Article;
http://economictimes.indiatimes.com/opinion/comments-analysis/banking-shadow-and-shadow-banking/articleshow/8919680.cms
Comment;
The article has been written beautifully but the writer misses the main points like financial education, and, the difference between regular banking and shadow banking. The term shadow banking comes from the great recession in the US in 2008 and points to practices that are run behind the regular banking practices. In shadow banking shadow bankers arrange funds on the market rate of interest and lend the money for other purposes like home loans to people who are unable to understand the dynamics of money market. The article lacks the point of generating own resources for microfinance that can avoid the ripples created by loan crises just like what happened in the US in 2008 in case of sub prime loans. People were educated and knew how our financial system works but they could not gauge the magnitude of the crisis. It was huge enough to sweep the incomes generated during prosperity. Financial education or financial awareness or financial consciousness all are equivalent terms in terms of meaning, they convey that people opting for loans understand the risk associated in face of no repayments, their properties, their mortgage will be confiscated… But many times the end receivers of the loans fail to estimate the individual risks associated with such deals due to lack of financial literacy. In India where half of the population is illiterate assuming financial literacy will increase the cases of individual defaults and in the end the burden will come on the shoulders of the government.
http://economictimes.indiatimes.com/opinion/comments-analysis/banking-shadow-and-shadow-banking/articleshow/8919680.cms
Comment;
The article has been written beautifully but the writer misses the main points like financial education, and, the difference between regular banking and shadow banking. The term shadow banking comes from the great recession in the US in 2008 and points to practices that are run behind the regular banking practices. In shadow banking shadow bankers arrange funds on the market rate of interest and lend the money for other purposes like home loans to people who are unable to understand the dynamics of money market. The article lacks the point of generating own resources for microfinance that can avoid the ripples created by loan crises just like what happened in the US in 2008 in case of sub prime loans. People were educated and knew how our financial system works but they could not gauge the magnitude of the crisis. It was huge enough to sweep the incomes generated during prosperity. Financial education or financial awareness or financial consciousness all are equivalent terms in terms of meaning, they convey that people opting for loans understand the risk associated in face of no repayments, their properties, their mortgage will be confiscated… But many times the end receivers of the loans fail to estimate the individual risks associated with such deals due to lack of financial literacy. In India where half of the population is illiterate assuming financial literacy will increase the cases of individual defaults and in the end the burden will come on the shoulders of the government.
No comments:
Post a Comment