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Old 4th August 2009, 16:07   #16
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It is quite common. Best way it to close the card.

And it is VERY difficult to pinpoint a particular reason for limit change for a particular customer.

Usually it is based on automatic modals for most customers and nobody in bank would know or trigger this action manually. It just does not make business sense to do that.

Look at it this way:
  1. You have 1 lakh limit on particular card
  2. You spend 10k per month on average
  3. You always pay on time
Your Bank + VISA + Merchant's Bank earn approx 3k from you card as transaction fees.

From that your bank would get 1k.

And it would spend 20 -30 Rs per month in sending you statements + 600 Rs it spent while getting you as a customer (DSA charges + courier + etc).
It would spend 20 Rs per month on buying your credit report from CIBIL and monitoring it electronically. It would spend 500 Rs every year on rewards program.

So, it hardly makes money from good customers. That is if credit card is the only relationship with customer.

That does not leave it with funds to have someone spend 2 - 3 hours every month to manually look at a customer's spending pattern and profitability and risk.

To earn, 4 - 500 Rs from a customer every year, Bank can only "risk" a limited amount of money.

So all this is driven by data.

If Bank's risk system sees that:
  1. Customers living in Pin code xxxxxx
  2. Having Total credit (ALL Credit card limits + Outstanding on personal loans + edu loans) X times of net salary
  3. Certain age group
  4. Does not have salary accounts with bank
have more than Y% chances of defaulting, it will "flag" ALL other customers that satisfy same criteria.

Now for each customer in this risk group system looks at:
  1. Total "Profitability" for account
  2. Total "Risk"
It than matches Risk with Profitability by bringing down the Risk. Or based on your profile you will see larger number of targeted "cross-selling" calls to sell you other products to increase Profitability.

For interest paying customers, increased Profitability would mean increasing Interest rate.

Bringing down risk means cutting credit limits or closing the credit line completely.
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Old 4th August 2009, 16:13   #17
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There's again the issue of liquidity in the market and with the bank particularly, if the said bank has had a lot of delinquencies it has lost money because the bank has paid the merchant who has sold the card holder goods and service.
Agreed and accept this


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When banks plan such things, they have millions of customers, they will see a trend and do their own analysis, if they see that males in the age group of 18 to 30 have the maximum delinquencies they will curb credit supply to that age group in these times.
Oh! I so wish I was a girl only for this!!!!

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9 months is what may have been decided as a gap where the situation improves, till then they have curbed credit to almost over 90% to an age group where they have facts which give rise to fears of delinquencies. Again there will be a sr bank manager who will evaluate credit and the bank's exposure, if delinquencies increase, its his job on the line.
Agree. But Why can't they mention it in writing. If they can record calls to them for quality and monitoring purposes, why can we have a reference for our records?

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Again, this is also sector specific, say for eg a retired businessman with respectable deposits with the issuing bank will not have any credit limit reductions. Airline, IT & BPO sector employees will definitely have a tough time extending credit as compared to a say bank employee, government employee.
I know. When I got this card, I was working for an American Chemical Giant. Now I am with a Large relocation company with its head quarters in Hong Kong. Ever seen the "ferrari" red trucks on Mumbai streets?

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It's not what's happened to you, but its a step taken by the bank to limit its exposure to a recessionary period.
True. My email to them clearly mentions this fact.
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Old 4th August 2009, 16:26   #18
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@NetfreakBombay: I was waiting for your inputs on this. In my case, its is clearly the PINCODE.

My simple question is, what were the banks doing when it offered loans/CC's and other benefits to people without checking their records? I belive a similar issue is faced by some people living in Lokhandwala, Jogeshwari area?

ICICI, for records has stopped accepting any online applications that reflect Mira Road pincode! What were they doing earlier? why do they still maintain a Branch in Mira Road and try to add ATM at every possible location here? Simple answer - Money! A lot of youngsters, a lot of money.

If you remember, I had a hard time getting a personal loan in December last year because of my Pincode issue. I was told to go to the branch personally. I did. No one bothered to entertain me (After visiting various ICICI brances). DSA's suggested me to submit a different address proof (Which i refused). Doesn't this in itself increase the possible crime rate in the city? When Bank's agents are suggesting to submit fasle documents?

If my neighbour is a defaulter, it necessarily doesn't mean, I am too. We bought a house in Mira Road when we relocated back to the city purely on affordability basis. You know an Honest Govt. Officer can no longer afford a house in Mumbai city but outskirts only.

I love this area. I find it better than all other areas within this city.

However, this post of mine is totally OT (Or related to topic as well)

PS: Forgot to mention one thing. I had last swiped this card for 68K and paid in full. What was the bank doing then? Paisa kamake laat maar di!!

PS2: I am still hounded by Barclays, Max New york, TATA Aig, HSBC DSA's for all possible offers. Guess I am still hot in the Financial sector

Last edited by amtak : 4th August 2009 at 16:28.
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Old 4th August 2009, 17:04   #19
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Default Mine is Opposite

Mine is opposite. I always receive mail from banks to increase my credit limit on my cards. To my surprise one bank increased my credit limit from 1.85 lakh to 3.65 lakh..

