[Vtach]

Originally Posted by autotranny

Many baseless allegations being raised against banks.
Banks insisting on Guarantee - The Bank's primary aim while assessing a loan is to ensure that the repayment is guaranteed. Afterall, we are dealing with people’s money and cannot do things on our whims and fancies.

I thought a bank's primary aim, as of any business venture, is to earn money for itself.
That those who help it do so also benefit is an unavoidable happy coincidence but not the primary goal. Kinda like cattle getting happily fed in lieu of providing milk, labour & meat to the farmer . Unless it's a no profit/no loss organization. Do we have such a bank here?

If Banks really cared as much about people's money as is claimed here then they would offer at least inflation matched deposit interest rates if not inflation beating ones. I give you X amount of money, you use it to lend further and earn money for yourself; and I get back less than X's "market value" one year down the line.. hmm why does that sound like NOT caring about people's money at all?

And as with any other trade, there are business risks that have to be taken, by the entity undertaking that venture. This whole "guarantor" spiel is just to palm off a part of the risk to some other hapless chap while continuing to corner the possible gains for oneself. If fairness would be the criteria, then they should include incentives for the guarantor when the loanee pays up. Do we see that happening?

And oh, bank officials at various levels do things on whims and fancies all the time. It just takes some time to come to general public's notice, if at all. PNB to Shri Neerav Modi & co, multiple banks' loans to Shri Vijay Mallya, Canara bank to Shri Jitin Mehta of Winsome diamonds fame, SBI to ABG shipyard, Andhra bank to Sterling Biotech, BoI to Shri Vikram Kothari of Rotomac Global, ICICI to Smt Chanda Kochar/Videocon, IDBI to Shri Chinnakannan S of Aircel are just some that come to mind....I mean we're getting buried under a literal avalanche of their whims and fancies.

These have managed to come to public domain, God only knows what all is not known yet.

All that IS people's money, isn't it? So no, I don't buy this argument of "keeping the depositors interest on top".

I have nothing against the esteemed member here please; I know you don't make the Banks' policies but they have to be called out for the self serving hot air that they are.

[Gansan]

^^ The reason is elementary. Interest rates on deposits and on loans are fixed by the RBI which all banks have to follow. There is not much scope for leeway there.

Apart from the depositor there is one more very important person in the equation whom you are forgetting. The shareholder. The bank pays interest to the depositor, but must make a profit to satisfy the shareholder.

All banks are now companies. Which do business, pure and simple. So don't expect altruistic motives.

[Capri89]

Banks can lend at varying rates depending upon the credit worthiness of the borrower.

Thus rates are different for housing loan (being a priority sector), car loan or personal loan. Even within the above rates vary significantly. I recently found out that while I got a car loan @ 7.8%, there were persons who got it @ even 14 %.

In addition banks have other income streams like consultancy, fixed fees, no minimum balance charges etc.

Banking is no more a boring business, though, it should be one.

[Hbh]

I had to give names of 2 people as guarantors for my car loan that I took from a nationalised bank. Do private banks also require guarantor?

Also, I watched a video from a youtube channel called LLA in which they explained how these new app based loan companies work. Apparently, their whole business model is to advertise and sell loans targated at young working class people or even students with little to no background check or paperwork. They charge high interest and hidden charges. When someone doesn't pay, they go directly after their personal life, threaten them, message their friends and relatives on social media and show up at their home or office. I'm sure we have all seen these 'pay later' apps and received personal loan calls. I get them a lot.

[invidious]

Originally Posted by aargee

Things aren't rosy even if you don't sign! Why?

It seemed that these banks were trying hard to recover whatever they could with whomsoever this ex-colleague had shared the contact number. They adviced me not to take it seriously as long as I haven't signed anything.

.

I had not even given my name as a contact! I still got a few calls from a bank asking if XYZ still lives in my building. If I could go down and give him my phone so they can talk!

I guess just found someone with the same address and decided to call.

[Naetik30]

While banks deserve all the bashing, there are some not-so-funny stuff done by our well-known oh-so-good corporates.

I started my career with one of the major IT-service providers (W***O) in the year 2004. While I am for ever thankful for the type of work and team I got to work with, there were some pretty shady stuff done.

So, we were about 60 engineers who joined the company in 2004. All fresh out of engineering with 80%+ scored by all of us. The company had a policy then, not sure how it has evolved now.

New employees had to make a deposit of INR 75000 with SBI. This would be forfeited to the company, if the employee decides to leave soon. For most us INR 75000 was a big amount at that time. Given our take home was less than 12000 per month.

