Correct non-partisan guidance that helps people handle a credit default or wrong credit report offers a humane and win-win solution for lenders and borrowers
Moneylife Foundation launched a new Credit Helpline on 17th October to provide free, confidential counselling about loans to borrowers in distress situation. These are people who are finding it difficult to repay loans due to certain exigencies; they have been wrongly marked as defaulters because of a mix-up in credit records or find that a forgotten credit card or mobile bill, now hugely inflated, has come back to haunt them through a recovery agency. Given the poor financial literacy in India, people facing such situations usually panic and rush to ‘debt doctors’ who promise to fix the problem or ‘settle’ the issue and give them a clean credit record. Often, these are fake promises or an attempt to take advantage of the borrower’s ignorance.
Here is an opportunity to get correct, non-partisan guidance on a confidential basis without paying anything. However, the Helpline is emphatic that it will not help people to avoid payment. The idea is to explore options and mutually acceptable solutions between the lender and the borrower, to find an amicable resolution which leads to the least possible damage to a person’s credit record. The advice will be provided by senior retired bankers and central bankers. The Foundation has created an advisory committee of experts who will guide the counselling effort.
The Helpline will also provide guidance for rebuilding one’s credit record or improving credit scores. It is based on the understanding that a payment default is sometimes beyond a person’s control—it can be the result of a pink slip, problems with the employer (non-payment of salary or closure of company), serious illness or a personal calamity or career change.
Dr Kirit Somaiya, Member of Parliament, launched Moneylife Foundation’s Credit Helpline (www.FreeCreditHelp.in), in the presence of Dr Deepali Pant Joshi, executive director, Reserve Bank of India, Mohan Jayaraman, managing director, Experian India, Ranjan Dhawan, executive director, Bank of Baroda and D Venkatesh, director of Softcell Technologies.
Speaking at the event, Dr Somaiya, a chartered accountant and Ph D in finance & capital markets from Mumbai University, highlighted an interesting aspect of the issue. He said, “We cannot encourage defaults. However, at the same time, we need to make sure that small borrowers are not punished, while big borrowers like Kingfisher are being given settlement options.”
Mr Somaiya said, “Let’s develop this concept of handholding borrowers in distress at the national level. I will take the initiative with the finance ministry, the Reserve Bank of India (RBI) and the Parliament. We will see that such a Helpline becomes an instrument for cleaning up the concept of credit and to stop extortion. We all know what is happening today. At some places, these credit recovery agencies are indulging in extortion. Let us all try and stop the extortion of borrowers who may have defaulted by the recovery agents and debt doctors.” He also alluded to the use of dubious recovery agencies with underworld links (‘bhai log’) to frighten people into paying.
Citing an example of mistaken identity, Mr Somaiya said, “Former Union minister Suresh Prabhu received bills from a mobile company, despite disconnecting the number for more than two years. Since the number was disconnected, he thought he was not liable to pay the bills. The amount grew to about Rs22,000. This was reported to a credit agency and Mr Prabhu got a negative credit rating and was denied a credit. If this can happen to Suresh Prabhu, I am trying to imagine what can happen to a common customer or investor.”
Mr Jayaraman of Experian underlined the importance of ‘just-in-time’ assistance provided by helplines such as these, which, in fact, encourage financial literacy at the time when the person is most receptive. He also made the big announcement that Experience CIC would provide free credit reports to the first 250 people who applied for it through Moneylife Foundation’s Credit Helpline.
Dr Pant Joshi, executive director RBI, highlighted numerous ways in which bankers were ignoring consumers or openly indulging in mis-selling. She explained at length how RBI is attempting to get a fairer deal for customers by enunciating their rights framed in the RBI’s newly issued consumer charter.
She further said, “There has to be a synergy between financial inclusion, financial literacy and customer protection for sustainable financial stability. The macro-economic framework and financial sector development necessitate financial deepening and a robust framework of Customer Protection for stability.”
Ranjan Dhawan, executive director Bank of Baroda, explained the Bank’s support to the Credit Helpline by illustrating the high financial illiteracy that he has personally encountered even among businessmen and highly educated persons. He said, it was one of the main reasons why so many persons fall prey to mis-selling.
D Venkatesh, director Softcell Technologies, said that technology played an important role in expanding the reach of the Helpline. “We will always be there to support Moneylife in this,” he added.
Moneylife Foundation’s Credit Helpline as well as a panel of counsellors and other resources in this initiative are free and can be availed by anyone.
