Kotak's aggressive 6% interest rate campaign

This is for those financially educated people wondering about kotak's aggressive campaign of 6%.

If you are in the above mentioned category you might have had a feeling of "Kotak Mahindra Bank burning money on unnecessary ads" every time you have seen their aggressively run "6% interest on savings account" campaign. The same was the situation with one of my colleague who questioned the rationale and answered herself with, "Everyone might give 6% very soon. What's there in advertising so heavily?"

But the answer is there's a lot to it than what you can see. You will understand this if you were one among those looking to buy a Air conditioner (or an electronic household item) about some years back. This was the time when you were attracted towards one or two companies advertising aggressively that their air conditioners are rated by certain agencies and are the best on features such as low electricity consumption, etc.,

You might have felt that these products are the best whereas a person from an electronics (retail) industry or a person having knowledge of the industry would have been having the same feeling "Burning money on unnecessary ads". And a similar colleague of yours would have said "Everyone might give a rated AC very soon. What's there in advertising so heavily?" This would have been the feeling since, the government/regulator had just sometime back made it mandatory for products to be certified for rating.

Although you cannot compare a savings account to an Air conditioner as a product or the respective change in regulations this comparison highlights the view from a customer's psyche.

RBI has deregulated interest rate on savings account deposits which was earlier fixed at 4%. This has lead to YES bank and Kotak Mahindra Bank increasing the savings account deposit interest rate to 6% followed by an aggressive campaign from Kotak for the last 3 months. Everyone expected many other banks to follow suit but, it hasn't happened and might not happen for good reasons. If you are one among those who knows about deregulation and that a 6% interest can hardly mean only a 500 rupee higher interest post tax than what you currently get (on an average savings account balance of Rs.50,000), the campaign will give you a feel of "Burning money on useless ads".

But, the answer lies in questioning "How many people know this?" and "How many are financially educated to this level?"

In the first case you were a person from the industry or else, industry wise educated. In the second case, you are not from the industry or industry wise educated and hence, the attraction towards aggressive advertising by the electronics company.

A country with a huge not so financially educated population presents in itself a huge opportunity to a company which has first mover advantage that Kotak is striking on. Looks like the campaign is wonderfully targeted at such customers and the liners like "Don't look at it as 2% more. Look at it as 50% extra. Interest of Rs.10,000 will become Rs.15,000" leaves people with slight awareness of deregulation also thinking. 


And seems like a campaign which many of us might have seen as an unnecessary/useless spend, has already helped it through an enormous increase in the pace of new savings accounts opening. 


However, hope they have a strategy in place to build strong relationships on these accounts. Else, once other major banks increase(if they choose to, looks like they will not) the rate to 6%, it is a well known story "The huge number of dead savings accounts across the country".

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National Food Security Bill & Socialism

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An email that I received the other day reminded me of the labour crisis that my parents spoke of some months back.

The maid wouldn’t want to work at anything less than twice the amount we paid till last month. Labour supply for construction work is low and hence, an indirect rise in the demand of higher wages. Similar is the situation in Agriculture although, the effect might not have been that severe or even more in other places.

"Why not?" was the answer that I received when I asked, "Why is that so?" ....When you get to do less work for same amount of money under some scheme “MGNREGA” implemented by central government with guarantee of work for some x number of days then, why not?

These Schemes under “MGNREGA” were implemented by the government to resolve lower section unemployment in the society however, the implementation of the so called schemes have disrupted the labour market in a huge way.

Similarly another highly appreciated and lauded “National Food Security Bill” which is about to be launched by the central government under much fanfare may create a major and heavy disruption in the labour market. And the email(shown below) tries to explain how this can happen in a beautiful way.

"You must have all read this or would know of this but I still felt strongly and hence wanted to share……

Lesson in Socialism

An economics professor at a local University made a statement that he had never failed a single student before, but had recently failed an entire class. The class had insisted that socialism worked and that no one would be poor and no one would be rich, a great equalizer.

The professor then said, "OK, we will have an experiment in this class on the socialism principles". All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an A(substituting grades for Rupees - something closer to home and more readily understood by all).

After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were HAPPY. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little.

The second test average was a D! No one was happy.

When the 3rd test rolled around, the average was an F.

As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.

To their great surprise, ALL FAILED and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed. Couldn’t be any simpler than that.

These are possibly the 3 best sentences you'll ever read and all applicable to this experiment:

1. What one person receives without working for, another person must work for without receiving.

2. The government cannot give to anybody anything that the government does not first take from somebody else.

3. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation."

So, the segment of population whom the government would supply the food at almost free/too low a cost tomorrow need not work the same amount of time they do today.

Let’s assume the market has 100 people working for 10hours today at a wage of 100 rupees a day. Hence, the amount of work in the market is 1000manhours a day or 30000manhours a month.

Once the “National Food Security bill” is implemented, some of them would be completely satisfied by working for 1hour a day instead of 10hours a day or by working for 1day instead of 10days. Since, this will give them 100rupees to take care of the basic requirements that they were earlier getting in 1000rupees. But, some would be ready/ambitious to work for 10hours a day everyday so that they can save the rest of money for some rainy day/betterment of lifestyle. However, the amount of work required in the market is still 30000manhours a month resulting in an indirect increase in demand of higher wages which have already gone higher due to the earlier schemes under “MGNREGA”.

No offense against reservations/Ambedkar. Dr.B.R.Ambedkar has brought in the reservations 60years back saying they will be removed in some 10years since, this period of 10years might have lead to upbringing of those backward sections in the society. But, everyone tried to play around and it has just become a political gimmick which may lead to a dangerous situation in the years to come. A day might be seen when who so ever is in the open category may ask for a reservation under a special status called “The Open category.”

Who guarantees that these MGNREGA and National Food security Bill will not be played with by future dynasties of politicians?

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Vodafone Blue : Trying to replicate Airtel's HFZ??

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I have read about the launch of new Vodafone Blue also known as Facebook Phone a couple of days back in India. Yet for the first time I viewed it on TV, I kept on asking myself "Why does Facebook want to advertise itself on TV?"

Yes, I had good amount of time to think by the end of which a Vodafone banner appeared for 3seconds reminding me of the new phone launch. It was approx. 2minutes 10seconds effort which more of takes you through some of the features/apps on Facebook to only realize at the end that these are gonna be available on the new Vodafone Blue.

Vodafone always had those cute 15seconds ads to inform of a new service/launch/offers. Even a service such as 3G, one of those highest on priority if you need to prioritize was also launched using zoozoo's and similar 15-30sec spots. However, this time it has deviated from an approach it always used since long time. Trying to move away from those that break the clutter might prove to be too dangerous for Vodafone.

What might be the reason for such a sudden and an altogether different move? Does Vodafone beleive that the launch of this phone is bigger than the launch of 3G or other offers/services it launched in the recent months? Definitely not. Or Is it trying to break the clutter? I really feel it's definitely not capable of with this ad and there isn’t any requirement since, this is the only one in this segment.

And what about the cost it is incurring on a 210seconds spot. Ok, many of those recent ads were played in the intial 2-3days for the entire length and later cut down to bits and pieces like Airtel's "Har Ek Friend Zaroori hain" or a Hero's "Hum mein hain Hero". But, I think the lyrics of this ad too are not something with which you can cut into bits.

Ohh wait, did I say Airtel?

Are they by any chance trying to replicate Airtel's HFZ song to get a similar anthem for Vodafone? I doubt this can be of any match to HFZ but, still are they trying to replicate and failed miserably?

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