Rumour Raining!

IIPM Admission Detail

Of course rumour-mongering is ingrained in much of Indian culture. Earlier the bank was also hit by rumours in 2003. But then it was contained only in parts of Gujarat. This time it took a pan-Indian field. One of the reasons for this lies in the aggressive and innovative strategy of investments that ICICI Bank has been following ever since its inception. But then this is what lands the bank in trouble at times. According to Morgan Stanley, ICICI bank is most exposed to the US market in Asia. The bank’s retail portfolio has also been much frowned upon. Charudatta Deshpande, Head of Corporate Communications, ICICI Banks, tells 4Ps B&M, “ICICI Bank’s leadership position in most segments and its tendency to take initiatives has been wrongly interpreted as over-aggression and recklessness.”

Another reason for it being extra prone to rumours lies in the slightly negative brand image that it has acquired over the years, despite its stellar achievements in banking. The main source for this negative brand image is the violent and outlawed methods that the bank had deployed to deal with some of its defaulters. From being fined for hiring goons for loan recovery to harassed defaulters committing suicide, ICICI Bank has gone through it all. To sum it all no other bank in India has been so mired in controversy as ICICI Bank. But Deshpande begs to differ, “This has nothing to do with the bank’s image. It’s a systematic, well-planned effort of a cartel of brokers to hammer down its share price.”

Post the 2003 run-on in Gujarat, ICICI Bank recovered smartly and its stock made spectacular gains. But then its recovery was fueled by the bull run in the markets during next five years. This time the scenario is different. The crisis has been aggravated by the bearish Indian stock markets. The market capitalisation of Indian capital markets has plunged by over 51% from $1.81 trillion on January 10, 2008 to $894 billion on September 30, 2008 and the onslaught is expected to continue further. Therefore stocks of ICICI Bank will find it even harder to move up.

But ICICI Bank has aptly described the continued rumour-mongering as a form of economic terrorism. This can be seen in the case of fallen US investment bank Bear Sterns. Post its fall, many believe that it was rumour-mongering that brought down Bear Sterns. The investment bank had $18 billion in cash reserves when it went under. But rumours led to a run on the bank and sealed its fate. Now Bear executives accuse rival Goldman Sachs for spreading the rumour.

Integration of world financial markets and continued financial innovation have made banking an extremely difficult, complicated and dynamically changing job. Rumours have added to its woes. Their economic terrorism is helped by the Internet and advances in information technology and telecommunications.

So now do companies and banks need to keep rumour management teams and sophisticated rumour management systems to gun down this economic terrorism? Do management schools need to teach additional courses in rumour management? Should rumour management be a management discipline like Financial Management? Well, though a victim of it, Deshpande disagrees, “I don’t think it’s about having separate rumour management systems. It’s part of the crisis management system.” But then there are many more who may readily agree to it. Ask Steve Jobs!

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Programme :- SUPERIOR COURSE CONTENTS
IIPM INTERNATIONAL - NEW DELHI, GURGAON & NOIDA
IIPM - Admission Procedure
IIPM, GURGAON
IIPM : EXECUTIVE EDUCATION
IIPM’s 36th Glorious Year of Academic Excellence
Why Study Abroad When IIPM Gives You 3 global Advantages!