General – Gaurav Tiwari's Blog

Brahmāstra: Part One – Shiva Review

The movie starts with the backstory of Infinity Stones and how powerful they are. It explains how a society of sorcerers was appointed to protect these stones from falling into wrong hands. Oops, wrong movie. The backstory is about the various astra which can harness the powers of various elements and animals. The most powerful of these astras is Brahmastra. Which for safekeeping was divided into three pieces and given to three different guardians for protection.

One of the guardians of these pieces is a scientist named Mohan Bhargava (SRK), who somehow keeps this very important thing on his work desk that he has set up on his balcony. (I would recommend you to watch this entire scene of goons confronting SRK in mute so that the silly dialogs do not distract you from the decent VFX work done here.) SRK also has a payal wearing that can make his channel the power of monkey, which can help him jump around a bit but it still is unable to make him fight these goons. He is then captured and tortured for information regarding the second piece of Brahmastra.

Before the second guardian is introduced we are told about the DJ Shiva, who sees a girl Isha in a party. Shiva somehow convinces Isha to join him for a birthday party. There Isha discovers that Shiva takes care of a few orphan kids and instantly falls in love with him. Then Shiva starts getting the vision of SRK being tortured by Junoon (Mouni Roy) and runs away leaving Isha alone.

Next day he goes to meet Isha and she agrees to go with this person on a life threatening adventure to save the second guardian of Brahmastra, who is an archaeologist played by Nagarjuna. Why does she decide to go with Shiva, because her name Isha means Parvati so she thinks she must follow Shiva everywhere. (If you had to keep this scene, it would have made more sense to name the hero Shiv, because Shiva also means Parvati. If only Isha knew a little better.) But maybe saving the life of Nagarjuna was not that important, they go on sightseeing singing and dancing, making love storiyan.

When they see Junoon they realise the actual reason they came to Varanasi and rush to find Nagarjuna. Here we are revealed that Nagarjuna has a Kangan that enables him to harness the power of Nandi. These astras are not very effective though (as clear from SRK cameo) Nagarjuna is shot and all three decide to run away to the secret ashram somewhere in Himalaya. Looks like they type “Guruji’s Secret Ashram” on google maps for directions.

On the way to the Ashram they are again confronted by Junoon and her two goons. Nagarjuna gives the piece of Brahmastra to Shiva, which he carries in his pocket wrapped in a newspaper like it was wada-paav and stays there to fight Junoon. Junoon invokes Kavacha-astra (really? Does no-one in team Brahmastra know the difference between a Kavacha and an Astra?) and is protected from Nandi-astra attack. But as established before these astras are useless, Nagarjuna also is easily killed by these goons.

So far only two characters have died and both of them possessed some powerful astras. Why exactly did we need a secret society to guard them? They are more suitable for circus tricks than fighting.

By the way Junoon wears a bajooband which gives her powers of some astra. There is no concept of being worthy or earning the right to use astras. Anyone wearing these jewellery can use these astras.

Eventually, Ranbir and Alia reach a closed gate but they are followed by one of the goons wearing the Vanar-astra payal. When he attacks Alia, Ranbir is able to invoke Agni-astra and burn the goon.

Enter sorcerer supreme, Amitabh Bacchan. Sorry, Guruji. He tells Ranbir that he is agni-astra. Then they send Alia to recover a conch-shell from Ranbir’s house which belonged to his mother. Then Guruji reveals that his father was Anakin Skywalker, who after acquiring the knowledge of force became Darthwader. Sorry, Dev.

Shiva’s mother helped defeat Dev and the third piece of Brahmastra is hidden in that conch-shell that Alia recovered.

I forgot to mention that there are other kids also in the Ashram who are guardians of different astras like Nag-astra, Vayu-astra etc. Guruji himself is guardian of Prabhastra (basically he can convert a knife into a blue sword made of CGI. I told you not more than circus tricks)

In the meantime Junoon goes to Dev, who is made of stone right now and asks for help. Dev gives him a piece of coal, which Junoon converts into many pendants and puts them on some villagers. These villagers become surveillance drones controlled by her.

Long story short Junoon ends up in the Ashram with her mind-controlled zombies and climactic CGI fight starts. Eventually Junoon is able to assemble all three pieces of the Brahmastra together and the power of Brahmastra starts destroying the world but then the world is saved by Prem-astra when Ranbir kisses Alia.

