Fixed or floating?

IIPM BEST B-SCHOOL

So what’s the final take? Should it be ‘fixed’ or ‘floating’? Amit Saxena, CEO, Planman Financial, has an innovative, yet well practiced take, “With inflation on a continuous high, it won’t be surprising for RBI to not only further raise rates across the board, but also to increase the CRR, thus forcing a larger liquidity crunch, consequently resulting in another rate hike. Ergo, borrowers should lock into a ‘fixed’ loan schedule immediately.” But what if the rates come down in the future? Saxena shoots back, “Simple! Immediately take a new ‘floating’ loan from another bank, and pre-pay the previous loan that you’d taken on a ‘fixed’ basis.”

And that, dear Shylock, is the most intelligent solution for any individual wishing to take a loan in current times, as most banks have a scheme where they allow borrowers of other banks to transfer their complete loan schedules lock, stock and barrel from another bank.

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Source : IIPM Editorial, 2007

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative