Cibil has a great role to play. but it is also being misused by banks and is affecting genuine customers, observes Vikas kumar
Name – Harsh Tiwari
Problem – His credit card application has been rejected by an international bank.
Reason – He had defaulted on the payment of a credit card issued by another private bank some months ago.
Harsh Tiwari's story is not as simple as it seems. A leading private sector bank had issued Harsh a credit card, but without his clear knowledge. After one year, the bank started sending bills. After protracted correspondence by Harsh and only after he threatened legal action against erring bank officials, did the bank reverse the bills; but bank officials put his name on CIBIL (Credit Information Bureau of India Limited) list. When Harsh applied for the credit card of another bank after some time, his application was rejected based on the information of CIBIL.
Name – Ramesh Rastogi
Problem – A loan application rejected twice because of an outstanding credit card dues worth Rs.2500 with a leading public sector bank.
Ramesh had not been convinced about the charges levied by the
bank so he had not bothered to pay the dues. His woes started when he applied for a personal loan in some other bank. His application was rejected as his name was found in the defaulters list in CIBIL database. Then, Ramesh approached the previous bank for settlement. During the period, the dues of Rs.2,500 had increased to Rs.10,300. He paid Rs.6000 for the dues of Rs.2500 and took a settlement letter from the bank. The letter says, “We would like to inform you that we have initiated the process of removal of your name from the defaulter’s database. We request you to bear with us in the interim.” However, he faced a similar problem after two years when he again applied for the home loan. His application was turned down by the bank due to poor CIBIL score. On a query from CIBIL he found that the account status was “Written Off,” which means bad debt. Aggrieved by the development, he approached the bank.
Ramesh Rastogi says, “Now, they are asking for full payment to remove the name from CIBIL. Then why did they give that letter? Why did they say that my name will be removed from defaulters list?” Till now, he has not received any satisfactory explanation from the concerned bank. In all likelihood, he never will. Harsh Roongta, CEO ApnaPaisa, a financial planning firm, says, “Generally, people get relaxed after settlement of dues with the bank. But technically speaking ‘settlement’ means this is your liability but I am unable to pay. It will feature as ‘written off’ in the list.”
The fact is – details of your accounts are an open secret today. All bank and Non-banking financial companies (NBFCs) have access to the loan repayment history of every borrower and the payment record of every credit card holder. And, whether you like it or not, banks do not need your consent before sharing details of your account with the CIBIL.
CIBIL is a repository of information that contains credit histories of borrowers. It generates credit reports of the borrower’s repayment history, settlement, defaults and contact details. Expectably, lenders like banks and financial institutions, have access to it. At present, with records of 130 million accounts, it is the largest database of retail bank account holders in India. In principal, CIBIL is not a bad concept, as default rates on the various kinds of loans in the country are constantly rising. Such a database helps banks to know about willful defaulters and saves their precious time and money while processing loan applications. Atul Ranjan, Head-Operations, Axis Bank Delhi, says to TSI, “It is a good thing. But most of the time, consumers suffer because they do no have a complete idea about all types of charges; many of them can be hidden.” It's not just defaulters who feature in the CIBIL database. If you pay your EMIs and credit card dues on time, this is also reflected in the database, which helps to generate good credit score. Clarifying this further, Arun Thukral, Managing Director, CIBIL says, “If you have a good credit score, say 700 out of a total of 900, this means faster processing of your loan application, waiver of processing fee and it might also lead to a reduction of your interest rate.”
However, there are instances when innocent customers have to suffer, as is the case of Harsh Tiwari. Lack of awareness about CIBIL is costing some customers and intermediaries alike. Avinash Kumar, CEO, Sai Motor Finance, says, “It may sound incredible to you, but 75% of auto loan applications are now rejected by banks, which was earlier 10-25%. The excessive reliance on the CIBIL score by banks has badly hampered our business prospects.” There are many indirect ways too in which one's credit scores can get affected. For example, if you become a guarantor for a loan taken by any of your acquaintances, and they default on the payment, even that would lead to your credit score being downgraded.
But then, there is a chink. It is the need of the hour that whenever any bank reports any negative information to CIBIL, a copy of this must be sent to customer so that the individual can take possible remedial action. Some consumers do comment that this process perhaps is not being adhered to with 100% compliance. Well started, half done is what we'd say...
