Notes to Myself


Notes to Myself

National Pi Day 2018

Today is National Pi Day (March 14th or 3/14). I had written a blog post on National Pi Day in 2009 which you can read here (the blog post was imported from my old blog and there seems to be some loss of content or distortion of metadata). I joined Twitter on 13th March 2009, just a day before the 2009 National Pi Day when I wrote that blog post. So I was hardly conversant with Twitter and hadn’t checked Pi Day messages. In fact Twitter itself was new at that time, so I doubt if there was much content around Pi Day.

Anyways, since then I have been following National Pi Day messages on Twitter every year and also on other social media.

So this year I thought of posting a collection of few interesting messages related to “Pi”.

Prof.  Arthur Benjamin is a well known Maths professor who has combined Mathematics and Magic through his program Mathemagic. All mathematicians find “Pi” intriguing and they like to explore various aspects of Pi. Prof. Arthur has composed a nice song on Pi which I recently saw on Youtube. Here is the song:


Matt Parker is another Math enthusiast who has several interesting videos on Mathametics on Youtube channel Numberphile. As we know Pi is an irrational number. It doesn’t end and goes on and on. As of now researchers have found out up to 2.7 trillion digits of Pi. That is 2,000,000,000,000,000th digit of Pi!

Coming back to Mike Parker…he printed first million digits of Pi and laid down along a mile strip on airport! He also discussed interesting points about Pi. Here is the video:

A comment on this video summarized the exercise pretty well. It said “Completely unnecessary, but absolutely awesome!!

Here are some interesting messages on Pi and Pi Day.

Pi looks as “PIE” in mirror

Humorous take on Pi – the “irrational number”

Today’s Google Doodle and message on Twitter handle of Google India. There was speculation on what the text message means. One possibility could be the next Android version (version P) could be named “Pi”

Unfortunately today’s Pi Day began with the sad news of demise of great theoretical physicist Dr. Stephen Hawking. Interestingly enough Pi Day also happens to be birthday of another great theoretical physicist, Dr Albert Einstein (or as a funny tweet called him, [mc^2-instein] ). And many people on twitter talked about this coincidence.

Then as usual, there were several offers celebrating Pi Day and offering things for $3.14


Here is a funny dialog between the “imaginary” number “i” and “irrational” number “pi”

And lastly, here is a funny cartoon on Pi being the lonely number 🙂

Humor for #PiDay Pi Day.

Question: “What did the palindrome and math lover say when she was offered cake?” Answer: “I prefer pi.”

Indian genius mathematician Srinivas Ramanujan had special affinity for Ramanujan. Lot of his equations involved “Pi” in very elegant and artistic manner. Here are a couple of examples:


I have few more resources on magnificent “Pi”, but will save it for the next year…till then Happy Pi Day!



Understanding The Punjab National Bank /Nirav Modi Scam

Understanding The PNB Scam!!!

What actually happened in PNB scam? Let’s start from the concept.

First, The Concept

Let’s understand how things work.

Some importer, let’s call him Nirav Modi or NM, wants to import pearls or diamonds and then sell them. The purchase requires money, so NM approaches a bank, say Punjab National Bank (PNB).

PNB says look, I’ll give you a loan but it will be like at 10%.

NM thinks hard and says, no, that’s too much. Wait, why don’t I take a foreign currency loan instead, after all I’m buying in dollars? Much lower interest rates no? I can get at LIBOR+2% and LIBOR is like 1.5% so I’ll have the money at 3.5%!

But who will give NM a foreign currency loan? A bank abroad? They don’t know NM. They don’t have any history of NM, so why will they give him money?

SO NM goes to PNB and says, boss, you’re my banker, so please help some foreign bank give me some money to buy diamonds. Say that you will guarantee my loan by giving me a “Letter of Undertaking” (LOU).

PNB now should be saying look, if you want me to give Rs. 100 cr. guarantee, you give me stuff worth 110 cr. at least. As collateral.

But PNB, for some strange reason, doesn’t ask for collateral. More on that later.

