OP(iu)M

Other Peoples’ Money(OPM). I recently came across this term while listening to a podcast on Indian Economy. The reference is to Mutual Fund salespeople who talk about the great things with the Indian economy as they need more and more people to invest in their funds. I tend to define OPM as Overly Positive MF sales. I know, not a perfect way to give a full form but you get the gist.

So, I got to thinking. I work in a bank. We also manage money for our clients. We lend it(or try to lend it, in these times) and this is how we end up making money for us and paying interest to our clients. Is everything alright with the banking system in India?

Most of us have read news reports recently mentioning that banks are parking most of their liquidity with RBI earning lesser interest rather than lending it onward and earning a bigger spread on the same. Why is that the case? The reason I believe is that most of the clients who would like money for their businesses aren’t very sure about their cash flows for the next 1-1.5 years, which makes the banks wary to lend them. Other clients would rather wait out the storm before taking any decision.

Then why is the stock market rising? It’s the cheap money flowing into India from outside. With the worldwide interest rates at the low end of the spectrum and no signs of them increasing anytime soon, cheap money is flowing into risky assets like the Indian Stock Market. Which is where you hear the MF guys selling you the India story, the 5 trillion dollar economy dream. Not that I have anything against having a positivist attitude, but you are managing money on behalf of other people. This alone should make you very conscious of what you sell as a dream. It might not be a fiduciary responsibility but it should be a moral one.

I am a realist and still believe that there is light at the end of this COVID tunnel. I am still optimistic about people and as an extension the economy coming out of this stronger and more resilient. This is how dreams get fulfilled. You fall down and always get back up again one more time.

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