House Of Trouble?
In Ruskin Bond's short story The Boy Who Broke the Bank, a boy working as a sweeper at a bank causes its collapse after the manager is unable to pay his salary on time. Soon the rumour spreads that the bank has run out of money. Customers queue up in large numbers demanding repayment of their deposits. Since the nearest bank is 30 miles away, the manager is unable to get emergency funds to meet the demand. The crowd gets unruly, someone hurls a brick at the bank's window and there is chaos all around. That's the end of the Pipalnagar Bank.
The financial services industry runs on the principle of confidence. Any rumour indicating drying up of funds can bring the confidence crashing down. Dewan Housing Finance (DHFL), a 35 year old housing finance company (HFC), began its journey downhill with a crisis of confidence resulting from a repayment default by IL&FS in September last year. What compounded DHFL's problems, however, was its aggressive bet on growth, backed by funding long term assets with short term debt. An annual growth of about 20 per cent (its growth rate for
