People think that the credit crunch is a creation of the 21st century. However, like the religious fundementalists say, all things are there in the scriptures. The Gods of India have a practical example of how individuals with low credit ratings are forced to accept loan terms which are frankly usurious. In contrast, we shall also see how a well managed fiscal plan makes living comfortably.
Our tale begins with Mr. Venkateshwara, a young god with a great deal on his hands, but not much hard cash to his name. One fine day, he finds this young lady and decides to marry her. But the young lady is not content with a simple court wedding. After all, this is a god’s wedding, and must be celebrated with the pomp and ceremony it delivers. So, Mr. Venkatashwara goes to Kuber Bank, a closely held firm controlled by its namesake, and requests a personal loan for marriage expenses.
Now, Kuber takes one look at the impecunious Venkateshwara (also called Balaji), and decides that this young man is what would be called sub-prime. And not only is he sub-prime, he also wishes to use this loan on a mere consumption expenditure rather than investment purposes. Automatically, the interest amount is now increased appropriately by rating the borrowers risk accordingly. Venkateshwara’s repayment philosophy also seems a bit dubious. Based upon this wedding, he intended to set up a temple where people could worship him, and thereby pay off his debt.
Well, to cut a long story short, due to low regulation, Kuber bank did make the loan to this sub-prime borrower, albeit at an interest rate that he considered was appropriate for such a high risk loan. As it turned out, Mr. Venkata’s temple was a spectacular commercial success, raking in over Rs. 500 crores a year (approximately INR 5 Billion).
But that is not quite enough. From the records that mythology provides us, this only counts as payment towards the interest portion, so that Mr. Venkateshwara stays out of the term “Stressed Asset”! So Mr. Venkateshwara, inspite of having fantastic cash flows is still indebted. If records are to be believed, he will only be able to pay it off at the end of the universe itself!
On the other hand, about a 1000 kilometres away, we have the example of Mr. Siddivinayak. An astute god, based out of India’s commercial capital, Mumbai, he has access to the finest financial consultants (the ones who believe that cash is king) in the world. Having been exposed to the business world’s ups and downs, he maintains a low level of financial leverage, ensuring that his debts to the Kuber Bank are always promptly paid off. As a result, although his revenues from his temple are at a comparitively paltry Rs. 50 Crores, he is comfortably in cash.
So there ends this lesson from mythology.