So, the company so-thoughtfully came up with another 'solution'.

It had a tie up with SBI to lend the employees - INR 70000. The employee has to pay INR 5000. The total of INR 75000 was held as a deposit with SBI itself, which would be forfeited in the event of employee leaving the company.

There was a monthly deduction of interest for the INR 70000 loan. If we stayed with the company, the FD would mature and the proceeds would be used to close the loan.

Leaving out the legality of this issue. I would like members to take it from an ethical point of view. Also, wonder if any of the new age kids would even sign up for this. So, when I see junior engineers jump jobs, I am not bothered. You got to do, what you got to do.

PS: If remember correctly almost all of us stayed at the company until the period expired.

PPS: The way the salary was structured by the company to keep PF as low as possible, is another story. The company running a private PF trust was yet-another story.

This from a company, that always told stories about how Mr. AHP was so ethical.

PPPS: I am not supporting any of the competing service providers here. How an FIL of a would-have-been British PM hounded out a CEO of 'his company?' is yet-yet-yet-another story for another day.

[Capri89]

Originally Posted by Naetik30

While banks deserve all the bashing, there are some not-so-funny stuff done by our well-known oh-so-good corporates.

I started my career with one of the major IT-service providers (W***O) in the year 2004. While I am for ever thankful for the type of work and team I got to work with, there were some pretty shady stuff done.

So, we were about 60 engineers who joined the company in 2004. All fresh out of engineering with 80%+ scored by all of us. The company had a policy then, not sure how it has evolved now.

New employees had to make a deposit of INR 75000 with SBI. This would be forfeited to the company, if the employee decides to leave soon. For most us INR 75000 was a big amount at that time. Given our take home was less than 12000 per month.

So, the company so-thoughtfully came up with another 'solution'.

It had a tie up with SBI to lend the employees - INR 70000. The employee has to pay INR 5000. The total of INR 75000 was held as a deposit with SBI itself, which would be forfeited in the event of employee leaving the company.

There was a monthly deduction of interest for the INR 70000 loan. If we stayed with the company, the FD would mature and the proceeds would be used to close the loan.

Leaving out the legality of this issue. I would like members to take it from an ethical point of view. Also, wonder if any of the new age kids would even sign up for this. So, when I see junior engineers jump jobs, I am not bothered. You got to do, what you got to do.

PS: If remember correctly almost all of us stayed at the company until the period expired.

PPS: The way the salary was structured by the company to keep PF as low as possible, is another story. The company running a private PF trust was yet-another story.

This from a company, that always told stories about how Mr. AHP was so ethical.

PPPS: I am not supporting any of the competing service providers here. How an FIL of a would-have-been British PM hounded out a CEO of 'his company?' is yet-yet-yet-another story for another day.

Not even 1 out of the 60 engineers could blow the whistle then ? That is a shame.

Reminds me of a case during my tenure in Saudi.

There was this company Saudia Catering, serving aircraft meals and beverages. Almost a monopoly. They weren't paying overtime to employees for extra work done. This was going on for several months. Two Filipino employees went to the labour court and won the case. They were terminated. But the company had to pay up for all employees in the payroll back wages for overtime. These two were happy that their stance benefited all the others.

[Naetik30]

Originally Posted by Capri89

Not even 1 out of the 60 engineers could blow the whistle then ? That is a shame.

Reminds me of a case during my tenure in Saudi.

There was this company Saudia Catering, serving aircraft meals and beverages. Almost a monopoly. They weren't paying overtime to employees for extra work done. This was going on for several months. Two Filipino employees went to the labour court and won the case. They were terminated. But the company had to pay up for all employees in the payroll back wages for overtime. These two were happy that their stance benefited all the others.

A shame in indeed. If even one of the engineers had blown the whistle then, against that small company, I am sure the government of India, karnataka and even the BBMP would have stood behind us and taken the company to task.

The government would have ensured that the case would be fast tracked, got ED to get back our FD. .

A shame on us newbie engineers indeed.

[Gansan]

^^ Taking a bond for s specific amount in lieu of serving for n number of years is valid if the company incurs any training cost towards the fresh recruits. But the contract will have to specify what the company will give if it tells the employee to go before the specified period as well. In short, there should be natural justice in the contract. Else it won't be legally valid. But an individual can hardly take the legal battle to a giant corporation. That is another story.

Similarly running a PF trust is allowed under the EPFO rules provided the company satisfies certain conditions. The accounts will be subject to audit by EPFO as well as statutory audit. But if the company reports losses in the books for four continuous years, the trust must be surrendered to the EPFO. Thereafter it can't be taken back, even after the company turns profitable again.

