RBI mulling to trim CIBIL's nails

Few months back I had written an article about CIBIL and its impact on Indian retail borrowing. Since then I have received number of queries around CIBIL. To my surprise, the highest number of queries revolved around how to rectify CIBIL record.

I found many readers complaining about wrong report in CIBIL. Banks were treating loan applicants as defaulters even though they have cleared the dues as per the settlement conditions on basis of CIBIL report. Here are probable reasons for wrong entry in CIBIL report

1. Bank has not sent updated details to CIBIL. As per the rule banks need to send updated data to CIBIL in 30 days but many times they failed to do that.
2. Customer does not ask for final settlement letter from bank and pays the amount on verbal communication.
3. Customer does not ask for loan clearance letter on payment of settlement amount.
4. Bank’s accounting policy is not in place to mark the settlement as a full and final payment. Bank keeps marking amount excess of settlement amount as written off. A written off account is considered a defaulter.

Looking to such multiple complaints RBI started looking into this. The leading newspaper recently reported that RBI is in process of framing a guideline to reduce the customer harassment. It will cover the treatment of one settlement payment with the banks. It may also cover the updating CIBIL record regularly by banks. We request RBI to consider following:

1. Categorizing default type and not considering default for annual fees
2. Make mandatory for banks to update customer about default before reporting to CIBIL.
3. Any settlement payment from customer should be properly accounted and reported to CIBIL in 30 days as per the stipulations.
4. Settling up CIBIL helpdesk with each bank
5. Directing banks to work on defaulters who are in list because of dispute of annual fees for credit card e.g. sales agent sold the card as free for life and banks charges fees from 2nd year. I believe more than 25 % of default cases will resolve with this single action.

What customer should ensure?

1. Customer should personally visit the branch and talk to bank officer rather than relying on verbal or email communication. He also should note name and contact number of bank officer he talked with.
2. Customer should seek for an official settlement letter from bank to ensure the correct amount of payment, terms and conditions.
3. Preferred mode of payment is cheque for customer. Customer should also insist on proper receipt for the payment made.
4. On payment, customer should seek for “No Due certificate” from bank.
5. “No Due certificate” along with a forwarding letter (with bank officer name and contact number) should be send to bank’s head office by registered post to ensure proper closure.
6. After 3 months from the settlement, customer should order the “Credit report” by paying required fees to ensure the proper entry.
7. In case of any irregularity in the Credit report, customer should forward documents and report to 'head - customer service' or 'nodal officer' of the bank to resolve.
8. For unresolved cases, customer has option to go to RBI, Consumer court or Banking Ombudsman.