RBI New Guidelines for Credit Facility Status in CIBIL
Are you worried because of some new credit facility status in your CIBIL report? Is there any term like “Post Write Off Closed”, “Account Sold”, or “Written Off and Account Sold” mentioned in your CIBIL report? As these all terms are newly introduced in the credit reporting format, that’s why most of the bank managers are not aware of them, which could lead to loan rejections.If you’re facing this situation, then it can be quite frustrating for you. However, don’t worry! In this article, we will discuss these newly introduced credit facility statuses, when they appear, what they mean, and what steps you should take in such cases. So, let’s start with a basic understanding of the credit facility status in CIBIL report.
What is the credit facility status in CIBIL Report?
A Credit Facility Status in CIBIL report refers to the current state of a borrower’s credit line, indicating whether it’s in a good standing or in default. Typically, each loan account listed in your CIBIL report has its own credit facility status, which reflects how well you are managing that particular credit line with the specified lender.
Since the credit facility status indicates the current state of a loan account, it naturally affects your credit score. For a regular account, the credit facility status is typically reported as “blank,” with no bad impact on the score. However, if an individual defaults on loan repayment, the status may be reported as “Written-off/Suit Filed/Wilful Default/Settled,” which has a severe negative impact on the CIBIL score.
But here is a twist for every borrower. Recently, the Reserve Bank of India (RBI) introduced some new credit facility terminologies in their uniform credit reporting format, which allow lenders to describe loan accounts more precisely. These include:
- Post Write-Off Closed
- Account Sold
- Written Off and Account Sold
- Account Purchased
- Account Purchased and Written-off
- Account Purchased and Settled
- Account Purchased and Restructured
- Restructured and Closed
- Auctioned and Settled
- Repossessed and Settled
- Guarantee Invoked
Let’s explore each of these terms in detail.
1. Post Write-Off Closed:
To understand the “Post Write-Off Closed” status in a CIBIL report, first you need to understand the concept of a Write-Off. When a borrower fails to repay a loan for more than six months, lenders classify the loan as a Non-Performing Asset (NPA) and remove it from their balance sheet by marking it as “Written-Off” in the borrower’s credit report. This indicates that the borrower has defaulted on the loan, and obviously it has a negative impact on credit score.
However later, if the lender recovers the entire outstanding loan, they used to remove the “Written-off” status entirely and update the loan status as “Blank.” But according to new RBI guidelines and the updated credit information reporting format, the lender must now update the loan status to “Post Write-Off Settled” instead of clearing the status completely.
Most lenders have already implemented this new reporting format. As a result, if you had a previously written-off loan that you later repaid in full, its status in your CIBIL report may now appear as “Post Write-Off Closed“, indicating the standard closure of your loan account with zero outstanding dues.
Rectification:
Since, the changes are made as per the RBI’s instruction, that’s why you can’t remove the particular “Post Write Off Closed” status from your CIBIL report. However, in this case, be assured that the written-off amount should be reflected as zero. If it’s not, then contact the lender and rectify them immediately.
2. Account Sold
Another credit facility status in CIBIL, “Account Sold” is reported on a loan account when thelender sells the loan to another regulated entity. This typically happens when a borrower consistently fails to pay his loan EMIs, and the lender sells the non-performing asset (NPA) to another regulated entity or an asset reconstruction company.
Previously, after selling the loan account, the primary lender would stop reporting by suppressing the entire loan account from the borrower’s credit report, whereas the new lender would then take over and continue further reporting.
But nowadays, as per the new credit information reporting format, both lenders have to report the same credit line to the borrower’s credit report, where the primary lender must report the account as “Account Sold”.
Rectification:
If you find that your loan account is reported as “Account Sold” in your CIBIL report, then it also can’t be rectified. But be assured, the primary lender updates the loan account with zero outstanding dues.
