community and to top it, a nearby village. They knew each other somewhat and were travelling together. He trusted him. The guy he trusted ran off with all he had taken along at a station. during the night. My cook simply trusted a man based on community or caste and deeply regretted it. This lack of analysis or thinking before trusting is quite disturbing.

By the way I am not condoning the faults or frauds at the institutions, it is apparent acute lapses in internal controls and systems were there and in audits. And in supervision. Harsh punishments should follow. And for the supervisory staff up the ladder. It has to be exemplary plus cross checks ensured. and systems reviewed.

But at least what was in the hand of the account holder, getting passbooks printed or checking the accounts, ensuring SMS alerts and taking custody of the papers, this was in their hands. This is the lacuna. The trust in the relationship and the lack of awareness as also of the consequences.

The other type of fraud, purely based on relationships, is another matter altogether but requires a deeper understanding of the causes which lead to such trust. Is it something hardwired into our DNA and accentuated by leaders etc. But the angle of trust based on primarily caste or community is rather difficult to fathom, at least the sheer emotional hold it still has for many and it’s pull factor. When extended to money and investments and returns or assurances, including implied political returns or positivity, well, it can at times backfire. With severe repercussions. Then we the angle of having served together or having a similar professional background, and investing, those who have gained, fine, compliments, but what about those who lost out or were defrauded. At a basic level, an ex-serviceman guard at a financial institution would always accept deposits from ex servicemen visiting or coming over. Later many claimed the sums did not match. Well what was the harm in stepping inside the branch to deposit or cross check. But as I must point out, when I did, I was politely told it amounted to be cynical. A fauji (ex Army) relative told me when I related this, how could you think like this !

An additional point, I have always emphasised at camps or gatherings, in smaller towns or villages, read the first page and third page of a newspaper to gossip and discuss politics and social scandals and the like, but do read the business page too. Or watch business news or channels, at least in Hindi there are many now. But For this, a middleman or agent or a friend would be trusted rather than formal media channels or literature. More trust is vested implicitly specially so in a community leader. With all the inputs now available, across multiple modes of the media, this should not happen. But it does.

I do acknowledge the system of informal agents in rural areas and maybe even urban areas, but then if an asset is to be acquired notionally for accessing a component of cash, then this will happen. The concern is to know the consequences including being liable for maybe the total value of the asset, say a tractor. The media does cover such incidents with sympathy but we must understand the basis and the reasons too. I have my heart in the right place but an inability to face facts only obfuscates the real issue .

As an aside, years ago, a NBFC employed a host of former defence officers and a dinner was organised to tap the pool of defence services officers in the city. I told Dad, no matter how well you know them, have the dinner and the fine array of drinks but do not invest a penny. He smiled but took my advise. His friend, a retired Brigadier, got back his deposit over ten years in small parts.

As appropriate, consult a lawyer or a registered financial advisor before actually investing. It’s your money and yours only. Think ahead always. And remember, its your money.

The point is that the formal system offers a variety of opportunities and products now, invest where you have the knowledge and comfort and just filter out the noise on other products. This is a must. And know your rights and precautions as regards the product. Trust, total trust, in an in between, or a lack of cross checks, sadly often comes with a cost. And embarrassment too, if nothing else. But the cost, In financial terms, with consequences for lifestyles and a cushion for old age can be severe. Assess. Always. And be aware. Financially aware. Consistently.

———/-/

All reactions:

1Rajesh Trehan