Finally. An actual reason to care about your rep in the NRI community.
It seems banks are sprouting up in the US that cater specifically to Indians, according to this Hindustan Times article, which says a dozen such already exist. Indians sans credit history who might be viewed unfavorably at the big banks – where sub-prime angst runs thicker than unclarified butter – turn to these Amma and Appa joints to be properly judged.
Sushil Patel, son of Chan Patel (founder, president, chairman and CEO of the State Bank of Texas) explains:
“Ethnic banks avoid bad loans as they take decisions based on factors like culture, background, social status. They are able to judge a person’s character better than regular American banks, who don’t know their clients as well. We are able to check the guy’s character because of the close-knit Indian community in the US.”
Hmm. So the aggressive pursuit of social standing produces real results these days, not just the downfall of budding young novelists.
The concept seems a bit like microlending in that it gives a chance to people who need it and can’t get it. Only instead of reducing risk by micro-ing the loan, this system pads itself by macro-ing the assessment. It’s a crowdsourcing model along the lines of the Wiki, where the wisdom of a group – in my case, the Kannadiga community in Dallas – acts as a legitimate reference point. I’m not quite sure the ins and outs of how one is judged, but I imagine it could go something like: “Her grandfather was a government officer with my father back in Coimbatore. I think she’s good for it.”
It creeps me out, but I think it’s sort of brilliant. And apart from what I think, it seems to be working.
Chan’s State Bank of Texas is running a major operation, with $500 million in assets and more than $175 per share. Three-quarters of its loans so far have been made to minorities, and it’s projecting more than $85 million in loans for the upcoming years, again, mostly for minorities (all this on its website).
The article cites the richest among the banks to be the Mutual Bank of Chicago, which boasts assets worth $1.35 billion (still a good 1,000 times smaller than the Bank of Amrika).
The Mutual Bank’s site is not nearly so forthcoming about its Indo-American agenda as are the Texas Patels, although it does have a section solely on “rupee remittance to India.” It is, however, on Devon Ave., which is akin to tattoing oneself in white, orange and green laddus. Not too far from it is the Devon Bank, which uses Muslim Sharia law in its lending practices.
The point here is not however, that these banks are targeting South Asians. That concept is not new, as the string of Laredo Banks in Texas proves. The point is that an abstract and central (and often depressing) reality of our ex-patriatic life is being capitalized on. It appears in the bulk of literature and movies we South Asians produce. It drives so many of our conversations. It is this simple fact: that in our communities – from Gibraltar to Kenya to Peoria, IL, in communities 1,000 to 10,000 strong – we can’t hide. We know everything about everyone. Who better to judge whether Such-and-Such Murthy deserves a $30,000 loan than all of us?
The loans seem intended for newly landed Indians, but with banks in straits as dire as they are, ABDs with no credit history to their name – like, well, me – could conceivably find themselves in Chan Patel’s worthy establishment asking to be floated that first down payment.
I assume I’d pass the background check. Then again, what if no one likes me?
very interesting. almost a return to old-time commercial banking, with the twist of favoring an ethnic minority. sub-prime was different. those banks never met their clients, operated more like a brokerage firm with a trading floor, and approved loans purely by objective measures: credit score, income, etc.
probably violates the civil rights act and bunch of other laws, but doubt they would be enforced.
Is there a chance of me flying over to the USA and then getting a loan and studying there?
which communities are you talking about? It’s often the ones that recognize no geographic boundary (i.e. when it’s time to check the global registry of community members because daughter X needs to continue Y tradition) that perpetuate informal traditions of enforcing whatever is seen as the in-group moral code.
that said, my own ‘ex-patriatic’ group is diffuse enough such that I don’t experience much of this and when it does, I get to violently disregard it with a show of force.
I smell a lawsuit? Maybe the Attorney General’s office in Texas can look into this instead of spending all their resources chasing dildo sellers.
Mallika – To be honest, I don’t think bribing the bar peeps will go over well with the loan officer. And shouldn’t it be “Loan Officer Uncle?”
I do think this will be good for, like you mentioned, people with no credit history or those who have just moved to the country. But if they’re going to be judged like this, how long until people are being turned down not because they won’t be repaying their loans, but because Loan Officer Uncle just doesn’t like them?
yes! loan officer uncle! i’ve been spending too much time with white people. i’ll change it now.
local houston chronicle wrote about this last year:
BANKING / `We’re after that desi market’ / Financial firms are the latest businesses popping up to serve Houston’s thriving South Asian community, centered along a bustling stretch of Hillcroft
By PURVA PATEL Staff
MANY of the stores in Houston’s Little India on Hillcroft are closed on Tuesday, usually the slowest day of the week for area retailers.
