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Credit Derivatives

 

Is Credit Policy Classist, Penalizing the Poor?

Created by : Kausik Panda, Sr. Associate, ICICI Securities  | 11 29 2008 05:29:00 +0000
Industry : Investment BankingFunctional Area : Derivatives(Markets)
Keywords : Credit Poor Policy Credit Policy Penalizing CLASSIST
Activity:  335 views;  last activity : 07 06 2010 20:18:09 +0000
As the saying goes, "It costs more to be poor." This day in time, when credit is king, are the credit rating and lending policies inherently classicist? I would welcome your thoughts on this.
  
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Your credit rating is based on your credit history, not your income, your wealth or anything else. Lenders have a right to know how reasonable an expectation it is that they will be paid back by you, in full and on time. Credit ratings are as reliable an indication of this as we have.
By Kausik Panda, Sr. Associate, ICICI Securities  | 11 29 2008 05:29:00 +0000
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Credit Policy can't be classicist, because it has no morals. From the perspective of the person lending, you have to charge late fees in order to achieve the risk premium you need in order to make lending to that borrower profitable.
By Satish Pandey, Sr. Associate, IL&FS Venture Corporation  | 11 29 2008 05:30:35 +0000
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