Credit counsel centres help manage borrowings better

When 28-year-old insur-ance agent Sudhir Sharma (name changed) approached V. N. Kulkarni, a counsellor at Abhay, the credit counselling centre set up by Bank of India, he had accumulated a debt of Rs 8 lakh though he was earning barely Rs 5,000 a month. Sharma had taken two personal loans to rent and furnish an office to expand his business. Then, when new business failed to materialise, he began using his five credit cards to pay off mounting monthly bills.

Things came to a head when recovery agents began hounding him. “He was running from one place to another,” says Kulkarni, who helped set up Abhay’s first branch in Mumbai. Kulkarni helped Sharma to convince the banks to extend his repayment period and fix a manageable equated monthly instalment (EMI). The banks took six months to agree but now Sharma hopes to repay his debt in a few years.

With growing consumer-ism coupled with rising interest rates and inflation leading to greater indebtedness, credit counselling centres like Abhay and Disha (set up by ICICI Bank) are stepping in to help borrowers.

After all, as Kulkarni says: “Most of middle class India is now living on EMIs. There’s a great need for credit counselling because financial literacy levels are poor, even among the educated.”

Agrees . J. Francis, senior counsellor, Disha: “More and more people are coming to places like our centre.” Disha, which was set up by ICICI Bank last year, is in seven cities including Mumbai, Kanpur, Ahmedabad, Delhi, Ludhiana, Hyderabad and Chennai. Now, another centre has just opened in Calcutta. Abhay too is present in Mumbai, Chennai and Wardha. Both offer free counselling.

People mainly approach the centres for problems related to personal and credit card loans. In some cases, debts balloon because borrowers aren’t aware of the fine print. Many people are unaware that if they use their credit card to withdraw cash, the interest meter will start ticking immediately.

Sometimes, genuine emergencies lead to financial distress. Francis recounts how one client’s mother had a paralytic stroke. So he applied for four credit cards and used them to pay her Rs 2.5 lakh medical bill.

How can the centres help? There are no quick fix solutions. Nor do the counsellors have legal authority. “We help clients on how to approach and negotiate with banks and credit card companies,” says Francis. They help borrowers to draw up an action plan. The idea is to convince the banks that they will repay their loans but need help through relief in penal interest and charges and extension of repayment periods. Another option, says Kulkarni, is to swap high-cost debt with low-cost debt. Or if they have any assets, borrowers can try and liquidate them to repay dues.

“Sometimes, clients don’t realise they have assets they can liquidate,” says Francis. Adds Kulkarni: “Going to a credit counsellor is like going to a doctor. You have to fully explain your ailments to get the right medicine.”

Apart from visiting the centres, borrowers can call or even email them at info@di-sha.org and abhaycenter@-gmail.com.