Moneylife Foundation expects the Credit Helpline to go a long way in creating an informed customer base for banks and finance companies and help solve the vexing problem of bad loans.
In fact, it is beneficial to banks as well. If a defaulter can be made to understand that he cannot renege on his obligations without consequences to himself, he will make an effort to pay at least some of the money, rather than run away. This allows banks to improve recoveries in personal credit far more than through threats and recovery agents.
To access Moneylife Foundation’s Credit Helpline, one needs fill up the form available at www.freecredithelp.in. If the person is a Moneylife Foundation member, her details get pre-filled in by algorithm, for convenience. However, the person needs to be logged in to www.moneylife.in to see her pre-filled details (and edit them, if needed).
• Consumers should email/ call and Moneylife Foundation personnel to set up a confidential meeting with counsellors, if required.
• Counselling will be done by ex-central bankers, commercial bankers and credit bureau experts.
• The details of each case reaching out to the Credit Helpline will be opened with a standard documentation and closed with a feedback form.
Noshir Dadrawala provided an enlightening account of what NGOs can expect by way of CSR funds as well as the eligibility criteria and reporting requirements that are mandated by law
Noshir Dadrawala, CEO of Centre for Philanthropy, addressed Moneylife Foundation on the legal provisions regarding CSR funding. However, he told NGOs to be pragmatic. He went on to explain in detail the provisions of the Companies Act, 2013, and the numerous clarifications notified which had not only expanded the scope of the funding, but also allowed the provisions of the Act to be interpreted in the broadest possible manner.
He said that CSR funds will not be available in the form of donations. NGOs can only seek funds for specific projects and their utilisation would need to be certified by an auditor.
Mr Dadrawala also explained the sort of expenses that could be included under project expenses and those which would be classified as administrative costs and disallowed.
Mr Dadrawala expects CSR rules to keep evolving and said that the first year of their implementation was the best time for companies to experiment with the rules and their interpretation.
Mr Dadrawala was addressing a packed audience at Moneylife Foundation on the provisions of CSR under the Companies Act, 2013, and legal compliances required. The audience comprised largely NGOs and their representatives. He took questions from a very engaged audience all through the session and was more than forthcoming in his replies. The pros and cons of registering an NGO or not-for-profit entity as a trust, society or a Section 8 entity (earlier Section 25) were also discussed.
Investors claim that investments made by ICICI Ventures in real estate projects caused huge losses, for which the investors are seeking damages
69 NRI investors, who had invested in ICICI Ventures' India Dynamic Fund III, have sued 'ICICI and associated companies' to the Mauritius Supreme Court. The suit is regarding losses suffered as a result of investments in real estate.
“A plaint with summons was lodged before the Supreme Court of Mauritius by a group of NRI and foreign investors against (DIF III), International Financial Services Ltd (IFS), ICICI Venture Funds Management Company Ltd (ICICI Venture), ICICI Bank and the Western India Trustee And Executor Co Ltd,” the legal firm handling the case, Banymandhup Boolell Chambers said.
These 69 investors are part of a larger group of 500 investors in the fund. The investors allege that the fund, promoted by ICICI Ventures and ICICI Bank, did not invest in world class projects as promised, but instead invested in projects that flopped miserably.
Calling the allegations baseless and pointing out that only 69 out of 500 investors are party to the suit, an ICICI spokesperson said, “It is common knowledge that globally PE as an asset class does not guarantee returns given the equity risks involved. Also, projects in real estate have a long gestation period and hence the returns accrue over a period of time.”
However, pointing to the fact that of the 13 projects invested in, 5 projects (2 in Mumbai and 3 in Hyderabad) took up 60% of the corpus, the investors said that this went against ICICI's original promise of diversifying the investments. The investors also alleged that as per the fund's March 2014 report, only one project in Pune had been exited, while the rest were in various stages of construction, with a Chennai project yet to begin.
The petitioners said that, “Thus, it is a classic case of total neglect of due diligence, research of suitability taking into account of exit term, outrageous underestimation of cost and completion, alleged negligence and overt manipulation of the finances for escalating costs and serious blunders in judgment of selection of projects.”
In its defence, ICICI through its spokesperson added, “ICICI Ventures has extended the fund’s life by three years to optimise the realizations from the portfolio. ICICI Ventures also simultaneously offered investors a cash exit option in line with global best practices.”
The investors are claiming a sum of USD 103,699,976, which is the capital investment made by the investors in DIF III and the moral damages.