So the RBI has threatened to crack down on banks using inappropriate collection agents. About time. But its still too little. They still aren’t out of bounds. Just that now the banks must know them a little better.
Enough digressing lets get back to the basics. What do we know about science? The less the better did you say? Bad jokes may get you a few chuckles in class Mr. Nath but wont pass you in your boards. Go stand in the corner!
Ok. Seriously - Physics and Chemistry are exact sciences. Means that the accuracy with which you can predict the outcome of an experiment or occurrence is quite high since the law applies across the board. Economics and anthropology (sociology) are in-exact sciences - on a good day. On a bad day the result will be as far from the predicted as a bad exit poll. Actually some purists would balk at Economics being called science at all, but that apart.
Lets take Chemistry First: Drop sodium into water, it will zip around - a glowing silver ball or explode. Drop granules of sodium chloride into water they will dissolve etc. you know the drill. Predictable. More complex experiment will have more complex but generally predictable results.
Physics now: Drop a feather and an iron ball from the same height in a vacuum. They will hit the ground together. Drop them in the atmosphere the air resistance will slow the feather and the ball will hit in XX seconds etc. The same laws of viscous drag and gravity apply to both objects. Predictable.
Now Economics: Open banking out and push loans aggressively and watch your profits multiply and put pressure on branches to achieve targets and we have a boom with very powerful large organizations entering into financial contacts with millions of very small borrowers. Consumption increases, manufacturing multiplies, easy credit leads to higher standards of living, more people venture into business, new enterprises and entrepreneurs are born (i.e. collection agents) a few people will hang themselves, there will be suicides and orphans, a mini riot outside ICICI bank (the largest of the biggies) in Mumbai, of course the bank isn’t liable, the collection is “outsourced”, journalists will get beat up and taken into custody, lots of bad publicity, money will change hands, favors will be sought and granted, arrest warrants will be issued but no arrests will be made, neighborhood dada’s will squat on hypothecated vehicles and… wait-wait WAIT!! Even I’ve lost track of what the experiment was. All this wasn’t part of the plan. People weren’t supposed to DIE! We were just supposed to quadruple profits and achieve mind-boggling growth. Who screwed up the experiment? How did all this happen?
You see, economics and sociology (anthropology) are inexact science and hopelessly interwoven in ways that impact each other dramatically. Which is why social reform movements like the Bhoodan movement (redistribution of land), abolition of zamidari and untouchability etc were in fact economic reform movements as well. One can at best speculate at what the outcome of a particular kind of reform will be. And if you are socially aware, other than being economically aware your speculation may also be intelligent. One is useless without the other. Society is way too complex you see, and…. WAKE UP!! Don’t sleep in class Kamath!!
Now for practical. Experiments. In the lab everyone, no fooling around here. Chidambaram!! Don’t pour Sulphuric acid into Reddy’s lunchbox. Detention for you. Yes, where were we?
So as scientific experiments go in Physics and Chemistry, to present a hypothesis or theory one conducts experiments. Lets take a simple one. Take an element or compound, heat it, and then cool/freeze it. Repeat the same with another element/compound. Similar results observed. We decipher that heat expands all elements and cold contracts them. Make a diagram, the result is predictable when you try it with different elements/compounds (give or take anomalous expansion of water type things. If you don’t know what that means doesn’t matter, ignore it. Wont change your life.) So there is a general law that applies to all. Simply put, laws tend to be universal. Ta-da. Now we can predict the effects of heat and cold on different things.
Now if we were to conduct a similar experiment in a socio-economic context one should get consistency too (assuming its somewhat a science). But. Allow me to present exhibit A, an aam admi, a sod who owes a bank money. He hasn’t paid his EMI (loan installment - for those sick of banking jargon) for a couple of months. He gets “collection agents” basically goons sent to his house and they smash a few windows, rough him up, slap him around and humiliate him in front of neighbors family kids etc. and then he either pays up, hangs himself or whatever else. And the file is closed for the bank. Loan recovered or written off as a bad debt as the case may be. The poor sod if alive goes to the police, if he killed himself or died as several have then his kids/wife/parents go. No bank arrests thus far.
Now lets take element/compound B, a bank, credit card company, cellular company (take your pick) owes an individual money for a service not provided or a product not performing. The bank owes you money, if you close an account and the draft does not arrive as often happens, repeated reminders, nothing. Or a mobile/credit card company overcharged you and are not reversing the transaction. You send “collection agents” to the bank. Your “collection agents” or “Loan facilitating agents” smash a few windows, rough up some bank manager or VP, slap him around and humiliate him in front of family or colleagues, if the agents are really good they make it to Kamath’s or one of the Ambani’s office and “collect” his car or maybe crumple his impeccable suit by shaking him by the collar. So after getting slapped around this Chairman of the bank or bank manager or VP calls the cops.
What do you think happens to your “collection agent” as opposed to the banks “collection agents”?
Will they get the same treatment? They are doing exactly the same thing. You think the cops would arrest you? Is there a uniform law governing these compounds?
So how do we have two COMPLETELY different outcomes for the SAME act? That is so un-scientific. Precisely, ta-da!!
So at the end of our little experiment, what have we observed dear students. That there is no easy predictable text-book logic to our wonderful socio-economic systems. Market reforms have preceded judicial reforms and land reforms (a committee has recently been constituted though). The attempt at the economy may be valiant but society and our sense of justice is as far away from reform as your short sighted gaze is from the appropriate focal point of the computer monitor.
So to get more dramatic results from the RBI and govt. agencies, get collection agents or “loan facilitating agents” working the other way as well. For retail customers collecting damages from companies and banks. How quick and effective would the response then be? Any collection agency interested?
OK. Wake up now. Class dismissed.
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