By Patricia Mukhim
Those who have walked to a bank wanting to get a loan to start an enterprise know what the experience is like. Firstly, no bank would entertain you if you do not already have an account with them. Fair enough. Perhaps that’s necessary in order to get an account of the financial history of the person and thereby gauge the paying capacity of the prospective borrower. But merely having an account with any bank does not necessarily guarantee you a loan. Not even if you are an account holder with the bank for over two decades and have a history of not defaulting on previous loans.
The reason? “Reserve Bank of India guidelines,” is the standard reply. And these guidelines are as whimsical as the weather. So one day you may be able to get a loan with a fairly less amount of paper work but the next day it could be an irksome affair and a lengthy rigmarole. And here one is not blaming the bank staff, many of whom are very friendly and helpful. I can’t however certify that they are equally friendly with illiterate, not so well endowed clients though. The RBI guidelines are meant to help the bank cover their backsides lest someone runs away with their money. Unfortunately the RBI is also a monstrous bureaucracy and many of those sitting at the top and taking landmark decisions may not even be aware of what happens on the ground. They have to depend on their juniors to fill their ears.
Let me narrate some experiences. A person (a fairly well known personality in the city) wanted a personal loan to the tune of Rs 1.5 lakhs. The person is a banker with a particular bank for over a quarter century. Incidentally she has no other account elsewhere save with that bank where she deposits the salary cheques and also all other cheques from various sources. The first word of caution from well meaning bank personnel is that personal loans are now discouraged. No reasons given. So what about car loans? Oh yes, car loans are usually sanctioned within a day. Good. So the policy of banks is to push in money into the most populist, yet environmentally destructive area. No questions asked.
But a personal loan for an exigency? No …that’s somehow not encouraged although the interest rates are fairly prohibitive at 15% per annum. However the bank agrees to sanction a personal loan to the person, as a special case, but on the following conditions. (1) A salary slip/certificate from the institution where the person works. And if you are not a government employee you are not even considered “salaried” in the real sense. And if you’re not salaried then you also have to have a guarantor even if the monthly deduction is a mere Rs 4500 and you earn a salary from all sources which is well over Rs 50,000. The guarantor must submit a copy of the bank passbook detailing the financial transactions for the last six months. (2) You need to give a list of all your worldly assets for the bank to do a scoring of your financial worth. Fine piece of exercise but faulty because one person may reveal all but another may concoct. Anyway that too is RBI guideline. (3) Then you have to submit a copy of your professional degree certificate. Don’t ask me why. But it made me wonder how a poor, illiterate person can ever get close to a bank. And you think the poor have no need of personal loan? Or that they cannot repay?
So why is the RBI demonising the micro-finance institutions when, if left to its own devices, the RBI makes rules that are very poor-unfriendly and encourages banks to tie their customers up in knots for petty amounts? But what is interesting is that while the small and marginal borrower (1.5 lakhs is not a big amount in today’s world) are put to so much of senseless rigmarole, the biggest borrower from State Bank of India, Mr Vijay Mallya can borrow over 800-900 crores of rupees without even entering a bank. The bank goes to him! And now that Mallya has defaulted on the much touted Kingfisher Airlines loan the State Bank of India finds that it has not sufficiently covered its risks. In short the asset scoring for Vijay Mallya must have been completely faulty. His UB breweries remain intact and are not charged for any loans he or his company has taken. So its alright to lend to Mallya with even secure mortgage. But if you and I, considered common persons (meaning not rolling in money and suspected to be potential defaulters) were to take a loan they will make sure that every asset is charged as mortgage so that they are not left in the lurch! And mind you, there is even a fine for paying off a loan before the stipulated time. So you’re damned if you do and damned if you don’t.
For the above reasons alone, anyone with self respect would prefer not to borrow from banks even if the banks are there precisely to lend to people in need with the capacity to repay. How else can they pay interest for savings if they don’t take risks and play around with the depositors’ money in safe areas? Do we often wonder why young people take up guns? I have met several who have genuinely tried to access a bank loan but have met with failure and turned despondent. So what financial inclusion are we talking about in this country? Who will the government include and who will it exclude? Just having a bank account for millions of people does not mean financial inclusion. Not by a long shot. Financial inclusion means that the weak and financially distressed are encouraged to start up small and medium enterprises with bank loans and with Government guarantees so that they are finally bankable as individuals.
Micro-finance institutions are accused of charging exorbitant rates of interest. But my experience from talking to people in the Marathwada region of Maharashtra and the villages of Andhra Pradesh is that they prefer to rely on MFIs because these send their workers to the people. The MFI workers/agents know the financial background and paying capacity of every person they loan to. They bring the bank to the doorsteps of people and do not take away their self respect by summoning them to the bank and making them wait for hours before someone talks to them. For some people self respect is about the only thing they have and value in life. Take that away from them and you turn them into a Maoist or some radical renegade. But those who occupy cushy positions in banks and push files will never, ever understand the common person’s woes. I wonder what sort of training these people undergo. They are as bureaucratic as the person in the government department, some even more so because they seem to enjoy the discomfiture of the borrower!
Government too is mouthing the financial inclusion mantra without understanding that the last mile must be met by the banks. And if the Government is trying to lure people to accept the Unique Identification System (UID) or Aadhar Card by promising them money in their accounts at the display of the Card, I dare say that this too is bound to fail in the long run. Those running banking systems in this country do not care for the poor who they consider not-bankable. The UID is merely an instrument designed to spy on each one of us and not to empower the poor.
So much for financial inclusion! It’s the biggest farce of the century sponsored by the UPA Government whose aam aadmi pitch is only for winning votes but which continues to patronise only the wealthy. Scamsters who are major defaulters will never pay for their sins. The poor will. A Raja and his cohorts are rare exceptions.
