Loans being offered to nearly four crore poor borrowers across the country by microfinance institutions (MFIs) are now being tracked on credit bureaus.
“About 30 MFIs, including major ones, have joined credit bureaus. Many of them have also started using the data for operations,” Mr Alok Prasad, Chief Executive Officer, Microfinance Institutions Network (MFIN), told Business Line on Saturday.
Equifax, Highmark and Credit Information Bureau of India Ltd (CIBIL) are now actively tapping the data.
While Equifax and Highmark are focussing mainly on MFIs, CIBIL is in the process of testing its technology platforms specifically for the micro-loan segment, he added.
The credit bureau, set up by the Andhra Pradesh Government in line with its Microfinance Institutions (Regulation of Moneylending) Act put in place in October 2010, is also fully functional.
However, the data are being used only to check the incidence of multiple lending which is prohibited by the Act.
But the AP situation has made MFIs in all other States more cautious as well.
“Profiles of over 38 million clients across the country are now with credit bureaus,” the MFIN functionary said.
According to industry estimates, the total number of MFI clients could be 30 million.
“However, the credit bureau data would be in excess of this as some tend to borrow from more than one company,” Mr Prasad said.
A booster
The expanded reach of credit bureaus is being seen as a ‘boost' to the MFI sector which was badly hit by the crisis in Andhra Pradesh which resulted in almost complete halt of fresh disbursal of loans and collection of dues.
“Now, multiple lending and overleveraging of clients can be prevented as the data are available. This is a win-win situation for the clients as well as MFIs,” he said.
The Malegam panel, set up by Reserve Bank of India on MFIs, had also recommended the setting up of “one or more” credit bureaus.
“The use of credit bureau has really taken off now. There is a record for 30 million transactions. About 20 small MFIs are expected to join credit bureaus soon,” Mr P. N. Vasudevan, Managing Director, Equitas Microfinance, said.