With reference to the column, "Small banks can make history" (September 23), the writer, Subir Roy, has succinctly explained the advantages of small finance banks (SFB), with 10 such banks granted licences recently.
I, however, disagree with the writer's suggestion that SFBs lend to the housing sector. It reminds me of the sub-prime crisis that destroyed the large banks in the US. Those banks did not entertain mortgage loans directly but refinanced lower-rung financiers. These financiers entertained mortgage loans even when the borrowers had sub-standard documents. Those who borrowed sold the homes causing a housing bubble due to changes in ownership. Such changes in ownership led prices for the same property - either with no documents or substandard documents - to escalate. Eventually there was a sudden steep fall in the prices of mortgaged houses as there were no buyers and the properties did not have proper documents.
I do not agree with the writer when he states that 80 per cent of Indians are circumstantial owners. That may be true only of slum-dwellers. The middle-income group that constitutes a big chunk of the population does not seek such shelters even when these can be bought cheap. Even the poor seeking their own shelters have become aware of the pitfalls of circumstantial ownership. There have been several cases of such shelters getting demolished by the civic authorities. Unauthorised constructions too, have come under the government's scanner.
K V Rao, Bengaluru
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