E.R. RAMACHANDRAN writes: The tragic suicide of a Mandya farmer, unable to repay an ICICI bank loan and allegedly following harassment by the lenders, resulting in a dharna in front of the bank for three full days in Mysore, raises a simple question: is all this avoidable with a bit more care?
# Shouldn’t banks disburse loans with greater scrutiny of the repaying capacity of the borrowers? Since the loans are given away at ‘Loan Melas’, there is normally a cavalier atmosphere under the shamiana and a serious assessment of the borrower’s credit record is found wanting.
# Shouldn’t the Reserve Bank of India, the government and/or financial institutions get into the picture before the loan is approved rather than stepping into after defaultment or death, instead of leaving the discretion of extending a loan and then recovering it entirely to the lending bank?
# Should the lending banks and institutions evolve guidelines for issual of loans? Advertisements shouting “Loans in 10 minutes flat”, “No guarantor required” are used to entice borrowers. Is it any wonder that the banks fall flat on their face? Shouldn’t there be a clampdown on specious claims?
# Shouldn’t the lending banks and institutions evolve a code of conduct for recovery of loans instead of vying with each other in the kind of tactics they employ to recover loans, like verbal harassment of the borrower and his family at odd hours, or physical abuse as was the case in Hyderabad recently?
While the onus is certainly on the borrower to pay up, something seriously seems to have gone wrong on all sides with the result we are seeing all too often the same cycle of enticement, failure to pay equated monthly instalments, phone and physical threats, goons being let loose to recover dues, and shamed borrowers commiting suicides.
Shouldn’t there be some kind of a regulator to rein in all sides?
Farming is a profitable business, but it’s not for me! Farmers are from decades entanged in debt trap and the bumper crops go to pay the interest. Also loans are used not for the farming purpose, but for needs like marriage etc.
Banks have to be more regulated: Banks, Hospitals ads need to be regulated.
Isn’t it unlawful to give loans without explaining the terms to debtors?
Isn’t it because of these banks’ carrots, targets and unrealistic deadlines that Recovery Agencies are forced to employ muscle men to coerce debtors just for missing one or two instalments!
If these banks want to enjoy the advantages of employing these tactics then they have to be affected by every adverse result also!
Make them liable for their agent’s criminal behaviour, it is because of them they act like that, they ought to be accountable too.
In this case, the actions of both the bank and the showroom that sold the loan and the tractor sans accessories, should be scrutinised!
If found guilty then stricter punishment should be given along with the statutory penalties.
It is the duty of the banks to lend money for the agricultual community and farmers should make use of these facilities in the rightmanner. As in any other field there are always risks involved, may be natural calamities, unforeseen circumstances etc. But none of these should make the person commit suicide. Banks should use civilised methods in getting back the money. On the other hand, some times unproductive ways pave way for such tricky situations. In acompetitive world, one should understand and venture into new fields by seeking advice from the right agency. In most parts our farmers blindly follow the system. They have not diversified their cropping pattern. Horticulture, floriculture – they don’t venture into these fields. With less investment they can get back at least what they have spent. The so-called leaders who appear on the scence never bother about such things. Thanks to a fe organisations, some have have gonein favour of natural farming and such other methods. Should not the concerned government departments like agriculture, horticulture, forest, co-operation, fisheries , animal husbandry enlighten the farmers? Any amount of compensation etc to family of the deceased cannot bring bacjk the victim. I always condemn the coercive measures adopted in any way, but a civilized society and concerned groups should also join hands in such cases.
If banks had access to a proper credit history of everyone, they might think again before handing out loans to all and sundry. Thankfully, India is getting a credit bureau soon. But the problem of coverage remains – only those with PANs will be in it.
ICICI = Irresponsible Criminal Investment Corporation of India
Remember Loan Mela Poojari?
that is the answer to the present day problems of the farmers…and the problem can be solved in 3 simple steps
1. bank provides loan for farmers
2. bank does not collect the loan installments from the farmer, but allocates 10 lac more to his mother, waives the loan= so we have an alive farmer, happy raitha sangha, happy politicians, sad financier.
3. burden is transferred to the hapless middle class salried person in the form of more taxes(deducted at source in salary)/ cess etc, so that farmer does not commit suicide due to loan recovery.
-this loan henceforth shall be called Daana!
-do not explain the meaning of tax to the poor farmer
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 in the short – medium term. Once setup and functional, it needs people to subscribe to it, vendors at point of sale to be able to mine it and, time to get enough data to translate the same into creditworthiness. Add to that the desi corruption monkey wrench.
USA on the other hand, does have credit bureaus, 3 major,a relatively new FICO and, a slew of wannabes ; but look at the sub prime mortgage mess there ; the US economy is on the brink of a recession. When you are talking of 8-10% of $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.
While nothing can top the insanity and sheer stupidity of Poojari’s melas, in the absence of an economic safety net, the government needs to step in and participate ; hopefully in something semi proven and sane as in microcredits for the farmers. Laws need to be enacted to safeguard against unethical creditor harassments. With the government’s skin in the game, the credit institutions, will hopefully, be deterred – assured enough to not resort to criminal ways.
Let me inform you about some facts:
Shouldn’t banks disburse loans with greater scrutiny of the repaying capacity of the borrowers?………….
Banks do their due diligence before any loan is disbursed. However it is the discretion of the lending bank to give or not to give. Secured ones are given based on some security and on the minimum guidelines of the RBI. However banks do not inform us on the minimum requirements and always take more than what is required as collateral. Banks are not fools to just give loans to anyone who walks -in to melas.
Shouldn’t the Reserve Bank of India, the government and/or financial institutions get into the picture ………….
RBI has issued guidelines on loan disbursement. Except you as a borrower is not aware of this and hence bank take advantage of this ignorance.
Advertisements shouting “Loans in 10 minutes flat”, “No guarantor required……..
These are usually for unsecured loans (absolute risk taking and speculation from banks) and for housing loans where the collateral value is very high and appreciating (House or Site)
Shouldn’t the lending banks and institutions evolve a code of conduct for recovery of loans……..
There is a code of conduct for recovery of loans of all types. Banks deliberately keep this info away from the customers and play on our sentiments and social status for recovery of loans.
Kindly have a look at this link for specific guidelines form RBI.
i a loan to estblishe my business i have tow house droped and 2cars