Us din Amithabh Bacchan ko ek baat pata chali ki Brahmastra se bhi shaktishali agar kuchh hai to wo hai prem. Aur hamein laga agar ye baat inko Mohabbatein ke time mein pata chal gayi hoti to hamein 3 ghanton ka torture nahin bardasht karna padta.

Shamshera – Review

It’s been a while since I have written review for any movie but yesterday I watched a movie so atrocious that it compelled me to find time from my schedule to write about it.

I have seen many bad movies in the past but it is very rare that any movie has made me feel so angry. Yes. I felt many emotions while watching the movie but anger would be the foremost. Hence the decision to write about it.

I am sure that most people who were interested in watching this movie have already seen it. If you haven’t and you continue to read this post you may not feel like watching it anyway. Nevertheless, here is your spoiler warning.

The movie is set up in a fictional desert village in 1871 India and is about the Khameran people and how they faced discrimination at the hands of upper caste Hindus. Movie starts with the narrator giving us this background and then spends 30 minutes telling us the story of Shamshera, a character played by Ranbir Kapoor. So that there is no confusion what the movie is about the word caste is used in almost every dialog.

Because of the atrocities faced by them Khameran people become dacoits under the leadership of Shamshera and starts robbing upper caste people of the village. All these people then approach the helpful British guy and pay them a lot of gold to get rid of this menace called Shamshera. Enter Shuddh Singh, the character played by Sanjay Dutt, who is a Daroga in British Police and he cons Shamshera and his people into surrendering only to hold the entire tribe captive inside an abandoned fort.

Khameran people are tortured and Shamshera feels guilty of putting them in this position. So he strikes a bargain with the British guy to get his people freed in exchange for double the amount of gold they were paid to capture them. He tries to flee the captivity to secure the gold but is captured and killed. Evil Daroga Shuddh Singh makes everyone believe that he was a traitor to his tribe.

The movie then jumps 25 years in future and we are shown Balli. Shamshera’s son, who is also played by Ranbir Kapoor. Balli doesn’t like being called a Khameran and wants to join British police. Shuddh Singh asks Balli to torture a little boy if he wants to join the police and he refuses instead accepts being tortured himself. This changes him completely and now he wants to know the truth about his father’s death and wants to work for the Khameran cause. He manages to escape from the fort in his very first attempt and once outside a white horse is conveniently waiting for him. He rides the horse and conveniently bumps into the person who had been waiting for his father for last 25 years.

Then with the help of this person, played by Saurabh Shukla, Balli gathers a bunch of Khameran people who had been living in disguise for last 25 years and creates his gang. With the help of his girlfriend, who is a dancer, they start robbing rich people of the village so that they can gather enough gold to fulfil the condition agreed by his father.

At this point movie introduces the British Colonel who has come to stop this new Shamshera. He is a compassionate guy who is sympathetic to Shamshera’s cause. He even stops evil Shuddh Singh from committing atrocities multiple times. In this process Shuddh Singh even shoots him and many other compassionate British soldiers.

There are many problems in this movie but the biggest one according to me is that you are setting up a movie in British India and showing Britishers as good guys and upper class Indians as real villain. Please note that there is not a single non-Khameran (barring one guy whose role is so insignificant the you wont even remember him) Indian character who is a good guy. Even Winston Churchill could not have come up with such propaganda. The movie even ends with Balli killing Shuddh Singh showing glorious Union Jack flying atop the fort gate signifying the victory of good over evil. It is impossible for me to believe that this movie was made by an all Indian cast and crew, I so much wish that the cast and crew had revolted and disowned the movie. On the other hand I am glad that audience rejected this crap propaganda and sent a clear message to the makers that we are no longer fools to consume any stupid crap you feed us.

Even if we keep the politics and misplaced social messaging aside the movie suffers from bad writing and direction throughout. Audience is supposed to feel for the Khameran people but the way it has been edited, you feel no emotional connect with them. (You are shown a mad-max style scene where all these Khameran captives are receiving water thrown from fort walls, only to be later shown that there is an easily accessible well inside the fort. The well plays an important role.) We should have felt invested in Balli’s quest but the movie completely fails into making you feel for the father-son bond. (How can you, when Balli himself is shown mocking his father being called a traitor and joking about it.) The love story between Ranbir and Vani’s character is sudden and fails to connect with the audience. (They are out-of-the blue shown dancing together and you are supposed to believe that they are in love.) We are supposed to believe that Shuddh Singh is this evil mastermind while he at times comes across as a comedic figure. (Shuddh Singh does not realize Balli is Shamshera’s son despite they having exact same face. He connect the dots only when he sees Shamshera’s old wife.) There is a significant role of crows, which is left completely unexplained. (Appearance of crows is sudden and out-of-the blue, without any explanation.)

