The initial aim of setting up the Credit Information Bureau of India (CIBIL) was to give bankers access to credit reports of borrowers that could help them take informed lending decisions.

While the move certainly helped, today a number of people are increasingly finding themselves on the default side of the CIBIL without actually having defaulted. There has been a definite increase in the number of complaints wherein banks have treated loan applicants as defaulters even though they have cleared all their dues as per the settlement conditions.

So why are borrowers being termed defaulters in spite of clearing their dues?

Also Read: Name in CIBIL list by mistake? Fix it!

Here are the probable reasons that amounts to getting your name wrongly entered in the CIBIL report

  1. The bank has not yet sent an updated report to CIBIL. As per the rules, banks have to send updated data to CIBIL in 30 days but many times they failed to do so.
  2. If in spite of settling all dues, a final settlement letter hasn’t been issued, chances are that you are still on the list.
  3. Another reason that can put you on the list is when you do not get a loan clearance letter while settling the dues.
  4. If the bank’s accounting policy isn’t in place, that could lead to getting your name in the list. It is possible that the bank hasn’t marked the settlement as a full and final payment and instead keeps marking the settlement amount as written off. A written off account is considered a defaulter.

Fortunately RBI has decided to take positive steps and in looking into the matter. According to recent newspaper reports, RBI is in process of framing a guideline to reduce customer complaints. The guidelines are meant to cover the treatment of settlement payment with the banks. It may also take a call on the delay caused by banks in updating the CIBIL records.

Also Read: How to: Correct errors in your CIBIL report!

Here is a list of things we wish RBI would look into:

  1. Categorising the different types of defaults and leaving defaulters on annual fees out of the list. Many times customers get duped into buying ‘free for life’ credit cards by agents only to realise later that the bank starts charging fees from the 2nd year.
  2. Make it mandatory for banks to update customers about default before reporting to CIBIL.
  3. Strictly make sure that any settlement payment from customers is properly accounted and reported to CIBIL in 30 days as per the stipulations.
  4. Settling up a CIBIL help desk with each bank.

What can you do to avoid getting on the list?

  1. Personally visit the branch and talk to the bank officer rather than relying on verbal or email communication. Make sure you note down the name and number of the officer you talk to for any further communication.
  2. Seek for an official settlement letter from bank to ensure the correct amount of payment, terms and conditions.
  3. Try to make payments via cheques only. Also insist on proper receipt for the payments made.
  4. On payment seek for “No Due certificate” from the bank along with a forwarding letter (with the bank officer’s name and contact number). Make sure that the letter is sent to the bank’s head office to ensure proper closure.
  5. Three months from the settlement, request for a ‘credit report’ to ensure that the dues are indeed cleared.
  6. In case of any irregularity in the credit report, immediately forward the relevant documents along with the report to the head office of the bank.
  7. If for some reasons your case remains unsolved you have the option to go to RBI, Consumer court or Banking Ombudsman.

Ketul H Shah is a Chartered Accountant and an MBA. He has specialized in banking, finance and insurance. He is passionate about consumer rights and actively offers professional advice on consumer-related matters.

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