Kid gloves for the credit-scarred
Customers feeling the pinch of the loan trap could approach debt counselling centres, who negotiate better deals for financially-distressed borrowers.
By Vidyalaxmi & Preeti R Iyer, TNN |
One gentleman is revolving on 19 credit cards with an outstanding due of Rs 98 lakh. The amount is quite a sum. What is he going to do to bail himself out of the situation? The answers aren’t easy. But there is light at the end of the tunnel. He knocks the doors of Abhay — a debt counselling centre set up by Bank of India — to seek help. The organisation takes up the issue with the banks concerned, seeking time to work out a solution. The latter probably could be in the form of reduced interest rate or extra time to pay back the dues.
There is another instance of a businessman with huge loan outstandings. He was later detected with cancer. In this case, considering the gravity of the situation, the counsellors advised banks to waive the interest component and increase the tenure of the loan, to lower the EMIs.
B Madhivanan, general manager-customer service, ICICI Bank and in charge of Disha says that in cases of extremely genuine cases, the counselling centre even advises consolidation of different loans. In such cases, the bank, which has lent the maximum amount, takes the lead responsibility of recovering loans. They could enter into a pact with other banks, which mandates them to pay back their loans as and when the recovery happens. This allows the borrower to be answerable only to a single authority. Simultaneously, the credit counsellor also apprises the credit bureau about the borrower, so that no other bank grants him any fresh loan.
“The counsellor then recommends the best way they feel, by which the borrower can obtain relief. This could be either by way of a moratorium (a holiday period on the loan), or by extending the tenure of the loan so that the EMI component is reduced. In case of a credit card, they suggest converting the outstanding amount into a personal loan,” he adds.
Echoing similar views, VS Kulkarni, retired manager of Bank of India manager and in charge of Abhay adds: “We also suggest ways in which our clients can increase their income. Above all, we are trying to exercise debt management, which has, so far, not been practised in our country.”
How do these centres work?
The debt counselling centres draw from the experiences of developed economies, educating people on proper use of consumer credit. Credit counselling centres broadly cover three areas: Financial education, credit counselling and debt management.
Typically, these centres conduct one-on-one sessions with financially-distressed borrowers. If the customer has a complaint against any bank, the counsellor takes it up with nodal officers. Then, depending upon the problem, a solution is worked out. Typically, borrowers are saddled with multiple loans from different banks.
The nodal offices of banks involved are free to carry out their own investigation to verify the credentials of the borrower, but the counselling centre does not guarantee the borrower of the bank’s mandate to accept the suggested recommendations. It is purely on a voluntary basis.
Once the case comes to the centre, the in-house counsellor conducts a personal interview with the affected borrower. The first session is a testing period, both for the borrower and the counsellor. The counsellor maintains a tough stance through the interaction, after which he discreetly contacts close relatives of the borrower in order to confirm the genuineness of the case.
Abhay has its main office in Dadar. You can receive the contact details of both the counselling centres at their websites — http://www.bankofindia.com/home/contactdtls.asp and http://www.dishafc.org. These offices are typically run by retired bankers or ex-ombudsmen officials, who have the expertise to counsel the customers. Moreover, the services offered are free of cost and you don’t have to be a customer of either of the banks to seek counselling.
There is another instance of a businessman with huge loan outstandings. He was later detected with cancer. In this case, considering the gravity of the situation, the counsellors advised banks to waive the interest component and increase the tenure of the loan, to lower the EMIs.
B Madhivanan, general manager-customer service, ICICI Bank and in charge of Disha says that in cases of extremely genuine cases, the counselling centre even advises consolidation of different loans. In such cases, the bank, which has lent the maximum amount, takes the lead responsibility of recovering loans. They could enter into a pact with other banks, which mandates them to pay back their loans as and when the recovery happens. This allows the borrower to be answerable only to a single authority. Simultaneously, the credit counsellor also apprises the credit bureau about the borrower, so that no other bank grants him any fresh loan.
“The counsellor then recommends the best way they feel, by which the borrower can obtain relief. This could be either by way of a moratorium (a holiday period on the loan), or by extending the tenure of the loan so that the EMI component is reduced. In case of a credit card, they suggest converting the outstanding amount into a personal loan,” he adds.
Echoing similar views, VS Kulkarni, retired manager of Bank of India manager and in charge of Abhay adds: “We also suggest ways in which our clients can increase their income. Above all, we are trying to exercise debt management, which has, so far, not been practised in our country.”
How do these centres work?
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The debt counselling centres draw from the experiences of developed economies, educating people on proper use of consumer credit. Credit counselling centres broadly cover three areas: Financial education, credit counselling and debt management.
Typically, these centres conduct one-on-one sessions with financially-distressed borrowers. If the customer has a complaint against any bank, the counsellor takes it up with nodal officers. Then, depending upon the problem, a solution is worked out. Typically, borrowers are saddled with multiple loans from different banks.
The nodal offices of banks involved are free to carry out their own investigation to verify the credentials of the borrower, but the counselling centre does not guarantee the borrower of the bank’s mandate to accept the suggested recommendations. It is purely on a voluntary basis.
Once the case comes to the centre, the in-house counsellor conducts a personal interview with the affected borrower. The first session is a testing period, both for the borrower and the counsellor. The counsellor maintains a tough stance through the interaction, after which he discreetly contacts close relatives of the borrower in order to confirm the genuineness of the case.
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Once he is convinced that the party he is interacting with is not an intentional defaulter, (situations wherein the customer has taken loans from more than one bank), the counsellor contacts the nodal officers of the banks and briefs them on the broad indebtedness of the borrower and what percentage their loan comprises in the total debt of the borrower. Abhay has its main office in Dadar. You can receive the contact details of both the counselling centres at their websites — http://www.bankofindia.com/home/contactdtls.asp and http://www.dishafc.org. These offices are typically run by retired bankers or ex-ombudsmen officials, who have the expertise to counsel the customers. Moreover, the services offered are free of cost and you don’t have to be a customer of either of the banks to seek counselling.
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You definitely wouldn’t want to be in the credit trap of Rs 98 lakh like the gentleman mentioned in the beginning. But early moves to identify the financial stretch could go a long away to avoid embarrassing situations for the borrower. Start a SIP with as low as ₹500 with ET Money App!
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