How to update Asset Reconstruction Company loan in CIBIL?
Is your CIBIL score getting affected by a loan from Asset Reconstruction Company (ARC)? Basically, you defaulted on your ongoing loan, and the lender sold out your account to an asset reconstruction company. Now, you are wondering about the loan repayment strategy and the updation procedure of the ARC loan in your CIBIL report. If you are going through the same situation, then you’re in the right place.
In this article, we have discussed in detail why ARC loans appear in CIBIL reports, the latest RBI guidelines on ARCs, and most importantly, the steps to update Asset Reconstruction Company loan in CIBIL report. So, let’s begin with a basic meaning of Asset Reconstruction Companies and their role in the financial ecosystem.
What is Asset Reconstruction Company?
An Asset Reconstruction Company (ARC) is a specialized financial institution that purchases non-performing assets (NPAs) or bad loans from banks and NBFCs at a mutually agreed-upon value, and generates profit by recovering them from the borrower at the maximum possible rate.
In this way, ARCs help banks and NBFCs manage their NPAs and gradually become an essential part of the Indian financial ecosystem.
In India, all ARCs are regulated by the Reserve Bank of India under Section 3 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SRFAESI) Act, 2002. As a pioneer in this domain, India’s first ARC, Asset Reconstruction Company (India) Limited, was established in 2002 and set the standards for the rest of the market to follow.
The basic understanding of Asset Reconstruction Company will be more clear when you understand how ARCs work.
How does an asset reconstruction company work?
India’s financial sector is primarily dominated by the banking industry, including public sector banks, private banks, NBFCs, and other financial institutions. Typically, these institutions conduct their business by lending money to customers and earning profits from the interest payments.
They take various precautions to minimize risk. However, the Indian banking industry has a vast customer base, there is always a substantial risk associated with lending.
When a borrower fails to repay their obligation for consecutive months, the loan account is categorized as a Non-Performing Asset (NPA). Lending institutions suffer significant losses from such NPA loans. While lenders do have the option to take legal action against the borrower to recover the unpaid debt, it is not always economically profitable to do so.
To minimize these losses and clean up their balance sheets, lenders sell such NPA loans in bulk to another regulated entity. This is where Asset Reconstruction Companies (ARCs) come into the picture.
ARCs acquire NPA loans from mainstream banks and NBFCs at discounted rates and work to recover the maximum possible value from the borrower. In this way, ARCs generate profits from these distressed loans.
Asset Reconstruction Company loan in CIBIL:
As mentioned earlier, all Asset Reconstruction Companies (ARCs) are regulated by the RBI under the SRFAESI Act, 2002. This means that when ARCs acquire NPA loans, as per the Credit Information submission guidelines, they are obligated to report the respective loan accounts to the Credit Information Companies (CICs).
In fact, on 10 October 2024, the RBI revised the SRFAESI Act, instructing all ARCs to report credit data and repayment records to all four CICs on a fortnightly basis after acquiring NPA loans from mainstream lending institutions.
ARC loan is reported in CIBIL after transferring your existing NPA loan account:
Now, we understand that an ARC loan can be reported on your CIBIL report if your current lender sells your existing loan after it turns into an NPA (Non-Performing Asset). For example, you availed of a credit card from Bajaj Finance, but failed to make payments, causing the loan to become delinquent.
Bajaj Finance sold out this NPA loan to ARCIL (Asset Reconstruction Company India Limited). Now, as per the CIC reporting format, Bajaj Finance will stop their further credit bureau reporting, and ARCIL will continue to report in your CIBIL report until the entire due is clear.
In such a scenario, you have to pay the entire loan outstanding to the concerned ARC, and then only, you can update the payment status in your CIBIL report. The entire procedure has been explained below.
ARC loan is reported due to data-mixing error:
This is a very rare instance, where an unknown asset reconstruction company loan account can appear on your CIBIL report due to data-mixing error. This occurs, when your name, DOB, address, and identification details are similar with an unknown borrower. Due to this similarity, someone else’s ARC loan can be reported on your CIBIL report mistakenly.
On investigation with the concerned ARC, if you find the particular loan account does not belong to you, then you can remove the complete loan from your CIBIL report easily by raising a complaint to TransUnion CIBIL customer care authorities.
How to update asset reconstruction company loan in CIBIL?
• Contact with the respective ARC:
To update asset reconstruction company loan in CIBIL, first, you have to contact the respective ARC who acquired your loan your existing loan due to non-payment.
You can contact the lender (ARC) by sending an email to their customer care or visiting the nearest branch. Ask them to provide the standard loan closure amount. Try the collect the payment details in written format.
• Pay the loan outstanding and collect NOC:
Then, make the payment as per their demand. After making the payment, make sure to collect the No Dues Certificate from the lender, as it will be treated as evidence when you raise complaints in CIBIL.
• Raise an online dispute in CIBIL:
Now, it’s time to communicate with TransUnion CIBIL authorities and update the loan status in your CIBIL report.
i. Raise an online dispute through CIBIL Portal:
Visit the TransUnion CIBIL official website, and log into your myCIBIL Portal by using your CIBIL User ID and password. After reaching your CIBIL dashboard, navigate to the “Raise a Dispute” section. Follow the instructions, and access the account section dispute form.
In the dispute form, change the incorrect details with the correct ones. And finally, submit the dispute form. After successful submission, a dispute ID will be generated. Keep the dispute ID for future references.
ii. Write a complaint letter in CIBIL:
In this method, you can briefly describe your issue along with supporting evidence such as a payment receipt, No Dues Certificate, or confirmation from the lender. Visit the official TransUnion CIBIL website and navigate to the Contact Us page: https://youtu.be/GS1VGR3s9QI?si=yqo3z7OQu8V8xYiw.
A “Dispute – Account Section” form will appear. Fill in the form with your KYC details, including your name, contact information, identification details, and more. Describe your query within 300 characters and attach the relevant supporting documents. Please ensure that all attachments are in PNG, JPG, JPEG, or PDF format and are not password protected.
• Send an email to ARC and request for credit bureau updation:
Since TransUnion CIBIL does not have the authority to make changes to your CIBIL report without confirmation from the respective lender, it is important to take the following steps.
When raising an online dispute with CIBIL, simultaneously send a request to the asset reconstruction company to promptly update the loan status in your CIBIL report.
• Sent an email to CIBIL higher authorities:
If CIBIL customer care fails to resolve your query within 30 working days, or if you’re not satisfied with their response, you can escalate your grievance to higher authorities, such as the Nodal Officer or the Principal Nodal Officer. Send an email to
CIBIL Escalation Desk: [email protected]
CIBIL Nodal Officer:[email protected]
• Register a grievance under the RBI Ombudsman:
If your dispute remains unresolved, you can finally approach the RBI and register an RBI Ombudsman complaint through their CMS Portal (https://cms.rbi.org.in/) or by sending an email to [email protected] .
