Insecurity of security cheques

Lately the lovely puchlines like "apna sapna ghar ho apna" and "home sweet home" is making me uncomfortable. Reason is simple but the situation is complex i.e. still high interest rates and burden of loan which keeps haunting me.

So after doing lot of math and complex simulations I decided to find better alternative. Two options I could find. Firstly demand, request, beg, plead (transition of the behavior happens in the same order) any public sector bank since they are the cheapest. Secondly renegociate with your existing bank since the process is expected to be simpler. Being a lazy person selecting from the options was not that difficult. I thank myself for not including a third option of continuing with the current loan.

So finally when I thought I found the right bargain (it's all in the mind), I decided to get going with the paper work. That's when I found out that for some strange reason they discontinued the practise of post date cheques. Though initially I laughed at it, but later it made sense (economically).

Here is their story. For post dated cheques, bank has to go through lot of hassle - firstly track and maintain the cheques, secondly when the cheques are all used up then chase the customer to get the fresh set (quite often the customer is not traceable since this great event happens once in 2 - 3 years) and thirdly you are not contributing to the environment (too much of paper is being used). So the innovative cost cutting measure is to cut down on post dated cheques and go only for electronic transfer.

Nevertheless I agreed with electronic transfer (or you can say there were no alternatives anyway). Here comes the next surprise. The so called PROCESS states that customer opting for electronic transfer has to provide 3 security cheques, each one of one third the value of the outstanding amount. Are you kidding - was my response. And why is that?

Apparently electronic transfer is not a legal instrument which means if customer defaults then bank can not go to court. So someone thought brilliantly of introducing security cheques. That gives bank the power to encash the cheques moment you default on electronic transfer. But obviously it will bounce (who in the world will have a bank balance equal to loan amount  and still take loan). Now that bank has a bounced cheque, they can go to court. Bravo!!!. It was explained to me that all this complex process is in place so that bank can recover the outstanding amount.

Interestingly all this blah blah was explained to me by the sales manager but when I requested for the exact legal terms and conditions, they were at loss of words (imagine a sales man in that situation). They could not provide details about their policy - I wonder who provided all these details to them in the first place. Truely word of mouth business.

Continuing with the saga, I further found out that court has given a verdict that bouncing of the security cheque can not be treated a normal case of cheque bounce since as customer you don't even mention the date on the cheque.

So I wonder how much secured the bank is with the security cheques. Anyway it's a sellers market so anything is fair.