[ArTigor]

A GPS Device tagged into Car for tracking the vehicle is obviously unethical, good that the court stepped in and reprimanded the bank. But I have a few more questions in mind:
1- How does the GPS device help in case of a willful defaulter? because a person with such mentality can anyway do away with the device and that's it!
As someone who really wants to keep the car untraceable can do it just any way, go to the rural hinterlands of India you will see my point.
2- If I am looking to buy a new car with a loan installing a GPS device with third party would void my electrical warranty right? Please correct me if I am wrong here.

Last year when I was looking for Car Insurance for my 4 year old Alto an Insurance Company(don't remember the name) was providing a GPS tracker device bundled in their plan, obviously it was an option with two other plans and not a compulsion.

On the part of such unethical practices, these private banks come up with various measures to have a bigger cut in the deal, may it be upselling things like GPS device or extra charges, I had a bad experience when I was looking for Financing my car, back in 2017 I was looking for a rupees 6 lakh loan and approached Axis where I have my salary account, They were charging me 9.5%ROI, I was fine with that but then came the deal breaker, the executive told me there would be a 26000rupees processing charge! that's almost 5% of my loan amount, and to add to that as I was a 'young individual'(a term they used) 27 years of age back then, hence another safety insurance has to be availed, so that in case if I die before completing the tenure of loan the Insurance pays the loan! this was costing me another 13000 rupees(despite I already having a heavy amount Life Insurance with me which would cover at least 3 times the cost of the car). So basically for a loan of 6 lakh rupees I had to shell out 39K rupees for a bank with whom I already had salary account and a Current account for years and few employees knew me well at the branch too! The same loan SBI provided at 8.2% ROI with absolutely zero processing charge, they only asked me 2500 rupees for 5x500 rupees stamp paper, and even here they gave me the option that I can myself procure the stamp paper and give them, by the way until this point I did not even have a basic account with SBI, so you see I was a completely unknown customer to them yet no processing charges and no hassles, yes the documentation was rigorous but quick, loan approved in 3 days!
I gave those Axis guys an earful and promised them to never take a product from them, which I adhere to date.

On the NPA and Bad Debt point as a mild justification to this GPS tracking issue, most of the NPAs and Bad Debt in banking today is not because of Untraceable assets, it is because of shady approval processes and background checks before disbursing loans.

[warrioraks]

Originally Posted by V.Narayan

I have a very different take on this which I suspect will not find favour with those who may have taken a car loan from a bank. I view RBI's approach to be counter productive in an economy that abounds in loan defaults, non-performing assets and a court system that makes it all but impossible for a lender, any lender or creditor, to recover his money, i.e. his asset, from a borrower who chooses to default for what ever reason.

I agree with the sentiment sir. But I think RBI's concerns are around charging customers for GPS rather than usage of GPS itself. The bank is still free to use GPS devices without asking the customer to pay.
This is also evident in the remedial measures taken by the bank. They are not taking GPS devices off the vehicles. Only the charges are being refunded.

Originally Posted by V.Narayan

PS :I have no professional or personal link to HDFC Bank.

Disclaimer: I am a customer of this bank, though not a very happy one

[sudeepg]

Every bank including PSU banks are trying to make more money. When I foreclosed my home loan with SBI, they offered to convert the SBI max gain account into a ready credit line, which I considered. But looking through the fine print, talking to the executive about procedures I quickly realized they were charging me to take insurance and charges to mortgage the property as collateral for the credit line.

Essentially, I pay for insurance to cover their liability and pay charges for mortgaging the property in their name as collateral security for the extension of credit line.

How's that? I firmly told them to close the Maxgain account and been happy since then.

[swami]

Originally Posted by V.Narayan

A bank in all developed countries has a right to know where its asset or other collateral security is and the right to repossess it. Instead of this rather anal view the RBI should make it mandatory for assets like automotives to be GPS tagged. This is the same worthy RBI that for two decades ignored the burgeoning NPA problem in the economy till an outsider like Raghuram Rajan brought it up as the single biggest factor that could derail the integrity of our financial system.