But you wouldn’t have known it from the crowd that gathered recently at Mutual Bank’s grand opening to chat with bankers over samosas, pakoras and other South Asian finger foods.
Months before opening in August, the bank hit the Houston area hard with a letter campaign to the city’s South Asian, or desi, community, advertised in local ethnic media, and handed out fliers hawking its CD rates and a drawing for a free plasma TV, all to make its presence known.
“We’re after that desi market,” said Amrish Mahajan, the bank’s CEO. “Our experience has been nothing but the best with them. They pay.”
Illinois-based Mutual Bank, with $1.2 billion in assets, is the latest in recent years to open in the heart of what’s known as Houston’s “Little India,” or to the city’s desi community, as just “Hillcroft.”
The area started out with a small Indian grocery store and a few sari shops. In the years since, the part of Hillcroft nestled between the Southwest Freeway and the Westpark Tollway, and the nearby street of Harwin have become home to desi jewelry stores, wholesalers, video stores, beauty salons and restaurants.
Financial firms are the latest to join the mix in hopes of banking on the businesses in the area. Last year, Dallas-based United Central Bank opened a branch on Hillcroft, one of three it has in the city. Metrobank and American First National Bank also have branches nearby, and India-based ICICI Securities opened an office in Houston earlier this year.
“The community has good depositors, good investors, and good borrowers. They have a fair amount of money to deposit, and they’re very meticulous about business,” said Jagdip Ahluwalia, executive director of the Indo-American Chamber of Commerce of Greater Houston.
So, he’s not surprised that Mutual Bank would come to Houston to tap South Asian wealth.
“But it’s a shame you have to have people come from out of town to take away our money,” he said.
A local group is in fact planning to acquire a Texas bank that will focus on South Asian businesses and open a Houston branch in 2008, but group members wouldn’t disclose details because the purchase is still pending regulatory approval.
One of 12
The Houston branch is one of 12 for Mutual Bank, which also has locations in Chicago, Edison, N.J., and other cities with large South Asian populations.
Mahajan is known in Chicago for his ties to the state’s governor, according to newspaper reports, but he said he won’t be partaking in politics here.
He said that when his wife was charged with allegedly overcharging the state of Illinois $2 million in services in connection with her drug-testing firm – she has pleaded not guilty – it was enough to drive him away from the political scene. His business and his wife’s are separate, he insisted, adding that he thinks she was targeted because of his political ties.
Mutual Bank also scouted Sugar Land, which has a concentrated Asian population, for potential locations but settled on Hillcroft when a spot became available in a new shopping center.
The bank employs Hindi, Urdu, Panjabi, Gujarati and Spanish speakers.
Mahajan said it was important to him to use banking to help the desi business community expand.
“No ethnic community is a success in this country unless they have a financial institution of their own,” Mahajan said. “We want to help the desi-owned businesses grow. I mean, look locally, they own the hotel-motel market.”
The Houston-area has 32,220 Asian-American-owned businesses, of which 6,629 are owned by Indian Americans, according to the most recently released Census Bureau data. The agency doesn’t have a category for all South Asians.
Big players
Though they may not be desi-owned, other banks have homed in on the market already.
Western Union and Citibank have run TV and print ads in ethnic media touting their remittance services. In 2006, the United States accounted for 36 percent of the $24.5 billion in remittances sent to India alone, according to the Inter-American Dialogue think tank in Washington.
Houston-based MetroBank, which has targeted all Asians, has had a branch on Harwin for years. Its Harwin and Sugar Land locations cater mostly to Indian and Pakistani customers, said Mohammad Tariq, a regional manager for the Houston-based bank.
While traditionally South Asian businesses have focused on hotels, convenience stores and small retail shops, Tariq said, more of his South Asian customers are now looking at real estate developments, health clinics and even sports facilities.
“The community has gone everywhere,” he said. “Their vision has changed, so they’re doing everything.”
United Central Bank caters to all Asian groups but opened on Hillcroft last year specifically to be close to the Indian-, Pakistani-, Sri Lankan- and Bangladeshi-owned businesses and residents in the area.
The bank’s ad in the local Pakistan Chronicle caught business owner Zia Burney’s eye when he moved to Texas earlier this year to run a retail store in the area.
He said he chose to bank with United Central because it was close to his store and one of the few banks that understood his check-cashing business.
“You feel at home,” he said. “It’s easy to do business with them.”
The bank’s other branches on Gessner also cater to convenience stores, motels and hotels, and shopping centers.
