'Cibil is geared up for challenges ahead'

Q&A/ Arun Thukral, MD, Cibil

Credit Information Bureau (India), the only operational credit bureau in the country, today introduced generic credit scoring which would help banks and financial institutions better evaluate the credit worthiness of an individual.

The credit bureau offers credit information reports and portfolio review reports. It plans to develop products which can generate fraud alerts, KYC alerts, limit alerts and product-specific credit scores.

Arun Thukral, managing director of Cibil, in an interview with Anita Bhoir spoke on the institution's growth plans. Excerpts:

How many institutions are members of Cibil?

Cibil became operational in 2004. We started with a modest 13 members and four million trades (the number of checks made by members) per annum.

Today we have 143 members which includes 77 banks, 16 housing finance companies, 10 financial institutions, 32 non-banking finance companies, six state finance companies and two credit card companies. We have over 90 million trades now. We provide around 2.5 lakh report a month to banks. We started the commercial bureau in 2006.

Now, we have 1.5 million companies, of which, 90 per cent are small and medium enterprises. Our shareholding pattern is also now held by 16 institutions. It is now diversified. We collect both positive and negative information.

The numbers suggest the organisation has come a long way. Yet, there are instances defaults on the rise.

We give the credit report of a customer to the bank. We do not pass a value judgement. The bank may, based on its internal policy, decide to lend to the customer or otherwise. The credit report facilitates the process of lending.

What are the challenges that you face in data collection?

The major issue faced is that we do not have a single identification number in the country. Consent of customers to permit banks to share their details with the credit bureau is still an issue.

In our country, individuals write their names differently. For instance, in one form, the person may write his first name and then the second name. While in the other, he may write his second name first and then the first name.

With technology (match logic) it is possible to get around this issue. We have also begun to use surrogates like date of birth, phonetic matching, address, phone and mobile numbers, permanent account numbers and voters ID.

However, the credit bureau is very urban-centric. It is a fact that in this country, people do not know their date of birth. Agriculture income is not taxed and so we do not have PAN cards.

Banks are now looking to expand their footprint in rural centres. As a credit bureau, how are you gearing up for this challenge?

In rural centres, the cost of intermediation is very high and there is no identification. We would have to use biometrics.

We are interacting with the Reserve Bank of India (RBI), the National Bank for Agriculture and Rural Development (Nabard) and the government to start a rural bureau. This would be beneficial in promoting inclusive banking. Since we are an established player, we are best positioned to start it.

How does Cibil and a bank handle disputes on overdues?

Banks are owners of the data. If there is an error in an individual's report, they can approach the bank.

They can also approach us. However, it's the responsibility of the credit grantor to give correct information. Data are updated on a monthly basis. Going forward, when all bank branches come under core banking it would be possible to update data every fortnight.

Under the Credit Information Companies Act, every financial institution will be required to provide accurate, complete and updated data. RBI has yet to issue guidelines on this, following which each bank will have a data compliance officer.

Going forward, if a customer disputes any overdues, then the entry would be marked accordingly. It's important to note that today you have a chance to improve your credit history.

How will a credit score help the bank?

A credit score takes a snapshot of a consumer's cerdit report and through advanced analytics turns the information into a three-digit number representing the amount of risk a consumer brings to a particular transaction.

The possible score range is between 300 and 900. The higher the score, the lesser would be the risk of the consumer going 91+ days overdue in the next one year. The score can be generated for all consumers with a credit history of six months.

The score is arrived at by analysing credit utilisation, defaulting, a number of inquiries and trade attributes like how old are a consumer's lines of credit, does the consumer have a good mix of credit or is it all credit cards among others. This will enable the lender to evaluate the portfolio.