Archive for the ‘banking’ Category

India on the move

This article was written by me for Sify.com on the event of the 60th birth anniversary of our nation. 6 years later we seem to be worse off than ever. Some part of the blame lies on the world financial crisis, but a large portion lies within lack of political will and business apathy.

Here is hoping that the next 6 years will see a robust change

 

2007 has been a momentous year for India. We have seen the stock markets rising and the dollar falling. Consumer spending and salary levels are never before heights. Today’s young Indian is earning a start salary that his father barely managed to before retiring.

India achieved 8.5% GDP growth in 2006, significantly expanding manufacturing. India is capitalizing on its large numbers of well-educated people skilled in the English language to become a major exporter of software services and software workers. Economic expansion has helped New Delhi continue to make progress in reducing its federal fiscal deficit. However, strong growth – more than 8 percent growth in each of the last three years (and over 9% in parts of the last year) – combined with easy consumer credit and a real estate boom is fuelling inflation concerns. The huge and growing population is the fundamental social, economic, and environmental problem. Here is a comparative picture of the growth of India’s GDP.

india graph

The 11th Plan

Sector              Growth rate                 Share of GDP
                          2002-07   1997-02     2002-07  1997-02

   Communications   15.0     17.14             2.3        1.7
   Manufacturing       9.82      3.68            16.7      15.3
   Agriculture            3.97     2.06             20.5      24.7

India is moving from an agricultural economy to a service economy surely but steadily. In relative terms, the decline of agriculture in the share of GDP from 24.7 to 20.5. That decline implies that services and manufacturing are gaining share and that implies that we are moving away from a subsistence economy to one in which we may have some hope of improving our lot.
Of course, as a developing economy, agriculture is the core of the economy.  If India is to ever develop. It is only very severely underdeveloped economies have high agricultural sector share of GDP. For instance Albania, Ethiopia, Mali, Nepal, Ghana — economies with agriculture accounting for a large share of the GDP. Australia, France, Germany, US — agriculture accounts for low single-digit shares of the GDP.

The Indian economy on the eve of the 11th Plan is in a much stronger position than it was a few years ago. After slowing down to an average growth rate of about 5.5% in the Ninth Plan period (1997-98 to 2001-02), it has accelerated in recent years and the average growth rate in the Tenth Plan period (2002-03 to 2006-07) is likely to be about 7%. This is below the Tenth Plan target of 8%, but it is the highest growth rate achieved in any plan period. While this performance reflects the strength of the economy in many areas, it is also true that large parts of our population are still living below the poverty line. The percentage of the population below the poverty line is declining, but only at a modest pace.  These problems are more severe in some states than in others, and in general they are especially severe in rural areas.

 

Oil- The master of the future

Petrol has dominated world economics for long and will continue to do so for the years to come. Oil has formed a large part of India forex outflow. It is however earning refining business which has been offsetting its import bills. In fact, during 2006-07, refined petroleum products formed the largest chunk of total exports overtaking the Gems and Jewellery sector.

The cost effectiveness of refining in India is drawing many global players here. This is because India is logistically well placed for refineries. Besides being a major market for crude oil and petroleum products, it adjoins major demand centres such as China. Also, crude oil from West Asia can easily be brought to refineries in India.

Of late, a number of players have evinced a keen interest in laying pipelines in the domestic market to supply gas to the consumers. For example, Gujarat State Petronet Ltd, a group company of the Gujarat State Petroleum Corporation, plans to connect all 25 districts of the state with 2,200-kilometre high pressure gas pipeline laid down across the state. Reliance will invest US$4 billion to lay a 1,386-kilometer pipeline from Andhra Pradesh to Gujarat. India is also one among the four countries which have the world’s richest gas hydrate reserves.

India ranks sixth in the world in terms of petroleum demand and by 2010, India is projected to replace South Korea and emerge as the fourth-largest consumer of energy, after the United States, China and Japan. The rising price of crude is of great concern to the growth of the Indian economy. India needs to step up its domestic exploration to produce substance instead of wisps of promise that it has been done till now.

The Forex concerns

In recent days the rupee-dollar exchange rate has been, on average, Rs 39.3 per dollar. A year ago it was 44.7. This means that the rupee has appreciated against the dollar by 13.7% in the last year. Put differently, for an Indian the average price of all American goods has fallen by 13.7% and, for Americans, goods from India have become more expensive.

