CIBIL to set up microfinance credit information bureau

To enable Microfinance Institutions (MFIs) to secure credit on faster and better terms, the Credit Information Bureau (India) Ltd. (CIBIL) will soon set up a MFIs credit information bureau, said CIBIL chairman M.V. Nair on Tuesday.

Prior to approving individual loans, public sector banks and financial institutions sought CIBIL credit information reports and credit score of an applicant. An individual was given points by the CIBIL TransUnion ranging from 300 to 900 (highest), based on his loan repayment pattern for the last few months. The credit score was updated every month. Individuals with 800 points were the most sought after by banks.

Talking to reporters, CBIL chairman, M.V. Nair said through the latest initiative they were planning to rope in 50 million MFIs as members. Currently, CIBIL was operating four bureaus – consumer, retail, mortgage and fraud.

“Currently, we have a database of 305 million in the consumer bureau and 15 million in retail bureau with 960 members. With the inclusion of MFIs, the total database will increase by 70 million. After the introduction of credit score, the overall Non-Performing Assets of banks have come down from 2.5 per cent to less than 1 per cent, while the credit penetration ratio in the country has risen to over 60 per cent of the Gross Domestic Product from 22 per cent,” he said.

Even though there was a wide spread use of credit score by the banks and lenders, Mr. Nair expressed concern over the quality of database. He asked the stakeholders to update the information on regular basis so that it could arrest rising Non-Performing Assets and denial of loans.

Reserve Bank of India, Regional Director, J. Sadakkadulla, asked the Credit Information Companies (CICs) to create database of Small and Medium Enterprises (SMEs). Creation of database would help banks to bridge the information gap and help facilitate easy flow of credit from banks to SMEs and provide impetus for overall growth of economy.

Dr. Sadakkadulla also stressed the need for enlarging the database of CICs by bringing in more customer segments and creating awareness among the consumers about the importance of credit information reports. The value added services of CICs would support more advanced risk management capabilities of the lending institutions, he said.