HDFC is not tagging the "asset". They are selling a GPS device - a physical device. Most of us will never end up using it since Google Maps tends to be better in most cases.
How will they even ensure that the borrower will keep the device in the car? If I intend to default, i can throw the device in the garbage bin and go on my merry way.
For HDFC this is a way of making a "non-interest" income. And that is what most branch staff are nowadays incentivised on. How many times have we received a call for an insurance / MF product to be sold? Compare that to how many times have we received for opening a FD / opening a locker facility etc. GPS device sales is not about tracking (imagine the privacy implications if HDFC Bank were to be able to actually track); it is about the direct bottom line impact of a commission sale.

[Stribog]

Originally Posted by anjan_c2007

HDFC Bank's auto loan department was in the news in 2020, when it was detected that half a dozen senior and middle level executives and the teams down below in the hierarchy were hand in glove and were indulging in unfair trade practices by compulsorily selling third party, non financial products to their auto loan customers....

Most banks around the world have had such scams, there are two ways to read it.

1) The senior management and the bank itself aren't culpable, banks frown against such practices yada yada yada

2) The one I subscribe to - Banks directly dont push for such practices, but they create immense pressures to generate sales, especially the arcane art of "Cross Sell". Salaries are tied into it, jobs can be lost because of it and this pushes the unscrupulous to indulge in malpractices, cut corners etc to sustain in such a system

From 2002-8 I worked and worked my way up in a private sector MNC Bank. Joined as a call centre rep but by the time I quit, was managing a direct (not DSA) team of 25 reps dealing exclusively with HNI. In 2008, to open their version of the HNI account you needed a min running balance of Rs 1 cr.

The kind of nonsense I saw in other competing teams, the below list is just sample

1) Selling high risk equity instruments to 80 year olds who had money but no conception of what was right or wrong, but just because you were kind to them and confused them, they invested money in a product that SHOULD HAVE never been sold to them.

2) Bundling - Too lazy to read a form and sign it when say opening a bank account? Then you get saddled with random nonsense like accident insurance, credit cards, supplementary cards etc (all of it generated financial incentives)

3) A HNI in trouble individual turns to you for advice in restructuring their personal debt, sell them a high interest, high tenure debt that does nothing to alleviate their concerns, but hey, in 2008 if you could sell a high ticket (say 20L) loan, you made the equivalent of your salary in that incentive alone. Customer be damned.

And this went on and on.

The problem is the system was perverse in that officially the bank condemned all forms of corruption, unethical behaviour etc (we had to sign forms on joining to this effect and then HNI sales guys had to do this yearly after some scams came out), but then if you did all this, it only reflected in your dashboard, which meant high incentives (imagine a 23 year old tier 2 MBA in 2008 making Rs 60,000 in salaries but Rs 1,20,000 in incentives!), fancy trips to Patayya with your family, awards, recognition etc. If you didnt do this, didnt cut corners, then your numbers reflected it, so you were called the foulest of words (F words, Hindi / Tamil / Malayalam words of a similar nature) on calls with 100 others (peers and subordinates) in attendance. This meant that you performed aka indulged in malpractice or perished (left to another bank where the cycle would repeat).

And this came from the highest levels of the APAC management (The push on xsell and numbers).

Whenever scams would bubble up, the customers would be offered hefty settlement sums, the person involved and their boss sacked and the whole thing hushed up.

And this was (I say was because I can't answer for the now, as I left the industry 12 years ago) the norm in varying degrees across banks, PSU banks were the exceptions here but their corruption came from the highest levels and was legion (one of the causes of the NPA crisis).

I personally refused to let go of my morals and quit in disgust and shifted lines entirely to Logistics and while back then it involved a huge pay cut, I do not regret it one bit. If I have one regret, it was switching from the logistics industry in 2001 to banking and wasting 6 years of my life.

Originally Posted by V.Narayan

A bank in all developed countries has a right to know where its asset or other collateral security is and the right to repossess it. Instead of this rather anal view the RBI should make it mandatory for assets like automotives to be GPS tagged. This is the same worthy RBI that for two decades ignored the burgeoning NPA problem in the economy till an outsider like Raghuram Rajan brought it up as the single biggest factor that could derail the integrity of our financial system.
[/i]

No developed country will allow private sector entities to unknowingly GPS tag their assets, it would be seen as a huge violation of privacy.

