CIBIL- The Fundamental Report for Bank Loan

CIBIL stands for Credit Information Bureau (India) Limited which is a part of “transunion” an american multinational group. It maintains credit files of around 600 million individuals and 32 million businesses. TransUnion is one of four credit bureaus operating in India and is majorly trusted by banks and Financial institutions due to its greater reliability and popularity in the Indian financial sector.

As from above it is clear that CIBIL is an agency that mainly collects and maintain credit information of customers and uses it for information purposes of lenders, borrowers and ultimately the economy. 

Now let us understand that how CIBIL works and why it is so important ?

i) All the banks and financial institutions operating in india are under an obligation to provide monthly reporting to CIBIL about their borrowers credit history whether they had repaid the loan, credit cards bills, etc on time or had defaulted in either repayment /interest payment.

ii) Based on such credit information from banks it uses it for further dissemination to lenders for credit evaluation process because whenever a prospective customer approaches any lender for availing credit then such lender prima-facie asks that customer to submit the CIBIL report in order to analysis his credit worthiness.

iii) CIBIL does the rating of both Institutional and Individual Customers based on their credit history and rate them based on CIBIL’s internal rating parameters.

iv) It must be noted here that the CIBIL score is not only useful for the lenders but also for the customers in planning their credit requirements accordingly.

v) A CIBIL score is basically a three digit numeric score of your credit history ranging from300-900.It is calculated by analyzing the credit history and enquiries made by lenders on behalf of borrowers. The Score indicates the ‘probability of default’ by the borrower in future.

vi) The lower the score the poor it is and closer the score to 900 the higher are the chances that your loan application will be approved. It is important to note that nearly 90% of individuals loans are granted with score greater than 750 which is considered to be a fair score in most of the cases by the lenders.

vii) CIBIL RANK– It is a specialized facility designed only for institutional customers that have outstanding loans of Rs. 10 lakhs to Rs. 50 crores in which CIBIL provides a Rank ranging from 10 to 1. It can be obtained only by the lenders for taking rational decisions but subject to non disclosure to any third party and by the company itself. A score of 10 is considered to the worst and 1 is the best.

viii) We can say that it is forecasting future based on historical data of borrowers.

ix) CIBIL Score impacts your borrowing power because a good CIBIL score may fetch you credit at comparatively lower prices.

Therefore from the above factors we understood that how important is the CIBIL score whether you are going to apply for a loan for your business or a personal loan or even a small credit card application. Hence it is very crucial to keep your CIBIL score good so as to not to face any rejection of credit application.

WHAT IF YOU ARE UNABLE TO VIEW YOUR CREDIT SCORE OR GENERATE YOUR CIBIL REPORT ON CIBIL WEBSITE:

If you are unable to get your CIBIL score or report, then this is not a case to worry about because CIBIL displays the credit information of only such borrowers who have a considerable credit history with lenders.

Say it is written as NA or NH then it might be that the customer is a new having no credit history or he has not done any transactions in past 24 months. 

In such a case you not to worry and you can start/resume your credit history by availing a fresh loan/credit card to appear in CIBIL database. However it is quite often seen that lenders prefer borrowers with a credit history.

Basic points to improve or to maintain your credit score intact:

i) Pay your dues on time:Late payments are viewed negatively by lenders. 

ii) Keep your balances low:Always be prudent to not use too much credit, control your utilization.

iii) Maintain a healthy credit mix: It is better to have a healthy mix of secured (such as home loan, auto loan) and unsecured loans (such as personal loan, credit cards). Too many unsecured loans may be viewed negatively.

iv) Do not apply in excitement:You should not apply here and there and everywhere very frequently and excessively. It may impact your history. 

v) Monitor your co-signed, guaranteed and joint accounts monthly:In co-signed guaranteed or jointly held accounts, you are held equally liable for missed payments. Your joint holder’s (or the guaranteed individual) negligence could affect your ability to access credit when you need it.

vi) Review you credit history frequently throughout the year:Monitor your CIBIL Score and Report regularly to avoid unpleasant surprises in the form of a rejected loan application.

You can trace your CIBIL score and generate CIBIL report by paying a nominal amount of Rs 550/-, Rs 800/- and Rs 1200/- for 1 month, 6 months and 1 year subscription respectively on CIBIL website(www.CIBIL.com) However viewing your credit score and one credit report with limited features per calendar year is absolutely free.

DISPUTES/ERRORS with CIBIL

It is quite possible that there might be certain errors in your CIBIL report which can be related to your Personal Information, Loan history, Income, etc then in such cases you have an option to directly raise a dispute with CIBIL by filing online Dispute resolution form which will be processed within 30 days of raising the dispute.

