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Monday, July 16, 2018

Public Credit Registry: Credit information database to lower interest costs for honest borrowers

Currently, there are four credit bureaus in India — Credit Information Bureau (India) Ltd (CIBIL), Equifax, Experian, and CRIF Highmark. These bureaus provide credit scores and allied reports and services. A Public Credit Registry will complement private credit bureaus by certifying details of collateral.

By: ENS Economic Bureau | New Delhi | Published: August 8, 2017 1:34:39 am
Public Credit Registry, Credit, RBI, credit information, credit information database, PCR, CRILC, The RBI will soon set up a high-level task force that will suggest a road map for PCR for India.

After setting up the Central Repository of Information on Large Credits (CRILC), the central bank now plans to create a Public Credit Registry (PCR) which will capture the entire database of credit information that is accessible to all stakeholders. While CRILC maintains database of loans of over Rs 5 crore, PCR is expected to be more broad-based in its scope and capture credit data on all kinds of loans. A PCR will complement the private credit bureaus — four bureaus already exist in India — by certifying details of collateral. The Reserve Bank of India (RBI) would soon set up a high-level task force that will suggest, among others, a road map for developing a transparent, comprehensive and near-real-time PCR for India. Such a registry would help “good borrowers” in securing credit at lowers costs and also improve access of credit to small and medium enterprises.

Apart from the credit information bureaus and CRILC, the Central government has also set up the Central Registry of Securitisation Asset Reconstruction and Security Interest (Cersai) to maintain database of properties which have been mortgaged to lenders. Currently, there are four credit bureaus in India — Credit Information Bureau (India) Limited (CIBIL), Equifax, Experian, and CRIF Highmark. These bureaus provide credit scores and allied reports and services. As of now, their analysis reports are used for issuing credit cards and for taking decisions mainly on retail loans. The bureaus are regulated by the RBI under the Credit Information Companies (Regulation) Act, 2005.
Separately, the RBI has set up CRILC in FY15 to improve assessment of credit risk by the banks, early detection of non-performing assets (NPAs), and to improve recovery of loans. CRILC was set up in order to collect, store and disseminate information on large credits of banks and non-banking financial companies. CRILC collects information at one place and member banks can have access to this information.

“It (CRILC) covers around 60 per cent of the loan portfolio and around 80 per cent of the non-performing loans of scheduled commercial banks. The reporting is done on a quarterly basis but the slippages are required to be reported in another format on as-and-when basis… However, CRILC captures only limited detail about the borrowers such as the industry to which they belong and their external and internal ratings. The pooled information under CRILC is shared with the reporting banks but is not shared with the credit bureaus, larger lender community, or researchers,” RBI deputy governor Viral Acharya said on July 6.

With private credit bureaus and CRILC already in place, setting up of PCR will effectively complete the circle of credit information collection and dissemination. Typically, a PCR is set up by the central bank and reporting of loan details to the Registry by lenders and/or borrowers is mandated by law. A survey conducted by the World Bank reported that as of 2012, out of 195 countries that were surveyed, 87 were having PCRs, as per the RBI.
“A central repository, which, for instance, captures and certifies the details of collaterals, can enable the writing of contracts that prevent over-pledging of collateral by a borrower. In absence of the repository, the lender may not trust its first right on the collateral and either charge a high cost on the loan or ask for more collateral than necessary to prevent being diluted by other lenders,” Acharya had said.

The Centre has set up another registry to help banks and housing finance companies to prevent multiple financing against the same property. The Central government-owned Cersai maintains details of properties provided as collateral to banks and financial institutions for availing of loans. The Cersai portal provides facility to file security interest in immovable properties created through all types of mortgages and in units under constructions besides filing of security interests in movable and intangible transactions.

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