Special effects are very low quality. There is a scene involving a train, which was done better by the Burning Train 45 years back. Watch out for the baby Vani Kapoor is supposed to be holding during the climax of the movie. The songs except for the title track are all misplaced and affect the pace of the movie. Ranbir and Sanjay have acted well in some scenes but that cannot be enough to tolerate a torture of a movie like this.

I wish the cast and crew involved with this atrocity of a movie repent and never again attempt making something like this. I pray to god that audience keeps on rejecting such movies and makes sure they suffer huge losses, because they deserve it.

Maybe someday in future if I find time and inclination, I would also write about how they could have done better; just to show how your misplaced politics can make a mess of a potential opportunity to create something great.

What Did I Learn in IIT?

I am often asked this question, specially in the context that my career choice has nothing do with my B.Tech. degree. I feel like recounting some of my experiences from my IIT life, which taught me a great deal and played a key role in shaping me as a person and have directly or indirectly helped me in my professional life as well.

Today I will recount a story from my 2nd year of IIT life, but before we get going, some background. People who are familiar with life in IIT Bombay or have seen Chhichhore know the competitive spirit between hostels when it comes to extracurricular activities. While Chhichhore talks about sports GC (General Championship), my story is more about Cult (cultural) GC.

I was in hostel 5 and at the end of my first year, when annual awards were being distributed, my hostel had won only one trophy. This trophy we won was in bridge, because we were fortunate to have one ace bridge player in our hostel. I was sitting in the crowd thinking why cannot our hostel win any awards. I told my friend sitting beside me that next year I will make sure our hostel wins at least one award.

With this conviction in my mind, I became dramatics secretary of my hostel and with the help of everyone in the hostel managed to win almost every inter-hostel dramatics event that year. Now coming back to the story.

The biggest inter-hostel creative event in IIT Bombay is called PAF, which is short for Performing Art Festival. In this event 2/3 hostels are paired together to put up a live play at the stage of Open Air Theater (OAT), witnessed by thousands of fellow students and other campus residents.

We design giant sets using crates, tables, newspaper and bamboos to facilitate the performance. I along with another senior from hostel was in-charge of set piece on center stage. The center stage was supposed to be the lair of a tantrik. The creative team gave us a design of a throne, which was supposed to be the main attraction of center stage. The design given to us looked something like this:

We had three days to design it, so we analyzed all the material we had and started working on it. We were having second thoughts about how the audience sitting in the OAT be able to appreciate the center piece like this and decided to be creative about it. At one point, I suggested checking with the creative team. To this my senior replied, “har kaam puchh-puchh ke nahi kiya jata.” (We need not ask permission for everything.)

So we kept working on our vision and kept learning and improvising at every step of the way. First we thought maybe we should make the skull bigger, if that was the main attraction. Then we decided that maybe instead of making a chair with skull on it, we should make a cave in the shape of a skull, where the character will sit inside its mouth.

While making it, we realized that mouth could not be made big enough for a person to fit. So, we decided to make nose of the skull big enough for a full size human to fit in it and designed steps for him to climb up and down. What we ended up creating was this.

Center stage for Shantimrigyam, PAF by hostel 5 and 6, IIT Bombay (2003)

We did not stop at that. We made the jaw of the skull movable, so when the villain laughed the jaw of the skull moved. (we made someone sit behind the skull to do this, since all our engineering efforts failed to produce results in time.)

I along with another friend sat behind the black curtain inside the two giant eyes and when the tantrik got killed we dropped red color, making it look like tears of blood.

That year along with winning the dramatics trophy, we also won the best PAF. The effort we had put in resulted into us winning best prop trophy.

Someone has uploaded a video of the PAF on Youtube (quality is very bad though), if you wish, you can watch the entire performance there.

