Explained: Importance of credit rating in getting a loan and how to fix it

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Recently, there have been several cases where fraudsters used permanent account numbers and other identity documents of people to avail loans from fintech companies and non-bank financial companies (NBFCs). As these loans remain unpaid, it affects the credit rating of a customer even if he does not avail these loans in case of default.

What a credit rating downgrade does is that it leads to the denial of future credits or the imposition of interest rates that are much higher than market rates. So what can a customer do in such a situation? We explain the options that are available to rectify the credit score.

How can one get their credit score fixed?

A customer can check their credit score and whether a loan (which has not been taken out) is outstanding through reports provided by the respective credit bureaus. These reports can be obtained by connecting to CIBIL, Equifax or Experian, or via net banking.

Experts say that the easiest way to fix the credit rating would be through an institutional process initiated by the Reserve Bank of India (RBI). Data subjects can also contact the information provider and offices directly, although this is usually a cumbersome process.

“This rectification process should be case specific…if a CIBIL score has been misrepresented, the client should contact the specific institution where their security was compromised. The lender, who is also the information provider, will need to approach CIBIL to regularize the client’s rating. In addition, aggrieved parties will also have to contact CIBIL and initiate a dispute request, either online or by writing to them,” said Surya Bhatia, certified financial planner.

A simpler way suggested by financial experts is to request the RBI to step in and provide relief to aggrieved customers as many people have been affected recently.

“The easiest and most transparent way is for credit institutions to correct them with credit bureaus. As thousands of customers have been affected by such scams, the RBI may order specific institutions to put in place a process to address this issue,” said Srinath Sridharan, Business Advisor and Independent Markets Commentator.

“If individuals have to do this, it will be a painful process and they will have to provide a lot of documentation. The ombudsman can also be approached if one does not receive a satisfactory response from the lender. The burden of proving this should be on the institution, not the individual,” he added. If the issue is still unresolved, customers should contact the RBI through its mediation program.

Where to go if the problem is still not solved?

The Reserve Bank of India has launched the Integrated Ombudsman Scheme which provides solutions to customer complaints such as deficient service from banks, NBFCs and payment system operators.

The program enables nearly 44 crore loan accounts and 220 crore deposit accounts to file any grievance with the RBI through an online portal. It offers a single interface for customers to file complaints, submit documents and track the status of their issues.

A centralized reception and processing center has been set up at RBI Chandigarh for the reception and initial handling of physical and email complaints in all languages. The scheme integrated RBI’s three existing ombudsman schemes – the Banking Ombudsman Scheme, 2006, the Non-Banking Financial Companies Ombudsman Scheme, 2018 and the Digital Transactions Ombudsman Scheme, 2019.

How do I file a complaint with the Ombudsman?

Since loan providers are mainly banks, NBFCs or payment service providers, most complaints will be covered by this scheme. Here’s how to contact the ombudsman:

  • Complaints can be filed online at https://cms.rbi.org.in.
  • Complaints can also be lodged through the dedicated email at [email protected] or sent in physical mode to the Centralized Receipt and Processing Center (CRPC) set up at the Reserve Bank of India, 4th Floor, Sector 17, Chandigarh – 160017.
  • A contact center with a toll-free number (14448) manned by RBI staff members operates to provide assistance to customers in filing complaints and providing information. This center operates from 9:30 a.m. to 5:15 p.m. and is available in Hindi, English and eight regional languages.

Electronic and physical complaints received at the CRPC are recorded on the CMS (Complaints Management System) by the staff after obtaining additional information, if necessary, from the client.

Has India seen an increase in such complaints?

The RBI witnessed a 22.27% increase in the volume of complaints under various mediation schemes between April 2020 and March 2021. Complaints related to ATMs and debit cards, banking mobile phones and credit cards represent the bulk: 42.74% of the total number of complaints. against 44.65% the previous year. There were 60,203 complaints about ATMs and debit cards, and 40,721 about credit cards.

The volume of claims amounted to 4,04,143 over the period at an annualized rate. Chandigarh, Kanpur and Delhi received the maximum number of complaints, according to the latest data from RBI.

The number of complaints received against NBFCs and digital transactions stood at 8.89% and 0.98%, respectively. The overall kill rate improved to 96.59% from 92.52% in 2021, despite higher volume. This was achieved through the end-to-end digitization of the complaints handling flow in the CMS.

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