So now the foreign bank is ready to lend NM the money. Because PNB will guarantee it. And the foreign bank trusts PNB. Why does it trust PNB?

Because PNB sends a message on SWIFT – the banking message service – that PNB guarantees Rs. 100 cr. of money for 180 days for Mr. NM at an interest rate of, say, LIBOR + 2%. It’s like a message – written in stone, effectively – that says PNB will pay if NM doesn’t pay.

In fact the foreign bank trusts only PNB. So it gives the money to PNBs account with it, called by PNB as a “Nostro” – the account that PNB maintains with banks abroad, where the other bank will send money meant for PNB customers.

PNB’s nostro account gets the money.

PNB then gives NM the money from the Nostro account, usually paid off to whoever NM is buying his diamonds from. This payment is to someone outside India usually, to fund a purchase of diamonds or whatever.

Note this carefully: The other bank gives money to PNB’s Nostro account. Not to NM. They don’t care about NM. They only know that PNB has given a guarantee on the SWIFT channel.

Note: the other bank is nowadays mostly the foreign branches of Indian banks. Because the phoren banks have realized something sinister – that PNB’s guarantee is a strange beast that isn’t backed with much, but we’ll come to that

The foreign bank couldn’t care less about whether NM was buying diamonds or bitcoin – to them, PNB would pay back even if NM’s bitcoin wallet got stolen.

Why does PNB give a guarantee? Fees. Each year, a bank may charge upto 2% to give the LoU.

So What Happens When It’s Time To Pay Back?

NM has to get the pearls in India, sell them, receive the money and pay PNB. On the due date written on the LoU.

Then PNB will pay back the foreign bank saying okay, we got the customer’s money so we’re giving it back to you. With interest etc.

That’s what is supposed to happen. But in reality, things went a little berserk, it seems.

The Reality: A Bit of a Ponzi

NM might not pay back at all. NM might use the money to speculate in the markets. Or do something else.

What if NM in the above example simply didn’t have the money to pay back? Instead, he asks a PNB official to open ANOTHER LoU. For the amount owed plus interest. So if we had the first LoU at $10 million the second one is $11 million to cover the interest on the first.

The money from the second LoU is used to repay the first. It’s just rolling over of credit. Over and over. Standard definition of a ponzi scheme.

This can easily balloon into a larger amount, so large that it’s too much. In effect many such arrangements have turned into semi-ponzi schemes, with one LoU being opened to repay another and so on.

Which is what is likely to have happened.

We don’t know the details, but it looks like:

Nirav Modi took loans from foreign branches of Indian banks through an LoU issued by PNB

This was done through a SWIFT based LoU issued through a rogue employee (or many of them) at PNB

The orders never showed up in the core banking system for monitoring

LoUs were rolled over all the way since 2011, and possibly increased over time too.

The rogue official retired in 2017, and the replacement refused to roll over the LoU which came due in Jan 2018 because he couldn’t find the past transactions in the system

No rollover means a default, since there was no money to pay. So PNB quickly files an FIR saying oh goodness we have lost 280 cr. on the Jan LoUs

Then someone said, “Abeyaar, is there more of these not-in-system LoUs? Someone check no?”

Then someone checked.

Oh gawd. 11,400 crores.

That’s a lot of crores.

Everyone in the bank panicked.

Why couldn’t Nirav Modi just pay it back? He must have the original money no?

Because if it was ever intended to be paid back, the rollovers wouldn’t have been required. At some point, things got so out of hand that rollovers were required in order to stay current.

Typically this would not be a problem. If PNB had done things right, they would have had collateral worth the amount of guarantee, and they would have sold that collateral and paid the foreign bank.

But, and here’s the real issue: PNB didn’t have any collateral.

Why did PNB give a guarantee without collateral?

If you and I go for a loan to a bank, they’ll ask us for income proof, and collateral. Only small tiny personal loans and credit card loans come backed without collateral. For something of the order of 11,000 cr. you would think they would ask for collateral.