“It’s not a big market for mainstream banks, so they’re not always as willing to customize products for customers,”said Sam Rukh, manager of the bank’s Hillcroft branch. “There’s a huge need for banking here, and it’s getting bigger and bigger day by day because the South Asian community is growing so much.”
I wonder if bringing the loan officer samosa’s and chai would help sway the decision?
Back in old times, when all banks were run like this, there were no savings-n-loan scandals, sub-prime problems, alt-A debacles, CDO market crashes and so on. A person got a loan based on not his/her needs or just his/her current financial standing, but also social acceptance and behaviour. Conversations went like this…
Applicant: I need a loan for five grand. Loan Officer Uncle: What do you need it for? A: I want to start X business. (Loans for consumption like vacations, personal purchases, health issues were rejected outright) L: What can you offer as collateral? A: I have a house… L: What percentage of the house do you own? A: 60% L: 40% is still outstanding? Not good enough. What else you got? A: I have A, B and C. L: Ok. Good enough. A: So I’ll get the loan? L: Well…did’nt I see you in the ABC restaurant the other day? A: Yes… L: Who was the woman you were with? Was that your wife? You seemed to be pretty intimate. A: How is that any of your… L: So it wasn’t your wife? Are you seeing someone else? Did’nt you give her a present in the restaurant? A: What does this got… L: What happens when your wife finds out and files for divorce? You may lose all your money to her. How am I going to get my money back? A: Well… L: Get your wife here to co-sign the loan. And about collateral C… L: Isn’t it true that it’s co-owned by your father? A: Yes – I am the 50% holder… L: Isn’t it true that you are not on speaking terms with him anymore because you married someone he did not like? A: How is that… L: I don’t like situations where family members quibble. If you can make up with your father and get him to co-sign the loan, fine. Else, that collateral is no good.
Yes. Getting money was tough, as it should be. Credit was non-existent. There were no consumer rights. The world worked as it should.
But we’re not in that world anymore. As AMFD says: A lawsuit is a certainity in these days. Once cannot run a business as one wishes to.
Nothing less than a full collapse of the modern financial system will get things to where they were. Looks like we are heading there. Fannie and Freddie shareholders will most likely get wiped out in the next few weeks. That’ll be a good start.
M. Nam
back in the day there were no collateralized instruments and the problems and counterparty risk were apparent and not hidden under layers.
I dont think the loan derivative market is essentially a bad thing. Counterparty risk may not be apparent but it is also devided among many holders and as a result loss to individual entity may be limited. The “innovation” in the lending market did democratize lending and increased the availability of credit. When we come out of this financial crisis, I dont think lending will go to the old days when it was much harder to get a loan. Availabilty of credit is what keeps the economy growing. I dont think any central bank (Fed) or any government would sacrifice growth.
RC: >>Availabilty of credit is what keeps the economy growing.
True. But credit should be very tough to get, and only for business/production purposes. Credit for consumption purposes should be impossible to get.
M. Nam
I am not saying the derivative market is bad, it only makes it muddled. Primary risks that the banks wouldn’t undertake due to credit concerns still ended up on their balance sheets due to investments in such derivatives. I also don’t think we will revert to old days but we will end up with increased regulatory oversight.
Not such a hot idea when you think about the expectations desi aunties and uncles have of us.
How about this…
Applicant: I need a loan for 10k.
Loan Officer: For what purpose?
A: I’m starting a vegan restaurant in my neighborhood which is predominated by Jains yet no suitable restaurant is available for us. It will be a huge success.
L: Who is the young man waiting for you out in the car. I know your parents and as of yet they have not arranged your marriage. Wait. Is that young man black or desi? I can’t tell from here. What if you get pregnant and he absconds and you cannot pay us back because you will be a struggling single mother…..
There have been some upheavels at various institutions following Harvards’ revamp its financial aid policies which maybe very favourable for the upper middle class desi kids. But as interestingly noted in the article what exactly is middle class by American standards ? Can people earning more than $100,000 per year be classified as middle class ?
The above question is naive on the count that it does not take place and/or family situation into account. A single in Bloomington, Indiana who makes 100K/Yr is most certainly upper middle class. A married man in New York city with a wife and three kids making 100K/Yr is bordering on poverty.
Obama wants to tax both of them the same way.
M. Nam
No home mortgages? No car loans? Thats not the american way.
