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Mehekti Khushboo

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MoneyLIFE-Citibank Seminar on Individual Credit Rating
The biggest asset on the balance sheet of banks today is the ignorance of customers about their rights and their reluctance to fight for them,” said Dr Sujatha E Prasad, general manager, consumer services, RBI (Reserve Bank of India) and that succinctly encapsulated the raison d’etre of the MoneyLIFE-Citibank workshop on ‘Individual Credit Ratings – Consequences of Negative Ratings and How to Deal with Them’. The workshop saw the participation of a wide cross-section of readers, borrowers, lenders, rating agencies, banks and credit counsellors such as Abhay (set up by Bank of India) and Disha (of ICICI Bank).
In the lively discussion that followed the presentations, participants raised three important issues. First, banks often fail to inform customers when they are reported to the defaulters’ list. Customers discover the fact only when their loan and credit card applications are repeatedly rejected.
Second, when there is a problem, usually related to wrong billing, bank officials are never available for a discussion and individuals are pushed from one call-centre executive to another, without a resolution of the issue. Meanwhile, the disputed sums continue to be billed at exorbitant interest.
Third, there were brazen cases like those of a Pune-based consumer who was put on the defaulter list after having ‘pre-paid’ his loan in full. Worse, the bank failed to correct the Credit Information Bureau (India) Limited (CIBIL) record after informing the RBI that it had rectified its mistake.
The responses from the panellists offer crucial lessons to borrowers and credit-card users. PS Jayakumar, country business manager, Citibank, pointed to the multiple channels of communication opened by Citibank to deal with the accessibility issue. His advice to credit-card borrowers was that if they had a problem with one item of billing or an interest charge, they must clear the undisputed part of the bill and write to the bank. This keeps interest charges from ballooning and establishes the customer’s willingness to pay. Jayakumar’s excellent and detailed presentation encompassed all issues leading to defaults and the recovery process. He also pointed out that the lender is often willing to help a borrower in distress in multiple ways – a short moratorium on repayment, extension of repayment period, consolidation of multiple borrowings and, in desperate situations, settlement of the loan (if a substantial portion is already paid) by waiving the rest. The key here is for the borrower to initiate a dialogue with the lender rather than hiding and evading calls.
Arun Thukral, CIBIL’s managing director, pointed out that CIBIL cannot correct the data made available to it by lenders. However, RBI’s new rules provide a 30-day window in which customers could have their credit history corrected by writing to the lender. He said that the credit provider alone could validate the customer’s contention but would need to justify its stand in writing, giving the customer a chance to prove its inaccuracy.
Dr Sujatha E Prasad pointed to a key issue: individual credit history remains impaired if a person closes a dispute after a settlement with the bank, where she pays less than the sum due. Dr Prasad also said that all banks do not necessarily reject individuals with negative credit histories. They can take a call on whether to take the risk and lend to these individuals. She also said that, over time, those with clean credit histories will be entitled to better rates while those with a patchy record may have to pay higher interest rates.
The 30-day window that allowed borrowers to contest negative ratings raised the question of what happens when multiple credit bureaus are licensed to operate. Incidentally, executives from High Mark and Experian (two of CIBIL’s possible competitors) also participated in the workshop. Would the borrower have to contest the negative rating separately with each new credit bureau? Mr Thukral pointed out that the customer would have to obtain a fresh declaration from the lender correcting the credit entry to remove her from the defaulter’s list, but there is no clarity as yet on whether the borrower would have to make sure that every credit bureau updates her record. This gave rise to another question. What is the need to have multiple credit bureaus? According to Jayakumar, each credit bureau tends to specialise in different aspects of the business. Experience from the developed nations shows that competition would help customers with a good credit record to access better credit terms over a period of time.
Since consumer experiences with different lenders differ, a participant suggested that there must be a rating agency for banks that would enable customers to decide on which is the best in terms of customer service. RBI officials pointed out that the banking ombudsman’s website provides a list of all banks with the exact number of complaints against them for every hundred thousand credit cards issued. This list was an excellent benchmark to choose the better lender. Ms Surekha Marandi, banking ombudsman, Mumbai, outlined at length RBI’s effort to “build confidence in the financial system by providing an easy, inexpensive and reasonably fast grievance redressal system for the customers of banks.” Ms Marandi explained the nature of the scheme provided for summary proceedings; it did not allow elaborate oral evidence and complicated cases. Details about the working of the ombudsman, scope of its actions, procedure for filing of complaints and data on grievance redressal are available at www. bankingombudsman.rbi.org.in. Essentially, a customer must attempt to have her complaint resolved by the lender before approaching the ombudsman. A complaint can be filed on plain paper or on email or in the prescribed form, but must be logged in within a year of the cause of action. Her advice to bank customers was to document their issues with the lender and ensure that they file complete complaints with the ombudsman’s office to ensure quick redressal. She also said that the ombudsman attempts to resolve issues through a process of conciliation and mediation. The ombudsman can reject complaints that she considers frivolous, vexatious, malafide or without sufficient cause or if they have not been pursued reasonably diligently by the complainant. Or, if the banking ombudsman believes that no loss, damage or inconvenience was caused to the complainant.
Dr Prasad’s presentation made it clear that RBI is fully cognisant of all the tricks played by lenders as well as borrowers and the extent to which both sides were responsible for issues that went up to the regulator for redressing. She outlined every mischief in selling a financial service as well as all the tricks employed by borrowers to avoid repayment.

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