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Don't need money? Take a loan!

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Last updated on: September 07, 2006 16:06 IST
Times have certainly changed.

Time was when nobody was willing to give me a credit card: no domestic bank, no foreign banker, nobody.

Cash had just about begun to be considered poor man's credit card, like the wit said. At that time, I thought I would be able to stretch my resources a bit if only I had a credit card.

But that plan was stillborn as the card issuers were just not willing to come to the aid of the party.

That was then, and not too long ago either: just over a decade or so ago.

Now I don't want any credit cards, sorry, any more credit cards. But woe is me. Everyone and his brother-in-law are offering me one.

Time was when I was ready to comply by all the rules and pay hefty annual fees for even a lousy low-limit card. I was ready not to roll over my credit, ready to make the payment on time, ready not to default ever. I was really ready.

But the card issuers weren't. They found it below their dignity to offer a credit card to the likes of me.

I filled in enough credit card forms and attached enough supporting documents to fill up a fair-sized truck. I made enough phone calls to banks and their direct selling agents to fill up the coffers of the telephone firm, but to no avail.

It was, like they used to say in my part of the woods, 'apply, apply, no reply.'

Today things have turned on their head. There are probably more credit card issuers now than there are credit cards. And it is they who are doing all the form-filling and telephoning. The telephone firm's coffers, meanwhile, are bursting at the seams.

That is only part of the story. Banks are also hell bent upon thrusting a loan down your throat, whether you can digest one or not. Personal loan, home loan, car loan, this loan, that loan... loan, loan, loan...

They also offer loans so that you can repay your credit card dues: in other words, they want to loan you money to get you out of debt!

These banks set up call centres and let loose a battalion of telemarketers, armed with a phone and a pitch. There's no escaping this gung-ho, phone-happy army. At all sorts of awkward hours, you get calls from unknown people tripping over themselves trying to offer you cards and loans.

And even when you emphatically -- and at time with some snobbery, I confess -- refuse the offer, these unknown callers drop their polite attitude in favour of an aggressive one. At times, they even adopt an offensive tone.

These days, I -- and I am sure so do you -- get so many similar calls that if even a single day goes by when no call centre turns its attention to me, I almost get an inferiority complex, as if my credit-worthiness is in jeopardy.

Add to this almost daily phone calls from telemarketers -- who are out to sell you insurance of all kinds, pension schemes, discounts on travel plans, club/hotel memberships, and now increasingly share brokers who offer to open demat accounts and manage your funds, and investment advisors offering portfolio management services -- and you are as busy as a mini-call centre yourself.

And if you wonder where they get your phone numbers from, well, banks and mobile operators share their 'databases.' Simply put, what this means is that your bank sells information about you -- at time, even your confidential account information -- to telemarketing firms.

So when that syrupy voice on the other side of the phone launches into its sales pitch, it already knows your name, age, and address... the bank might even have disclosed your bank account number, credit limit, your creditworthiness, the credit cards you have and what you owe on each of those.

Banks earn money on the sale of this database and also a commission on sales, when you buy something.

Anyway, so why is the world beating a path to my door -- and yours -- to offer a credit card/loan? What has happened in just a decade for banks to suddenly make you and me feel like a king? Especially me, as my 'creditworthiness' is no worse or better than it was then. Okay, maybe it's just slightly better, but not nearly good enough to make me a 'favoured customer.'

So what has changed? A lot really:

  • The economy is booming (yawn!);
  • The purchasing power of the ordinary Indian has risen (so they keep telling me);
  • No longer is there any stigma attached to 'taking a loan;'
  • A lot of Indians are slowly approaching something that resembles affluence;
  • People are drawing bigger pay packets (would like to meet them);
  • Everyone seems to be spending a lot (but me);
  • The middle class -- since it is middle class -- is also entrapped in its own sense of rules, sensibilities and morality, and attaches a lot of importance to paying dues on time and not defaulting;
  • Banks have slightly more confidence in their clients and are almost certain that defaults will be not assume unmanageable proportions;
  • There is a consumerism boom sweeping through the nation, or at least in the cities...;
  • The nation is one of the youngest in the world (and we all know how well a young person armed with a credit card can spend), on the brink of attaining superpower status with its enormous talent pool, blah, blah, blah...;

Yes, all these changes seem to have revolutionised India. Consumerism is at its peak, more and more products are being bought and even more produced... The economy has surged ahead on booster rockets with purchases going through the roof. And to keep this economic cycle going round and the country's financial system in a robust state, you and I have to be enticed into spending more and more.

This is where the banks come in: they offer newer ways to fill up your empty wallet and even more imaginative ways to help you empty your wallet.

By the way, if you are looking for some profound theorisation or a moral in this story, if you are looking for ways to help you save money or tips on how not to overspend on your credit card, let me warn you that you will be disappointed. For all of us know that if you spend at least 40 per cent less than what you earn, you won't ever be foundering in a financial quagmire.

The point of this unhinged nonsense is rather poignant: On the one hand you have banks incessantly calling up city people who do NOT want a loan and offering them large sums of money without a question asked. You can get a loan by just replying to an SMS, and the rest of the formalities will be taken care of by these helpful banks and their agents. Once you have taken a loan, the bank calls you again: this time to offer you a 'top-up loan.'

On the other hand, you have poor villagers and farmers committing suicide because banks don't want to extend credit to them... and these are the people who need money most. If some farmer is 'lucky' enough to get a loan, it is more than likely that on a loan request for Rs 25,000, he might be given not more than Rs 2,000! An amount so paltry that it cannot even begin to help him revive his failed crop. Indeed, a bank is a place that will loan you money if you can prove you don't need it.

So is India the 'next superpower?'

You can ask the farmer, who has just left for the local moneylender's place to borrow funds and to get sucked deeper and deeper into the debt trap...

Shishir Bhate