Your CIBIL information will be updated accordingly after rectifying the errors.

An important thing to note here is that CIBIL considers only your credit history pertaining to any loans and doesn’t have any bearing on your Income, asset or any other factors to determine your credit score.

Therefore it is correct to say that CIBIL Score is a lender’s very important thermometer with the help of which they diagnose their borrowers.

काय देशात आर्थिक आणीबाणी लागू होणार ??? जाणून घेऊ आर्थिक आणीबाणी म्हणजे काय ???

कोरोनामुळे येणाऱ्या आर्थिक संकटाचा सामना करण्यासाठी केंद्र सरकारने आर्थिक आणीबाणी जाहीर करण्याची शक्यता वर्तवली जाते पण अशी काही घोषणा आतापर्यंत केलेली नाही  पंतप्रधान मोदी यांनी यांसंदर्भात कोविड कृती दलाशी चर्चा केली. कलम ३६० अन्वये राष्ट्रपती आणीबाणी जाहीर करतील. आणीबाणी मध्ये  राज्यांचे आर्थिक अधिकार गोठतील व खर्चाचे अधिकार केवळ केंद्र सरकारकडे असलीत. राज्यांच्या सर्व खर्चावर केंद्राचेच नियंत्रण असेल.

Image-आर्थिक आणीबाणी

जाणून घेऊ आर्थिक आणीबाणी म्हणजे काय ???

देशाचे प्रथम नागरिक आणि घटनात्मक प्रमुख म्हणून राष्ट्रपती आणीबाणी जाहीर करू शकतात.

राष्ट्रपती तीन प्रकारच्या आणीबाणी लागू करू शकतात.

१) राष्ट्रीय आणीबाणी - युद्ध, बाह्य आक्रमण, सहत्र उठाव यामुळे देशात आणीबाणी लावली जाऊ शकते. या घोषणेविषयी न्यायलायात दाद मागता येत नाही. १९६२- चीन युद्ध, १९७१- पाकिस्तान युद्ध, १९७५ -इंदिरा गांधी यांनी आणीबाणी लागू केली होती.

२) राज्यातील राष्ट्रपती राजवट - एखाद्या राज्यात पेचप्रसंग निर्माण झाल्यास राज्यात ‘राष्ट्रपती राजवट’ लावली जाते .

३) आर्थिक आणीबाणी - देशाची आर्थिक स्थिती धोक्यात आल्यास ही आणीबाणी लावली जाते. भारतात आर्थिक आणीबाणी अजून लागलेली नाही.

भारतीय घटनेमध्ये 360 या कलमामध्ये तशी तरतूद आहे.वेगवेगळ्या देशामध्ये याचे वेगळे नियम आहेत. राष्ट्रपतींना असे वाटले की देशामध्ये कोणत्याही भागात आर्थिक स्थैर्य किंवा वित्त नियोजनात कमतरता जाणवत आहे अथवा वित्त जीवन विस्कळीत किंवा कमकुवत झाले आहे अशा परिस्थितीमध्ये आर्थिक आणिबाणी लावली जावू शकते.

राष्ट्रपती राज्याचे सर्व मौद्रिक (Monetary) आणि वित्तीय(Financial) बिलाचे मसुदे स्वतःच्या देखरेखेखाली ठेवतात. आणि कोणताही आर्थिक निर्णय घेण्यापूर्वी त्यांची मंजुरी आवश्यक ठरते

आर्थिक आणिबाणीचा आपल्यावर काय परिणाम होतो ?

थेट परिणाम व्यवस्थेवर होतो. आर्थिक व्यवस्था चक्र थांबते. काही वेळेला नोकरदार आणि इतर कामगार वर्गाची पगार कपात केली जाते.यामध्ये कुणालाही सूट दिली जात नाही.

सरकारी नोकरदारांच्या पगारवाढीवर निर्बंध घातले जातात. तर सार्वजनिक सेवा देणाऱ्या कोणत्याही कर्मचाऱ्यांची वेळेवर पगार होण्याची कोणतीही शाश्वती नसते. याचा अप्रत्यक्ष परिणाम त्या वर्गावर किंवा तो वर्ग देत असलेल्या सेवेवर होत असतो.

