Imagine a customer sitting in front of a credit manager in any of the banks in J&K and asking for a loan. The standard first response of the manager would be; “can you provide guarantee of a government employer?” This typical sample conversation explains the predicaments of banks operating in J&K, the hassles faced by customers and implications on credit pricing.
Banks primarily deal with money and earn their profits by lending money against a cost. Lending in a conflict area like J&K is a risky business because uncertainty, lockdowns, curfews and sometimes weather stall normal business growth and impact the repayment capacities of the borrowers. That is why banks show reluctance to lending in conflict areas and resort to such mitigation measures which have no relation with the business plans of the customers. Seeking mortgages of disproportionate immoveable property to secure a loan is one such measure. For smaller loans, guarantees of government employees are asked for, as the government employees are supposed to have regular and assured income streams.
One more way of risk mitigation generally practised by the banks is to factor in risk premiums into the pricing of the loan. That makes credit much costlier for a businessman in J&K as compared to his counterparts elsewhere. As is evident, this creates a vicious circle of high-cost debt and lower margins for businesses in J&K and impairs their competitiveness and growth.
It has been generally seen that banks in J&K, apart from showing general reluctance to lending to businesses within the state resort to all the above measures to secure their loans. This does not just make loans costlier in terms of rates of interest but also adds opportunity costs to the operations of local businesses by making access to credit difficult.
この記事は Kashmir Life の September 22-28, 2019 ; Issue 25 Vol 11 ; ‘OUT OF CIRCULATION’ 版に掲載されています。
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この記事は Kashmir Life の September 22-28, 2019 ; Issue 25 Vol 11 ; ‘OUT OF CIRCULATION’ 版に掲載されています。
7 日間の Magzter GOLD 無料トライアルを開始して、何千もの厳選されたプレミアム ストーリー、9,000 以上の雑誌や新聞にアクセスしてください。
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