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Originally Posted by Vtach I thought a bank's primary aim, as of any business venture, is to earn money for itself. |
That's exactly what I meant, The Bank's primary aim while lending is to ensure that the
money is repaid; if not, it’s a direct write off in the Bank's P&L. Upon reading it again, I realize that my next sentence about people's money must've given a false pretense about our noble intentions. It is a business after all, and everyone is here to make gains. That said, we should also remember that banks have been the backbone for many genuine industries/businesses throughout India, lending money under various developmental schemes.
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Originally Posted by Vtach And oh, bank officials at various levels do things on whims and fancies all the time. It just takes some time to come to general public's notice, if at all. PNB to Shri Neerav Modi & co, multiple banks' loans to Shri Vijay Mallya, Canara bank to Shri Jitin Mehta of Winsome diamonds fame, SBI to ABG shipyard, Andhra bank to Sterling Biotech, BoI to Shri Vikram Kothari of Rotomac Global, ICICI to Smt Chanda Kochar/Videocon, IDBI to Shri Chinnakannan S of Aircel are just some that come to mind....I mean we're getting buried under a literal avalanche of their whims and fancies.
These have managed to come to public domain, God only knows what all is not known yet.
All that IS people's money, isn't it? So no, I don't buy this argument of "keeping the depositors interest on top". |
I can safely say that there are millions more that never come to light; but what you are mentioning here is about corruption in the banking system v/s what I was mentioning was that asking for a guarantor is not according to whims and fancies of the banker. There are policies around lending, which we are forced to follow. PSU banks have been generally slow to adapt to these things and still find having a guarantor more comforting.
Anyway - if I have to sum up my thoughts on the lending market in our country -
a) PSU Banks (e.g. SBI, Canara, PNB etc.) –
• May insist on Guarantor, and tedious paperwork; but offer lower interest rates.
• They will not have any loan repossession agents. You will not get threatening calls, let alone any violent behavior.
• They follow the time tested legal path to recovery.
• However, be mindful that if you have signed up as a guarantor then you are obliged to pay and there is no way to wriggle out of your responsibility when things go bad. Your intentions whether it was to help someone, doesn’t really matter when it comes to repayment obligation.
b) New Gen Banks (e.g. HDFC, ICICI, Axis) –
• They turnaround loan requests the fastest and at pretty competitive interest rates.
• They rarely insist on guarantors (other than for certain profile of customers).
• However, owing to the sheer volume of loans they process, they generally outsource their collection to agencies (loans > 30 days overdues). Unfortunately, the senior management at the Bank have no/limited control or ownership on what happens thereafter.
• Even if someone has given your name as reference while taking the loan, expect to get calls coercing you to pay, even if they can’t do anything against you legally. They are just hoping for the best.
• However, if calls get too irritating you can always raise a complaint to the Bank. There will be a nominated person within the Bank to address such customer complaints. Their contact addresses/emails are mentioned in the bank's homepage.
• Also, there is a clear escalation matrix. If the complaint is not resolved within reasonable timeframe, then it can be escalated to the Banking Ombudsman (contact details available on RBI website). You are assured of a resolution then.
• On a side note, in HDFC, there is a channel called MD Complaints (I can’t remember the email address now). If any complaint goes to this id, then rest assured everyone will be on high alert starting from the top to the bottom.
• However, again the thing to remember is if you have signed on as guarantor, then you are obliged to pay. Anything else is just a minor irritant that you can brush aside or resolve with proper escalation.
c) Private Lenders / Money Apps / Fintechs
• Ideally I shouldn’t have clubbed these three. It is assumed that a private lender is generally an unscrupulous person who is a goon, well connected to police etc. to threaten you using illegal means. If you have to deal with them, then god save you.
• Money Apps and Fintechs are still evolving in our country and hence have limited regulatory oversight at this point. Lot of stories are being shared about some of them using illegal means to recover money.
• In any of these cases, my advice is to go to the police and hope for the best; but you all know how that works.