INDImag – Contemporary fiction | Motivational short stories | Social stories | Short story criticism

“I believe that banking institutions are more dangerous to our liberties than standing armies.”
- Thomas Jefferson

In a recent Churumuri article ‘Till debt, defaultment and death do us apart‘, Mr E R Ramachandaran explores the moral and ethical responsibilities of financial institutions. The article and the comments make an interesting read.

Elaborating on my comments there, Credit Bureau(s) are a step in the right direction for India, no doubts about it. But it would be naive to hope they would solve mishaps like these (Mandya farmer’s suicide) in the short – medium term. Once setup and functional, these bureaus need time : Time for people to subscribe to the idea ; vendors at point of sale to warm up to it and be able to mine it ; and, enough time to get get a sizeable data that can be translated into creditworthiness. Add to that, the desi corruption monkey wrench — it will not be long before a convicted scamster ends up with a stellar score.

USA on the other hand, does have credit bureaus, 3 major : Experian ; Equifax ; Transunion, a relatively new FICO and, a slew of wannabes . They do act as a fiscal compass of sorts, but are they deterrents enough ? For the answer, look no farther than the sub prime mortgage mess there ; the US economy is on the brink of a recession. When you are talking of 8-10% of a $10 trillion dollar mortgage market, it is a huge pie to ignore. The result, premier prime lenders operate the sub prime markets as well, but under their bastard cousin aka affiliates’ name.

Subprime lending, also called B-paper, near-prime, or second chance lending, is the practice of making a loan to borrowers, who do not qualify for the best market interest rates because of their deficient credit historySource : Wikipedia

For Indians, nothing can top the insanity and sheer stupidity of Janardhan Poojary’s melas, a scam in the 90s, where the Government doled out money to the needy, with gay abandon and good realization that a vast majority of these cases would default on payments. The losses, eventually hurt the common man in the form of additional taxes, while the government washed it’s hands away. This farce has left a huge gaping chasm in people’s faith Vi’s-a-Vi’s Government participation in farmers’ needs. This, with the added Governmental lethargy, almost always results in the help being too little, too late — more of a compensation than a loan.

India does not boast of very many financial safety nets. In the absence of safety nets, the Indian Government needs to step in and participate-partner with the financial institutions ; hopefully in something semi proven and sane as in microcredit loans for the farmers. Microcredit operates with a relatively small capital and more of a community participation. Relatives and acquaintances vouch for one another and, prompt payment ensures bigger follow-up loan eligibility. Additionally, laws need to be enacted to safeguard against unethical creditor harassment — can be done, here and now. With the government’s skin in the game, the credit institutions, will hopefully, be deterred – assured enough to not resort to criminal ways….

@ Copyrights Athreya

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