Given that the education segment saw bad loans of over 7.54 per cent (for loans below Rs.4 lakh) as on March 31, 2014, a top Reserve Bank of India official said borrowers are dearly oblivious of the consequences of non-repayment on their credit track record. 

Usually, future loan applications of borrowers, who don't re-pay their loans, are rejected by banks as they cross-check their loan repayment history with the Credit Information Companies (CICs). "In terms of developing a credit culture amongst the future generation, the most important financial product is the education loan. Can the Credit Information Companies and banks look at a 'catch 'em young' policy for credit counseling and developing a credit culture? Can the CICs provide a periodic non-chargeable credit report to the student loanees?" RBI Deputy Governor R Gandhi said at a 

credit information conference. CICs function as a repository of credit information — both cur-rent and historical data on exist-ing and potential borrowers. These institutions maintain database of credit information —both positive and negative — on the borrower which can be accessed by the intending lending institution. 

Gandhi elaborated that "It is vital for consumers to under-stand the importance of maintaining financial discipline and paying their loans' equated monthly installments (EMIs) and credit card dues regularly. CICs have an important role to play in this regard. 

"Increased awareness by individuals, small and medium enterprises

and micro-finance institution borrowers on consequences of default in re-payment of loans leading to lowering of their credit scores and possibly denial of new loans would lead to better credit discipline and also prevent deterioration in the asset quality of banks." 

Pointing out that of late the RBI has been receiving many disputes from consumers related to their credit information reports, the Deputy Governor urged CICs to invest in processes and technologies for speedier resolution of customer disputes. 

"Another aspect about these disputes actually relates to the banks. These disputes are related to non updating of data and/ or incorrect submission of data by member banks. "In many of these cases, the CIC has not been able to receive timely response from the banks even after following up regularly. This causes significant delay in redressing the customers' disputes," he said. 

Therefore, credit institutions should put in place a proper system for consumer complaint redressal at their end as well.