Why do banks look for so many details about car loans?

One night I sat down to fill out the form and my blood pressure started to rise. Crazy and absurd details have to be filled.

BHPian MadinMumbai recently shared it with other enthusiasts.

In July 2021 we were ready to buy a new car. The decision was made and, as we have been doing for the last 25 years, we started asking for car loans. The best offer was offered by a nationalized bank, so we contacted the loan officer and he immediately sent us an application.

So far so good.

One night I sat down to fill out the form and my blood pressure started to rise. It was necessary to fill in irrational and irrational data. In addition to the usual KYC and income items, the form had columns about religion, caste, children, etc.

Why does a bank need to know my religion or caste? And what will they do with the details for my kids? This is a business deal. I borrow money and all they need to know is my ability to repay the loan. But clearly the details had to be filled in according to the loan officer. I flatly refused. Then we broke the piggy bank and bought the car.

Have any of you encountered this form? Is it legal for a bank to request this information? What will they do if I am from a particular religion or caste? Or if I have 1 child or 16 children? Will a loan base deny me these details?

Here’s what BHPian padmrajravi had to say on the subject:

I borrow money and all they need to know is my ability to repay the loan.

Yes, that’s why they need to know your caste, religion, number of children, age, number of other family members, age, medical history and endless other details.

The machine learning models in modern banks look at all these details to decide if your loan is a safe bet or not. Your loan may have been pre-approved now, but whether your loan turned out to be a profitable business or not is a crucial data point and will be included in the next iteration. This will affect the assignment of risk ratings to prospective applicants like you.

Yes, it’s offensive, but that’s where the world is. If you want to get a loan without such details, contact a cooperative bank or an agricultural bank that has not yet adopted such procedures.

Here’s what BHPian locusjag had to say on the subject:

The lending officer has skin in the game. PSU bank executives take the CBI to extremes when big loans go bad. My dad, who worked at a PSU bank, had approved a big commercial loan that went bad and guess what – the CBI investigation went on after he retired, they kept his pension and he almost got to a point where he could go to jail! Fortunately, the truth prevailed and my father was cleared of any suspicion by a judge.

Another colleague had approved a loan for a Skoda Octavia 10 years ago and the customer just got up and disappeared into the world with the car. It just became unsearchable. I tried unsuccessfully to look for him through my company HR, as he was working for my agency when he got the car loan … So my dad’s colleague got into the CBI scanner, as some of his other loans had similarly broken down. The case is always – this clerk is a bad apple, he gave the bank money in collusion with fraudulent applicants?

The bank itself has skin in the game. Officers and leaders at various levels are accountable to NPAs (non performing assets).

I imagine private banks will lay off their employees under the NPA.

You will be amazed at the unusual ways in which our junta indulges in fraud, to the detriment of unfortunate bank employees. I know of another case where a guy took out personal loans from various banks, used all that money to buy a place at a famous B School abroad and then legally changed his name and flew abroad.

So maybe – our banks are trying to bring in as many variables as possible and possibly compare to previous NPA experience to provide red flags to current loan applicants.

Here’s what BHPian The Rationalist had to say on the subject:

First of all congratulations on saving a lot of money, buying a car on loan is a loss-making exercise, unless you are a smart investor who can generate returns that are far greater than the losses from loans.

I have not faced it for loans, but I faced it when my daughter was born. My wife and I belong to different religions (not a love affair!), But I’m an atheist, so I did not give my daughter any religion in the hospital birth record column. They said you should fill either my religion or your wife’s. I told them, please give it in writing and I will meet them in court. They retreated.

Our country is at least 5 decades behind in a process of thinking and simplification of procedures. It’s all because of the redundant education system I feel.

Here’s what BHPian Overlander had to say on the subject:

Being one of these “faceless, brainless” people, I can assure you that the loan you are given will not be determined by the information you have provided. However, such details are required by the Reserve Bank of India, which requires banks, through various methods and timetables, to provide data on integration, priority lending, etc. If people have time (in addition to their exhausting work schedule) they can read the PSL regulations, the amendments to the FEMA guidelines, the main credit facility circular in minority communities, to name a few, where the history of Customers are key determinants.

Although I’m not free to certify or guarantee the data this Bank requests for a car loan application, each would be a customer profile feed into the processing system that would have to make some poor soul in the Operations shop. come in, someone poor at the headquarters should show up at the next RBI on-site inspection. Retail banking is not a very easy practice, I can assure you. But I’m glad that as an informed customer, you have agreed to exercise your rights to information confidentiality, which by the way is the new fashion / wave in the financial world.

Congratulations on buying a new car It’s really a wonderful moment in someone’s life, do not let these trivial details affect or affect it. Cheers.

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