If it is still not clear, what I learned from this experience, let me state it explicitly. I learned that if you are clear about the objective and are ready to learn and adopt, with belief in your own ability, you can end up achieving more than what you imagined to begin with. Don’t lose sight of the end goal. As long as you are clear of the bigger objective, finer details are not rules cast in stone but general guidelines.

My IIT JEE Preparation Story

How a sixteen year old me navigated through coaching classes in Kanpur with almost no money to prepare for IIT JEE and managed to sail through in my first attempt.

I prepared this on request of my friends from ExtraClass to help their students in these uncertain times. Hopefully this will motivate kids preparing themselves for competitive exams in particular and life in general.

Thoughts on Product Management

While I rarely held the title of Product Manager, I spent most of my career as one. During my stints as part of Business Solutions Group in Banks, my role usually was to design solutions for the concepts raised by product or operations teams. I still took it upon myself to launch various initiatives on my own, throughout my career. In simple words I was the solutions guy who didn’t wait for someone else to identify the problems to work on them. When I look back, these initiatives were the best part of my job, specially when I see some of them have become industry standards now. In this post I am trying to look back and analyse, what worked for me. Hopefully this will help people who are working on Product roles or aspire to become one.

Spend considerable time with your users: Spending as little time as possible at my desk was one of the key features of my work-day. I would rarely be sitting at my desk, instead I would go to operations floor and spend time with teams there. I would sit with them, talk to them, watch them work and observe their day. One obvious benefit of this was knowing my users and his work-day. What my users appreciates and what irritates them. This also helped me empathize with my users. When a user would complain about some problem in the system I would take it seriously instead of trivialize it because I would know how much it affected her/his daily routine.

Another benefit of this was that I became the go-to person for them whenever they faced any issues. They trusted me and saw me as their representative inside the IT team.

The result of this was that with time I managed to automate most of their operational activities. The reconciliation system that I worked on with the help of our direct banking operations team is being sold internationally by that vendor and controls almost 85% of Indian market.

Talk to customer service team and study customer complaints: I was not only responsible for building solutions for operations team but also direct banking channels products used by bank customers. The first thing I did after joining bank was to find out the customer service head and set-up with a meeting with his team. I made sure they knew me and found me approachable. With-in months I managed to train them enough to address most of the customer complaints at their level itself.

The biggest advantage I got out of this was, whenever they got a tricky customer complaint, I was usually getting copied on them. I would try to analyse the complaint and sometimes these complaints resulted into redesigning our CX or a new feature.

I got the idea of introducing most of the debit card related support functions via net-banking through this. Now every bank is doing it because it is the most obvious thing to do. Sometimes obvious things are hardest to get attention though.

Spend time with your vendor/development team: If I was spending 30% of my work-day at my desk, rest of the time I was distributing between my operations teams and vendors/tech team. I would sit with my vendor, ask them questions about how a particular setting affected the system behavior. Sometimes, if I got a chance, I would even sit with them analyzing the code. This last part usually would happen on holidays, when I would call them to office with promise of drinks and pizza afterwards.

This made me aware of what the systems we were using were capable of and the speed of introducing any change in the system. If you have worked for any large organization, you would know that introducing any change in core systems is frowned up on, specially for smaller impact items. Hence my objective used to be to get thing done with zero to minimum changes in the core systems/processes. Knowing the systems capabilities and good equation with vendor teams helped.

When we decided to launch mobile payments in partnership with mChek way back in 2006/07, I could do it with zero code changes in our core systems. By the way this solution was designed for basic phones and I used mobile device as a factor of authentication.

Testing: During my early days one of my key responsibilities was testing and I used to hate it. I used to think that have I graduated from IIT to do this but with time I understood how important it was for my learning and growth as a product person. Testing gave me the opportunity to be the user. It would help me play around with the system to explore the capabilities of the system. It also helped me plug any process changes that need to be introduced or any user training required before we launch the product/feature more efficiently.

Once I understood the benefits of it I started spending time on our test systems voluntarily also. When my bank decided to have separated dedicated team for testing and also worked on testing automation, I insisted on my team still participating in the testing process. There is no better way to learn and experience actual user interaction.