उदाहरणार्थ -

शेजारच्याची नोकरी गेली तर मंदी येणार आहे असे आपण म्हणू शकतो. त्याच्याबरोबर आपली स्वतःची नोकरी गेली तर मंदी आलीच आहे असे आपण म्हणू शकतो. आपल्याला आर्थिक सल्ला देणाऱ्याची नोकरी गेली तर आर्थिक मंदी आली आहे असे आपण म्हणू शकतो. आणि शेवटी आपल्याला आर्थिक मदत करणाऱ्याची नोकरी गेली तर आर्थिक आणिबाणी दूर नाही असे म्हणायला हरकत नाही. अर्थात हे चक्र सुरळीत चालू असणाऱ्या व्यवस्थेला लागू होते.

EMI Moratorium Facility Will Increase Cost of Loan ???

EMI Moratorium Facility Will Increase

Cost of Loan ???

RBI announced 3 months EMI Moratorium on loans. People rejoiced and there was a big relief on many thinking they are now safe for the next 3 months. However, the reality is entirely different.

What is the meaning of 3 Months Moratorium?

As per the definition of the dictionary, Moratorium means “A legal authorization to debtors to POSTPONE the payment”. You are just allowed to postpone your EMI for 3 months but your EMIs were NOT WAIVED OFF.

Due to the 21 days lockdown across the country, many businesses are suffering. Hence, to give a rest for loan repayment for retail borrowers, RBI announced this 3 months moratorium.

If due to financial problems during these three months, you are unable to pay the EMI, then such non-repayment is not considered as DEFAULT.

3 Months EMI Moratorium on loans – What it is actually?

• Banks which are eligible for providing 3 months EMI Moratorium-

All commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all-India Financial Institutions, and NBFCs (including housing finance companies) (“lending institutions”) are permitted to grant a moratorium of three months on payment of all installments.

• It is not WAIVER but DEFERING-

Many thought that it is a waiver of your EMI for the next 3 months from Government. However, it is just deferring your EMIs. Hence, you can’t run away from these 3 months EMI.

• Types of loans eligible under 3 months EMI moratorium-

Term loans, including agriculture term loans and crop loans besides retail loans, are part of this moratorium.Retail loans are typically home loans, personal loans, education loans, auto and any loans that have a fixed tenure. They also include consumer durable loans, such as EMIs on mobiles, fridge, TV etc.

• Credit card payments are also part of this 3 months EMI moratorium-

Earlier there was confusion on whether the credit card payments are also the part of 3 months EMI moratorium or not. However, later RBI cleared this doubt and such credit card payments are also now part of this 3 months EMI moratorium.

• Your loan tenure will increase by 3 months-

If you opted the 3 months EMI moratorium, your loan tenure will increase by 3 months. Suppose your loan tenure is 20 years, then now the loan tenure is 20 years and 3 months.

• Only RETAIL loans are covered but not BUSINESS loans-

This 3 months EMI moratorium covers only retail loans but not any business loans. For Business Loan or Working Capital Loan, Central bank has deferred the payment of interest for period as on March 1, 2020 up to May 31, 2020. Businesses will be required to pay off the entire accumulated interest after the expiry of moratorium or deferment period.

• Eligibility EMIS Moratorium-

EMIs due between 1st March 12020 to 31st May 2020 are eligible for such moratorium.

• It is not a DEFAULT option but you have to approach the bank to avail this moratorium-

Banks may provide this moratorium on their own. However, as of now, it is clear this it is not a default option on all EMIs. You as a borrower have to approach the bank and opt for this moratorium by mentioning the reasons of difficulty in paying the EMI.

However, considering the severity, we think banks will not look for reasons but provide this moratorium to all those who wish to opt.

However, as of now, RBI is clear in this regard with this sentence” accounts provided relief under these instructions shall be subject to subsequent supervisory review with regard to their justifiability on account of the economic fallout from COVID-19.”

•  Impact on Credit Score-

As this is considered as a deferment than the default, such moratorium will not affect your credit score. Hence, no need to worry on credit score front.

3 Months EMI Moratorium on loans – Don’t opt-

Why we should not opt this 3 months EMI moratorium on loans? The reasons are as below. The biggest reason for saying DON”T OPT is the below lines from RBI notification.

> It is not a WAIVER but a DEFER-

As mentioned above, RBI not waiving your 3 months EMI. However, provided you an option to defer it. Hence, no such benefit for all of you. You are just deferring your EMI.

In general terms if we say, if your loan tenure is 120 months, then it will increase to 123 months. But in real sense it is not simple as it is. Lets see the example,

Outstanding Term(Months)	Moratorium Term (Months)	Effective Revised Term(Months)	Extra EMI (Nos)
36	3	40	1
60	3	65	2
120	3	128	5
180	3	191	8
240	3	258	15

** (EMI- Number of Moths Assums-8.50% Home Loan Interest Rate. As Interest rate increases EMI will also Increases).See how many Extra EMI required to pay and take the decision.

