Customers are largely at the mercy of banks for approval of loan application

Most of the time we hear people saying they have been denied a bank loan or credit card on the excuse that they have a bad credit record. In spite of when you have been paying your entire home loan EMIs and credit card bills on time.

Let’s have a look at the world of easy banking which is in no means easy for some unwary customers who have suffered at the hands of the bank.

Here is an example to give a clear picture. Chandan Lunawat, heads a commodities export business. He had applied for a loan but his application was rejected. He was shocked to learn from his bank that his loan request had been rejected because he owed Citibank Rs 3.69 crore on a credit card.

Usually before giving loan the banks check with the Credit Information Bureau (India) Ltd (Cibil), is a one-stop shop for banks to check the credit histories of individuals. The bank that had rejected his loan application said that they have checked with Cibil database and found this information.

Lunawat told DNA reporter he had been regular in paying his credit card bills and auto loan EMIs. On being denied the loan, he asked the bank for his credit report, which a bank is obliged to give once it rejects a loan application. From that credit report he came to know he "owed" Citibank Rs 3.69 crore on a credit card that was started in July 1995 and closed in October 1995.

"I have never held this credit card which is mentioned in the report," Lunawat says. "I took up this issue with the bank (Citibank) and they promised me that my name will be removed from the list immediately. But till date it has not been removed," he told DNA.

On the other hand Citibank said Lunawat had out standings on his Diners/Citibank credit card as in July 2006 and that's why he was reported to Cibil "as per regulatory requirements".

Later on the bank had agreed to issue a "no dues outstanding letter" to the customer following a "mutually satisfactory settlement with the customer in August, 2006," and has promised to correct the customer's credit history with Cibil "at the earliest."

After all this it seems all's well that ends well.

But the question arises when settlement reached in August 2006, why is not reflected in Cibil's database two years later? Today banks are growing at 30-40% every quarter, acquiring customers seems more important than servicing them.

Lunawat's is just one of the cases; there are more customers at the receiving end.

If we see the Credit Information Companies Rules, 2006, a bank has to send across corrected information to credit information bureaus — in this case Cibil — within a period of 21 days.

In case there is a settlement between the borrower and the bank or the borrower repays his dues, then the bank needs to inform the credit information bureau within 30 days. But in Lunawat's case, it has been more than 20 months and Citibank does not appear to have updated the information.

Vishal Gohil, also has a similar story to share. He is an employee of Tata Motors in Pune,. He had applied for a credit card with Standard Chartered Bank. The bank issued a health insurance policy along with the card, but Gohil did not want it. After much persuasion, he was able to get the insurance policy cancelled.

But the bank did not update its data and continued billing his card for the premium on the policy he didn't ask for. Gohil refused to pay this amount as a result he was reported as a defaulter on Cibil's database.

He took up the issue with the bank authorities and the latter agreed to reverse the charges, as well update his status on Cibil's database. As usual it did not happen. "I sought a loan from ICICI Bank, but the bank never responded.

Later, when I applied for a loan at HDFC Bank, I got to know that my status was showing as a defaulter on the credit report. "Later I followed up with my earlier bank (Standard Chartered Bank) and received a confirmation that the data had been updated. Yet, three to four months down the line when I approach banks, I am denied loans", says Gohil.

While Standard Chartered maintained that it had updated the Cibil database and informed Gohil that there is no outstanding against his name, but the pain of being called a defaulter and being denied a loan stays with the customer.

People are also suffering because of the halfhearted attitude of banks to customer concerns. Here is the case of Tejinder Singh (name changed on request). Singh got a divorce from his wife some time back. His wife had an add-on card on his credit card. After divorce he asked the private sector bank to stop his wife's add-on card. The card wasn't stopped.

In fact it is still active. "My ex-wife has been on a spending spree and I have refused to pay the money she has been spending after the divorce", says Singh.

In the meantime, the bank has updated his data with Cibil and Singh is now on a defaulter list as he has refused to pay up money spent by his ex-wife through the add-on card. "I approached a bank for a personal loan recently and was denied one. The bank told me that I had not cleared my credit card bills fully," he says.

After looking at these examples one thing is clear that currently individuals are largely at the mercy of banks when it comes to the kind of credit standing they have.

So what do you do when the bank you have approached for a loan is not ready to give you one because they say you have a bad credit record when you really don't have one?

According to Sujan Sinha, senior vice-president - retail assets of Axis Bank the first and foremost thing to be done in such a situation is to get your credit report from the bank. "Then they should take up the issue with Cibil through a bank."

Currently the individual’s position is very bad as they are largely at the mercy of banks when it comes to get their credit record corrected.

Seeing such a situation, market sources say that Cibil is in the process of preparing an Internet-based solution, which will allow individuals to have an access of their credit reports at a nominal cost of Rs 100. That still won't solve the problem of banks declaring you as defaulters through sheer insensitivity.