Over the last year virtually all major currencies have been appreciating vis-à-vis the US dollar. The euro rose by 14.7%, the pound by 10.4%; the Canadian dollar by 23%, Sweden’s kroner by 13.7% – the same as the Indian rupee. Vis-a-vis all major currencies, outside of the US dollar, the rupee has changed very little. It is due to our high dollar exposure of our exports (especially software exports which has been driving the economy to a high) that the fall of the dollar has become a cause of concern.

The 3-D Advanage

As Mr Anand G Mahindra, Vice-Chairman and Managing Director, Mahindra and Mahindra, India said in a seminar, he reposed faith in the 3D advantages of India, Democracy, Demography and Durability. Democracy is a prerequisite to a healthy society, polity and economy. India’s demographic advantage is that it has the highest number of people in the working age group and this is going to continue for some time. Durability stems from the fact that India is a peaceful and stable nation despite many internal disturbances. He said that India has the second largest Muslim population in the world peacefully coexisting with the Hindu majority.

Some facts to chew on

  • India is the world’s fourth-largest economy.
  • By 2034, India will be the most populous country on Earth, with 1.6 billion people.
  • India’s middle class is already larger than the entire population of the United States.
  • One out of three of the world’s malnourished children live in India.
  • India is home to the biggest youth population on earth: 600 million people are under the age of 25.
  • India just edged past the United States to become the second-most-preferred destination for foreign direct investment after China.
  • In 1991, Indians purchased 150,000 automobiles; in 2007, they are estimated to purchase 10 million.
  • By 2008, India’s total pool of qualified graduates will be more than twice as large as China’s.
  • By 2015, an estimated 3.5 million white-collar U.S. jobs will be offshored.
  • India is the largest arms importer in the developing world.
  • American corporations expect to earn $20 to $40 billion from the civilian nuclear agreement with India.
  • In 2007, there are 2.2 million Indian Americans, a number expected to double every decade.
  • Twenty-nine percent of India’s population speaks English – that’s 350 million people.

Mortgages in Reverse

In India, we pride ourselves for our family values and joint family support system. But the urban culture is creeping in all corners of India. Independence has become a catch word for not only the yonger generation bit also for the senior citizens. Today’s grandparents want to live life on their own terms and do not want to be financial dependent on their children. Many provide for the retirement years through savings. But often the income required for retirement is underestimated or due to some reason a chunk of the retirement funds are used for other purposes like medical emergencies, child’s education etc.

Coming to the rescue of senior citizens who need a steady income during their golden years is reverse mortgage. Highly popular in the west reverse mortgage unlocks you’re the money locked in you most important asset – your home.

What is reverse mortgage?

A reverse mortgage is a loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month. The cash you get from a reverse mortgage can be paid to you in several ways: all at once, in a single lump sum of cash; as a regular monthly cash advance; as a ‘credit line’ account that lets you decide when and how much of your available cash is paid to you; or as a combination of these payment methods.

No matter how this loan is paid out to you, you typically don’t have to pay anything back until you die, sell your home, or permanently move out of your home. To qualify for most loans, the lender checks your income to see how much you can afford to pay back each month. But with a reverse mortgage, you don’t have to make monthly repayments. So you don’t need a minimum amount of income to qualify for a reverse mortgage. You could have no income and still be able to get a reverse mortgage.

With most home loans, you could lose your home if you don’t make your monthly payments. But with a reverse mortgage, there are no monthly repayments to make, so you can’t lose your home by not making them.  Reverse mortgage systems would, perhaps be a boon to senior citizens who are property rich, but cash poor, and shall be another instrument for the banks to compete for

 

How does it work?

Suppose the value of your house is assessed at Rs. 60 lakhs and you are 65 years of age. Going according to the general stats, assuming that you will live upto the age of 82 years, you are eligible to get loan for a tenure of 15 years. It becomes important to mention that the older you are the more eligible you become for the loan since this would reduce your loan tenure. Coming back to the example, lets say you get 60% of the value of your house as loan, which comes to Rs. 36 lakhs. It means that the amount you will receive be Rs. 88,000 on an annual basis so every month you will receive an amount of Rs. 7,352 for 15 years.

 

Value of the property Rs.60,00,000
Tenure of reverse mortgage 15 years
Amount of mortgage 36% i.e. Rs.36,00,000
Monthly income Rs. 7,352

 

 

How do you get the loan?

 

You have to approach a housing finance company (HFC) or a bank and express your interest in pledging your home for the reverse mortgage scheme. The HFC will asses the value of your house and, depending on your age and the prevailing interest rate, the amount of loan payable to you will be decided upon.