Once when I was in a senior position in my organization and didn’t have to do testing myself, I decided to test the launch of new version of mobile app. I downloaded the app, log-in was with mobile number and OTP. OTP was being automatically read by the app, so no input from user. Yet I got error “Invalid OTP”. I tried again and this time it went through. I tried to probe further and noticed that the OTP in first attempt was 0431. I understood, what the problem was. I got the development team to check the field classification and got it changed accordingly. This was such a trivial and accidental discovery, with potentially huge impact. It also made me realize that even after 12 years, testing can throw these kind of surprises.

Be friends with Security, Risk and Audit guys: This is specially important because I was building products for one the most highly regulated industry prone to frauds resulting into real financial losses. This made me take regulatory aspects into account while designing a solution. This also made me appreciate and keep in mind fraud trends and how to control them at design level itself.

Things like KYC-AML, PCI-DSS and their impact on your product/feature are very important in your journey. There were projects where we had to factor regulatory reporting as key aspect of design process.

When I was working on GreenPIN project, this came in very handy. Things like you can/should not send a PIN over SMS, a card PIN should always be inputted on an encrypted key pad, J & K customers could not receive SMS etc were important aspects.

Be curious and keep experimenting and analyzing: Always analyze the data that is available. Data will tell you how your customer is interacting with your product/feature. Which features are loved by your customers and which are ignored. Data can often show you very interesting positive/negative ways your product/feature is being used and you may have to take some actions accordingly.

Get access to that test system and keep experimenting. Play around with parameters and observe how it affects the behavior.

Once I was observing data of one of innovative products launched by our bank and I observed that few of our customers were accessing that feature everyday doing a part of the action and leave it halfway. On further investigation I realized that they were trying to game the system into gaining unfair rewards. I immediately initiated a change in the system to plug this gap.

I am sure many of you would have already known most of these and were doing these things. Some of you probably knew and didn’t do, for them I have thrown examples of how exactly these things have helped me in actually real life situations. Hopefully people who want to become product managers or become proactive solutions guys may find this useful.

Decoding CRED

CRED is one start-up, which has been getting a lot of media attention since it was launched by its charismatic founder, who in his previous avatar founded a very interesting start-up and gave a massive exit to his investors, when that start-up got acquired by Snapdeal. VC world loves a successful exit, for very obvious reasons. What do they love more than that though? They love it even more when the same founder offers them another chance at yet another successful bet. This time the confidence is higher, the dreams are bigger hence the bets are also bigger. Thus starts the journey of CRED.

Now most of us reading this post know about the massive funding round raised before even the launch. They are also aware of subsequent massive funding rounds before the start-up has even made any revenue. However there is one question in everyone’s mind. What exactly is CRED? Some call it a Fintech, while its own founder used to call it a Lifestyle company; some are still clueless. Very recently I read someone calling it an status symbol also. To that I jokingly mentioned that now the investors must be dreaming about it becoming the Louis Vuitton of the digital world and how they are now looking at another spectacular exit. Some may have even started planning, what they would do with this massive windfall.

I, like every other curious minds in start-up and Fintech space, have paid attention to CRED. Despite having no use for the base service it is offering, I yet downloaded the app. I even referred it to my wife to check what exactly is happening with their coin offering. One thing is for sure. The app is good to look at. It is one app, that I check from time to time without ever needing to use it for any purpose. I am someone who likes to keep things clean around myself, meaning when I don’t find the need for an app for a prolonged period of time, I just delete it. This is one app, I still keep. It’s just that good to look at. Design team of CRED, take a bow.

Let me start with a small story. Recently I was invited by my alma mater to mentor their budding entrepreneurs in the campus and I met this team of very bright young men still in their 2nd year of B.Tech. They are working on building something focused on students living in various campuses, so that companies wanting to advertise to that specific group of people can use their app to run campaigns on their platform and they can earn from these advertisers, while offering all the services to their users for free. They had thought of a bunch of services they were planning to offer. These services were all needed by students but not correlated or complimenting to each other in anyway.

I asked the team,”who is your customer?” They answered,”students.” I told them,”well, your customer is who pays you. While students are your users, your customers are the advertisers.” Then I tried to explain it to them using obvious examples of Google and Facebook and how the service they offer to their users is a mean to acquire user base, because their service is not their product. Their user base is their product. Then they find creative ways to sell this product (user base) to their customers, who are the advertisers.

I told the team that their thought process is in the right direction, however they should not focus on building ten services from the beginning. They should pick one to begin with, that they find most appealing and engaging to their potential user base and use that service to acquire as many users as possible. They may end up building all those service in the long run, but they should find an organic path towards it.

