Friday, November 23, 2007

on ICICI bank again

To know where I am coming from, please read -
Another discussion with "dost janta" (friends) over many bottles of beer veered to ICICI Bank's goon activities.  A friend of mine pointed out that the legal system is very slow and cumbersome for banks to recover their money.  The banks cannot survive this way.  There are many con men who go for loans without the intention to repay or at least be regular with their payments.  Someone else pointed out that the bank has the freedom to set the loan interest rate.  I agree.  

I reiterate that

1. The bank should be more careful before lending to a customer.  The customer is no way responsible for "minority loan quota" of these banks.  In fact, we anyway pay a higher interest rate to compensate for those "minority quota" loan losses. 

2. Many a times, the bank just thrusts the loan amount or a credit card into the hands of the consumer, without considering the repayment capability of the consumer.  Of course, the bank does it because it already has paid goons on their rolls for the dirty work.  As a customer, I would not pay anything if the bank promises me a "free credit card for life" (free as in no annual fees or entry fee), and then charges me even if I never use my credit card.
I use no credit card just to avoid the hassles of keeping track of yet another device. 

3. The borrower should not be harassed for the faults, inefficiencies or shortcomings of the bank itself.  The borrower is no way responsible in case the bank misplaces some documents or is slow to complete the process.  If the bank cannot manage to control errors and inefficiencies, they should pull down the shutters and pack up.

4. Using goons is no way to recover loans.  ICICI bank is nothing more than a loan shark in a business suit.

5. Many a times, it might be a technical problem or somebody else's fault (like it happened in my case).  Still the bank will not contact you (not even an email which costs practically nothing), and straightaway send goons, even though you have a good repayment record.  Whats more - they would even threaten to reduce your credit ratings with , etc.

6. Regarding the bank can charge interest rates as per its wish. True.  Now, when the bank sells you a loan with a floating rate, it claims that "the interest rate applicable to you drops when interest rates in the market fall".  But ICICI bank continues to charge higher interest rates though the interest rates have fallen, and almost every other big competing bank has reduced its interest rates as per the market rates.  Note that this is not illegal, but surely its unethical.  ICICI bank is using legal technicalities to cheat customers, and reneging on its promise to lower interest rates for floating loan customers.
It works for ICICI bank, they continue to fleece the existing customers, even if they dont get new customers (given their malpractices).  But still the bank offers lower interest rates to new customers, while charging existing customers about 1 - 2 % higher). 
The practice of not lowering floating loan interest rates is being probed by MRTPC. Link here - - Must read (I recall ICICI Bank telling me that their floating interest rates are based on RBI PLR, but there is no such thing. Blatant cheating by the bank).

Who, do you think, sets the 'benchmark' prime lending rate that your loan floats against? The RBI? No, it is the banks themselves who fix the benchmark.

The market is left with no independently fixed home loan benchmark. Two things can happen - RBI can make it mandatory for banks to disclose transparently their benchmarks like banks in Australia. Or, the RBI can make it mandatory for banks to fix home loans to an independent benchmark, like the Mibor .
Oct 11, 2007
The country's two biggest banks, State Bank of India (SBI) and ICICI Bank, have cut interest rates on new home and other retail loans, a move that is expected to be followed by other banks.

Buying a floating loan is a farce. It just means that your interest rates will always go up, but never come down.

Also, on 21 Nov 2007, we have this news item.  More cases of ICICI bank's goondagardi keep coming to the limelight.  They get rapped yet again.  Still they dont learn.  At this rate, I think they will have to wind up their retail banking soon.



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