The value of the house will be determined by independent valuation through the generally accepted property valuation methodology in the industry. Though there would be a provision for periodic valuation and consequent adjustment of payments, the loan amount will be fixed on the basis of current value and not on possible future appreciation.    The interest rate at which the loan will be given most likely to be marginally higher than the prevailing interest rates as the lending company will receive its money when the borrower dies. The loan to value ratio is fixed at 45-60 per cent of the value of the property based on the age.

What happens after the loan tenure?

Under the present recommendations of the NHB, the borrower needs to be 62 years of age and the tenure of the loan is fixed at 15 years.  However, if he outlive the tenure of the loan, he will not be asked to move out of the house. Although payments will stop after 15 years, the interest will keep accumulating till the accounts are finally settled.
The corpus accumulated at the end of 15 years will be used to fund the years that you outlive the loan tenure.  The accounts will be settled by the HFC only after the borrower’s death or if he vacates or sells the property. The settlement of the outstanding loan amount, along with the accumulated interest, will be met by the proceeds of the sale. In the event of his death, his spouse can continue to occupy the property until her demise, and she usually made a co-borrower. So it makes sense to include the spouse in the loan or else the bank will reclaim the loan after the borrower’s demise.

How is it different from a usual home loan?

A Reverse Mortgage as the name implies goes in reverse of the usual loan structure. Here it is the borrower who gets a monthly payment instead of making a payment. There is an evaluation of the cost of the property and then the around 60% of that is lent by the bank. It is a loan without recourse. The lender will never ask the borrower to pay the loan amount instead he will recover the loan after the death of the borrower.

The rate of interest is expected to be 1-2% higher than the home loan rate. There will also be some additional cost like the property evaluation costs. The reverse mortgage does not take into account any income stream or your earning capacity. It will only evaluate the value of your home and lend.

 

 

Some quick facts about reverse mortgages

  • To qualify for a reverse mortgage, you must own your home.
  • The amount you are eligible to borrow generally is based on your age, the equity in your home, and the interest rate the lender is charging.
  • Because you keep the title to your home, you are responsible for taxes, repairs, and maintenance.
  • Depending on the reverse-mortgage plan you choose, your reverse mortgage becomes due, with interest, when you move, sell your home, die, or reach the end of the selected loan term.
  • The lender does not take title to your home when you die, but your heirs must pay off the loan. The debt is usually paid off by refinancing it into a forward mortgage (assuming the heirs are eligible) or with the proceeds from the sale of the home.
  • A real benefit of reverse mortgages is that borrowers can live in their homes as long as they like, even after they have completely exhausted their equity. Borrowers must do their best to maintain the value of the home with diligent upkeep.

*Published in Capital market magazine

Is India insulated from the financial crisis?

Are we living in an insulated shell? The finance minister is reassuring the public that our banking system is solid and we are not in a crisis.

But is India a closed economy? Are we not interconnected with the world economy? The sad part is that the popular media prints only press releases. There is very little investigative information available. Get on the Internet and see for your self that the financial world and with it all other parts of industry are crumbling. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Can we only take the benefits of globalisation and be protected against the down falls?

Go right ahead and bury your head in the sand. The wake up is going to very tough.

Financial crisis taking nations under

 

Move over America the financial crisis in Europe aims at being bigger than anything Americans have faced. This crisis is about to take nations under with it.

It is not just the banks but also the countries that are about to declare bankruptcy

Kaupthing Bank hf, Landsbanki Islands hf and Glitnir are highly leveraged, like other now-troubled banks. The banks’ assets reached €100 billion, about 10 times the country’s gross domestic product last year, and their foreign depositors have come to far outnumber the island’s population.

Today, Iceland’s swollen banks are ruined. In the space of a few days, practically the government has seized the entire banking system. The largest bank of all, Kaupthing Bank, was seized Thursday, and trading was suspended on the stock exchange until Monday. The krona has ceased functioning as a currency outside Iceland.

Switzerland – the banking haven is on verge of a break down and the governement cannot rescue it. Here is why…

Switzerland’s gross domestic product totals 512 billion Swiss francs (€332.1 billion). UBS’s balance sheet adds up to 2 trillion Swiss francs (€1.3 trillion) — four times as much. Even Switzerland’s second biggest bank, Credit Suisse, oversees assets totalling 1.2 trillion Swiss francs (€778.4 billion). Together UBS and Credit Suisse have over 640 billion Swiss francs (€415.1 billion) in outstanding loans.

