Booming economy, Sleeping RBI and Consumer Suicides

The controversy over harassment by loan recovery agents just doesn’t seem to stop. The situation is so bad that even the ICICI bank page on wikipedia (http://en.wikipedia.org/wiki/ICICI_Bank) has links to several instances of use of “goondas” by the bank. There are horror stories of people being kidnapped and even driven to suicide because of harassment by the bank. Such instances not only discourage individuals to take loans but also create an atmosphere of general distrust of banks. This, obviously, is extremely bad for any economy because it diverts funds away from its most productive uses.

The reason for increasing number of such instances may not be obvious at first but dig a little deeper and it all falls in place. First of all, our economy is booming. This means some banks want to garner huge market share any which way before the saturation sets in. This includes compromising on loan quality and pushing loans to people who really cannot afford them. No wonder then, some banks have credit card activation rates (First time use of a credit card that has been sold) of as low as 30%, forcing them to offer “cash back” on first purchase.

Second, as always, RBI is yet to be stirred out of its deep slumber. Simple measures like getting a copy of schedules of charges signed by customer when opening an account can be of great help to harassed public. How many of us really know charges levied by our bank? Of course almost everyone has one or two experiences of being cheated by sales agents about charges. Yet, RBI fails to take any notice of them.

Third, our criminal justice system is hardly anything to rely on. Individuals just can’t hope to win a legal battle against banks who keep a coterie of lawyers on payroll just for the day when some unfortunate victim takes them to court. Even if some individual shows courage to complain against these banks, what chances he has of getting a verdict in his lifetime?

These factors make India a fertile ground for unscrupulous elements opening banks and looting innocent customers who have no reprieve.

But how does one protect oneself against such harassment. I think its wise to abide by age old wisdom- “live within your means”.If you genuinely need a loan, make sure that you can fulfill your commitments even in worst possible scenario. Then, if you are sure you can afford to take the loan, ignore offers of loans from banks with bad reputation and head straight to good old public sector banks. After all, some documentation and patience is surely better than being driven to suicide…

http://timesofindia.indiatimes.com/articleshow/msid-1315099,prtpage-1.cms

…or being murdered…

http://timesofindia.indiatimes.com/India/4_loan_recovery_agents_arrested/articleshow/2148758.cms