The phrase Loan may be a four letter word but it’s effect on today’s economic scenario is too large to ignore. The American economy had a very convenient process of sanctioning loans to both individuals and corporates without being putting too much heed to the repayment capacity of the borrowers and even some cases without properly examining the quality of the papers of collateral pledged to them. The result was evident. The collapse of mighty American banks and almost it’s economic system as a whole. The trend of fast and effective credit disbursal started out by our western counterparts has caught on us too. Almost every Indian is found to be in the clutch of multiple credit cards and some personal loans in his or her kitty. But the fault does not lie with the individuals.

With every trappings and lure of a consumerist society in place, it’s really hard for anyone to deprive himself or herself from getting a share of the pie when someone else is paying for their bills. But when they realise that their is nothing called a free lunch, it probably becomes too late. The random suicides in both the the upper, middle and lower middle class of the society is a proof of that. The recent American mortgage crisis can testify that.

The same can be said about the Industrial Sector when millions are distributed without really paying too much heed to the profitability potential of the corporates and risking public money as such. The fall of Real Estate Sector in India and the infamous Satyam saga will testify to that. The banks or NBFCs disbursing the loans are not only accountable to themselves but also to their depositors, stakeholders and most importantly the takers of such credit who are sometimes force fed credit by the financial institutions in order to make their loan portfolio large.

If properly disbursed, loans are the most convenient financial tools to help bailout any individual or corporate and contribute to their prosperity. A healthy and transparent credit system is the backbone of any flourishing and robust economy.

A bit of human approach, bit of transparency, honesty and lack of greed can go a long way in making the current credit disbursal scenario effective in all parts of the world and may take out the world economy from the fierce clutches of recession it is encountering with.

Suddhadeb Chakraborti. Article Source: http://EzineArticles.com/?expert=Suddhadeb_Chakraborti