It is a bit of a surprise that the World Bank ranks India #13 on the criteria ‘protecting minority investors’. The ranking is, perhaps, based more on legislative intent than on actual performance.

Ask any victim of a Ponzi scam (Sarada, NSEL, PACL, etc) or of a bank collapse such as PMC Cooperative Bank, or those who have suffered from credit card frauds, orretail investors in Amravati Bonds which were guaranteed by the State Government of Andhra Pradesh for building a new capital city, now scrapped because of a change of government! They will testify to the utter absence of investor protection, belying the high ranking given by the World Bank.

Duped individual investors whose savings have been stolen through such frauds do not have the financial resources left to fight a protracted battle. Top Supreme Court lawyers charge ₹5 lakh per appearance, affordable for those scamsters who stole the money but not their victims. The judicial system has lost its soul and permits endless delays, denying justice.

In the PMC Bank case, the cooperative bank lent 75 per cent of its funds to a single group, in violation of all norms. The RBI, supposed to do regular audits of all banks, did not spot this? The ones suffering are the depositors, who may lose their deposits. Where is the protection?

To rub salt in the wound, the promoter of HDIL told the Bombay High Court that he had no objection to sale of personal assets to pay back the bank, to pay the depositors. It is strange why his permission needs to be sought.

Even when assets are sold, as in the case of borrowers of NSEL, the money is retained by the authorities, and not distributed to the victims. Is this investor protection?

At a recent conference, several prominent speakers suggested that interest rates should be lowered. They forget that several interest rate cuts/injections of liquidity have not led to either consumption or investment demand; but have, instead, helped create asset bubbles. They do not even look at what lies ahead, which a simple reading of newspapers would reveal.

Lower interest rates hurts savers/ pension funds. Decades later, the developed world is facing a serious crisis in their pension funds, unable to meet obligations, precisely because of reduced interest rates. Paris is, as we speak, burning, over President Macron’s attempts to modify the pension system.

Interest costs as a per cent of revenue, would be under 5 per cent. If the experts are desirous of reducing prices of products/services, they should urge the Centre to reduce indirect taxes. GST slabs are higher than interest costs so the impact will be greater. Yet the government is looking at ways to increase GST collection!

Going back to Ease of Doing Business rankings, under the criteria ‘Enforcing Contracts’ India ranks a poor #163 (out of 190). The judicial system is too slow and too kindly towards frauds and scamsters.

If India wants to seriously improve its Ease of Doing Business ranking there are lots of things that need to be done. Start with providing adequate, and swift, punishment for wrongdoing. In the case of Sterling Biotech, eg, the investigating agencies are keen to criminally pursue the case of absconding defaulters, the banks are willing to settle for part of the dues; all sins forgiven. If there is no deterrent punishment will frauds not continue to be perpetrated? Where is investor protection.

Long way to go.

The writer is India Head — Finance Asia/Haymarket. The views are personal.

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