The Hindu Business Line : Commercial credit bureau needs legislative stamp

WHILE sharing of retail credit information under CIBIL will be available from now onwards, corporate credit information will be shared only by October. The delay for sharing commercial credit information under the newly set up Credit Information Bureau (India) Ltd (CIBIL) is partly due to the lack of legislative clearance and the low level of computerisation in several PSU banks.

"Banks are currently taking permission from each of their corporate clients in order to share the credit data. If legislative clearance for sharing data had been in place we would have been able to start the commercial credit bureau faster," said Mr Satish Mehta, Managing Director, CIBIL.

Under the Banking Regulation Act, banks cannot share customer information to other agencies unless there is a clause in the loan document that permits it.

CIBIL officials hope that the new Lok Sabha will pass an Act to make this data sharing legal and also grant CIBIL a legislative status.

The matter is currently under the consideration of the Ministry of Law and Justice and has already been cleared by the Reserve Bank of India and the Ministry of Finance.

"Legislative changes would be needed to share historical credit information of clients. The utility of the data will go up as history increases," said Mr Pramod Vaidya, Head Corporate Risk Management, IDBI Bank.

Sharing retail information has been fairly simple when compared to corporate lending. Retail lending, a comparatively new business for banks, has mostly been done with loan documents that contain a clause that permits information sharing to other agencies.

The more recent corporate loan sanctions are also being done inclusive of this clause.

Another reason for the delay is that most PSU banks do not have fully computerised and networked branches. Therefore, the customer data often incomplete is scattered across several regional offices.

These have to be collated and then validated by CIBIL for entry into the common database.

The database will be highly secured with very few employees of even CIBIL having access to it, said Mr Mehta. CIBIL claims that it will ensure that credit records are given away only for lending purposes and not for marketing or sales needs of banks and FIs.

CIBIL expects to break even in the first year itself by charging a one-time membership fee between Rs 1 lakh and Rs 6 lakh and a charge of Rs 50 for every retail record and Rs 500 for every commercial record.

The usage charges will reduce for a lender as usage levels go up, said Mr Haren Parekh, Vice-President (Finance), CIBIL.