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Regulation and supervision of the financial system

BY PRASHANT DUBEY Chief Manager


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WHAT ?

CIBIL
- India's first credit information bureau- is a repository of information, which contains the credit history of commercial and consumer borrowers. CIBIL provides this information in the form of credit information reports only to it's Members in India

Ownership Pattern

Name of Institutions Transunion International incorporation SBI HDFC ICICI Standard Chartered Bank BOI BOB UBI PNB CITI CORP FIN(I) IOB GE Dun & Bradstreet CBI Sundaram Hongkong & Sanghai TOTAL

Share holding in % 19.99 10 10 10 5 5 5 5 5 5 5 2.5 0.01 5 2.5 5 100

TYPE OF INFORMATION

The CIR includes the following information: Basic borrower information like:
Name Address In case of individuals: Identification numbers Passport ID Voters ID

Date of birth
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In case of non-individuals Data-Universal-Numbering-System Number Registration Number Legal Constitution

Other Common Information


Records of all the credit facilities availed by the borrower ,Past payment history,Amount overdue Number of inquiries made on that borrower, by different Members Suit-filed status As per the Credit Information Companies (Regulation) Act, 2005 governing Credit Information Companies, all accounts irrespective of their status (both Good Standing and Delinquent accounts) will remain on your report for 7 years from the date the account was last reported 9

Exclusion
The CIR does not contain: Income / Revenue details Amount(s) deposited with the bank Details of borrowers' assets Value of asset(s) mortgaged Details of investment(s) Right to Information Act, 2005 is not applicable to CIBIL. The reason being that the CIBIL is not a Public Authority as defined under Sec 2(h) of the 10 Right to Information Act, 2005.

CIBIL TransUnion Score


This is a 3 digit numeric summary of a credit history. The Score is derived by using the details found in the "Accounts" and "Enquiries" sections on your Credit Information Report (CIR) and ranges from 300 to 900 points. The closer your Score is to 900, the more favourably your loan application will be viewed by a Credit Institution. The Score plays a critical role in the loan approval process
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There are 4 major factors that affect your Score. These are described below: Late payments or defaults in the recent past: Your payment history has a significant impact on your Score. Hence, if you have missed payments on any of your existing loans, over the last couple of years, your Score is likely to be negatively affected because it indicates that you are having trouble servicing your existing obligations. High Utilization of Credit Limits: While the balances on your loans will only reduce over time as payments are made, you must be diligent about making timely payments on your credit cards. While increased spending on your credit cards may not necessarily negatively affect your Score, an increase in the current balance on the card over time is an indication of an increased repayment burden and 12 may negatively impact your Score. It's always prudent to

Higher percentage of Credit Cards or Personal Loans (commonly known as Unsecured Loans) on your CIR: A higher concentration of home loans or auto loans (commonly known as Secured Loans) is likely to be more favourable for your Score than a large number of unsecured loans. Although unsecured loans offer easy access to finance, it's also by far the most expensive forms of credit. More the number of unsecured loans with high utilization, larger are the payments resulting from its high rate of interest. 13

Behaving "Credit Hungry": If you have made many applications for loans, or have recently been sanctioned new credit facilities, a Credit Institution is likely to view your application with caution. This "Credit Hungry" behaviour indicates your debt burden is likely to, or has increased and you are less capable of honouring any additional debt and is likely to negatively impact your Score.

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WHY?

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A Credit Information Report (CIR) is a factual record of a borrower's credit payment history compiled from information received from different credit grantors. Its purpose is to help credit grantors make informed lending decisions - quickly and objectively.
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CIBIL is a composite Credit Bureau, which caters to both commercial and consumer segments. The Consumer Credit Bureau covers credit availed by individuals while the Commercial Credit Bureau covers credit availed by non-individuals such as partnership firms, proprietary concerns, private and public limited companies, etc.
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For credit grantors to gain a complete picture of the payment history of a credit applicant, they must be able to gain access to the applicant's complete credit record that may be spread over different institutions. CIBIL collects commercial and consumer creditrelated data and collates such data to create and distribute credit reports to Members. Differential Pricing by using CIRs will prove beneficial to both credit grantors and borrowers.
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HOW ?

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Source
CIBIL primarily gets information from its Members only and at a subsequent stage will supplement it with public domain information in order to create a truly comprehensive snapshot of an entitys financial track record.

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Default
CIBIL does not classify any accounts as default accounts. It merely reflects this information after the Member has classified it as such. The Number of Days Past Due and / or Asset Classification as per RBI definition as submitted by Members is reflected in the CIR.
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Access
CIBIL Members, which include leading Banks and Financial Institutions, can access information from CIBIL on the principle of reciprocity i.e. only those Members who have provided all their data to CIBIL are permitted to access CIBIL Credit Reports. Members can do so only to take valid credit decisions. Disclosure to any other person or entity is prohibited 22

Benefit To The Credit Grantors


The use of CIRs will enable loan officers to make objective and informed credit decisions quickly, competitively and costeffectively. The use of CIRs will enable them to increase their lending volumes and improve the quality of their credit portfolios while reducing their delinquencies and loan processing costs. This will translate into improved profit margins. 23

Security
Encryption is technique used to mask proprietary information in order to prevent it from being accessed by unauthorized individuals. Only authorized individuals who have been provided with the appropriate decoding software can unscramble the information. Thus, encrypted information that our Members provide us with is extremely secure 24

Benefits to a borrower from CIBIL?


CIBIL's CIRs are aimed at helping credit grantors make fast and objective lending decisions. This will contribute to a more competitive credit marketplace among Credit Grantors. With a Bureau in place, responsible customers can expect faster and more competitive services at better terms from the Credit Grantors. Ref: "data universal numbering system." DUNS
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Regulatory & Legal Environment


Reserve Bank of India (RBI), in its continued support of CIBIL, has issued several notifications to credit grantors covering the following: Boards of banks and FIs to closely monitor submission of data to CIBIL Penalties could be imposed on banks for nonsubmission of data CIBIL, in consultation with RBI, SIDBI and IBA, to develop a mechanism to facilitate the flow of credit to the SME sector 26

Dispute Process
As per The Credit Information Companies (Regulation) Act, 2005, the Credit Institutions are expected to give the updated credit information of individuals. The Dispute Process is provided to the consumer to help correct any inaccuracies / discrepancies that may arise in their CIR exactly for this reason. Hence, it is recommended to review your CIR prior to submitting a loan application just to be sure that there are no errors on your CIR which may hamper your loan approval
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Thank you

September 25, 2012

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