Not all debts have to be repaid. In formal banking circles this is well understood. Lenders too bear a portion of the risk when they lend to businesses. Its this arrangement that lets a Kingfisher Airlines, for example, fold financially and take down some of the creditors money too with it. But poor people dont have this protection. They cant throw up their hands in the face of bankruptcy and start with a clean slate. Sometimes farmers have this kind of escape hatch through write-offs on their loans, but in those cases creditors actually get compensated with taxpayers money. The government and RBI must figure out a way by which lenders assume risk along with borrowers at all levels of the economy. In the process, we may find that many more financial instruments and tools that are now inaccessible to the poor also get closer to them.
Posted on: Sun, 11 May 2014 13:17:07 +0000
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