[thefastelephant]

Speaking from personal experience of mine. Signed once, literally on a paper document for one of my parent's Housing Loan. This is when I was 3 months on after passing college and taking up my first job at an MNC with really low pay back in 2016.

Come 2020, lockdown hit, 2 EMIs went overdue by 50 days.

Suddenly Jan 2022, my CIBIL showed this instance. I mean, given my income I would easily be rejected for this loan if I applied myself but a guarantor is basically a bait to lenders to enforce recovery by harassing someone in contact or close to the applier.

It was really annoying and put a permanent dent in my credit history. Never ever be associated to a credit line unless its for yourself. Just my personal experience.

[TheBigV]

Originally Posted by RedTerrano

A friend in need is a friend indeed eh?

Well, one Rajendra Raut was such a friend indeed. When his buddy Kiran Bhatlawande wanted to avail of a loan to purchase a car, he happily signed on the dotted line and stood guarantor. Little did he know he was signing his death warrant.

Loan disbursed, car delivered.
However, Kiran did not repay the EMIs.
Eventually the bank initiated legal action and Rajendra was shocked to get the court notice. Unable to believe what was happening, he took the matter to the police station.
Again, little did he know he was jumping out of the frying pan into the fire.

At the police station, API Dyandev Nikam and Hawaldar Sachin Barkade demanded moolah to keep him from getting arrested. Cherishing his freedom, Rajendra did cough up 7-8K but still the duo in Khaki continued to pester him for more.

Absolutely fed up, Rajendra contacted Kiran and after sharing the whole sad saga with his friend, begged him to repay the due loan amount.
Shockingly, Kiran in turn threatened to kill Rajendra.

All this was too much for Rajendra to cope up with. Seeing no other way out, he hung himself.

https://www.punekarnews.in/pune-two-...oan-guarantor/

I have never understood this bank policy.
Any vehicle purchased on a loan is hypothecated to the bank. In case of non repayment, they can repossess the vehicle and auction it off to recover the dues. Same is applicable to real estate as well.

When their monies are reasonably protected, why insist on an additional guarantor? Is it even legal?

As a Banker, I think I am qualified to reply. Banks normally do not insist for guarantor in retail loans. But if financials or past repayment record of the borrower is weak, banks may insist for extra guarantee. In case of non repayment by the borrower, as per the guidelines laid down by Supreme court, Guarantor has to make repayment. In this case, the only culprits are the corrupt policemen. If borrower doesn't pays, GUARANTOR CANNOT BE ARRESTED . Mr. Rajendra was an honest, law fearing citizen and the policemen exploited him so much, that they drove him to suicide. Attitude of his friend, was the last straw.
During our training, we were told to think twice before agreeing to becoming guarantor to even your brother. So please be very careful before becoming a guarantor in any kind of loan.

[Capri89]

Originally Posted by thefastelephant

Come 2020, lockdown hit, 2 EMIs went overdue by 50 days.

Suddenly Jan 2022, my CIBIL showed this instance.

There was a EMI moratorium for 6 months during the 1st lockdown that shouldn't affect your CIBIL score. Please do take this up with the lender.

[thefastelephant]

Been through the documentation and process, its a fault from my parent's end. Took care of it now. But still hurts to know this will always show in my credit history. Sadly!

The annoying part is, its gonna still be there and all cos' of an innocent or a naive signature (and emotional manipulation)

[V.Narayan]

My condolences to the family of Late Rajendra Raut. He was clearly a well meaning man innocent to the ways of the world. The article does not {cannot} tell us what social pressures he went through at the time he was asked to be a guarantor, what his life long links were to the borrower that made him comfortable with such a step. I wouldn't judge him. In India it is common to seek help from each other and till banks started giving consumer loans, 25 years back, the only source of reliable credit was your network of friends and family.

Even the astute amongst us {which I flatteringly consider my self} allow ourselves to get taken for a ride. I once invested a large sum in one of my wife's batch mates and best friends tech business. A friend I had known for decades. Someone whom we had helped get married and who till then had a track record of being a successful entrepreneur. There was no sign that he will cheat us. My mistake was to invest without doing the fairly thorough due diligence homework I usually do. There were other senior industrialists investing too which added to the comfort. But frankly his sales pitch was so good over so long that my ego got all puffed up and came in the way of doing my due diligence. What we didn't know, thanks to my cavalier approach of 'yeh tou hamara dost hai' {oh this chap is my friend}, is that his business was already hemorrhaging under the surface and he was collecting funds to stem the collapse. And in two years collapse it did and my investment with it. I'm grateful for the lessons he taught me.

