Indians Cling To Old Ways Of Banking
Tuesday, October 7, 2008
NEW DELHI -- Clutching a bunch of bank papers, Lakshmi Rajgopal squeezed through a narrow gated entrance and walked past a long line of customers jostling at the cashier's window. Some were complaining about the slow service, their voices muffled by the whir and creak of old printers.
This grim, cramped government-owned bank may lack the polish of the more modern private banks springing up nationwide. But to Rajgopal, a 50-year-old radiologist, it's now the safest place to deposit her family savings.
"When the American financial system is collapsing, I am happy we still have the old-fashioned conservative banks in India. Thank God we did not globalize too much," Rajgopal said, sitting down to fill out a form at a Syndicate Bank branch in South Delhi.
"I have been coming to this bank for 30 years. My money is safe here because I know it is a government bank. I am confident that they will not take any unnecessary risk or gamble away my hard-earned money."
Rajgopal's view is becoming increasingly common in India and China, which have two of the most heavily regulated financial systems in the world.
In the weeks since the financial meltdown in the United States, "I told you so" has become a mantra in Asia's two biggest developing economies. Television debates, economic conferences and newspaper columns praise the domestic financial leaders, sometimes even gloating that they are wiser than Wall Street's. The glee is particularly strong in view of years of U.S. lecturing on the virtues of the free market.
"We were often scolded by the West about how India's financial sector was over-regulated and we needed to adopt Western best practices," said Kamal Nath, India's commerce and industry minister, to an audience of cheering business leaders in New Delhi recently. "We all now know how good those best practices were."
Critics point out that some of India's finance leaders, especially Nath, have spent years pushing for the very reforms they now seem to be disparaging.
In light of the U.S. troubles, Chinese officials are considering delaying or scrapping plans to introduce more complex and potentially riskier financial instruments such as futures and stock swaps.
"China doesn't need speed first; China needs quality first," said Liu Mingkang, chairman of the China Banking Regulatory Commission, at an economic forum last month. "When the U.S. had its zero-down-payment scheme and reverse mortgage loans, we thought it was ridiculous."
U.S. Treasury Secretary Henry M. Paulson Jr. has been pushing China to allow its currency to float freely and to give foreign banks more access. Over the past few weeks, people in China have pointed out that the crisis on Wall Street bolsters what they have been saying all along.
In China, as in India, ordinary people often pay cash for big-ticket items such as cars, weddings and even houses. But those habits have been slowly changing. In India, where credit card companies and other lenders have spent millions of dollars on colorful ad campaigns, more young people are borrowing money.