The Hindu has published a long-pending editorial on the ongoing credit crunch in the US which is a result of housing lenders competing against each other in the recent past to provide home loans to unqualified people without properly assessing the long-term risk of their actions. Promptly, the editorial cites the chances of a similar crisis in India if the lending institutions are not careful enough.
A comparison with the developed world might not seem appropriate, given the vastly differing sizes of the financial systems. Yet, looking at the way things could go so horribly wrong in the U.S., it is time to wake up and strengthen credit evaluation systems and procedures (in India).
I remember a TV advertisement by ICICI Bank, in which a couple go to the bank in order to apply for a loan. Coffee is served, and by the time they have downed it, the loan manager is ready with their approval. Whereas one cannot read too much into this advertisement, it is not very far from the crisis-inducing behaviour that banks in the US are now paying for.
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