By Kapildeo Singh

Mundane as it may sound, proofs and documents are vital in the world of finance. moneycontrol.com tells the story of one individual who learnt this the hard way.  

Name: Rohan Vasu*
Age: 54
Where he lives: Nigdi, Pune
What happened: Rohan's name continued to remain in the 'defaulters' list, even though he managed to pay off  the outstanding amount on his credit card.
Now what: Rohan was denied a loan because of this. 

Here's why:
Rohan had run up a credit card bill of Rs 25,475. Due to some genuine problems, he was unable to pay off his bill. So, he approached the bank with a settlement plea.

After the bank verified his financial position, they agreed to a settlement of Rs 10,000 payable in two instalments of Rs 5,000, each. Rohan was issued a settlement letter.

Before Rohan could pay this amount to the bank, a recovery agent approached him. Rohan showed him his settlement letter and asked the agent if he could settle the entire amount in a single instalment of Rs 8,000. The recovery agent agreed and collected Rs 8,000. He confirmed receipt by signing on Rohan's copy of the settlement letter.

What a recovery agent does: He collects dues. He cannot agree to settle dues for lower amounts without the bank's permission. In this case, the agent, in his chase to earn a commission settled the dues at his own will and did not inform or confirm this with the bank.

A few months later:
Rohan, who assumed that the matter was now closed, applied for a home loan. It was rejected because he was a credit card defaulter. He touched base with the credit card issuer bank, and was told that he had an outstanding of Rs 2,000, which was yet to be paid against his card!

Since, he only paid Rs 8,000 and not the agreed amount, the bank had sent his name to the Credit Information Bureau (India) Ltd (CIBIL), which maintains a database of defaulters and shares these details with other banks. Hence, the rejection of his home loan.

Post several visits to the bank, and thanks to the agent's signature on Rohan's copy of the settlement letter, he was able to clear his name from the defaulters list. But all this could have been avoided had he done a few simple things.

Things to do:

i. Obtain a no-dues certificate from the recovery agent, which must be printed on the letterhead of the bank.

“Getting this isn’t difficult at all. Just make a written request for it and you will get it instantly as soon as your repayment is complete." says an official from Bank of Baroda. 

ii. Rohan could have asked the bank to remove the loan from the defaulter’s list as soon as he paid up the last outstanding EMI.

Now, that he has done this, he is eligible to apply for a loan.

*name changed to protect identity