Why do banks look for so many details to give car loans

One night I sat down to fill out the form and my blood pressure started to skyrocket. Insane, insane details had to be filled in.

BHPian Madin Mumbai recently shared this with other enthusiasts.

In July 2021, we were ready to buy a new car. The decision was made and, as we have done for the past 25 years, we began to educate ourselves about car loans. The best offer was offered by a nationalized bank, so we contacted the loan officer and he promptly sent an application form.

So far, so good.

One night I sat down to fill out the form and my blood pressure started to skyrocket. Insane, insane details had to be filled in. Along with the usual KYC and income details, the form had columns for religion, caste, children, and more.

Why does a bank need to know my religion or caste? And what will they do with the details of my children? This is a trade agreement. I borrow money and the only thing 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 categorically refused. We then broke the piggy bank and bought the car.

Have any of you come across this type of form? Is it even legal for a bank to ask for these details? What will they do if I am of a certain religion or caste? Or if I have 1 child or 16 children? Will they deny me a loan based on these details?

Here is what BHPian padmrajravi should say about it:

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

Yes, that is exactly why they need to know your caste, religion, number of children, age, number of other family members, age, medical history, and countless other details.

Modern banks’ machine learning models consider all of these details to decide whether your loan is a safe bet or not. Your loan may be pre-approved now, but whether your loan ended up being a profitable venture or not, is a critical data point and will be included in the next iteration of the training. This will impact the risk score assignment for future applicants like you.

Yes, it’s offensive, but that’s where the world has gone. If you want to get a loan without these details, go to a cooperative bank or a rural bank that has not yet adopted such processes.

Here is what Locusjag BHPien should say about it:

The loan sanctioning officer has his skin in the game. PSU bank officers take the CBI on their heels when big loans go bad. My dad, who worked at a PSU bank, had sanctioned a big business loan gone bad and guess what – the CBI investigation dragged on after he retired, they kept his pension and it almost happened to a point where he could have been imprisoned! Fortunately, the truth prevailed and my father was cleared of suspicion by a judge.

Another colleague of his had taken out a loan for a Skoda Octavia 10 years ago and the customer just drove up and got lost in the world with the car. He simply became untraceable. I had tried to search for him through my company’s HR to no avail, as he had worked in my organization when he got the car loan…So dad’s co-worker also came under the CBI scanner, since a few other of his loans had also gone bad. The assumption is always – is this employee a bad apple, did he give the bank money in collusion with fraudulent applicants?

The bank itself is in the game. Officers and managers at different levels are responsible for NPAs (non-performing assets).

I imagine that private banks will lay off their employees on the basis of NPA.

You will be surprised at the gregarious way our junta engages in fraud at the expense of unfortunate bank clerks. I know of another case where a guy got personal loans from various banks, used all that money to buy a place at a prestigious B-school overseas, then legally changed his name and flew abroad. ‘foreign.

So maybe – our banks are trying to extract as many variables as possible and maybe compare with past NPA experience to predict red flags in current loan seekers.

Here is what BHPian the rationalist should say about it:

First of all, congratulations on saving a lot of money, buying a car on loan is a loss making exercise unless you are a savvy investor who can generate returns well above the damage of loans.

I didn’t face this for the loans, but I did face it when my daughter was born. My wife and I belong to different religions (not the love of marriage!), but I’m an atheist, so I didn’t give my daughter any religion in the birth registration column at the hospital. They said you have to fill in my wife’s religion or my wife’s religion. I told them, please give it in writing and I will meet them in court. They backed off.

Our country is at least 5 decades behind in thinking and simplifying procedures. This is all due to the redundant education system I feel.

Here is what BHPian Overlander should say about it:

Being one of those “faceless, brainless” people, I can assure you that the loan granted to you will not be determined by the information you have provided. However, these details are mandated by no less than the Reserve Bank of India, which requires, through various methods and timeframes, that banks provide data on inclusiveness, lending to priority sectors, etc. If people have the time (outside of their grueling work schedules) can read the PSL regulations, changes to FEMA guidelines, the Master Circular on Minority Community Credit Facilities, to name a few. a few, where customer backgrounds are key determinants.

While I’m not at liberty to attest or vouch for the data requested by this bank on a rather simple auto loan application, each would be a customer profile feed into their processing system that a poor soul of the operations shop will have to punch, some poor guy at HQ will have to demonstrate during his next on-site RBI inspection. Retail banking is not a very easy practice, I can assure you. But I am glad that as an informed client, you have agreed to exercise your rights to privacy of information, which is the new fashion/wave in the financial world by the way.

Congratulations on buying a new car It is indeed a wonderful time in life, don’t let these insignificant details spoil or detract from it. Cheers.

Check out BHPian’s comments for more ideas and information.