 

Britain is looking at a  bailout package for its banks with plenty of stings attached.

Next to go under seems to be Austria…Germany looks sold as of now but France is on very shaky grounds.

 

BBC has an excellent summary about what is happening in Europe

 

A historic week in September

Timeline of the week’s events in the face of the worst financial crisis since the Great Depression:

 

Sunday September 14, 2008

·    Frantic talks during the weekend fail as Paulson states that there will be no bailout for Lehman. The bank is dumped by potential suitors such as Barclays   and effectively allowed to go bankrupt.

·    Stocks expected to tumble Monday, threatening the start of the next leg of the bear market.

Monday September 15th

·    Lehman declares bankruptcy; serious risk of default on counterparty derivatives results in central banks pumping in $100 billion into the money markets, which follows the announcement of $70 billion on Sunday as they attempt to contain the impact of Lehman’s bankruptcy.

·    Bank of America  takeover of Merrill Lynch  for $50 billion, the world’s third-largest investment bank, to prevent a Lehman-style bankruptcy.

·    HBOS  Britain’s biggest mortgage bank, crashes 30% after being targeted by short-selling hedge funds that sought a similar fate for the bank as Northern Rock. I was probably one of the first to break the news of a hedge fund assault on the bank, as a similar attack of March this year was still fresh in my mind, and therefore had a head start on the scrambling mainstream media that only started to connect the pieces together some 24 hours later.

·    The world’s largest insurer, AIG , seeks bailout cash, with speculation that the insurer seeks a loan of between $30 billion and $75 billions from the Fed.

·    Stock markets crash; Dow Jones ends down 504 points.

Tuesday September 16

·    Money markets freeze with the interbank rate (LIBOR) jumping to 6.75% due to the extreme risk of counterparty default.

·    No U.S. interest rate cut, despite calls and speculation that the Fed could cut by as much as 50 basis points.

·    AIG, the world’s biggest insurer, is bailed by the Fed for an initial $85 billion for an 80% stake in the insurer.

·    Stocks bounce on AIG bailout; Dow Jones rallies 142 points.

Wednesday September 17

·    HBOS is taken over by Lloyds TSB   for £12 billion amidst a stock price crash of 66% in three days. The shotgun wedding was to prevent another Northern Rock-style collapse and nationalization, precisely the possibility warned of on Monday. My analysis called for restrictions on short-selling to give distressed financial institutions room to breathe.

·    Gold as a safe haven soars by an historic one-day move of $85 following the news of the AIG nationalization and Lehman’s continuing impact on counterparties, with no end in sight to the crisis.

·    Russians shut down their exchanges, fearful of a similar collapse to that which followed the LTCM crisis a decade earlier.

·    Stock market slide resumes as the market lines up the next financial dominos to fall; investors fearful of capital losses dump financials, and the Dow Jones ends down 450 points.

Thursday September 18

·    Lloyds TSB takeover of HBOS confirmed for £12 billion ($21 billion) or £2.32 per share in an all-stock deal.

·    Central banks around the world flood the markets with over $250 billion more cash as the interbank market’s freeze sees the money market rate surge to above 6.75%.

·    Morgan Stanley the big investment bank to be targeted, with expectations of a merger with Wachovia 

·    U.K. FSA announces a ban on short-selling of financial stocks. I suggested this as a necessary move some 24 hours earlier. This and the central bank extra liquidity is seen as extremely bullish on a short-term basis at least, as short covering will lead to a strong rally as well as speculators jumping on the band wagon.

·    U.S. stocks soar in late trading following speculation of further restrictions on short-selling and a huge bailout. The Dow Jones ends up 410 points.

Friday September 19th

·    U.S. Treasury announces the mother of all bailouts – Stocks soar across the board on the intention to allocate an initial $700 billion and probably countless trillions more to buy up much of the financial sectors’ bad illiquid debt. The U.K. FTSE rockets higher by 8%.

·    The SEC also expands short-selling restrictions to 799 financial stocks, which contributes to the short-covering rally that leaves the Dow Jones up 369 points.

·    Washington expands the “mother of all bailouts” by guaranteeing money market funds that invest in high-risk instruments like commercial paper

Is your bank safe?

The Fed’s and other central banks’ action does not mean that all the banks have now been saved, as last week’s example of the world’s fourth-largest investment bank, Lehman, going bankrupt illustrates that literally many hundreds if not a thousand plus banks will go bust during the course of the worsening credit crisis, with all of the consequences for depositors. The following report by EWI presents a list of the 100 safest banks.

