BANK CRISIS & COLLAPSE
Banks operate by taking public money at a rate of interest and lend that money in the form of loans at a higher rate of interest. The differerence is to be the operating margin for the banks.
When banks are the custodians of public money, then it follows that that they have to be careful where they lend the money. They are supposed to ensure that loan-takers return the amount within a stipulated time.
So they have to follow certain procedures of lending and this process need to be given at the hands of responsible professionals.
1). Loans have to be provided to buyers with co-lateral safeguards. This has to be adhered to strictly, no matter what the competition is. This is because, loans, by nature are a risky proposition. For eg. Loan given for farming or setting up an industry cannot be said will succeed.
2). Loans if provided on the recommendation of politicians or influencial people, due legal guarantee have to be taken from those recommending in addition to guarantees from the loan takers. .
3). It is better if factual & authentic Credit rating is given to individuals or Institutions taking loans. Amount of loan can be based on such credit ratings.
4). The punishment for default of loan repayment must be made severe and prompt for loan takers, guarantor as well as the issue officer if he has acted bypassing the laid out procedure. Presently the perpetrators are no doubt arrested, but legal procedure takes so long that eventually the criminals come out on bail.
5). Above all good conscience must prevail in all, the loan taker, the recommending agency and the official sanctioning the loan.
Otherwise more and more banks will fail and public and nation as a whole shall be the losers. Hope some good sense prevails in all. more