Scenario: Existing Banker is charging interest @ 10.15% and the offer from the new bank is interest @ 8.15%. Confusion is that whether to change the bank account at this point of time. We used Cartesian Coordinates to arrive at the decision.

Theorem: What would happen if I change the bank.

1. I have to pay interest of Rs. 10L to the existing bank upfront.
2. I have to pay processing fees of Rs. 1.5 L to the new bank. Other charges of 1 L
3. I would get interest benefit of 2% per annum (appr: 4 L)
4. Margin on stock and book debt shall remain at 75% level. New bank shall deny to increase it.
5. New bank may deny the emergency line of credit of 20% outstanding announced by GOI.
6. Existing banker may charge pre-closure charge of Rs. 6 L

Inverse: What would happen if I didn’t change the bank.

1. Shall get moratorium to pay interest of 10L from October 2020 to March 2021 in installments.
2. Shall save on the processing fees and other charges of Rs. 2.5L
3. Existing bank may lower the interest rate as per announcement by Government of India.
4. Margin on stock and book debt increased to 100% level, hence higher Drawing Power.
5. Shall be eligible for Emergency Line of credit of 20%, thereby increasing liquidity of the organization.
6. Save time, legal expenses and mental harassment fighting with existing bank for reversing the pre-closure charges.
7. May get extra benefit or emergency fund, since relationship is more than 7 years.
8. We have to pay 2% pa extra interest.
   
   

Non-mirror image reversal: What wouldn’t happen if I didn’t change the bank.

1. Interest reduction will not happen
2. Don’t have a pay the processing fees and other charges
3. Cash crunch will not happen
4. Drop in drawing power will not happen.
   
   

Converse: What wouldn’t happen if I change the bank.

1. 20% Emergency line of credit will not happen
2. Margin on Stock and book debt increase will not happen.

Decision: To stay with the current bank and request them to reduce the interest rate.

Also read: How your past can affect your future with the decisions you make today

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