Dear Editor of Economic Times:
This has reference to the op-ed entitled Credit Ratings Need To Get Personal in today’s Economic Times.
The article makes a false equivalence between the scope of corporate credit rating and consumer credit rating and misses two crucial points while making the case for enriching consumer credit rating by comparing it with the composition of the more-enriched corporate credit rating.
One, corporate credit rating happens only when the borrower is raising debt whereas consumer credit rating happens even when the consumer has not applied for a loan.
Two, corporate credit rating is initiated by the borrower whereas consumer credit rating happens behind the consumer’s back.
Therefore, whatever information the corporate borrower submits for credit rating exercise has its tacit consent. But, as a consumer, I see no reason why I should allow everyone to know about my deposits and other assets, as this article is advocating, when I am not seeking a loan.
And, when I am seeking a loan, no bank gives a loan just on the basis of credit rating – they ask for income statement and tons of other data, so I don’t agree with the claim made in the article that banks end up with NPAs in consumer loans because of lack of information.
In short, the present consumer credit rating system is fair to all parties concerned, and I see NO case for it to get more personal.
Thanks and Regards.
KETHARAMAN SWAMINATHAN
5 September 2023
In case the op-ed referenced above is not available online or is paywalled, cf. following exhibit.
A condensed version of my above email was published by Economic Times in its edition dated 6 September 2023.
As you can see, the published version says “…details of a consumer’s assets are known to everyone”.
The authors of the original article make the case for lenders / banks to know all details of a consumer’s assets. The crux of my reply is that they do not and should not know them.
The above remark is obviously wrong. Neither the original article nor my rebuttal would have been written if it were true. I never wrote this line, as you can see in my original email version featured above.
Most letters to the editor are written by readers wanting to share their thoughts about an article that appeared in the newspaper. Occasionally, a reader might write in to point out gross inaccuracies in a letter written by another reader, as I did in My Article On Car Speed Governor In Economic Times.
I think I might set a record of sorts by being the first reader in the history of the newspaper industry to write a letter to the editor to point out an inaccuracy in their own letter!