At this point in the discussion I invoked CRED. I told them while Facebook, Google and many more have built useful services to acquire user base for selling them ads, Kunal Shah is one brilliant mind. He noticed that in today’s market scenario the easiest way to acquire customers is offering them rewards. So instead of putting too much efforts in creating a service offering, he just picked up the common attribute of his target customer base (credit card) and offer them rewards for the very reason of possessing a credit card.

Under normal situation, one would spend resources building a service, then spend further in marketing and customer acquisition. This entire exercise will require a lot of money. Why not use that very same money to offer rewards to people and acquire them. Sounds simple? Well; it is. Now you can acquire the customer with this strategy, how you keep them engaged? Two ways, make the reward recurring (earn points on paying your monthly bill) and introduce gamification (lottery).

How do you make money now? The big question. Now that CRED has acquired a large number of customers who like to spend on lifestyle expenses (credit card users), next step is to connect Lifestyle brands to these customers. Imagine I run a premium coffee chain, opening a new outlet in Powai. What is the best way to market it? Whatever your answer is, unless it is CRED, it’s wrong answer. All you do is create a campaign for users living/working in Powai and surrounding area (200 Rs discount on your first visit up on burning 50,000 CRED points). Maybe you are launching a new premium FMCG brand. Create a campaign on CRED (spin the wheel to get 10-70% discount on your first purchase).

Why all the earning and burning points then? Well as I said Kunal is one of the smartest brains we have around. His offerings are designed based on users’ psychological needs not your mundane obvious things like paying your bills and all (this is probably the reason some people have called it a status symbol). All this earning and burning completes the loop and you are the hamster keeping the loop moving. It also makes this customer acquisition loop an opt-in. CRED is not into the business of selling your data. You will have to opt-in for the offer.

Just in case you have still not understood, how the money will be made; let me state it clearly. Each brand spends on customer acquisition, today they may be utilizing all the money they would be getting from brands for creating the offers, but they can always increase their margin. If the coffee chain offers you 200 Rs per customer acquired, you can make the offer 100 Rs discount instead of 200 Rs. Or spin the wheel. It may even go Google Pay’s “better luck next time” direction if there is too much pressure to generate revenue. Right now it looks like they have enough cash to keep on burning.

Some people may have question on why then they recently started rent payment and lending offerings. COVID is expected to hit the non-essential lifestyle expenses the hardest. With this situation, people will be less interested in visiting a new coffee chain or trying out new expensive face cream. That means the whole “Lifestyle company” business will slow down. These two recent offerings are attempts at offering something that is related to essential needs to its customer base.

He has not done this for the first time. Even Freecharge was same thing, targeting a completely different customer base though. You can say CRED is affluent person’s Freecharge. I think Freecharge had potential. When Snapdeal acquired it, the deal made some sense to me but when Axis Bank acquired it from Snapdeal, I knew it was a mistake and I also knew Axis Bank did not have any clue what Freecharge was all about (Axis Bank thought it was a Fintech, probably). This made me conclude that a Kunal Shah business can only be run by a Kunal Shah and there are not many Kunal Shah out there. He has an amazing understanding of how human psychology works and he uses this knowledge beautifully when creating his offering. So as long as Kunal is at the helm of CRED, it has the potential to grow into something unique and extraordinary and if he decides to sell it; there is a big chance it will also end up like Freecharge i.e. people in-charge of it having no clue what to do with it.

PS: Last night I heard the episode of Cyrus Says podcast with Kunal Shah, that more or less confirmed what I have written above. He also mentioned about a Mall that opened in Mumbai many years ago, which allowed entry only to people possessing mobile phones, cars or credit cards. So maybe he is trying to create that mall digitally. He has got the customers in the Mall already, he is waiting for brands to open their stores in this Mall and pay him rent for using his digital real estate.

PS 2: While I agree with most of the point he made there is slight deviation on what he mentioned about India being a low trust society. It may be true for cities, for whom most of the techies are building offerings, but I when we move beyond cities to smaller towns and villages, India is an extremely high trust society. I may be wrong, but being born in a small village and growing up in smaller towns my experience has been such.

