Believe it, it is not a concocted story. It is the real story of a smart bank customer, who used to withdraw all the balances from her bank account leaving behind a big Zero Balance in the account. She used to withdraw the balance only after application of quarterly or half yearly interest so that nothing is left behind in the account. One such customer asked me in Quora Forum if she could close this Zero Balance account without visiting the Bank Branch. Legally speaking anybody can neither open nor close the bank account without visiting the branch because while opening the account, the customer has to enter into a contract under the Indian Contract Act and while closing the bank account the said contract has to be canceled in the immediate presence of the customer and the banker. To make it more clear, let us suppose that customer sends an email or postal request to close the bank account and by the time it reaches the banker, the customer dies or gets incapacitated due to injury or other medical conditions. In such a scenario, the customers’ instructions become inoperative.
How Zero Balance Accounts can Damage Credit History:
The Banks levy “Minimum Balance Charges” on a quarterly basis and such Zero Balance accounts are no exceptions. The Banker went on applying the zero balance charges to the bank account of the smart customer, whose story will make us more smarter. The bank charged, applied by the Bank, piled up to a few thousand rupees and the bank started applying interest on the debit balance, at a rate as applicable to clean advances, recoverable from the customer till the customer closes the bank account by visiting the bank branch. The ignorant customer did not bother to reply to bank’s SMSes, Emails and finally a registered notice.
At this junction, the bank issued a legal notice to the customer for recovery of its dues from the customer and to add insult to the injury, the bank debited the legal charges also to the customers’ account. It is pertinent to mention here that the customer while opening the bank account, had signed the “Account Opening Form” of the bank which included the “Terms and Conditions” and rules governing the Saving Bank account and the Bank was legally right in levying the charges, interest. On receipt of the legal notice, the customer visited the bank branch and narrated her point of view. The bank advised the customer to give a request in writing to close the account and “write off all the Charges and Interest” levied in the account.
Lo ! the problem starts. The smart bank accepted the request of the customer and not only waived off all the charges, interest and legal expenses but also closed the bank account with a debit balance. The customer heaved a sigh of relief at the first instance.
The very next month, the customer visited her present bankers with a request for Personal Loan and the Bank drew her CIBIL Credit Score. The CIBIL Report included one account with “Written Off Status“ and the customer’s Personal Credit Score stood reduced to mere 680 whereas the prudent bankers do not sanction any fresh loan to customers with Credit Score less than 750 and in whose case there is delinquency to suggest that the customer did not pay the dues to his or her previous lenders and the lending institutions had to write off the loans as bad loan.
Now, I think, it must be clear to the audiences that Zero Balance Accounts can Damage your Credit Reputation.
Now you will be wondering as to what happened to the above customer, who had never defaulted in repaying her loan installments. She was referred to one of the leading CIBIL Consultants in northern India by one of her trusted friends. The CIBIL Consultant analyzed the CIBIL Report, found the name of the lending banker, who reported the “Written Off” account and asked the customer to clear the dues after which the banker agreed to update the status in CIBIL.
Word of Caution: Similar is the situation with thousand of Credit Cards forcibly issued by the modern bankers like HDFC Bank, ICICI Bank, Yes Bank, Axis Bank and even SBI to its gullible customers, who do not know that even if they do not use the credit cards they are charged annual maintenance charges along with exorbitant rate of interest on unpaid dues. I remember 4-5 cases where the piled up charges and interest increased to tens of thousands which damage the credit reputation of the unaware customers. The conditions get aggravated when such lending institution go into merger, liquidation or close their operations as in the case of HSBC and it becomes difficult to negotiate with such closed, merged lending institutions as they do not upkeep their records whereas the CIBIL Credit reports haunt the customers for decades.
Still, have any questions? Do you have bad CIBIL report? Has your Bank rejected your loan? Are you finding it difficult to get strangers’ accounts removed from your Credit Report? Has your Bank damaged your reputation by reporting the loans as “Settled” or “Written Off”? Consult Ashok Goyal for long lasting solutions to your bad CIBIL reports.