Monday, March 20, 2017

Catastrophe of bank interest rates – 5

Continued from the previous post –
Third category is personal loans. This category helps only that individual without harming interests of other.
Out of the thirteen types of borrowers such as, Shop owners, manufacturers, builders, contractors and transport are doing business, which generally benefits society. The gambler group category consists of forward traders, commission agents, money launderers, black market, gamblers, speculators and crony borrowers. These are actually burden on the economy of that society and they are the ones who benefit by lower rates in interest on loans. The first category borrowers do not really benefit by reduced interest rates on loans. I shall explain how in coming part of this essay.
Policy of lowering of interest rates benefits the gambler group types of borrowers and personal loans type. All political parties benefit of funds from these people and so they are always favored by government when policies on financial activities are finalized. After all, what is government? It is a team comprising of political parties. Out of the "Real economic group, most do not really benefit by any reduction in interest rates. When lower rates are offered, they do not mind that minute benefit and so keep silent. I shall explain this point as the topic progresses further. it is observed that if company management is working efficiently bank interest component remains at around 4% out of total expenditure but if the company management is not efficient we notice this components grows to as high as 10%. Mismanagement in controlling demand/supply ratio could be major grounds; in addition to that, other wasteful spending may add to that. We do not have any regulation to decide management efficiency; if that factor gets importance we can stop unnecessary expenditures and keep this component at its best level (4%). We may say that this component can be used to indicate how efficiently that company works. If it is 4% or less company efficiency could be best and for every rise in this indicates inefficiency of that management. These companies never want to improve their working style and cover up for that they want to keep bank interest component at lowest level and continue to demand lower interest rates on their borrowings.
Continues in next post –
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