After all the money put in by the US government, the bailout plan is under scrutiny by FBI. The markets are still on a free fall and democracy as we know it had died. A new form of controlled democracy is on the rise.

Banking Crisis – A blessing in disguise

While most of us are panicing at the banking crisis, it may prove to be sharp wakeup call and a blessing in disguise. The crisis is leading to re-evaluvating our priorities in spending and saving

We are finally curbing our excesses. In countires like India, which have been partly insulated due to controls of the ministry and Reseve Bank, we are truely counting our blessing.

If the current crisis will lead to better checks and controls Kudos to it.

This is not to discount the people who have lost savings and are still gapling with problems….but we definately need to look at the brighter side and say – this is not all too bad – to come out as tough winners instead of winning losers,

 

Within a matter of months, three of the “Big 5” independent Wall Street merchant banks have collapsed. Other banks are de-leveraging at a brutal pace. So far, the global banking industry has written off half a trillion dollars. The IMF has estimated the full extent of the global bad debt at some $1 trillion, including at non-banks andNouriel Roubini, an economics professor at New York University, has been talking of an ultimately $2 trillion size problem. Alan Greenspan said just last week that “there’s no question that this in the process of outstripping anything I’ve seen and it still is not resolved and still has a way to go and, indeed, it will continue to be a corrosive force until the price of homes in the United States stabilizes.”

 

Problems in the banking sector spill into the broader economy. As these complex Wall Street investments sour, banks need to keep more capital on hand to assure investors that they can weather any future losses from loan portfolios. That means banks are playing defense.

If you want a business loan, car loan, home loan, student loan or virtually any other kind of loan, they’re hesitant to lend, lest they wind up with more bad loans. With lending drying up, auto dealers are sitting with inventory they can’t move and real-estate agents are showing homes they can’t sell. The economy is slowing as credit is squeezed.

The crisis feeds on itself. As banks and corporations are perceived to be short of capital and their stock prices fall, their need to raise capital grows even as lenders are defensive. That forces them to sell assets at low prices, and it becomes a vicious circle. That’s what insurance and finance giant American International Group now faces.

 

 

Says Jeremy Siegel in today’s WSJ

The turmoil in the financial markets will reorganize the financial landscape. But this does not mean the financial industry will shrink dramatically. In fact the current crisis could well lead to an increase in the demand for financial services, as the world grapples with the need for new financial instruments, new risk management techniques, and the increasing complexity of the financial world.


Despite the recent turmoil, there is good evidence that the worst is over, especially for the commercial banks with access to Federal Reserve credit. Despite yesterday’s severe sell-off, most are significantly higher than their July 15 low, and some such as Wells Fargo and UBS are up over 50% (see chart above).
Nevertheless, the current crisis will change the financial landscape. Certainly Bear, Merrill, Lehman and others will disappear as separate corporate entitles. But other institutions, specifically the commercial banks that absorb these firms, and who have direct access to Federal Reserve credit, will become larger.

The demand for financial services will in no way disappear as the automobile pushed out the horse and buggy a century ago. Although unemployment on Wall Street will undoubtedly rise, many workers will be reabsorbed elsewhere in the industry. The current financial crisis calls out for new products and services as well as more, not less, information about what is safe and profitable in the future environment.

It is easy to be pessimistic about the future of financial services in the current climate. But objective facts indicate that the future demand for these services will be high. Looking beyond past losses, the demand for financial services, especially internationally, has been strong. The growth of the developing countries, combined with the aging in the developed countries, will lead to huge international capital flows that will be facilitated by new and existing financial intermediaries.
It is shocking that firms that withstood the Great Depression are now failing in what economists might not even call a recession. But their failure was not caused by lack of demand for their services. It was caused by management’s unwillingness to understand and face the risks of the investments they made. The names of the players will change, but the future growth of the financial services industry is assured.

 

In Germany, Speigel reports 

Industry representatives are fond of saying that Germany is “overbanked.” In their view, there are too many financial institutions with too many branches — and not enough profit. And under these conditions, they say, German banks stand little chance of prevailing in the long term against their international competitors, which — thanks to soaring profits in their home markets — are expanding into more and more markets.

Why are interest rates on credit cards so high in India?

 

 

This is Guest post by Vinod Chand.

 

Of late there has been an increase in the interest rate that the bank is offering you on your fixed deposits. When banks pay you more money it translates to a higher cost of borrowing for them.