Especially after the scene with Mallya where loans to Kingfisher were given on nearly no collateral (though even there they had a house and some promoter shares pledged)

Why did PNB give this guarantee then? It’s typical – banks give guarantees for more the amount you give as collateral. Because business relationships etc. And then:

Because nearly every bank is doing it.

The loan was not a “fund based limit”. In a fund based limit like a term loan, the bank pays out money. In non-fund-based limits, the bank will only pay if someone else defaults or an event happens – like a Bank Guarantee or an LC or an LoU.

Meaning, PNB assumed that the foreign bank was giving a loan directly to Nirav Modi and that PNB needed to pay only in case Nirav Modi defaulted. So in the eyes of PNB it was always an “non-fund-based” loan.

But this is how a significant part of import financing works. They all rollover credit, and they all use LoUs for much higher than they can offer as collateral.

From my sources, the scale is huge. For every Rs. 100 that a bank has collateral, they will easily provide LOUs for upto 6x the amount. This is a real problem – that most public sector banks do not keep much collateral against non-fund-based limits given to importing customers.

So even if a bank has collateral, it’s nowhere near enough. And then, such unfunded liabilities are not even reported to RBI!

Basel Reporting: No Disclosure

PNB has “unfunded” exposure of 11,000 cr. they say. But they don’t even reveal it in their latest Basel III disclosure:

The funded exposure to “Gems and Jewellery” is shown at 1860 cr.

Unfunded to the same sector: 842 cr.

This doesn’t even add up. So, in effect, PNB didn’t reveal that it was funding massive quantities of “unfunded, contingent exposure”. They will of course pretend that they didn’t know, because the transactions weren’t in the core banking system.

Did Employees Hide it? Was PNB Responsible or was it a fraud?

Can employees be responsible? Could they have hidden the credit and the rolling over of LoUs? But honestly, how does a 11,000 cr. credit pass muster without top management realizing it?

Think of it – your nostro account with these other banks keeps getting big credits that add up to 11,000 cr. Will you not reconcile it in the accounting? The “why is this money even here?” question should have been asked by someone who audits accounts, one thinks?

And the SWIFT messages. It’s a specific kind of message. Why wouldn’t PNB audit the SWIFT trail? Reconcile it with the core banking system? How many more such skeletons will tumble if they do?

Their excuses are

Data wasn’t entered into the core banking system. (Of course, otherwise you would have had to report it)

LOUs weren’t authorized. (Hard to believe, because the amounts are very large. Surely someone on the top would know?)

The SWIFT system was illegally used. (Again, hard to believe that a bank like PNB would not audit its SWIFT messages regularly. Or its auditors. Or RBI.)

On the face of it, it looks like the ex-employee is being used as a scapegoat. It’s likely that a lot of people were in on this thing. And that it generated massive, fat fees for PNB all these years.

Fees wise: Imagine 11,000 cr. worth LoUs being renewed each year – that’s upto Rs. 200 cr. in fees that was all hitting PNB’s top line. You could bribe an employee to maybe give you a small increase – say 10-20 cr. but when you hit numbers like 11,000 cr. this is surely something the top management would know.

What’s the Scale of this scam?

While PNB reported it as a 11,000 cr. scam, they filed an FIR with the CBI for only Rs. 280 cr. This has probably expanded since then but even if the total outstanding is as much as that, there’s a good chance that the actual loss amount will be lesser.

All of it will be borne by PNB right now. Whether someone abused their SWIFT usage is not relevant, if PNB’s SWIFT message said they will pay, they have to pay if there is a default.

But think about the fallout. The problem was that some liabilities were not in the system. There could be more such LoUs. From the same branch or others. Other banks could have such LoUs too. It’s trivial to start looking – and we know that Nirav Modi will not be an isolated case.

Also, the issue was that the limits had no collateral behind them. If all banks are told to verify their non-fund-based limits and demand collateral against them (say at least 25%) then the scale would be absolutely massive. It’s not like this is happening only with Nirav Modi or Choksi. A very large number of importers of commodities have been doing this, and rotating credit. A change in regulation here can change the game dramatically for every other bank (and import account) in the system.

