All this big talk in financial and political circles about Financial Inclusion is a big sham. The reality is that we have been suddenly disenfranchised from the Financial Inclusion Club. The whole world has inexorably moved from a regime of Financial Inclusion to a regime of Financial Exclusion.
Not long ago everyone had easy access to financial products – personal loans, home loans, credit cards. Credit was no longer a six letter word that was frowned upon by our parents who waited years to collect enough cash to buy that Lambretta scooter of their dreams. Financial Institutions had made it easy for our generation to realise our dreams that faster. FIs fell over themselves to make you a Credit Man. Instead of assets, your networth was built on the total EMIs you paid. To help all of us, smart investment bankers came out with fancy products called Mortgaged Backed Securities (MBS) and Collaterilized Debt Obligations (CDO) and in turn got hefty bonuses for their social service endeavours that in turn helped the auto sector by moving Ferrari 612 Scaglietti in record numbers.
Contrary to popular belief, India committed a blunder by missing the US Subprime Mortgage revolution. Lets first understand how this revolution turned into a worlwide crisis. During the Financial Inclusion times, nonsensical conditions like being employed or having a regular income source were dispensed with. Anyone could afford the monthly mortgage payments. These were called NINJA mortgages – No Income! No Job! No Problem! To begin with, the interest rates were kept as low as 1%. So even if rates go up so would the value of the houses and therefore the mortgage could be refinanced. As the rates went up – upto 8% - the house prices actually came down. Borrowers began to default and banks went about repossessing the houses. House supply went up and the prices crashed creating a situation where the outstanding mortgage was more than the value of the house. A big wave of foreclosures hit the ship which had global funds worth $70 trillion riding on it. And this is how the global financial market sank. Today, the chief economist of Bear Stearns serves coffee at Starbucks – a small price to pay for financial inclusion.
We should have had something similar in India but with totally different outcome. Everyone would have at least got a house. Instead of the capitalist banks in the west who jumped on the poor homewners and repossessed their houses, our government would have acted with maturity by invoking its socialist spirit. All the default loans would have been taken on government books. In the election year along with waiving off the farm loans, the government would have waived off the defaulting home loans too. Finance Ministry to balance its books would have had a quite talk with the realtors – do not bring down the prices under any circumstances but we need a cut of 30% on all deals. All the poor realtors and developers would still have been in business selling crappy houses on the 15th floor for crores and eager techies lapping them up.
So while the world goes into recession, India's red hot economy would be burning rubber at 15%. Sensex would be touching 35K. After a long time we would have been hit by Chinese invasion – not of cheap plastic toys with lead kind but actual immigration through Nathu La. School Board of Kokkola, Finland who had invested in Indian CDOs would still be making a killing.
Things have changed for the worse now. You actually need to show proof of income now to get any kind of loan. They check out your credit history. You need to produce all kind of documentation and living guarantors. Is this how business should be conducted? You are looked upon suspiciously and not trusted anymore. This is no way to build relationships. To get a paltry microfinance loan of Rs. 5000, you have this nosy girl who has come to your village in Sitapur all the way from Noida asking the buffalo if you are her real owner. Can you believe this? All this background check and paperwork is a killjoy. It is so embarrasing now to tell your friends that you have booked a 3BHK flat for a measely 15 lacs in Ghiya County.
As for me, I miss all those late evening calls selling me personal loans to help me take advanced origami classes and iridium credit cards with free lifetime membership to Sundar Nagar Falafel Club when I was watching awestruck Steve Irwin riding a crocodile on Animal Planet. Like the Ferrari dealer in Manhattan, I feel blue and so financially excluded now.
Nirdesh Singh
8669cf12-096b-4661-acfd-43489670e870|0|.0