In order to check asset quality in the banking sector, the urban co-operative banks, the regional rural banks (RRBs) and the smaller non-banking finance companies (NBFCs) should also be brought into the system of credit rating, said J Sadakkadulla, regional director of Reserve Bank of India, Chennai.
Delivering a keynote address on the importance of credit information to financial institutions at the fourth Annual Credit Information Conference in Chennai organised by the Credit Information Bureau (India) Ltd (CIBIL) and TransUnion Software Services, he said, "Those who are left out, the urban cooperative banks (which as a whole is as good as a commercial bank), RRBs, the smaller NBFCs should also be gradually brought into the system."
He added that while private sector and foreign banks had already been using the credit scoring extensively before the approval of loan, public sector banks adopted the model recently.
He said public sector banks should also make use of the credit scoring from the credit information agencies for better performance.
Besides, the credit rating information is also available for every individual. Agencies like CIBIL should make individuals and financial entities credit information literate, which would help a healthy credit system in the country, added Sadakkadulla.
Moreover, there is also a need to collate information of the non-banking system. For instance, the payment behaviour of an individual for various bills such as electricity, which would show the payment nature of the individual.
