You may have settled your dues with your bank. But make sure the bank lets the CIBIL know about it, lest you are branded a 'defaulter', advises Preeti Kulkarni

Thanks to the advent of credit information companies, banks and lending institutions in India have managed to enhance their ability to prudently assess loan applicants' creditworthiness. However, on the flipside, many borrowers are complaining of having got the short end of the stick.

GRIEVANCES GALORE

One of the chief grouses aired by borrowers is that of lending institutions branding them defaulters despite their having cleared their outstanding dues, particularly in case of compromise settlements. Instead of considering the loan account to be 'closed', many lenders resort to the practice of treating the forgone amount as a 'written-off' portion. Though banks are required to revalidate the data submitted to credit information companies like Credit Information Bureau (India) (CIBIL) within 30 days, many fail to do so. This, despite their code of commitment to customers which states that if a borrower's account is regularised after having been in default, steps would be taken to update the information with the credit information company in the subsequent monthly report.

As a result, such borrowers' credit history is deemed unfavourable by other credit grantors, often leading to their loan applications being rejected. "We have come across cases where borrowers who had settled their dues more than five years ago have seen their loan applications being rejected by other lenders now, citing unfavourable credit history. Many borrowers say that lenders are using this tactic to extract the entire amount," says VN Kulkarni, chief counsellor of the Bank of Indiabacked Abhay Credit Counselling Centre.

Even the Reserve Bank of India (RBI) is reported to have taken cognisance of such activities, and is framing guidelines to deter banks from declaring borrowers who have paid the negotiated amount as defaulters. The aggrieved borrowers, on their part, can take up the matter with the bank's nodal officer (the contact details are available on bank Web sites). If s/he fails to respond to your satisfaction, you can write to the Banking Ombudsman. However, the ideal approach would be to take precautions right at the settlement stage and avoid the tedious path to redressal.

CREDIT CARD & PERSONAL LOANS

Once you have arrived at a settlement with your bank or credit card company, you have to receive an offer letter stating the terms and conditions of the same, including the amount payable. Subsequently, when you pay the negotiated amount, you need to insist on getting a 'No Due Certificate', stating, as the name suggests, that you do not owe the bank any money. The same should be delivered to you a week from the date of repayment. "Make sure that you preserve the copy. It will come in handy in case the bank takes a U-turn at a later date. You should also ask for an assurance from the bank that you will not be pronounced a defaulter in the CIBIL records," adds Mr Kulkarni.

HOUSING LOAN

While secured loans usually may not give rise to such disputes, the borrower would do well not to leave loose ends untied. Upon repayment, the key document to be collected from the lending bank or the housing finance company is the title deed pertaining to your house property. "This apart, if you have opted for a home loan insurance policy to cover the loan, you need to revoke the endorsement to the bank," says Madan Mohan, chief counsellor with the ICICI Bank-supported Disha Financial Counselling Centre. Such policies, which are typically sold by banks along with the home loan, undertake to discharge the liability in the event of the insured borrower's death.

Finally, a month after obtaining these documents, you can also approach CIBIL for a copy of your credit report, if you do not mind shelling out a sum of Rs 142. The report, which will be sent to you upon receipt of the fee and relevant identity proofs, will help you ascertain if the bank has fulfilled the commitment made to you at the time of settlement.

FINANCIAL SEE-SAW

In compromise settlements, some banks and lending institutions follow the practice of treating the foregone amount as a 'writtenoff' portion, while updating the borrower's repayment history with credit information cos As a result, such borrowers' credit history is likely to be deemed unfavourable by other credit grantors, often leading to their loan applications being rejected

Some lenders also try to use the situation to their advantage by asking the borrowers to shell out the entire outstanding, instead of the mutually-agreed amount TO AVOID such hassles, one needs to exercise caution at the time of settlement. Once you reach an agreement, the lending bank has to hand over an offer letter stating the terms and conditions of the same, including the amount payable upon payment of the negotiated amount, you should insist on getting a 'No Due Certificate', stating that you do not owe the bank any money, along with an assurance that your records with credit information cos will be updated to reflect the same to ensure complete peace of mind, you can, a month after obtaining these documents, approach CIBIL for a copy of your credit report to ascertain if the bank has kept its word.

Source: http://epaper.timesofindia.com/