You know you have a serious breakdown in your information systems, if people start dying before you realise there is a problem. I use the term 'realise' in the sense of 'realise we need to do something' rather than the dictionary definition of the word.
Vidharbha's cotton farmers are a classic example. The growing number of urban Indians caught in a debt trap, and being harassed, intimidated and even driven to suicide by so called 'collection agents', are another.
The reactions to these two apparently highly dissimilar types of customers and issues reflect a basic similarity in the establishment's general attitude towards such problems. They are also a telling indictment of the powerlessness of the individual, versus the power of organised vote banks.
Let us take the farmers first. Everybody knew that cotton growers in Maharashtra were running into trouble. Everybody knew about it, but nobody did anything about it. Systems which had been expressly created to provide relief and prevent an extreme crisis, abjectly failed on both counts.
It took hundreds of suicides by indebted farmers and the unwelcome, glare of media publicity (including a path-breaking investigative series by this newspaper) to galvanise the government into action. The Prime Minister himself visited the area, promised concrete relief and is keeping an eye on delivery of this relief by officialdom.
The pattern is repeated when it comes to a new form of urban indebtedness, created by a competitive banking system, eager to grab market share. True, retail credit – whether secured against collateral, like a housing or an automobile loan, or unsecured loans like personal loans or credit card advances – have been growing at an exponential rate.
So have non-performing assets – bankerspeak for dud loans. As of the end of the last financial year, scheduled commercial banks alone had gross non-performing assets of almost Rs 52,000 crore.
The fallout has also been along predictable lines. Under intense pressure to recover advances, while cutting costs to the minimum, most banks and credit card issuers have 'outsourced' the recovery of bad loans to collection agencies.
Collection agencies stand to make money only when they collect. It is hardly surprising to find that many are simply a modified form of the local toughs used by moneylenders since year dot to recover their dues. These agencies often use strong-arm tactics to frighten customers who have fallen behind on their repayments.
Such threats are used because they work. Sometimes a little too well, as witnessed by the recent suicide by a Mumbai resident, who killed himself because he was unable to either repay his loans or face down the toughs.
There are systems of checks and balances in place, which are supposed to prevent this sort of thing from happening.
Bankers are going blue in the face explaining how we do not have a proper system of collecting the credit history of borrowers, which would have helped avert such a crisis. If that's so, why did they lend in the first place, without adequate information? Why are telemarketers continuing to offer people credit cards and loans on phone? Why is there no system in place for credit (and debt) counseling? Why are goons still doing the dirty work for the financial system?
Clearly, there is urgent need for reform. I wonder whether the middle-class borrower will get it, though. Farmers at least had the potential rural votebank going for them. India's urban consumers are truly disenfranchised.