Saying no to relatives and friends can be difficult. And in our culture where we are not taught to say no it is even harder.

The other thing I learnt is that money, gold and land turn heads 180 degrees and ethics sink out of sight. The best amongst us cannot predict how someone's behaviour towards us or others will change when money, gold or land are involved. Here I have not been directly affected but for better or worse been compelled to act as arbitrator in good faith between warring relatives.

[autotranny]

Originally Posted by Vtach

I thought a bank's primary aim, as of any business venture, is to earn money for itself.

That's exactly what I meant, The Bank's primary aim while lending is to ensure that the money is repaid; if not, it’s a direct write off in the Bank's P&L. Upon reading it again, I realize that my next sentence about people's money must've given a false pretense about our noble intentions. It is a business after all, and everyone is here to make gains. That said, we should also remember that banks have been the backbone for many genuine industries/businesses throughout India, lending money under various developmental schemes.

Originally Posted by Vtach

And oh, bank officials at various levels do things on whims and fancies all the time. It just takes some time to come to general public's notice, if at all. PNB to Shri Neerav Modi & co, multiple banks' loans to Shri Vijay Mallya, Canara bank to Shri Jitin Mehta of Winsome diamonds fame, SBI to ABG shipyard, Andhra bank to Sterling Biotech, BoI to Shri Vikram Kothari of Rotomac Global, ICICI to Smt Chanda Kochar/Videocon, IDBI to Shri Chinnakannan S of Aircel are just some that come to mind....I mean we're getting buried under a literal avalanche of their whims and fancies.
These have managed to come to public domain, God only knows what all is not known yet.
All that IS people's money, isn't it? So no, I don't buy this argument of "keeping the depositors interest on top".

I can safely say that there are millions more that never come to light; but what you are mentioning here is about corruption in the banking system v/s what I was mentioning was that asking for a guarantor is not according to whims and fancies of the banker. There are policies around lending, which we are forced to follow. PSU banks have been generally slow to adapt to these things and still find having a guarantor more comforting.


Anyway - if I have to sum up my thoughts on the lending market in our country -

a) PSU Banks (e.g. SBI, Canara, PNB etc.) –
• May insist on Guarantor, and tedious paperwork; but offer lower interest rates.
• They will not have any loan repossession agents. You will not get threatening calls, let alone any violent behavior.
• They follow the time tested legal path to recovery.
• However, be mindful that if you have signed up as a guarantor then you are obliged to pay and there is no way to wriggle out of your responsibility when things go bad. Your intentions whether it was to help someone, doesn’t really matter when it comes to repayment obligation.

b) New Gen Banks (e.g. HDFC, ICICI, Axis) –
• They turnaround loan requests the fastest and at pretty competitive interest rates.
• They rarely insist on guarantors (other than for certain profile of customers).
• However, owing to the sheer volume of loans they process, they generally outsource their collection to agencies (loans > 30 days overdues). Unfortunately, the senior management at the Bank have no/limited control or ownership on what happens thereafter.
• Even if someone has given your name as reference while taking the loan, expect to get calls coercing you to pay, even if they can’t do anything against you legally. They are just hoping for the best.
• However, if calls get too irritating you can always raise a complaint to the Bank. There will be a nominated person within the Bank to address such customer complaints. Their contact addresses/emails are mentioned in the bank's homepage.
• Also, there is a clear escalation matrix. If the complaint is not resolved within reasonable timeframe, then it can be escalated to the Banking Ombudsman (contact details available on RBI website). You are assured of a resolution then.
• On a side note, in HDFC, there is a channel called MD Complaints (I can’t remember the email address now). If any complaint goes to this id, then rest assured everyone will be on high alert starting from the top to the bottom.
• However, again the thing to remember is if you have signed on as guarantor, then you are obliged to pay. Anything else is just a minor irritant that you can brush aside or resolve with proper escalation.

c) Private Lenders / Money Apps / Fintechs
• Ideally I shouldn’t have clubbed these three. It is assumed that a private lender is generally an unscrupulous person who is a goon, well connected to police etc. to threaten you using illegal means. If you have to deal with them, then god save you.
• Money Apps and Fintechs are still evolving in our country and hence have limited regulatory oversight at this point. Lot of stories are being shared about some of them using illegal means to recover money.
• In any of these cases, my advice is to go to the police and hope for the best; but you all know how that works.