A Bad Omen

Reports that banks are thinking of taking recourse to hired goons in order to recover bad loans need to be taken with the utmost seriousness. If creditors are driven to such dire straits, the implication is that the state is not performing its function. It is the responsibility of the state to ensure that contracts are enforced and loans are repaid, and fair and speedy implementation of any breaches of these laws is essential for the smooth functioning of any capitalist economy. But if tortuous legal processes result in delays which force creditors to take the law into their own hands, the consequences for society can be ominous. Bank managements as well as their borrowers know well enough that civil suits drag on for decades, with the funds being locked up in unproductive assets. Debt recovery tribunals, set up to solve the problem, have proved to be ineffective. In the circumstances, the most that banks can do is to negotiate compromise proposals with borrowers. In the case of small loans, it could work outcheaper for banks to write off loans rather than incur the necessary legal expenses on trying to recover paltry amounts. Clearly, it is sheer desperation which has led bank managements to consider the appointment of what are euphemistically termed "private agencies" to recover their dues.

It's not just the banks which are placed in this peculiar position. Landlords often have to resort to hiring goons to evict tenants. Private businesses very often resort to such tactics, and there are anecdotes which say that such services are available from policemen at a price. The ordinary businessman will go to almost any lengths to avoid having to seek recourse to the legal system. The criminalisation of business is only a matter of time under such circumstances. The solution of the problem, of course, is thorough-going reform of the judicial system.

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