RBI Loan Deferment (take it or leave it)

RBI has recently announced deferment option to financial institutions for 3months to fight the challenges arising due to the pandemic (Covid 19). This announcement is a welcome step to fight the sudden financial uncertainties faced by retail borrowers. While many people will grab this opportunity due to financial problems it has also increased confusion amongst those who have not understood it well.

So I would try to explain the various aspects of the loan deferment announced alongwith an excel sheet where you can calculate the impact of using the deferment option

What is the option?

RBI has permitted all the financial institutions to allow a moratorium of three months on payment of instalments in respect of all retail term loans outstanding as on March 1, 2020. This means if you have taken a term loan from any lending institution, be it a regional rural bank, small finance bank and local area bank, a co-operative bank, all-India financial institutions, and NBFC (including a housing finance companies like HDFC), you can defer EMI payments for three months (March 20 to May 20).

Please understand that this is an option for the financial institutions and not a compulsory order. So your bank can refuse to defer your loans and demand regular payments for your loan.

What type of loan are covered (Is credit cards included)?

The announcement covers all the term loans like home loans, automobile loans, personal loans, farm loans, and crop loans. The announcement also includes other loans/revolving facility like credit card.

The loan deferment includes principal and interest payment for all the term loans and credit card outstanding.

Is it a loan waiver or loan deferment?

This is only a deferment option and not a waiver. In simple terms if you don’t pay your loan for 2 months your loan tenure will be extended by 2 months. You will have to pay the interest amount for the deferment period also along with the original payment schedule. Your loan EMI has not been waived off and only deferred if needed.

Which loans to defer(or not) and what will be the interest rate?

The interest rate on deferred payments will most probably be the same as your ongoing rate of the loan. It means that deferring a credit card payment will attract 36-42% interest rates while a housing loan will attract 8-10% interest rates.

So even though credit cards are also included in this option you should definitely not use it for regular payments of credit cards. A term loan on credit card carries 12%-18% interest hence even they should be avoided.

Housing loans are the best loans to be utilised in this announcement (if needed) as they are typically the biggest loans with low interest rates (<10%) and a long tenure. Any other loan should also be judged on similar parameters.

Will your loan EMI increase after deferment option?

Yes most likely. If you use the deferment option the interest amount accumulated on the deferred months will have to be adjusted. Which means you will have to pay more when your regular repayment starts. So either your accumulated interest will have to paid in one go or it will be distributed along the remaining tenure of the loan.

I have prepared a sheet to calculate the impact of using the deferment option. Please input your loan amount, tenure and interest rate to check the impact and your revised schedule.

Ex: If you have a loan of 3,00,000 at 12% interest and 18 months remaining the impact will be as follows.

		Deferment options
	Current schedule (to be input)	Paid in March but not in April and May	No payment from March to May
Loan outstanding on 1st March	*3,00,000*	3,00,000	3,00,000
Remaining tenure in months	18	18	18
Interest rate	*12%*	12%	12%
Last EMI date	Sep-2021	Nov-2021	Dec-2021
Current EMI	₹ 18,295	₹ 18,295	₹ 18,295
Revised EMI	₹ 18,295	₹ 18,662	₹ 18,849
Total amount paid	3,29,303	3,35,554	3,39,281

Do you have to inform the banks?

Yes you have to. While some banks like SBI have automatically deferred the loans every bank will have its own policy. Its best to check with your bank/financial institutions and inform them in writing.

The bank may ask you the reason for deferment and deny the option to you. So take your documents or any other supporting evidence to show why you need deferment before meeting them.

What if I paid/not paid in March and what happens to my credit score?

Since the announcement came in the last week of March and applies retrospectively for all loans outstanding on 1^st March 2020 many people would have paid the installment for March. If you have paid your installment for March then you need to discuss with your bank. They may be able to adjust this amount for future payments along-with deferment for April and May.

If you have defaulted on your March installment for some reason you should immediately contact your bank/lender. You can get your loan adjusted retrospectively for March 2020 and escape being reported to credit bureaus.

Your credit score and credit history will not be impacted if you choose this option but continuing regular payment may boost your credit score. So this option should be used only if you are facing huge uncertainty.

Conclusion

The loan deferment option is a good option for those who are facing huge financial uncertainty. For all those who can repay their loans comfortably should continue with their regular schedules.

PS: This post is curtsy my good friend Abhishek. You can follow him on twitter @bhartiya_abhi

PS2: This is the link to his medium blog.