Other bank increased from 1.10 lakh to 1.80 lakh. I use credit card judiciously and pay bill all on time.

I am going to write to customer care. Please do not increase my credit limit anymore.
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Old 4th August 2009, 17:13   #20
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Originally Posted by anujmishra View Post
Mine is opposite. I always receive mail from banks to increase my credit limit on my cards. To my surprise one bank increased my credit limit from 1.85 lakh to 3.65 lakh..

Other bank increased from 1.10 lakh to 1.80 lakh. I use credit card judiciously and pay bill all on time.

I am going to write to customer care. Please do not increase my credit limit anymore.
Good to hear that Anuj. In these times of recession, its a good news. I am sure it has something to do with the Organization you work for and the location where you are based. I haven't heard any good news from the Mumbai folks!
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Old 4th August 2009, 17:19   #21
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just curious, isn't such profiling discriminatory? Is it illegal?
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Old 4th August 2009, 17:22   #22
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Originally Posted by greenhorn View Post
just curious, isn't such profiling discriminatory? Is it illegal?
Not too sure on this. May be NetFreak can give a better answer. But It should certainly be made Illegal. How can you black list an entire area?

Just to put things in perspective, My area is in terms of growth, one of the fastest growing suburbs in Mumbai. However, we face issues like this.
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Old 4th August 2009, 17:34   #23
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Originally Posted by greenhorn View Post
just curious, isn't such profiling discriminatory? Is it illegal?
When you sign the application form, its clearly mentioned "credit at the sole discretion of the bank" areas which have a high rate of defaulters (willful defaulters) and where the bank cannot recover the funds is classified as a negative area. Examples (only hypothetical) are Mira Road, Dharavi, Kurla, Bail Bazaar area, Cheetah Camp, Antop Hill etc (all in Mumbai). Again, this is based on experiences in the past where collectors have been roughed up and threatened.

If you live in an area such as Churchgate/Colaba/Cuffe Parade/Breach Candy etc the ability of the card holder residing in these areas have shown that they can pay back and wilful defaults are very negligible.

No one is going to lend where they cannot recover from.

Again, discrimination happens when a single individual or a common community is singled out for denial of opportunity.

How is the discrimination theory valid for reduction in credit limits ? Its a commercial endeavour and the bank has all right to reduce credit limit based on residential proof evidenced by pin codes, areas etc.

The bank will once again make a sweeping policy move so that all people meeting credit criteria have reduced credit limits, without even looking at race/religion etc.

The reduction on credit limits has happened to encompass all and sundry having cards with limits depending upon a certain criteria.

Anyways, the availability of ready and huge credit in the US market lead to a lot of banks going belly up.

OT: Even if your card is lost, the bank will loose money despite you telling them that it was lost, in the interim if there are any charges on the card, the bank will reverse it but at the end pay the funds to the merchant and continue its investigations to catch the culprits of card fraud/theft.

So to say, before August 1 2009, if you found a card on the road with a 4 lakh credit limit, you could have had a party till the bill was received by the card owner. . (no offence meant to any one).

Last edited by mmmjgm : 4th August 2009 at 17:38.
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Old 4th August 2009, 17:52   #24
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Originally Posted by greenhorn View Post
just curious, isn't such profiling discriminatory? Is it illegal?
Thats why you would never be "informed" of actual criteria.

And this is "explosive".

In US, most poor areas would have large population of black people. So Risk software has to take special care. It should not be possible to prove in court that discrimination is based on Race/Religion or any other "protected" attribute. Software has to log and document each decision making step to prove its based on pincode and not on race. This is audited regularly.


In UK, it has to be documented that discrimination is not based on Age.

Similarly in India, certain localities are closely tied to communities. E.g. traditionally Malad-W was known to be dominated by Gujrati community.

Now it would a big PR scandal if a Media house spins Pin-Code based profiling to say

"XYZ Bank" is exploiting ABC community by charging high interest rates.

In fact high rates could be due to higher defaults in past from that Pin-Code.
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Old 4th August 2009, 19:02   #25
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Originally Posted by NetfreakBombay View Post

In US, most poor areas would have large population of black people. So Risk software has to take special care. It should not be possible to prove in court that discrimination is based on Race/Religion or any other "protected" attribute. Software has to log and document each decision making step to prove its based on pincode and not on race. This is audited regularly.
I dint quite understand this. Are you implying that creditors in US decline credit based on pincode? And that such pincode profiling is actually ok with the US judiciary?
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Old 4th August 2009, 21:52   #26
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mmmjgm, can't the bank change this and do a periodic review of the areas as well? I am sure its possible. Once, what was a den for bar girls/bars and all anti social activities is now a fast growing (sort of) Mumbai suburb. Its the same banks who are offering various incentives and loan schemes to buy their home loan and other sort of benefits to buy a home here. I find it discriminatory in this sense. First, the bank is willing to give a home loan, but no credit card? Hadn't the same bank profiled me (and thousands like me) when we applied for a home loan (Thankfully I don't have any). Banks have my records for the past 5 years (ever since I started earning), never defaulted a penny. Just because my building falls under a specific 6 digit number, why should my life be made miserable?