The simple point: this particular transaction will result in a lower loss than 11,000 cr. for PNB. Because of recoveries and such. But if RBI asks all banks to pull up collateral on such lending and stop such practices, the scale is many times larger.

What about the PNB stock?

It’s fallen 17%. But note that it already has 60,000 cr. of gross NPAs. Another 11,000 cr. will hurt it but not kill it. It won’t die – the government will take it over. Shareholders might suffer, but come on as a shareholder of a public sector bank you’re used to suffering.

The problem really is: There is never just one cockroach. When you go deeper, you are likely to find more dirty, dark secrets, and none of them will be any good.

PNB is gonna hurt for a while, but so are others who will find their books similarly tarnished once they investigate.

Will This Bring The Market Down?

Have you been living under a rock? Nothing will ever bring the market down, nowadays.

But the one thing that does bring markets down is the outflow of liquidity. What if so much of the “ponzi” credit – essentially money that was rolled over very month – is being invested directly, or indirectly, into stocks? If RBI tightens up, liquidity will pull money out of stocks, and that will hurt.

Of course, this hurts the fiscal deficit since PNB has to be rescued. So bond yields are up to 7.6% and therefore we’d avoid any long term funds or bonds. Short term it will have to be.

But overall, we wouldn’t worry too much. Just react, don’t predict. What would you do if stocks fell? Better to answer that than to say they will, or they will not.

(And no, not buying PNB)

Our View: Fix it.

This is the Indian public sector banking system. Fix it.

How can you have transactions on SWIFT outside CBS? Fix it.

Why would you not reconcile the nostro accounts? Suspend the auditors. Fire top management. Fix it.

Closing the door behind Modi, who’s already left the country, is probably useless. If you find fraud, invoke their personal guarantees, and file cases to attach their personal properties. After that, file in NCLT to make these companies insolvent. Take the hit, and try to recover.

Find out more such instances where collateral cover is too low. Find out if the LoUs or LCs are just getting rolled over or is the customer actually paying back through the Indian current account. And if not, demand more collateral to avoid further spread of the ponzi.

But this is quite unlikely to happen because the banking system is going to take massive hits now, and we’re going to have to deal with the fallout of really horrible systems. It’s amazing that our banks have been this lax, but they have been allowed to; with no bankers being investigated, the rot inside the banks has been ignored and instead, industrialists have been the target of outrage. It’s time to look at banks as malicious players too, and to fix that rot.

Note: Based on WhatsApp forward and publicly available information. Attributed to Deepak Shenoy, but I have not verified.

Pointers for Superior Stock Picking

Identifying the next big trend:


Assessing the Management and Business dynamics linkage:


Avoiding certain stocks:


And finally…

Metrics for Picking a winning stocks:



75 Hidden Gems…stock picks from Indian small cap

I contributed a write-up to this magazine.

Just got my copy…

Now reading all stock thesis in detail over the weekend. Look forward to lots of in-depth reading and analysis over the week end.

Good read: “Seat Belts, Condoms and the Indian Equity Investor” by The Eighty Twenty Investor

Here is an interesting blog post from The Eighty Twenty Investor titled: Seat Belts, Condoms and the Indian Equity Investor


Last year I attended a workshop on “Value Investing and Behavioural Finance” in which Peltzman effect and many such biases/effects were discussed. Behavioural finance is a funny domain. It is very very difficult, if not impossible, to change human behaviour.

My friend said to me during the workshop: “I doubt if I would be able to correct my behaviour after knowing all such behavioural pitfalls and biases.”

I said: “True, we will commit same mistakes and carry same biases. But now at least we will have a name for it!”

But it is good to expand our “Johari Window” and reduce unknown unknowns and convert them, if possible, to known unknowns. Even if we know what we don’t know, and/or what we cannot change/control, that is good enough.

To quote Socrates: “I know one thing, that I know nothing.”





Soul Curry: Interviewing God

I dreamed I had an interview with God. “So you would like to interview me?” God asked. “If you have the time,” I said. God smiled. “My time is eternity. What questions do you have in mind for me?”