> You pay HIGHER interest-

Assume that you have Rs. 30 Lakh loan with 8% interest. Assume you opted for this 3 months EMI moratorium, then during such moratorium period, banks will calculate the interest on this outstanding Rs.20 lakh at 8% and the monthly interest of Rs. 20,000/- (Rs.30,00,000*8%*1/12).

Hence, if you opted for this 3 months moratorium, you have to additionally pay Rs. 60,000/- interest for 3 months on your outstanding just because you deferred your EMI. Interests due in 3 Months will be added to principal on July 2020 Onwards.

However, as of now, it is not clear how you have to pay this interest. They will adjust to your EMI and your EMI may slightly get increased.Hence, this is nothing but deferring your credit card payment dues for 3 months.

>Heavy Interest on Credit card payments for 3 months EMI moratorium-

All credit card holders will charge heavy interest after opting for 3 months moratorium period. Generally credit card companied will charge 18% to 24% p. a. interest for late settlement of credit card dues.

> Deferment of interest payments for Business loans-

The central bank has deferred the payment of interest for all business loans working capital loans outstanding as on March 1, 2020 up to May 31, 2020. Businesses will be required to pay off the entire accumulated interest after the expiry of moratorium or deferment period. This will increase the burden on corporate borrowers.

>Available for those whose income affected due to Coronavirus-

All are not eligible to avail this 3 months moratorium. If your salary or income affected due to this Coronavirus outbreak, then you have to approach the bank and convince the reality. Based on that only banks can offer you such moratorium.

However, considering the impact of Coronavirus on all of us, banks may provide this to all who approach the bank. But remember, it cost you more.

Conclusion:-It is clear now that there is no point in opting for this moratorium. If your income is intact or you have sufficient emergency fund placed to face such a situation, it is far better to let the EMI continues than opting for EMI moratorium. In the end, banks are not under loss by providing this moratorium but you will be under loss by opting this.

IF YOUR INCOME IS INTACT OR YOU HAVE SUFFICIENT EMERGENCY FUND PLACED TO COVER INCOME LOSS, THEN DON’T OPT FOR THIS 3 MONTHS EMI MORATORIUM. LET YOUR EMI CONTINUE.

1) Refer- For RBI Announcement-
https://thefinancebuzz.blogspot.com/2020/03/covid-19.html

2) EMI Moratorium Explained by Banking Editor Latha Venkatesh, CNBC TV18-

Financial Year Ending On ????

Financial year Ends on 31^st March 2020 ??

or on 30^th June 2020 ??

Recently a message is circulating on Social Media which claims that Financial Year 2019-20 ending on 31.03.2020 is been extended to end on 30.06.2020. With this message a Government notification issued by Ministry of Finance is also been circulated. Here we would like to clarify that this notification is not fake but someone either deliberately or by mistake interpreted it wrong to interpret the same as notification for extension of financial year to 30.06.2020.

We have found the notification been hosted on following website, which is a Government website and same proves that notification is not fake but interpretation of the same on Social Media is fully wrong-

http://egazette.nic.in/WriteReadData/2020/218957.pdf

So what Notification is all about?

Vide this notification actually Central Government appoints 01.07.2020 instead of 01.04.2020, as the date on which the provisions of Part I of Chapter IV related to Amendments to Indian Stamp Act, 1899 which were notified by Finance Act, 2019 (7 of 2019). Ie it’s related to Deferment of amendment applicable to Indian Stamp Act, 1899 and not related to ending of financial year

Also Read Following Press Release from CBIC-

Ministry of Finance

Government of India

Press Note

30.03.2020

No Extension of the Financial Year

New Delhi: There is a take news circulating in some sections of media that the financial year has been extended. A notification issued by the Government of India on 30^th March 2020 with respect to some other amendments done in the Indian Stamp Act is being misquoted. There is no extension of the financial year.

Finance ministry said that a notification has been issued by Department of Revenue, Ministry of Finance dated 30^th March, 2020 which relates to certain amendments to the Indian Stamp Act. It pertains to putting in place an efficient mechanism for collection of Stamp Duty on Security Market Instruments transactions through Stock Exchanges or Clearing Corporation authorized by Stock Exchanges Depositories, This change was earlier notified to be implemented from 1 April, 2020. However, due to the prevailing situation, it has been decided that the date of implementation will now be postponed to 1.7.2020.