This would also raise questions such as, who monitors these GPS tags and movements?

Besides Indian delinquency rates (pre covid 2019 Data) were minuscule and do not warrant such measures.

In Dec 2019, the 60, 90 and 180+ delinquency bucket rates were, 2.4%, 0.9% and 0.2%

Banks consider only a bucket 180 and above as delinquent, and here we are sitting at a pretty 0.2% of all loans provided (auto).

In the same period (Jan-Dec 2019), the USA delinquency rate in the 180 day basket was around 0.4%.

Broadly speaking, if it is a clearly declared choice, linked to your premium (say, install this device, pay 10-15% lesser premium) then it should be allowed, and the customer has a choice, but what HDFC did here was a scam.

Tangential but on the topic of NPA's, NPA's weren't rising from 1993 (as your post says it was rising for 2 decades before Rajan 'warned'us about it). If anything in the period 1998-2006 they declined, stabilised in 2007 & 8, before exponentially exploding from 2010 on. This is mirrored by the factor, "Share of Debt owned by stressed companies" which was as low as 15% in 2008, rising to 40% by 2015 and continues to climb since, stabilising at the 45% mark by 2017. In other words, this alone tripled from 2008-2017.

Similarly the Gross NPA ratio which was around 10% in 96, went down to 3% by 2005, declining further to around 2% by 2008 and hit 10% by 2017 (with PSU banks @ 12% in 2017).

So no, it did not need an outsider like Rajan to tell us about it, because the burgeoning problem was recognised only by 2011-12, and Rajan took office in 2013. Under his watch it continued to climb exponentially mind you, but then again this was because of the asset review instituted by him.

Source - Credit Suisse paper on the Indian NPA crisis and the Economic survey of 2017, 18 and 19.

[charanreddy]

Having worked in a bank for the first 7 years of my career in a supposedly developed nation with high regulatory oversight, I can say for sure that banks are next only to used car salesman in ethics. There are many instances of banks Paying multimillion dollar fines due to corrupt and deceptive practices.

I am not surprised in the least bit of this happening in India. I took a car loan from Tata motors finance and not only did the company give me outrightly false information on interest rates and pre payment terms, they don’t have a redressal mechanism for customer to escalate. None of the banks or business in India are ethically strong and an extremely strong degree of vigilance is needed from our end.

[Stribog]

Originally Posted by charanreddy

Having worked in a bank for the first 7 years of my career in a supposedly developed nation with high regulatory oversight, I can say for sure that banks are next only to used car salesman in ethics. There are many instances of banks Paying multimillion dollar fines due to corrupt and deceptive practices.

I am not surprised in the least bit of this happening in India. I took a car loan from Tata motors finance and not only did the company give me outrightly false information on interest rates and pre payment terms, they don’t have a redressal mechanism for customer to escalate. None of the banks or business in India are ethically strong and an extremely strong degree of vigilance is needed from our end.

Out of curiosity, they should have given you the summary of the loan sheet which you needed to have signed (without which no loan or card can be extended), and this would have had the interest rates explicitly mentioned

was it oversight that you missed this? Because during the sales process yes banks lie, but even spending 10 minutes reading the critical documents during signing would expose those lies.

[KGS]

In my opinion, problem is not about GPS.

Problem is mis-selling. Any customer has right to know
1. what is being sold to him/her, what is the purpose of that "device" / "product".
2. Is there any option for customer to agree or deny with it.
3. Is there any option for customer to cancel it at a later date .

If these all points are not crystal clear, then the seller is hiding the crucial details and should be corrected by the appropriate regulatory authority.

Having lived my life in India (a developing nation with lot of improvement but still many areas of improvement) and UK (developed nation with most of the process almost sorted), I can vouch from my personal experience, for all my interactions be it with bank, shops, insurance companies, every time I was given the details and option to accept or reject it.