“What surprises you most about mankind?” God answered…”That they get bored with childhood, they rush to grow up, and then they long to be children again. That they lose their health to make money…and then lose their money to restore their health. That by thinking anxiously about the future, they forget the present, such that they live neither in the present nor in the future. That they live as if they will never die, and die as if they had never lived.”

God’s hand took mine and we were silent for a while. And then I asked…”As a parent, what are some of life’s lessons you want your children to learn?”

“To learn that they cannot make anyone love them. All they can do is to let themselves be loved. To learn that it is not good to compare themselves to others. To learn that it only takes a few seconds to open profound wounds in those they love, and it can take many years to heal them. To learn that a reach person is not the one who has the most, but is one who needs least. To learn that it is not enough that they forgive one another, but they must also forgive themselves.”

P.S.: I do not believe in God…well almost. (At least not in the colloquial sense). But if a good message has God as an ‘Actor’, I don’t mind sharing it.


मला आयुष्यात मिळालेले वक्त्रुत्व स्पर्धेतले एकमेव बक्षीस ह्या गोष्टीमुळे मिळाले. (इयत्ता ६ वी मधे. तेही ३ रे बक्षीस). तेही वक्त्रुत्व गुणांपेक्षा ह्या गोष्तीतील भाबडेपणाला मिळाले असावे.

६ वी चे वर्ष माझ्यासाठी विशेष संस्मरणीय होते कारण मला हस्ताक्षर स्पर्धेत पहिले, चित्रकलेत दुसरे तर कथाकथनात तिसरे बक्षीस मिळाले होते.

असो. स्वतःचे कौतुक पुष्कळ झाले. आता गोष्ट सांगतो…
आटपाट नगर होते. तिथे एक राजा राज्य करत होता. त्याने आजूबाजूची लहान मोठी राज्ये जिंकून आपल्या राज्याचा विस्तार केला होता.

राज्याच्या तिजोरीत भरपूर खजिना आणि धान्यकोठारात भरपूर धान्य होते. एकूणच राज्यकारभार चांगला चालला होता. पण तरीही राजाला मन:स्वास्थ्य नव्हते.

आपण कुठे तरी अपुरे पडत आहोत असे त्याला वाटायचे.

एके रात्री तो असाच वेष बदलून राज्यात फेरफटका मारायला निघाला. जाता जाता त्याला एक झोपडी दिसली. त्या झोपडीतून त्याला गाणे गुणगुणण्याचा आणि काम करत असल्याचा आवाज ऐकु आला. इतक्या रात्री कोणी तरी तरी काम करत आहे हे पाहून राजाची उत्सुकता चाळवली गेली. तो झोपडीपाशी गेला आणि आत डोकावून पाहू लागला.

आत एक लोहार आपले काम करत होता. राजाला बघताच तो काम करायचे थांबला. त्याने राजाला ओळखले नाही पण तरीही कोणी एक वाटसरु आपल्या दाराशी आला हे पाहून त्याने राजाला बसायला पाट पुढे केला आणि प्यायला पाणी दिले. तो काम करुन दमल्याचे त्याचा चेहरा स्पष्टपणे दाखवत होता पण तरीही तो आनंदी आणि समाधानी वाटत होता.

इकडचे तिकडचे प्रश्न न विचारता राजाने त्याला थेट प्रश्न विचारला, “तुम्ही खूप आनंदी दिसता. ह्याचे कारण काय?” लोहार म्हणाला, “असेलही कदाचीत. ह्याच्याबद्दल विचार करायला मला कधी वेळच मिळाला नाही.” त्याच्या इतक्या बेफ़िकिर आणि निर्विकार पणाचे राजाला खूप वैषम्य वाटले. तो म्हणाला, “नक्कीच तुम्ही खूप पैसे मिळवत असणार, खूप नावलौकीक कमावत असणार. अगदीच काही नाही तर निदान देवपूजा आणि दानधर्म तरी भरपूर करत असणार.” लोहार उत्तरला, “भल्या माणसा, तू आत्ता जाणीव करून दिलीस तेव्हा मला जाणवले की मी ह्यातले काहीच करत नाही. खर सांगायचे तर हे सगळे करण्यासाठी माझ्याकडे वेळ आणि पैसा दोन्ही नाही. पूर्ण दिवस मी राब-राब राबतो आणि मिळेल तो सगळा पैसा खर्च करतो. मग मी हे सर्व कधी आणि कुठल्या पैशानी करणार?”

