Taking into consideration the economic slowdown and its consequences vis-à-vis the job market, some banks have expressed willingness to reschedule repayment of student loans and even some home loans. While that’s certainly good news, far more needs to be done to help consumers who may face difficulties in repaying loans, including personal loans and credit card debts. And that help should come in the form of independent, well-monitored, reliable and free credit counselling centres that are easily accessible and assist consumers in managing their debts better.

In fact, the government should have promoted and encouraged such credit counselling when it opened the banking sector to private and foreign banks, which aggressively marketed credit and credit cards. The consequences of such inaction can be seen in large number of complaints pertaining to illegal recovery and harassment of consumers by banks. In the last few years, a few banks have started credit counselling, but that’s not adequate. For credit counselling to be truly meaningful, it should be easily accessible, effective and should not only be independent, but also seem to be so. And should cater to the needs of different kinds and classes of consumers — the poor and the middle class, the urban and the rural.

An internal group constituted by the RBI to study credit counselling initiatives of some banks made three important points: (1) credit counselling centres faced a major constraint in that there was no credence attached to the references made by them to the banks on the ground that they had no locus standi, (2) there was need for an appropriate fire wall between a bank and the counselling centre or else the centres may well be perceived as debt collection wings of banks, and (3) there was need for appropriate bench-marked quality standards and a system of accreditation of counsellors.

The RBI concept paper on the subject incorporated these points and suggested counselling centres to be set up at the block, district, town and city levels. In fact, given the present scenario where consumers are facing retrenchment, salary cuts and similar problems affecting their repayment schedules, such counselling centres are urgently needed. Besides counselling the consumer, these centres should be empowered to negotiate with banks, financial institutions and credit card companies on behalf of consumers and work out reduced interest rates, reduction in the amount of debt owed or work out payment plans that are manageable.