Swati CA

Swati_CA column in The Hindu Business Line

Saturday, December 29, 2007

Mutuo caveo

Mutuo caveo: Borrower beware

Hundreds of years ago moneylenders used to send “lathials” to collect their dues from poor farmers. The borrower put up with a lot of insult starting from expletives, physical torture and finally ended with the farmer’s cattle or crop finding their way out of his home.

Centuries down the line, the borrower’s situation hasn’t changed much!

“Own that new vehicle you have constantly desired, with a small help from us.”

“Our interest rates would surprise you.”

“Worried about paperwork? Calm down.”

Funny how the catchy advertisements by banks don’t mention a word about the rogues that arrive at your doorstep when you fail to pay up an EMI!

Welcome to the world of loans where borrowing can be a handicap, literally, if you were go by the events that have unfolded recently.

What has attracted more attention is not the quantum of compensation ordered recently by The Delhi State Consumer Commission, but the sheer brutality of the violence on an innocent person who was in no way connected to the loan doled out by the errant bank.



  • At 8:28 PM, Blogger Swati CA said…


    It is incorrect to accuse banks of treating all customers as defaulters. Out of 100 loans sanctioned, only 5 to 10 per cent turn defaulters, that too as chronic, wilful defaulters. This 10 per cent deserves bad treatment. Of this, 1 or 2 people might have turned defaulters for genuine reasons. This is like when police is lathi-charging the unruly mob, one or two good people also may get beaten up.

    This is inevitable. Ninety per cent of borrowers are promptly repaying the loans as per repayment schedule (originally agreed upon), otherwise it will amount to premium for dishonesty. Banks initiate legal action as has been hitherto, but of no use. The defaulters may not appear in the Court as the case will be decreed ex-party. The decree is valid for 13 years and the borrowers are further benefited by this method by gaining time. This type of system has not yielded any results in the past.

    Ramalingam Ayyappa

  • At 8:30 PM, Blogger Swati CA said…


    When the whole nation talks about financial inclusion, bankers advertise themselves as customer-friendly. But the recent incidents involving their recovery agents prove it otherwise. In my opinion, the recovery of loans should not be outsourced, as this involves customer relationship. When the bankers give so much of importance to “Know your customer” at the time of the introduction, why don’t they try to know the credit-worthiness of the customer. While the loan is lent by the banker, the recovery is done by a stranger, often using all wrong and violent methods.

    This is one of the reasons why the poor are afraid of banks and prefer the money-lenders, in spite of the high interest rates they charge. I am not defending the defaulters but I am against the methods adopted by the bankers to recover the loans. Banks should be made user-friendly. They need not disburse loans over phones. Let them know their customer and lend. They can have their own recovery departments instead of hiring unqualified persons. Let more people come to the banks and enjoy the benefits. Only bankers can help achieve financial inclusion. Let the bankers educate the borrowers and make banking a pleasure.

    R Thesinghrajan, Ooty


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