I feel its time for the RBI/CIBIL to step in and wack these banks who are mis-using their reports. I am a very satisfied ICICI customer. Have a salary account with them ever since I started getting a hea;thy salary. Still, I am told - Oh! you live in mira road? Why don't you finish give me that token that you collected from the security and walk outside the branch. We got nothing for you fella!

On the other hand, when they say a healthy bank account, sir! why don't you invest in our SIP/Gold plan. What happens to their "filtering" then?
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Old 4th August 2009, 21:55   #27
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Originally Posted by ak916 View Post
I dint quite understand this. Are you implying that creditors in US decline credit based on pincode? And that such pincode profiling is actually ok with the US judiciary?
In India, it happens I wish I was I could improve the system somehow. USA, no idea.
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Old 4th August 2009, 22:48   #28
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Originally Posted by ak916 View Post
pincode profiling is actually ok with the US judiciary?
It is not only OK, it is governed by specific law. This law is federal and applies to all states.

Basically banks are free to profile based on locality. But they have to meet some goals in lending to poor localities to expediat M&A approvals and new branch approvals.

Risk/Approval systems are audited by FED for CRA compliance every year.

Details :

US CODE: Title 12,2902. Definitions



Quote:
Originally Posted by amtak View Post
I feel its time for the RBI/CIBIL to step in and wack these banks who are mis-using their reports. I am a very satisfied ICICI customer. Have a salary account with them ever since I started getting a hea;thy salary. Still, I am told - Oh! you live in mira road? Why don't you finish give me that token that you collected from the security and walk outside the branch. We got nothing for you fella!
That is strange.

Usually a salary account customer would not receive such treatment. Bank has rights to deduct loan / card payments directly from salary accounts in case of defaults.
So salary accounts are preferred for loans since banks have Income details of customer and usually have deposits. So other factors become less important.


Best case here would be a Govt bank other than SBI.

In such banks, loan processing is still not centralized and branch manager has lot of say in loans. There, such factors (pincode, age,employer) are not that important.

Last edited by NetfreakBombay : 4th August 2009 at 23:04.
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Old 5th August 2009, 14:12   #29
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Originally Posted by amtak View Post
mmmjgm, can't the bank change this and do a periodic review of the areas

I feel its time for the RBI/CIBIL to step in and wack these banks who are mis-using their reports. I am a very satisfied ICICI customer. Have a salary account with them ever since I started getting a hea;thy salary

On the other hand, when they say a healthy bank account, sir! why don't you invest in our SIP/Gold plan. What happens to their "filtering" then?
Well, if you have a population of say 10 million in an area and out of which you have one million customers and of those one million, you are chasing delinquencies of over 2 lakh customers with an average default of 20k each how does that sound, vs a default of say 0.7-0.1% of the customer base in a south Bombay area ?

Again, even if you have, you have collectors saying they cannot collect in these areas as their collection personnel are roughed up and taken to the cops, the cops in turn call up the collection agency owner and say "next time you harass this person, we will lock up the collector"

Collection agency is then straddled by a law suit from its employees in the labour court.

These are reported facts.Can't help any one there. After all a bank is supposed to first protect its assets.

The above won't happen very often, but the bank senior management will pull up any manager extending credit to people in negative areas.

Again this present day situation is more to do with an age group who is in a sensitive situation vis a vis job/career demographics. Sr management is far less likely to be made redundant today as against middle management.

Forget that, in a company I used to work earlier banks refused to lend, period, despite how much money you had, how much deposits you had etc. They refused to lend to employees of this co because it was on a negative networth growth path.

FYI - as of today this company has wiped out its networth.

The bank once again will protect its assets and not endanger it.

As with reference to SIP/Investment plan, that's totally unrelated to credit cards/personal loans. The department is seperate and has nothing to do with the credit card department on an operational level, why ? SIPs are governed by SEBI/RBI/Public Deposits/NBFC Act etc, they CANNOT afford to secure a credit card loan/advance against a SIP of a customer.

Healthy bank account means something in the decent region of a million plus in both FDs/other bank deposits.

Yes, you can ask for a prepaid card/credit card against a Fixed deposit.

Cheers
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Old 5th August 2009, 16:38   #30
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Slightly off topic. But recently my credit card application was rejected citing bad credit history. I am worried. I have only taken car loan which I paid on time. I have missed payment of my card 2-3 times in years (by a few days max and always pay full dues) . I am scared whether it would affect my housing loan eligibility at a later point of time. How do I rectify this? They still havent reduced my credit limit though which is strange. I thought they would do that first before tagging me 'bad guy' !
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