For a simple TV purchase , the seller offered me a care plan with a complimentary first month and an option to cancel that plan whenever I wished to. I used the plan for one month, found it to be not that useful and cancelled it with after a month without any hassle.

Relating this incident to HDFC saga, if HDFC was not giving all details and option for use to opt in or opt out. Then it is completely wrong in my opinion.

[anjan_c2007]

Originally Posted by V.Narayan

A bank in all developed countries has a right to know where its asset or other collateral security is and the right to repossess it. Instead of this rather anal view the RBI should make it mandatory for assets like automotives to be GPS tagged. This is the same worthy RBI that for two decades ignored the burgeoning NPA problem in the economy till an outsider like Raghuram Rajan brought it up as the single biggest factor that could derail the integrity of our financial system.

In an economy where the PSU banks sit on the highest ratio of non-performing assets to total assets in the top 20 economies is it a surprise that the worthies at RBI have once again trampled on a bank trying to protect its balance sheet. Those borrowers who don't like the GPS can go borrow from 50 other banks. It is not as if HDFC Bank is holding them to gun point.

PS :I have no professional or personal link to HDFC Bank.

While appreciating your concern about NPA's, defaults and GPS tagging of a movable property like a car, but if done on the sly by institutions like HDFC Bank and some others quoted by fellow members here by taking its customers for a ride is shady,scheming and bad business.

Yes, as you say the RBI needs to make GPS tagging mandatory for assets like automotives to lessen their NPA's, but even with the tardy statistics available for defaults and declaration of automotive loans as NPA's, I doubt that these amounts are colossal. Automotives are the easiest immovable assets to target, recover, seize and auction from loan defaulters by any auto finance company. Companies like Shriram Transport Finance Company (STFC) have grown and grown in size every year, with their core business in truck and commercial vehicle financing.

The massive NPA's about which you are expressing your genuine concerns, that have been growing in PSU and private banks are mostly from the wilfully defaulting industrialists, most of whom have been closer to the centres of power.

[charanreddy]

Originally Posted by Stribog

Out of curiosity, they should have given you the summary of the loan sheet which you needed to have signed (without which no loan or card can be extended), and this would have had the interest rates explicitly mentioned

was it oversight that you missed this? Because during the sales process yes banks lie, but even spending 10 minutes reading the critical documents during signing would expose those lies.

It was all hush hush. They said they needed 3 days to process my loan, the application was put up at last minute on 3rd day and it was a rush job from then on.. The loan welcome kit/ letter was also online download from TMF post a few days after availing the loan and not handed to me during the loan process. You could make an argument that I am equally at fault but I would expect a bit more transperancy from a corporate.. in an ideal world that is..

[SmartCat]

Banks should first surgically implant a tracking device on any industrialist who takes a loan of Rs. 100 cr or more. In the control room, alarm should ring as soon as such industrialists get close to an international airport.

Once that is implemented, car loan consumers will not have much issues with HDFC Bank's GPS idea.

[fhdowntheline]

Large institutions need to balance their interests with something fundamental to a banking activity, that is TRUST. Customers also repose their faith in the banks, usually over and above the 5 lac deposit insurance limit.

Hark back to an incident last year when SBI was publicly chided by the Finance Minister over the failure to operationalise Jan Dhan accounts of tea garden workers pending KYC. What would have been the possible risk of such a set of customers?

[msa.30789]

Being an industry insider, let me throw my two points on this issue.

1. Bank employees are being forced to push third party products due to the lavishing incentive everyone from top to bottom gets. Sit at the top, force everyone under you to sell this product and you get commission. Most of the banks top bosses get more incentives than salary. That has become the norm of the day.

2. Regarding selling of insurance policies tied up with loan, make life insurance compulsory just like property / vehicle insurance and mis selling will stop. Give an option of refund or premium. Insurance amount will automatically be displayed along with required processing charges in the bank website itself. This will lead to more transparency in banking.

3. Also, customers like us also should be aware and vigilant enough. In this case of HDFC bank selling GPS devices, if the executives push it as a compulsory product, ask for the relevant catelouge and / or quote from bank. Just put up a mail in the bank's website and with ombudsman, before actually availing the loan. Once, we are clear on what we need and what the banks offer us, banks also will stop mis selling.