Source-  https://twitter.com/cbic_india/status/1244671644372615177

Mega Merger of State-Run Banks

Mega Merger of State-Run Banks, From 01^st April 2020

Ten Public Sector Undertaking (PSU) banks will be amalgamated into four banks from tomorrow, 1 April. In the biggest consolidation exercise in the banking space, the government in August 2019 had announced the merger of 10 public sector lenders into four bigger and stronger banks. With this, the number of public sector banks in India will come down to 12 from 27 in 2017. It was widely speculated that the government may defer the consolidation exercise for some time due to the novel coronavirus pandemic that has impacted our economy.

Here is all you need to know about the mega merger of PSU banks that will come into force from 1 April:

1) Oriental Bank of Commerce (OBC) and United Bank of India will be merged into Punjab National Bank (PNB). After the merger, these together will form the second-largest public sector bank in the country, after State Bank of India (SBI).

2) Syndicate Bank will be merged into Canara Bank, which will make it the fourth-largest public sector lender.

3) Indian Bank will be merged with Allahabad Bank.

4) Union Bank of India will be merged with Andhra Bank and Corporation Bank

5) Customers, including depositors of merging banks will be treated as customers of the banks in which these banks have been merged with effect from 1 April 2020.

6) After the merger, there will be 12 PSUs - six merged banks and six independent public sector banks.

-Six merged banks - SBI, Bank of Baroda, Punjab National Bank, Canara Bank, Union Bank of India, Indian Bank

-Six independent banks - Indian Overseas Bank, Uco Bank, Bank of Maharashtra, Punjab and Sind Bank, Bank of India, Central Bank of India.

7) The Oriental Bank of Commerce and United Bank of India will operate as the branches of the Punjab National Bank from tomorrow (1 April 2020).

8) Syndicate Bank will function as the branch of Canara Bank effective 1 April 2020.

9) Similarly, all Allahabad Bank branches will be treated as branches of the Indian Bank

10) All branches of Andhra Bank and Corporation Bank will function as Union Bank of India branches with effect from 1 April, 2020.

Earlier this month the cabinet gave its approval for the mergers that will consolidate operations of 10 public sector banks (PSBs) into four 'mega banks'.

IMPACT ON CUSTOMERS

Now, bank customers including account holders of amalgamating banks are likely to get affected. Here is a look at how bank customers will be impacted.

Bank account number, customer IDs to change :-

-According to the FAQs on the amalgamation of UBI and OBC with PNB, "The existing Account No., IFSC, MICR, Debit Card etc. will continue post amalgamation, until further notification. Your existing account in all three amalgamating banks will continue with all its services.

On a later date, you are likely to get a new account number and customer ID. For instance, a couple of years ago, when five associate banks of State Bank of India (SBI) were merged, IFSC codes and names of 1,300 branches were changed. The banking behemoth changed the names and IFSC codes of branches of the amalgamating banks located in major cities such as Mumbai, New Delhi, Bengaluru, Chennai, Hyderabad, Kolkata and Lucknow.

Account details for auto-credits/debits :-

You would have given your bank account numbers and IFSC codes for various financial transactions - auto credit of dividends via ECS, auto-credit of salary, auto debit of various bills/charges etc. Unless these accounts are seamlessly merged into the financial system of the anchor bank, you would be required to change the details of your bank account given for these purposes.

According to the FAQs of the OBC, UBI and PNB merger, "All ECS/NACH arrangements/standing instructions for utility payments, Loan EMIs, RD Instalments, Credit Card payments and other services shall function without any disruption to the customer. There is no need to resubmit your mandate."

Local branches and ATMs :-

Customers will now have access to a larger number of branches and ATM network and next generation banking technology. However, do keep in mind that branch rationalisation will happen. For instance, your existing home branch could shut shop if the new acquiring entity has its own branch in the same vicinity.

According to the above mentioned FAQs, "There shall be no immediate branch closures in any of the Banks. In future, if there are some closely located branches of the three Banks, they may be merged/shifted with prior notice to our esteemed customers." Keep an eye on the new IFSC and MICR code applicable to your branch and account since you will have to quote it for funds transfer and other financial transactions.

Fixed deposit and recurring deposit rates :-

The current rate of interest for existing RD/FD will continue till maturity. For FD, renewal will be done with the latest term deposit rates of the amalgamated bank.

Credit and debit cards :-

Your existing credit card will be valid until the date of expiry printed on the credit card and then it will be renewed on its expiry. You can also approach amalgamating bank for a fresh credit card.

With regards to debit cards, customers will not be charged a fee. For instance, the customers Allahabad Bank and Indian Bank can use their debit cards in the ATMs of both banks without any charges.

 (Source- Economic Times)