From "3-6-3" to "10-8-out"

During the lore days, bankers typically had a 3-6-3 formula. This essentially meant "borrow at 3%, lend at 6% and be at the golf course by 3 PM!" Those were however, those good times when the stocks were rising, consumption was high fueled by the emerging economies by maintaining high surpluses and huge forex reserves and the economies growing at an astonishing rate. 

Slowly this model began to change. With rising inflation, interest rates rose. So the new formula that emerged was 4-7-3! Following this was 5-8-3, then 6-9-3, and so on and so forth. 

This continued till the time was 9-12-3 (perfect combination of 3 multiples to send the global economies into a recession for a period of atleast 3 years). 

Then came the defaults! Failing economies and pressure of governments to reduce interest rates. 

Mind you, till now the borrowing has been fixed at 9 to 10% and that is in the form of fixed deposits! This means, bankers now are obliged to pay 10% rates atleast till the FD term. 

This phenomenon explains why banks are reluctant to lend. Lowering the interest rates to 8% will essentially mean only one thing for a banker, that is, 10-8-out. This means " borrow at 10%, lend at 8% and then be fired by the bank heads for maintaining such scrupulous lending and borrowing procedures!"