Even though consumer credit counselling is an old concept in many countries, in India, it is of recent origin.
But the banking regulator has promised that there would be one counselling centre in every district of the country.
So far, counselling centres have been set up by the Bank of India (Abhay), ICICI (Disha), Federal Bank (Ashwas), Bank of Baroda (Grameen Paramarsh Kendras) and Indian Bank.
The Banking Code and Standards Board of India (BCSBI) has also opened up its doors for credit counselling.
It will provide counselling only to borrowers of member banks (you can see the list on the BCSBI website) in the retail segment (personal loan, vehicle loan, home loan and credit cards), whose credit exposure does not exceed Rs 50 lakh.
The Banking Code and Standards Board of India (BCSBI) says that its counsellors will talk to those who apply for counselling (the application form is also available online) and come up with a debt restructuring plan.
The bank concerned is free to accept it fully or with modifications.
There is no fee and the confidentiality of the applicant would be maintained.
The Banking Code and Standards Board of India (BCSBI) has also asked all member banks to identify a nodal officer from the credit department to deal with counsellors.
This would ensure that the process of counselling and restructuring is speeded up.
In countries like the US and UK, which have well-developed credit counselling, these services are provided free of charge by charities.
They are also provided, for a fee, by professional debt management companies that work for a profit.
And credit counselling here goes well beyond just offering advice.
These companies not only negotiate with the creditors on behalf of consumers in debt, but they also make payments collected from the clients, to the creditors.
However, despite stringent laws and guidelines to regulate and monitor them, there are allegations of unfair trade practices by those who work for a profit.
India has so far, (rightly) opted for free counselling by independent trusts started by banks.
However, these counselling centres should act independently and should not appear to be debt recovery wings of these banks.
Second, the counselling rendered should be of standard quality.
Even more important, for the counselling to be effective and fruitful, the banks have to respond positively to the counsellors’ proposals and negotiations.
Question (name withheld on request): I have credit cards from three banks issued in my name, which my husband has misused very badly.
There are now huge debts on them. Now, I husband and I have been separated for the past eight months.
I do not have the kind of money that I can pay them back. My salary is not too much and on top of that, I have the additional responsibility of looking after my daughter.
The credit card recovery agents regularly visit my house. They keep on calling me and really harass me too much. I do not know what to do. I would request you if you can help me with your suggestions. (My husband is an alcoholic and unemployed and I do not have any idea of his whereabouts.)
Answer: You can seek the help of the Banking Code and Standards Board of India(www.bscbi.org.in/pdf/creditcounselling.pdf) by filling up the form provided on their
Website. They should be able to negotiate with all the three banks and help you in sorting out your financial problems. You also need to complain to the Banking Code and Standards Board of India (BCSBI) as well as the Reserve Bank of India (RBI) about the harassment by credit card companies, which is in violation of the RBI guidelines on the subject, so that the harassment stops. You can also complain to the police about this. I would also suggest that you please read the RBI guidelines on recovery agents. (You will find them on the RBI website) It will help you quite a lot in dealing with these banks.