a call from citibank or a loan bubble !!
A lady calls from Citibank, Chennai, waking me up from my afternoon siesta!
Citibank: can i speak to mrs ****
Me: Sorry she is not available, what it regarding?
CB: can i know who is speaking
Me: this is her son
CB: Your mother card ends with no: **** ( i can't think of any reason why i should know), and she has been paying her bills regularly. so, we are offering her a draft scheme, and we can make out a draft in any third party's name for upto Rs 4.5 lakhs. There is no need for any paperwork. this is not a loan.
Me: Can you give the draft in her name?
CB: Sure, the interest rate is only 7.5% per year
Me: What is the longest tenure you can offer and what will the monthly installments be for a 4 lakhs.
CB: It is 48 months and the EMI is Rs 10,932
Me: Great. will call u if i need it. ( i later figured the interest works out to 14% and i didnt find out what is the processing charge and prepayment penalty)
It is usual call that many of us get these days. the only problem i had with it was my mom was a retired person with a small income and could no way pay back such an amount. This got me wide awake and set me wondering. what if people accepted such offers and what if a lot of them did. (my father would have certainly accepted the offer had he picked up the phone and honestly i was tempted!) what happens if there is a minor economic shock. what will happen to these people and the asset quality of the banks. it seems to me we very clearly have a loan bubble.
I am reminded of the end -1990 days, when banks, NBFCs were lending like no tomorrow to small companies. when the bubble burst it was very painful. Kotak Mahindra, now a favourite private sector bank, was quoting at rs 15 during 1999 (rs 3 adjusted for the bonus issues and now trades at over rs 200, thats 66 times!!). of course i wasnt smart enough to buy then.
But i am hoping Uday kotak is a smarter man these days. he said in a TV interview that he has learnt a lot from from the past mistakes and they wont happen again. i wonder if he is really that smart and so are the other in the finacial services space. i feel otherwise.
Citibank: can i speak to mrs ****
Me: Sorry she is not available, what it regarding?
CB: can i know who is speaking
Me: this is her son
CB: Your mother card ends with no: **** ( i can't think of any reason why i should know), and she has been paying her bills regularly. so, we are offering her a draft scheme, and we can make out a draft in any third party's name for upto Rs 4.5 lakhs. There is no need for any paperwork. this is not a loan.
Me: Can you give the draft in her name?
CB: Sure, the interest rate is only 7.5% per year
Me: What is the longest tenure you can offer and what will the monthly installments be for a 4 lakhs.
CB: It is 48 months and the EMI is Rs 10,932
Me: Great. will call u if i need it. ( i later figured the interest works out to 14% and i didnt find out what is the processing charge and prepayment penalty)
It is usual call that many of us get these days. the only problem i had with it was my mom was a retired person with a small income and could no way pay back such an amount. This got me wide awake and set me wondering. what if people accepted such offers and what if a lot of them did. (my father would have certainly accepted the offer had he picked up the phone and honestly i was tempted!) what happens if there is a minor economic shock. what will happen to these people and the asset quality of the banks. it seems to me we very clearly have a loan bubble.
I am reminded of the end -1990 days, when banks, NBFCs were lending like no tomorrow to small companies. when the bubble burst it was very painful. Kotak Mahindra, now a favourite private sector bank, was quoting at rs 15 during 1999 (rs 3 adjusted for the bonus issues and now trades at over rs 200, thats 66 times!!). of course i wasnt smart enough to buy then.
But i am hoping Uday kotak is a smarter man these days. he said in a TV interview that he has learnt a lot from from the past mistakes and they wont happen again. i wonder if he is really that smart and so are the other in the finacial services space. i feel otherwise.
posted by tvm at 7:15 PM
1 Comments:
Blogging
The humble web log, or blog, has enjoyed a truly meteoric rise in popularity. Few would dispute that the rate at which the practice has embedded itself into the mainstream of internet culture is staggering.
Hey, you have a great blog here! I'm definitely going to bookmark you!
I have a make money at home site/blog. It pretty much covers make money at home related stuff.
Come and check it out if you get time :-)
Post a Comment
<< Home