FIs disallowed from granting further unsecured credit to borrowers who are 60 days past due on any credit card or unsecured credit facility extended by the FI. Other FIs will also not be allowed to grant credit limit increases, or issue new credit cards or unsecured credit facilities, to such borrowers (“60 days past due rule”).
Why is a borrower whose debt with one FI is more than 60 days past due still permitted to use existing credit lines already extended by other FIs?
A borrower is permitted to use only existing credit lines that are not more than 60 days past due. If the borrower has been duly servicing debts owed to other FIs on time, cutting off all credit lines because of a breach with one FI, may be too punitive.