Name – Harsh Tiwari
Problem – His credit card application has been rejected by an international bank.
Reason – He had defaulted on the payment of a credit card issued by another private bank some months ago.
Harsh Tiwari's story is not as simple as it seems. A leading private sector bank had issued Harsh a credit card, but without his clear knowledge. After one year, the bank started sending bills. After protracted correspondence by Harsh and only after he threatened legal action against erring bank officials, did the bank reverse the bills; but bank officials put his name on CIBIL (Credit Information Bureau of India Limited) list. When Harsh applied for the credit card of another bank after some time, his application was rejected based on the information of CIBIL.
Name – Ramesh Rastogi
Problem – A loan application rejected twice because of an outstanding credit card dues worth Rs.2500 with a leading public sector bank.
Ramesh had not been convinced about the charges levied by the
bank so he had not bothered to pay the dues. His woes started when he applied for a personal loan in some other bank. His application was rejected as his name was found in the defaulters list in CIBIL database. Then, Ramesh approached the previous bank for settlement. During the period, the dues of Rs.2,500 had increased to Rs.10,300. He paid Rs.6000 for the dues of Rs.2500 and took a settlement letter from the bank. The letter says, “We would like to inform you that we have initiated the process of removal of your name from the defaulter’s database. We request you to bear with us in the interim.” However, he faced a similar problem after two years when he again applied for the home loan. His application was turned down by the bank due to poor CIBIL score. On a query from CIBIL he found that the account status was “Written Off,” which means bad debt. Aggrieved by the development, he approached the bank.Ramesh Rastogi says, “Now, they are asking for full payment to remove the name from CIBIL. Then why did they give that letter? Why did they say that my name will be removed from defaulters list?” Till now, he has not received any satisfactory explanation from the concerned bank. In all likelihood, he never will. Harsh Roongta, CEO ApnaPaisa, a financial planning firm, says, “Generally, people get relaxed after settlement of dues with the bank. But technically speaking ‘settlement’ means this is your liability but I am unable to pay. It will feature as ‘written off’ in the list.”
The fact is – details of your accounts are an open secret today. All bank and Non-banking financial companies (NBFCs) have access to the loan repayment history of every borrower and the payment record of every credit card holder. And, whether you like it or not, banks do not need your consent before sharing details of your account with the CIBIL.
CIBIL is a repository of information that contains credit histories of borrowers. It generates credit reports of the borrower’s repayment history, settlement, defaults and contact details. Expectably, lenders like banks and financial institutions, have access to it. At present, with records of 130 million accounts, it is the largest database of retail bank account holders in India. In principal, CIBIL is not a bad concept, as default rates on the various kinds of loans in the country are constantly rising. Such a database helps banks to know about willful defaulters and saves their precious time and money while processing loan applications. Atul Ranjan, Head-Operations, Axis Bank Delhi, says to TSI, “It is a good thing. But most of the time, consumers suffer because they do no have a complete idea about all types of charges; many of them can be hidden.” It's not just defaulters who feature in the CIBIL database. If you pay your EMIs and credit card dues on time, this is also reflected in the database, which helps to generate good credit score. Clarifying this further, Arun Thukral, Managing Director, CIBIL says, “If you have a good credit score, say 700 out of a total of 900, this means faster processing of your loan application, waiver of processing fee and it might also lead to a reduction of your interest rate.”
However, there are instances when innocent customers have to suffer, as is the case of Harsh Tiwari. Lack of awareness about CIBIL is costing some customers and intermediaries alike. Avinash Kumar, CEO, Sai Motor Finance, says, “It may sound incredible to you, but 75% of auto loan applications are now rejected by banks, which was earlier 10-25%. The excessive reliance on the CIBIL score by banks has badly hampered our business prospects.” There are many indirect ways too in which one's credit scores can get affected. For example, if you become a guarantor for a loan taken by any of your acquaintances, and they default on the payment, even that would lead to your credit score being downgraded.
But then, there is a chink. It is the need of the hour that whenever any bank reports any negative information to CIBIL, a copy of this must be sent to customer so that the individual can take possible remedial action. Some consumers do comment that this process perhaps is not being adhered to with 100% compliance. Well started, half done is what we'd say...
Source : IIPM Editorial, 2008
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