राजा चक्रावला. त्याने विचारले, “म्हणजे. तू मिळवतोस किती आणि त्या पैशाचे तू करतोस तरी काय?”

लोहार म्हणाला, “मी जे काही मिळवतो त्याचे ४ भाग करतो. एक भाग स्वत: खातो, एक भाग कर्ज फेडतो, एक भाग उधार देतो आणि एक भाग नदीत फेकतो. बस्स.”

राजा उतावळे पणाने म्हणला, “अरे बाबा असे कोड्यात बोलू नकोस. नीट स्पष्टपणे सांग याचा अर्थ.”

लोहार म्हणला, “मी एक भाग खातो म्हणजे एक भाग स्वत: वर, माझ्या पत्नीवर खर्च करतो.

एक भाग कर्ज फेडतो म्हणजे तो भाग माझ्या आई-वडिलांवर खर्च करतो आणि त्यांचे उपकार माझ्या परीने फेडण्याचा प्रयत्न करतो.

एक भाग उधार देतो म्हणजे माझ्या मुलावर खर्च करतो. म्हातारपणी तो माझी काळजी घेईल हीच त्या मागची स्वार्थी भावना आहे.

आणि राहिलेला शेवटचा भाग मी नदीत फेकतो. म्हणजे माझ्या मुलीवर खर्च करतो. आज ना उद्या ती सासरी जाणार. तोवर तिला सांभाळणे हे माझे कर्तव्य आहे. त्यानंतर माझ्या तिच्याकडून कसल्याही अपेक्षा नाहीत. हे सगळे करता करता आपण म्हणालात त्या गोष्टींचा विचार करायला मला वेळच मिळत नाही”

राजा काय समजायचे ते समजला. तो तिथून उठला आणि निमूटपणे निघून गेला.

मन:शांती मिळावी म्हणून काय करावे असा प्रश्न आता त्याला पडला नव्हता.

Good Youtube Channel for Indian Classical Music Enthusiasts

अनुजा कामत ही झी सारेगमप मध्ये एक स्पर्धक होती. त्यानंतर तिने संगीत शिक्षण चालू ठेवून नंतर युट्युब चॅनेल चालू केला.
तिचा “एकच गाणे पण वेगवेगळ्या रागात” हा व्हिडिओ मी नुकताच योगायोगानेच पाहिला.
त्यापूर्वी बरीच वर्षे माझा गाण्यातला रस कमी झाला होता (३-४ वर्षे तरी). पण ह्या व्हिडिओ नंतर मी तिथले बाकीचे व्हिडिओ पण पाहीले आणि मला तिचा उपक्रम आवडला!
भारतीय शास्रीय संगीताबद्दल माहिती देणारा एक उपक्रम तिने  केला आहे.
माझ्यासारख्या संगीत न शिकलेल्या पण संगीताची खूप आवड असलेल्या व्यक्तीसाठी खूपच उपयुक्त आहे.
त्यामुळे मी परत संगीताकडे वळलो असे म्हणायला हरकत नाही…

Anuja Kamat was a participant in Zee TV’s SaReGaMaPa. She later continued her musical training and went on to create a Youtube channel.

I recently discovered the channel when I stumbled upon a video by her reciting the same song in many different Ragas! That got me very interested. Before I watched this my interest in music had faded for few years (don’t ask why…very personal). But after this video I watched another initiative on her channel about Basics of Indian Classical Music.

For someone like me who is not trained in music but is a music lover, this initiative means a lot!

My love for music was rekindled!

31st December…1 year later

Things I wanted to say on 31st December 2016…but didn’t/couldn’t.
We are complete strangers now.
I don’t regret our time together or the separation.
You have earned a status that nobody (myself included) can deny or take away.
You are still my password.


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