Tuesday, December 9, 2008

Indian Banks: Lax Standards chasing growth?

(My Original Blog Post: -*http://www.onlineequitycalls.com/2008/12/indian-banks-lax-standards-chasing-growth/)

Lee's Dhaba

The picture below is a scan of an actual letter offering Rs 7.2 lakhs at 17% fixed rate for up to four years, with all sorts of processing fees...but there is no need of any documents.

...no salary slips, no document, no guarantor documents or bank statement...Just ask for it.

  1. If there is no documentation...why the 1% processing fee? Just put it in my account

  2. 12.36% service tax on interest...normally we tax income...now we have decided to tax cost...if I buy something with this money..I will pay another sales/service tax...and the bank will pay tax on the interest received...reminds me of Ronald Reagan who said:  Government's view of the economy could be summed up in a few short phrases:
    If it moves, tax it.
    If it keeps moving, regulate it.
    And if it stops moving, subsidize it.

  3. No documents means bad news...I will just say what money, when the time comes?

  4. The Rs 7.2 lakhs is 3 times the borrowers limit on the credit card...where is the credit department?

Now imagine if a customer banks with three or four institutions and they all had this offer. And competitive pressures have created such an environment...this is a recipe for trouble..the bank or the borrower...which means both.

Reminds me of the US when institutions were chasing customers so fast that the family dog was receiving a pre-approved $500 limit credit card.

This is another slippery slope...

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