What is Public Credit Registry?
- A Public Credit Registry 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 public credit registry is an information repository that collates all loan information of individuals and corporate borrowers.
- A credit repository helps banks distinguish between a bad and a good borrower and accordingly offer attractive interest rates to good borrowers and higher interest rates to bad borrowers.
- PCR will address issues such as information asymmetry, improve access to credit and strengthen the credit culture among consumers.
- It can also address the bad loan problem staring at banks, as corporate debtors will not be able to borrow across banks without disclosing existing debt.
- Setting up the PCR will help improve India’s rankings in the World Bank’s ease of doing business index.
- 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.
- 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.
- The Reserve Bank of India (RBI) formed a high-level task force on public credit registry (PCR) for India, which was chaired by Y M Deosthalee.
- The committee has suggested that the registry should capture all loan information and borrowers be able to access their own history.
- Data is to be made available to stakeholders such as banks, on a need-to-know basis and data privacy will be protected.
Why PCR is necessary?
- Credit information is now available across multiple systems in bits and pieces and not in one window.
- Data on borrowings from banks, non-banking financial companies, corporate bonds or debentures from the market, external commercial borrowings (ECBs), foreign currency convertible bonds (FCCBs), masala bonds, and inter-corporate borrowings are not available in one data repository.
- PCR will help capture all relevant information about a borrower, across different borrowing products in one place.
- It can flag early warnings on asset quality by tracking performance on other credits.
PCR in other countries
- PCR in other countries now include other transactional data such as payments to utilities like power and telecom for retail consumers and trade credit data for businesses.
- Regularity in making payments to utilities and trade creditors provides an indication of the credit quality of such customers.
How it can support in financial inclusion?
- Access to credit information, including debt details and repayment history would drive innovation in lending.
- For example, currently most banks focus on large companies for loans and consequently the micro, small and medium enterprises are left with limited options for borrowing.
- With satisfactory payment history and validated debt details made available, it will increase the credit availability to micro, small and medium enterprises along with deepening of the financial markets.
- This will support the policy of financial inclusion.