Reserve Bank of India To Propose New Rules Regarding Settlements
The Reserve Bank of India is framing new guidelines that would prevent banks from declaring credit cardholders in default after paying their outstanding debts determined through negotiated settlement, a central bank official confirms to PaymentsSource.
In India, even when a cardholder pays a negotiated settlement amount, the bank still lists him in its records as being in default, according to an official at the Credit Information Bureau of India Ltd. “And so his name continues to be in the defaulters list,” he says on the condition of anonymity. “[The bureau] compiles the list according to the data provided by banks.”
This essentially blacklists the cardholder, making it difficult for him to secure most types of loans, including home loans and personal loans, sources say. In some cases, the cardholder has to settle a new “balance amount” from the earlier settlement, which has further additions in penalties and interest.
“We are aware of this issue, and you should see new rules by the end of June this year,” the central bank official adds. “We have met officials at [the bureau] and major card issuers on this regard.”
According to the official, the central bank’s ombudsman has received many complaints from cardholders kept on banks’ default lists.
“Besides the written-off amount, some banks keep cardholders in the defaulter list for things like annual fees on the cards, which the holders argue were never there in the first place,” he adds.
