The Hindu Business Line : <I>Credit counselling for the urban spendthrift </I>

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Credit counselling for the urban spendthrift

Elina Mohanty

DEBT TRAP

The credit-counselling centre is a non-profit organisation and Bank of India sponsored funding through a Trust known as `Abhay'.

Mumbai April 12 He works in a city-based company with an annual income of around Rs 9 lakh. All was normal for 40-year-old Anurag (name changed on request) till he chose to latch on to the maddening consumerism of Mumbai. He used multiple credit cards to buy consumer goods to live a lavish life and accumulated a Rs 98-lakh debt. When he realised the cost of his expensive lifestyle and wanted to repay the debt, he didn't have any guidance.

Anurag is not the only case. There are several men in urban cities who use multiple credit cards to buy goods and run into severe debt. "In rural areas, there are limited resources for lending, while in cities people get access to multiple borrowing, often referred to by bankers as the `urban debt trap'," said Mr M. Krishnamoorthy, Assistant General Manager, Bank of India.

Anurag approached Bank of India's credit counselling centre at Dadar. It is the first of its kind in the country, where retired bank officials counsel people on credit-related issues.

The credit-counselling centre is a non-profit organisation and is the brainchild of Bank of India's Chairman and Managing Director, Mr M. Balachandran. Bank of India has sponsored funding for it through a Trust known as `Abhay'. The centre was set up for the common people who cannot engage expensive consultants and financial advisors.

The centre helped Anurag prepare an income expenditure statement, and draw up a plan for minimum investment in his daily life. The counsellors also appealed to the banks, which had issued him credit cards, to swap the high cost borrowings for low cost debt, which brought down the interest rates charged on the funds from an average of 36 per cent to 18 per cent, in some cases.

And now Anurag knows how to repay his debt, and he is repaying.

Free advice

Credit counselling is provided free of charge at centres in Mumbai and Chennai.

Most of the people who come for counselling are men but in one case, a woman approached the centre after losing her credit card.

"The lady's card was lost and misused, and her account was debited. She wanted to talk to the bank officials but she was only guided to the call centres," Mr Krishnamoorthy said. In some cases, there were reports of harassment of customers and their family by recovery agents.

Money message

"People, who cannot visit the centres can write to us about their credit related problems and we will reply, " he said.

But what is the way forward? "It is very important to sensitise the present generation about "over-spending".

We are thinking of approaching schools and colleges to create awareness among the students on over-borrowing. Our message will solely be this — don't borrow beyond your means," said Mr Krishnamoorthy. The centre is also planning to contact NGOs to make the common people aware of financial planning.

Bank of India credit counselling centre has around 130 clients in Mumbai.

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