To all of you who have pending home loans, I have a sincere and sensible financial advice: Default.
Oh OK, you say that you’re already doing that. In which case pass this info to others who may not know anything about the new and forward-thinking RBI guideline, which unequivocally stipulates: If a person dutifully pays his loan amount, it is only prudential to fleece him further.
Let me explain further. The bank from which I have taken a home loan cut down its interest rate recently, but said I will not be eligible for the rate cut because — this is why we should love our banking system — I was an ‘existing customer’. The home loan at a lower interest rate, the bank most helpfully pointed out, was only for ‘new customers’.
As is clearly evident, it was a big blunder on my part to have remained a customer with the bank, when the provident option was to secure the safety and security that come with by being a defaulter, technically defined as a person who can’t repay his loan, but still the banks go to him with a begging bowl. Exhibit A: Vijay Mallya.
We will get to Vijay Mallya in a moment. Before that I will tell you about the other experience that I had with another bank, where I was slapped a heavy charge for — you will want to write this down and frame it — for fully paying up my home loan amount well before its due date.
‘You have a foreclosure charge to pay,’ the manager of the bank, where I had gone to settle the entirety of my loan amount, told me without bating an eyelid. Foreclosure charge, I was to learn later, is that reasonable one-time penalty levied on people for their extreme carelessness and stupidity in repaying the loan in full ahead of schedule when the most lawful thing to do is to go missing, something that my friend, whom I will just call Mr. C, did much to his advantage.
Mr. C bought a flat through a bank loan, and later entered into a five-year lease agreement with another person, and rented it (the flat) to him. As per the agreement, there was to be no rent increase for the full five-years if Mr. C was paid the entire rent amount (for five years) right at the start.
Now, seven months into this deal, Mr. C is reportedly missing and his home loan EMIs are unpaid. The bank officials want to take over the flat, but the man who has rented it is claiming that he won’t move out because he has already paid the full rent for the next five years. ‘Get me the money that I paid to Mr. C then I will vacate,’ is his contention.
The options before the bank are:
1) Pay the money that Mr C owes to that tenant and take over the flat and later claim the full amount from Mr. C.
(But apparently the bank manager told his field officer: When you can’t get back the amount that Mr C actually owes to you, how can you hope to get back the amount that Mr C actually owes to somebody else?)
2) Pay none nothing. Wait for five years and then take over the flat.
(But the manager feels that this will be a bigger mistake, as if they don’t stake a claim now, it would be more difficult five years later).
As of now, the bank seems to have gone for the third option: Pay a lawyer.
The bank is fighting the matter in the court. The case, going by the evidence of what happens in our courts, is guaranteed to last the next 10 years, by which time it would be pointless, because the said flat would have been, anyway, demolished on the grounds that it had been constructed flouting the CMDA regulations.
Meanwhile, Mr. C, who owes the bank a lot of money, has already acquired another house for himself —- this time all through down cash payment — thanks to the hefty five-year rent and the heftier dowry that he commanded based on the fact that he ‘owned’ a house at the time of his marriage five months ago.
It’s the kind of smart skullduggery that Mallya would do well to conjure up now. As far as I can surmise, he is knocking on the doors of the banks seeking more loans, on the most rational premise that he has been unable to pay his existing loans.
The banks, in turn, are advising him to recast his debt as equity, which in layman’s terms means: If your company is making losses and you are unable to repay your creditors, then sell a part of your company to them so that — this is important — everyone can be in debt.
In any case, if Mallya fails to pay up, the banks can call it as NPAs and pass them to the government, which, for its part, can underwrite it all by passing them on to us tax-payers, which is kind of justified. As the price for ogling at the Kingfisher airhostesses and the swimsuit models on the calendar, that is.