While banks are offering up to 9.5% on a one-year fixed deposit, they are charging up to 13.5% to people who are borrowing from them. This translates to a spread of about 4%.

But banks deal in many products. Amongst them are home loans, personal loans, vehicle loans, credit cards, etc. Similarly on the deposit side bank are having savings accounts on which they are paying just 3.5% interest per annum.

On the lending side, banks have quietly raised the interest rates on credit cards to as high as 49% per annum. Recently National Consumer Redressal Forum passed an order restricting the interest rate on credit cards to 30%. Most of the foreign banks including Standard Chartered, American Express, CitiBank, etc. have gone in appeal against this order to the Supreme Court of India and sought a stay on the order of the National Consumer Redressal Forum. For the time being Supreme Court has rejected the demand for the stay.

Interestingly in the affidavit filed by the banks justifying the high rates are reasons such as high cost of acquiring a customer, setting up his account, providing phone banking services, making telemarketing calls are cited as reasons.

It would make an interesting study to compare the operations of credit cards across the globe. Cursory research on the internet points to the following

Benchmark Rates in India

Percentage

Benchmark Rates in US

Percentage

Bank Rate

6%

Bank Rate

2%

Prime Lending Rate

12.75% to 13.25%

Prime Lending Rate

5%

Savings Bank Rate

3.5%

Savings Bank Rate

0.4%

Fixed Deposit Rate

9.5% for One Year

Certificate of Deposit

1.98%

Citibank Platinum

49% APR

Citibank Platinum

8.49%

Citibank Platinum Cash Advance

19.99% APR

Citibank Platinum Cash Advance Fees

24% APR

Home Loan

11.5%

Mortgage Loan

4.75% to 7.75%

From above information it becomes clear that there is a huge gap between the rates charged on credit cards in India and the US. While the gap in bank rate is just 4% (translating to 300% increase) the gap in Credit card rates is 41% translating to an increase of more than 600%.

Amazingly the delinquency rate in India is much lower that that in the US. In India, insolvency laws are myriad and declaring oneself insolvent rare.

Even after being armed with a Credit Information Bureau in the form of CIBIL, credit card issuing banks are painting all their borrowers with the same brush. Each one of the card holder is being charged the same rate of interest taking shelter under the reason that there are defaulters who are making doing credit card business expensive.

The questions to ask here are, when bank are aware that this is a very high risk business, justified by then by charging very high interest rates, why are they indulging in it?

Why not stick to regular business of banking where you borrow from your own account holders and lend rather than borrow from anyone, including RBI, fellow bankers and lend to high risk products?

When rates dip, business increases. Take the example of mobile phone call rates. Once upon a time it used to cost 16 rupees to talk for a minute on the mobile phone. Even incoming calls were to be paid by the called person. When rates started dipping, mobile penetration increased by leaps and bounds.

I think banks need to look inward to curtail their lending rates. If the rates were low, more people would use credit cards. Even rolling over credit card dues would then not lead to a debt trap which it currently does in most cases. Banks need to reduce their cost of operation rather than try to transfer the high cost to the hapless card holder. They need to shun the five-star culture of their operations.

As the Supreme Court is seized with the matter, I am sure good sense will prevail and an errant government, Reserve Bank of India, which has let this situation happen by not giving proper guidelines, along with the banks will be reined in as far as interest rates on credit cards are concerned.

Interesting Links

http://www.smartmoney.com/nowwhat/index.cfm?story=credittricks

http://www.smartmoney.com/debt/advice/index.cfm?story=digoutofdebt

http://cardweb.com/

http://www.online.citibank.co.in/portal/newgen/service/service_charges.htm#4c

Interesting calculator that allows you to find out how much interest you will pay if you stop spending on your card and make a fixed payment every month. I tried with 20,000 and a fixed payment of 1000 (5%) and it came back with an amazing detail of 23,037 as interest and a payment period of 43 months (3 Years and 7 months). This does not include the annual charges that you would per force have to pay since you have an outstanding on your card!

http://www.smartmoney.com/debt/calculator/index.cfm?story=loancost

A professional from the Information Technology field and an entrepreneur at heart. With more than 20 years of experience, he has been involved in IT Training, Software Development, Web Portal Development. As part of his attempt to give back to the society, he does credit counselling for people distressed by credit card and other debts. He is the General Secretary of Credit Consumers Association of India, a non-profit body. He can be contacted at vinodchand@gmail.com. He also blogs passionately at www.creditconsumersassociation.blogspot.com