3. Written Off and Account Sold
The “Written-off and Account Sold” status is similar to the “Account Sold” status, with the key difference: the original/primary lender sells the NPA (Non-Performing Asset) loan to another regulated entity after it has been written off.
Once the loan is sold, the primary lender updates the account status to “Written-off and Account Sold” in the borrower’s credit report.
It’s important to remember that having a “Written-off and Account Sold” as credit facility status in CIBIL report does not mean you are a loan defaulter. However, this status does impact your CIBIL score negatively.
Rectification:
Just like “Account Sold”, you cannot remove “Written-off and Account Sold” from your CIBIL report. However, in this case, the loan account should be updated as closed with zero outstanding balance, and the written-off amount should also be zero.
If the lender has not updated the loan record correctly, you should immediately contact both the lender and the concerned credit bureau to rectify the errors.
4. Account Purchased
When an individual’s NPA loan is sold to another regulated entity, the original lender reports the loan status as ‘Account Sold.’ Similarly, the new lender (who purchases the loan) reports the status as ‘Account Purchased’ in the borrower’s credit report.
For example, suppose you have a credit card from SBI, and due to non-payment, it becomes an NPA. Later, SBI Card sells the loan account to an asset reconstruction company, such as EARCPL (Encore Asset Reconstruction Company Private Limited).
In this case, SBI Card will update the credit card status as ‘Written-off and Account Sold,’ while EARCPL will report the same credit account with the status ‘Account Purchased.’
Rectification:
The ‘Account Purchased’ status itself is not considered negative. However, you must repay the outstanding loan amount to the new lender. Once the payment is made, ensure that the loan closure status is updated in your CIBIL report promptly to maintain a healthy credit score.
5. Account Purchased and Written-off
In the account sold-purchase cases, when the lender buys an NPA (Non-Performing Asset) loan after it has been written off, the loan status is reported as “Account Purchased and Written-Off” in the borrower’s CIBIL report.
This status indicates that the loan remains unpaid, and it can severely impact on CIBIL score. Here, the respective lender will remove the particular loan status from the borrower’s CIBIL report, once they get the due payment.
Rectification:
Contact with the lender and pay the loan outstanding immediately. After making the payment, collect the No Dues Certificate and remove the negative status from your CIBIL report accordingly.
6. Account Purchased and Settled
In the case of account purchase, if the borrower closed the loan by paying less than the actual outstanding amount, the lender reports the account status as “Account Purchased and Settled” in the borrower’s CIBIL report. Since the borrower was unable to pay the full due amount, that’s why, this is considered a negative remark and impacts the CIBIL score severely.
Rectification:
Here, you can remove the particular status from your CIBIL report, but here you have to pay the remaining outstanding balance to the lender. After making payment, raise your concern with CIBIL customer care authorities to eliminate the negative status from CIBIL report.
7. Account Purchased and Restructured
In case of Account Purchased, if the customer chose the loan restructure option, instead of closing the loan, then the loan account will be reported as “Account Purchased and Restructured” in his CIBIL report.
Rectification:
This is not considered a negative remark. However, it is important to pay the loan EMIs on time throughout the loan tenure, according to the new lender’s policy.
8. Restructured and Closed
When a borrower restructures his loan account and repays it in full by the end of the loan tenure, the lender may report the credit facility status in CIBIL report as ‘Restructured and Closed’.
Rectification:
As it is not considered as a negative remark, that’s why, you do not need to worry about it.
9. Auctioned and Settled
When you avail of a secured loan (such as gold loan, vehicle loan, and so on) and fail to serve the loan interest for a long time, in such cases, the lender tries to recover the unpaid debt by selling the collateral in an auction.
Now, if the lender makes losses and the recovered amount is less than the loan outstanding, then they will close the loan account and update the loan status as “Auctioned and Settled” in your CIBIL report.
Rectification:
Like settled status, this is also considered as negative and impacts badly on the CIBIL score. To remove the credit facility status in CIBIL, you have to pay the remaining outstanding balance to the lender.