Salesman: Hello Mr. Subramanyam, Mr……..Patel calling from …….Share Brokers….from …………… (not Mumbai, not Delhi…) of Gujarat…Can I talk to you for 3 minutes?

Subra: Sure

Salesman: Sir I have a RISK FREE, 13% interest bearing instrument!

Subra (with a skeptical look, as always) – why is it risk free and paying a 5% risk premium?

Salesman: Sir, there is no premium……you pay Rs. 10,00,000 and you will get about 11-13% interest based on the commodity that is bought and sold

Subra: Is it like a Ready Forward?

SM: do not know sir

Subra: Listen, risk free is the State Bank of India Fixed deposit at 8% p.a. – anybody who pays me more than that is paying me a risk premium. So frankly this is very very risky. Also I take all my risks in Equity…and I have an aggressive portfolio. My debt portfolio is lying in PPF, bank FD, income fund, liquid fund, and in some Long Term MIP. Nothing else – I may get a NAV fluctuation, but there is no capital risk.

SM: Sir this is guaranteed by a Stock exchange….

Subra: But Mr. Abraham did not want to give these people license to do anything….

SM: Sir we won in the Supreme Court….

Subra: If somebody thought you were not ‘fit and proper’ – to me that person’s view is very important. I have a lot of respect for Mr. Abraham, and I also know how this country operates, so I will not ‘invest’ my Rs. 10,00,000 in this product.

PS: this conversation is only partly real….but yes I did get a call from one of the big brokerage houses. I can understand revenue pressures – but I know the top management. Somewhere there is a disconnect between the owners and the P&L pressures. Of course being the conservative person that I am not only did I stay away I also kept a few friends away.

It is too damn risky to put your hard earned money in an unregulated market. The person trying to sell me this product kept saying NSEL. For old dogs like us who have been around since Moses parted the waters, NSEL always stood for National Stock Exchange. And I do think 99% of the world thought so too.

My view is more towards Bimal Jalan and Mr. Abraham – about ownership and regulation of stock exchanges.

Sad that 15,000 HNIs (a few of Subramoney readers too, as I found out!) lost about Rs. 5500 crores to know what Alan Greenspan never knew: “IN the Accounting and in the Finance space, self Regulation is a joke”. When you are playing with your own money, playing in unregulated market is fine (so I have no issues dealing with builders) but when you are advising clients, or investing other people’s money you need to be in supervised markets (Sebi, Rbi, Irda, Pfrda). I may have issues with regulator’s performance – but I do think their sheer presence ensures that people like terrible reputation will not come into the markets…Amen. RIP NSEL. For me you were never born.


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  1. Subra,

    You have definitely been around since Moses parted the waters!

    People after you think it is perfectly fine playing around with client’s money! Infact enjoy it! 🙂

  2. i frankly do not understand what you and other people got , and some of them invested in offers of 11-13% interest based on the commodity from NSEL broker or agent (i guess, it would be something like old badla financing in BSE) , but i tried to open account as a client in NSEL for buying e-gold for investment purpose only with some broker by emailing clearly the motive, as i thought it could be better than ETF gold unit and physical gold for periodic small quantities, and with mind set that all exchanges would be similarly regulated as NSE and BSE , but incidentally , it was not responded.

  3. Subra, the fact that they could get a deceptively similar name to NSE, itself shows that the idea was to con people to think that NSE was backing these transactions. This happens only in India !

  4. Srini exactly. Now the people who put the money are running from pillar to post. Amount involved is high..but the people who have put money have put in big is not about 10,000 people putting in Rs. 5000. It is about 1000 people putting 500,000 each. Oops about 13000 people putting a few million …

  5. I landed on your blog very recently and found it to be one of the most comprehensive when it comes to personal finance. It is sad that in our country a basic like the balance between risk and returns is not understood which makes it easy for such instruments to survive.

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