[Ragavsr]

Originally Posted by V.Narayan

a court system that makes it all but impossible for a lender, any lender or creditor, to recover his money, i.e. his asset, from a borrower who chooses to default for what ever reason.
A bank in all developed countries has a right to know where its asset or other collateral security is and the right to repossess it. Instead of this rather anal view the RBI should make it mandatory for assets like automotives to be GPS tagged. If banks knew that the RBI-Court-recovery system can work in its favour on defaults

You , for a change ,on this topic have a surprisingly negative take on the recovery process in this country.

1. I routinely see bank auction properties being purchased and sold under Sarafesi Act. If the recovery % is low, it's because of the arcane bidding rules that screw any prospective buyer. A lot of banks don't display original title deeds for inspection before bidding and I have come across quite a few cases where the bank claimed the title deeds were lost after taking 10 % of the amount bid which is non refundable.

2. GPS tagging is a contentious subject even in developed countries and is the norm only for below sub prime and for those whose loan accounts were regularized after the vehicle was repossessed once. Not having a GPS doesn't mean the lender gives up the right to repossess it.

3. RBI , the government and courts are already working in the banks' favour by refusing to rein in (by outlawing ) their illegal and exploitative practice of asking blank cheques / undated cheques as security guarantee to foist a criminal case of cheque bounce while defaulting on a loan is a civil offence.

This whole concept of a cheque needs to be removed. There is no need to create money out of thin air and criminalize it , opening loopholes for banks and moneylenders to exploit people. Last I checked , 25% of cases clogging the courts was this nuisance.

Originally Posted by ArTigor

So basically for a loan of 6 lakh rupees I had to shell out 39K rupees for a bank . The same loan SBI provided at 8.2% ROI with absolutely zero processing charge, they only asked me 2500 rupees for 5x500 rupees stamp paper

Well, 5 years ago when I had to take an education loan to fund my expensive private medical education, Karnataka Bank (a private bank , not PSU) , around the time of sanction , pitched me an insurance policy as compulsory for which I had to pay 40000 yearly for 10 years on a loan of 9.7L . If one thing I am good at , it's basic math. Before my parents could even react ( they were co-signing the loan ) , I told the bank employee there was no way I would take a 9.7L as loan and give back 4L to the bank after placing a property as collateral. I can easily go to another bank and get any loan below 7.5L without collateral.

The next day the loan was sanctioned only with a term insurance policy that costed 3000. Never mind that I have never received a copy of the term insurance policy certificate over the years.

Disclaimer : I have never taken any loan to purchase a vehicle .When I did buy a car , I came close to taking one and then balked at the pre payment penalties charged.

The banking sector desperately needs new players that are ready to upset status quo with ethical processes while being very strict with underwriting processes. Basically, prime borrowers with good credit history and income shouldn't be screwed with illegal and arbitrary practices.

[kinetic]

Originally Posted by V.Narayan

.....

A bank in all developed countries has a right to know where its asset or other collateral security is and the right to repossess it. Instead of this rather anal view the RBI should make it mandatory for assets like automotives to be GPS tagged. ......

PS :I have no professional or personal link to HDFC Bank.

This approach will open up a pandora's box of issues. As someone who lives in a developed country (If we can still call America that), I can confirm that none of my vehicles have ever been GPS tagged by any lender, nor have I heard of this practice being legal. In fact, I remember a federal investigation into some lenders who were doing this a few years ago. If a customer's car needs to be repossessed for any reason, they have the owner's address. It's not as easy as showing up to the GPS coordinates if its being moved surreptitiously, but at least it doesn't fly in the face of all sorts of privacy laws. Given the more stringent EU privacy laws, pretty sure this isn't legal in EU either.

Its possible Indian laws allow it currently, or at least don't prevent it (I'm not sure), but I would absolutely not allow my vehicle location to be broadcasted to anyone except myself and anyone else of my choosing. If a lender installed one of these things in my car, I'd rip it out and throw it into a dump truck on day 1.