Stocks Hypothecated to…

At Food Bazaar yesterday, there was a notice that said “Stocks Hypothecated to:”  followed by a list of banks that the stocks were hypothecated to. I know that many retailers are in trouble because of falling demand and difficulties in finance, and I can understand hypothecating your stocks to get working capital finance. But why announce that fact to your customers? What possible relevance can it have to a customer who has shown up with cash to buy toor dal to learn that the toor dal is in fact hypothecated to State Bank of India?  Obviously, once he buys the toor dal, it is his. SBI will not raid his kitchen to recover money from Big Bazaar.  It looks like some legal requirement or some requirement imposed by the creditors, but I don’t see why it makes sense to the creditors either. If at all the notice has an effect, it will make the customer unnecessarily panic, driving him away and making it less likely that Big Bazaar will make enough money to return its loan. So why put up those notices? Any ideas?

16 thoughts on “Stocks Hypothecated to…

  1. Publicity for the banks, I guess. Most autorikshaws have this “hypothecated to so and so bank” on the rear and I always thought it was a requirement by the bank to get some publicity.

  2. Gaurav,
    Those who tender sodexho coupons ought to be shot. They waste the time of everyone behind them. Those who expect change on top of that should be shot twice just to make sure that they are really dead.

    Mohan and raj, but this is a different case. The reason for putting up the notice on autorickshaws is to avoid it getting sold or hypothecated to someone else. In the case of stocks, there is no point trying to prevent it from getting sold. And if you want to prevent it from being hypothecated to someone else, you should put it up in the godown where they are stored, not in the shop. In any case, I see that they have put up a huge list of banks (some kind of syndicated loan, I guess) to whom the damn thing has been hypothecated, so I am not sure if there is any other bank left to hypothecate it to.

  3. Those who tender sodexho coupons ought to be shot. They waste the time of everyone behind them. Those who expect change on top of that should be shot twice just to make sure that they are really dead.

    I heartily agree. Shoot them all. I am sometimes asked if I accept Sodexho coupons at my restaurant. I am tempted to say, “Why? So you can make me count Rs. 1150 in Rs. 10 vouchers? Bollocks!”

  4. Question – So paying say a bill of Rs 1,000 in ten rupee notes is fine, but paying it in equivalent 10 rupee Sodexho coupons is not? Why?

  5. Well, who said paying a bill of Rs 1000 in ten rupee notes is fine? I know that the government insists that legal tender should be accepted, but I believe that all right-thinking people should condemn those who impose such negative externalities on people.

  6. Fair enough..:-) As long as you don’t distinguish between cash and Sodexhos, that may make sense.

    I guess you’re saying that anyone who does not have the exact change or close to exact change for the amount they are seeking to pay is imposing an unacceptable negative externality on others seeking to transact at the same time.

  7. Oh, BTW, let me clarify. You’re saying that people should have the exact change or close to the exact change in the least possible number of currency notes required to get there.

  8. I didn’t say anything about exact change or close to exact change. Someone who pays a bill of 1,010 in 101 10-rupee notes is tendering exact change, but he is still being annoying, because the checkout clerk has to count those notes.

    Tendering exact change is a different rant altogether. In India, the good thing is that the bill amount tends to be rounded off to a civilized number so that if I do want to pay exact change, it is easy for me. On the other hand, giving a 100 for a bill of Rs 3.50 will result in unnecessary back and forth, with the cashier asking if you have change, saying he doesn’t have change, etc.

    In the US, the utterly annoying thing is that they still have not learnt the art of rounding off, so it is difficult to tender exact change. The good thing is that cash registers are well-managed and well-organized, and you actually annoy people less by giving a large bill and have the cashier do the job of giving you change. (Of course, this leads to the problem of you ending up with a lot of change. Obama has promised to tackle the problem, let’s see.)

    But on the whole, I don’t believe that not tendering exact change is as big a social menace as people handing over sodexho coupons.

  9. I don’t accept Sodexho, so I don’t need to abuse much. 😉
    (Sodexho also charges quite a high percentage in transaction charges; another reason for me not to accept them.)

    And fortunately, credit cards form some 75-80% of our transactions.

    Lastly, it’s rare that people carry a hundred Rs. 10 notes around with them. On the other hand, small value Sodexho vouchers are far more common.

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