16 · MoorNam said
Socio-economic situation getting coupled into geography thereby affecting demography in future ?
moor, u think BoA will survive ? got some 250k in there, get jittery thinking about it. can’t store that kind of money in the pillows either. fre/fnm definitely dead by yearend, put vol thru roof.
sj,
I prefer not to give monetary advice. Personally, I don’t keep more than FDIC insurance limit of 100K in any one bank. Can’t say about BoA (because of work related gag-rules), but hundreds of small banks, dozens of mid-size banks and at least one major bank will go under before this is all over. It’s better to hedge your bets.
M. Nam
19 · sj said
brokerage accounts usually have bank deposit programs. cash is spread out over a variety banks adn no one bank gets more than 100K, but you can access it all thru one account. smith barney has one so even if citi fails you won’ lose your cash (or securites but that’s a different story), i’d be very surprised if schwab or merril didn’t have one too.
personally i balance my portfolio across commodities. cocoa, potato and milk products are a preference. ferinstance i shall be researching a chocolate milkshake and fries this afternoon.
may the great komodo’s breath protect your assets.
may the great komodo’s breath protect your ass
😀 😀 😀 😀
Plus brokerage accounts I believe up to $500K may be protected by the SIPC insurance which is similar to FDIC in case a brokerage firm fails.
SIPC will cover up to $100K in cash losses and up to $500K in security losses.
Tax rates should be adjusted by zipcode, then again, it just opens a huge Pandora’s box in terms of enforcement.
Indus American Bank is another such venture.
There is also this upcoming PIO/NRI university in desh that may of interest to future desi kids who cannot afford a good education in America
25 · umber desi said
most of the big brokerage houses will buy additional insurance to cover up to 50 million or so in securities if the broker defaults. none of the bears sterns retail accounts, for example, were ever at risk.
You are right about extra cover. Although any specualtion on the big bank about to fail as per IMF?
I meant the ex-IMF chief
rogoff’s hinting at WaMu and/or Wachovia.
16 · MoorNam said
Unless one of the two owns a business or the income is derived from something other than a job, both would be / ARE being taxed the same way minus the state income taxes.
Is there something missing here?
ok. and if they are both single or both married?
Check the guy’s character, eh?
Something tells me that if it’s a girl, the character check will be even more rigorous. Imagine our girl Anita Jain waltzing in;
Loan Officer Auntie: Welcome beti, how can we help you today?
Anita Jain: Well Auntie, after the success of my first book I would like to publish independently so I need a loan for that.
Loan Officer Auntie: You’ve written a book have you? I tell you beti, I am so proud of our desi youth and how they stop at nothing to succeed and make a name for themselves over here. What’s the title of your book, dear?
Anita Jain: I have a copy for you right here, Auntie. (Jain proudly hands Auntie copy).
Loan Officer Auntie: Why don’t we break for lunch and that will give me an oppurtunity to read over what you’ve written. Meet me back here at 2:00. I’m sure you will be approved for the loan.
Anita Jain: Sure Auntie, 2:00 it is!
Auntie locks her office door from within, tunes in Hari Prasada Chaurasia on her iPOD, leans back and digs into MARRYING ANITA, while gingerly dipping her roti into the mung ki daal in her stainless steel tiffin. Turning page after page, a surge of conflicting emotions sweep over Auntie…
“You mean all these years I’ve obeyed my elders and followed their advice on the proper tazeeb for an Indian girl and remained tightly closed and chaste only to be wed to an over-weight moustached man from Kanpur who didn’t even know how to kiss on our wedding night and has since forth not improved, followed their advice to give birth within the first year of marriage and tend to my wifely and motherly duties as homemaker, maid, cook and everything while at the same time working full time at an underpaid job only to come home to the same man who saw no neccessity in acknowledging our anniversaries or taking me out on the town or learning how to make good love or even learning how to put daal in the pressure cooker and this little tart got her taste of all kinds of goodies from NY to Mumbai and was even shameless and bold enough to write about it??? While I was driving my nagging saas to all the pujas from Jackson Heights to Cherry Hill this little horrible example of Indian womanhood was shaking her booty all over the Upper West and Lower East sides like Carrie or worse yet, Samantha? Loan, my ass!!!! I will make her into a proper Bharatiya nari if it’s the last thing I do!”
Auntieji flings her iPOD across the office and contemplates how she can make Jain’s and every other desi woman’s life in the city as miserable as her’s.
Jain returns at 2:00
Loan Officer Auntie: Sit down beti. I’m sorry but I’m afraid you don’t qualify.
Anita Jain: Really? But how could that be? I’ve shown you all my bank records, all my stats, my bio data, my book. Auntie why? Why? Why? Why?
Loan Officer Auntie: Don’t cry beti, that’s just the way things work around here…..