Consider this: The investor community is the largest amongst any voting bloc. Every citizen who saves is an investor. He may invest in a house, or in bank deposits, or in equity/debt mutual funds, or in gold or any other asset, but he is an investor.

It is thus, surprising, that the largest voting bloc is not wooed, and sought after, by any political party in its manifesto. Investors in India are amongst the worst protected. That they do not use their collective strength to protest atrocities against them is a mystery. They have, probably, been minsinformed that it is their ‘karma’ and so protest is meaningless. ‘Karma’ is the biggest con job used by politicians to keep protest under check.

So, what are the investment options for investors in financial assets?

Bank Deposits: Where, hitherto, most financial savings were invested, until deposit interest rates were lowered drastically, tempting investors to divert savings to other assets, mainly mutual funds, through SIP route.

The problem is that banks have lent these deposits poorly, to borrowers who have not paid and have, sometimes, fled the country. This ultimately poses the risk of a ‘bail-in’ of banks (i.e., the bank is rescued in-house, by expropriating depositor money, as opposed to a ‘bail-out (i.e., the bank is rescued by taxpayer money).

Debt mutual funds: Another alternative is to invest in a debt mutual fund. This has its own risks, as do all investments. The Essel Group has defaulted on servicing of its debt, and some fixed maturity plan (FMP) debt funds have, in turn, been unable to meet their obligations and have suspended payments pending resolution. Similarly, lots of pension funds, including that of the Army, invested in debt instruments of IL&FS, have lost money, until some sort of asset-sale takes place.

Equity mutual funds: This investment class has done well thus far. Having said that, those who invested in small- and mid-cap stocks or funds have suffered badly; it is the large-cap stocks/funds that have been performing. Stock prices of groups which are straining under huge debt loads have collapsed on bad news, such as that of the ADAG group or of Essel Group (Zee).

These issues, though, are for investors to assess. The government’s role is to protect investors who are defrauded, and not those who make incorrect decisions.

Yet, when it comes to pursuing scams where private investors have lost money, such as Sarada, NSEL and others, the government merely puts its little finger to the wheel. The investigating agencies are ‘induced’ to go slow, even to corrupt the investigative findings.

The judicial system, slow at best, becomes even more generous with granting of adjournments, in one case, a month’s adjournment simply because the lawyer defending the scamster had to go for an annual vacation to London! Little did the court bother of the fate of thousands of victims, suffering in quiet pain.

This must be changed by any future government.

Unless we crack the whip on scamsters who ruin lives, unless we stop giving them indefinite adjournments, unless we stop the watering down, for reasons unknown, by investigating agencies, of the process, and until the government treats public sector and private sector losses equally, we can never hope to be a developed economy.

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

Related Topics