19 Apr 2011
Edition: Mumbai Pg: 20
The credit cycle of 2007-08 resulted in significant losses for many
banks in the consumer lending space, especially in unsecured lending
products. Post the crisis, banks have become more stringent in their
lending policies. With the Reserve Bank of India granting licences to
new credit information companies, banks now have the choice of using
multiple bureaus and new credit risk products. A credit report, which
is a compilation and analysis of the borrowing history of an
individual, is one such key product. Banks and financial institutions
refer to credit reports before they decide to lend.
It, therefore, becomes imperative that individuals’ credit
report accurately reflects all their loans and cards and their
repayment history. All information contained in a credit report is
submitted by financial institutions that are members of the credit
bureau and any changes can be made only after it has been certified by
the concerned financial institution. Individuals who currently have an
outstanding loan/debt in any form or who are looking to borrow should
ideally get their credit report on a quarterly basis to ensure that
the details reported therein are accurate.
This translates to a cost of `500-600 per annum. There could be
instances where some discrepancies can occur or the report may not be
completely updated due to incorrect or delayed/non-submission of data
by a financial institution. In case the information is incorrect or
the report is not updated, the borrower can approach the respective
financial institution and the credit bureau to correct/update the
report. The bureau and the financial institution should take
appropriate steps to correct/update the information within 30 days of
being requested to do so. The escalation channel for non-action is the
banking ombudsman or consumer forums.
The borrower has to submit the relevant identification
(know-your-client) documents and fill up the dispute investigation
form to authorize the dispute escalation. During the course of the
dispute resolution period, the bureau will inform the individuals
about the status. Financial institutions that deny credit to a
borrower on the basis of the credit report need to intimate the
borrower within 30 days of such a decision. Upon request, they would
also need to forward a copy of the credit report. Borrowers can study
the report for any inaccuracies and get it corrected to improve their
chances of getting a loan.
In case the credit bureau supplies wrong information and
discovers it on its own later, it needs to intimate the financial
institution or individual within seven days of finding the problem.
The bureau must also take immediate steps to correct the same and
forward to the concerned financial institution or individual within 30
days. Consumers must be wary of providing copies of their identity
documentation to external agencies. In India, it is very common for
people to give copies of their driving licence/passport/ voter
identity card/permanent account number for obtaining various services.
Such documents can be misused for obtaining a loan/credit card fraudulently.
This could result in unwanted litigation and problems. One way
of ensuring that your identity has not been stolen is to obtain a
credit report at frequent intervals and ensuring that all loan
outstanding reported therein are yours. Individuals who ensure that
their credit report is accurate stand a much better chance in ensuring
that they get funds when they need and may also get the best rates on
offer. Samir Bhatia is managing director and CEO, Equifax Credit
Information Services Pvt. Ltd.