Continued
from the previous post –
Transport –
borrowers from this category borrow mostly to purchase a vehicle.
They ply that vehicle and charge for the transport. They earn on
mileage. Their margins are over and above the cost of running (fuel,
maintenance) around 25% or more depending upon what quality of
transport it is. If they get good business in one year, they can
repay the loan. They are likely to suffer if there is no business due
to market conditions. Interest rate of 15% is no issue to this
category when they are busy with work.
Personal loans –
this is a third category in this category loan money cannot earn back
its own return. These loans are normally taken for sickness, surgery,
repairing of house, buying of home and such personal needs are
included. To pay back it and its interest borrower has to arrange for
money from some other source. Unlike other types, this loan is a
liability on the borrower. Other types can arrange to earn back its
money as well as its interest if worked properly. Therefore, those
loans are not liability to the borrower. People buy apartments for
residence and they take loan from banks for that purpose. This type
comes in same position as depositors since both come from common
person category. Many agencies try to justify lower interest rate for
this category by giving excuse that they are common persons and not
having much capacity to afford higher rates of interests. However,
when we observe the rents on the apartments, we find that the rent is
similar to EMI that they pay at higher rates (15%). Quite often it is
justified that taking loan for the apartment is like taking it on
rent for particular period and after that the flat becomes your.
Therefore, this rate of interest cannot be considered as high. All
sympathy for borrowers is shown because their lobby is strong.
Depositors having no proper lobby are at the receiving end all the
times.
When loan taken for
health treatment they have to pay back that loan from other source.
Therefore, for such loans a small reduction in interest rate may be
allowed on humanitarian grounds provided depositors approve of it. If
that person has insurance facility that insurance may be able to take
care of that interest and help the borrower. Banks are not charitable
institutes. They are in business of lending and that they should do
earnestly and honestly. We cannot expect them to be generous on such
lines. They must look after the depositors first and so to my opinion
no need to reduce any interest on such loans. Today we notice that
depositors are taken for granted and any amount of exploitation of
his funds has become a right of money lending authority.
Continues in the
next post –
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