Getting credit from the bank is not as easy as it seems in bigger cities after the credit card revolution. Tele Callers don’t call you for loans so often. Even for Banks, not all loans are risk free.
Funds are allotted for general people by the Government, Policies are in place, but implementation is poor. Middlemen ask for their cut. Those who are need find it difficult to get a loan. Many of those who take such loans, give a lot of money to middleman and has no intent to return the principal too. They never mind interest rate or giving away some money to get the loan unethically.
High level of Babudom at local branch level of Banks makes it more and more difficult for ordinary people. More focus on red tapeism and less on actual due diligence too is one of the major causes of Bad debt cases. Bad Debt was always there. Banks find it difficult to keep track of such loans which eventually becomes bad debt. So they become very cautious while distributing loans. Which makes life difficult for those, who are in genuine need.
Life is not that tough for those who have secured admission in premium institutions. They get much easier loans for paying their tuition fees. Because Banks feel they will definitely secure a good job and will have the ability to pay back loans. It’s called as Scholar Loan Scheme (and similar names). If you see from Bank Perspective its considered as a Risk Free loan. Theoretically true. Scholar loan was considered to be low risk loan (if not risk free). That’s why it’s given with minimum hassles and less rigorous procedures. People get loans easily without showing any income certificate or a mortgage, which will be required in any other type of loan. Admission letter is sufficient to sanction such loans. Generally, SBI banks have a branch in each of the Premium institutions to get a majority of loan accounts.
But getting admission into a premium institution alone, can’t ensure integrity.
Recently a case came about IIM Ahmedabad branch of State Bank of India are searching for many defaulters. They all have taken education loan, taken a good job and are working in good companies. But they have decided not to pay their loan. This is not one off case, A similar case came up in 2006 with 20 such IIM Bangalore students. They are many cases which are still there in bank files.
Pointing out a certain institution is definitely not what I want to do here. It’s not about IIMA or IIMB. It is about mindset of people. It is about moral bankruptcy. Ethics in elite. At the most, I am questioning “need of money makes unethical” assumptions.
I am not even generalizing the people. Such people might be 0.1 % of population. But they are enough for damage.
We never focus on being Ethical. None of the entrance test does. These people are future of corporates and they all will be in important decision making positions. They will be taking decision, which we might not be aware, but will impact our lives. We get shocked when we hear cases like, Rajat Gupta, Enron, Union Carbides, Larva in Milk Solid, pesticide in cold drinks, heavy metals in our staple food. But these cases appear due to lack of ethics at every stage of life.
These People must be working at elitist corporate and are future leaders. Those who have chosen not to pay their own loans, which is less than their annual salary now will take decisions tomorrow. They will decide which all elements should go into your food and other items you use. They will decide where your hard earn money should get invested.
I strongly feel, Banks should name and shame them. Those who can’t manage their loan honestly, certainly can’t manage corporates and our future. Defaulters must realize they are committing an economic offense and technically are an absconding criminal.
As result for such bad debts for banks, procedure for loan becomes difficult; Many Poor find it difficult to take loan for farming and many activities which affects our economies.
Sorry but wrong and one sided analysis. SBI has raised interest rates arbitrarily 10 times over last 4 years to 14.50% for old customers. To new ones it offers at 10% and then traps you. SBI also works in a sarkari way and unilaterally increases tenure and EMI without ever informing you – you end becoming a slave to this bank because they work in the most sarkari way. Also, you are assuming everything is rosy for IIM guys – jobs have been lost, families have been destroyed by the economic collapse when the first jobs to go were the high paying ones. You have assumed a lot and it would be good if you did some research instead of taking a banks wailing for truth – they are crooks.
Are you one among those who have not paid back?!! Blaming the bank is easy; it’s ones moral obligation to repay the loan. No excuses there.
Are you really justifying defaulting on a loan? If you think SBI is a quicksand, don’t take a loan. Everyone has problems. That doesn’t mean people stop paying loans.
If you are not happy with your bank you have option to change it or pre-pay it.
I have always maintained the common man is more corrupt than the much maligned politicians. We break rules for our own convenience, we grease palms to get things done, we default on loans even when well off because there are no heavy repercussions.
After all the politicians and elected representatives are a reflection of the society they govern, not vice-versa.
My father is a banker and he has been telling me about student loans going bad since more than 10 years or so. In fact, student loan is the most risk prone loan these days. Especially the loans which students take for studying abroad. I have heard of examples where the student took a loan with his parents’ house as collateral, went to USA to study, found a job there and didn’t even turn back home. The bank finally seized the collateral and the parents were on the street. One can’t imagine how much people can be unethical.