Not easy to get loans from banks

Now getting loans from banks have become difficult as banks are closely scrutinizing your credit history. This will be applicable even though you have defaulted in repaying a paltry loan sum taken several years ago.

Banks are logging on to data supplied by the Credit Information Bureau of India (CIBIL). CIBIL provides information on the credit history of commercial and individual borrowers to its members that include all banks, financial institutions, non-banking financial companies and housing finance companies.

A HDFC Bank official stated, “Even if a person had defaulted on a payment of Rs 500 several years ago, we will take that into consideration. Recently we rejected a loan application because the person defaulted on an amount of Rs 28,000 in 2006. We checked his record from CIBIL”.

While a year ago, banks would have pursued you to take loans irrespective of your ‘track record’. But now it has become history, and this is causing heartburn among consumers. Leading auto dealers like Magnum Honda and Cauvery Ford have informed of a 15%-20 % decline in new loan distribution to potential customers of mid-size cars on the basis of CIBIL data. While the rejection figure in the purchase of small cars have gone up by 25%-30 %.

Banks are also rejecting home loans on account of this. A real estate developer stated, “Though there are genuine home buyers, what is affecting the market now is the fact that they are not getting loans.”

CIBIL collects data from all members and categorize borrowers into two broad categories: a positive and a negative list. In case you default on payments or have outstanding dues even to credit card companies, your name is moved from the positive list to the negative list. And it is this negative list to which banks refer while issuing fresh loans now.

B R Pai, GM (retail banking) of Syndicate Bank remarked, “We don’t lend to people if their names appear in the negative list of CIBIL, unless they come with a clean chit or a no-dues certificate from the bank”.

Incidentally, names can be shifted in the negative list even though the borrower has cleared the entire amount as CIBIL updates the list only on a quarterly basis.