The major concern of the Bank while taking a lending decision is the repayment capacity of the borrower. Credit Information Companies (CIC) are playing an important role in taking a lending decision by the Banks / Financial Institutions (FIs) by collecting, processing and collating individual’s data about their debt repayment along with its history and providing these data to Banks / Financial Institutions.
Currently, Credit Information Bureau India Limited formally known as CIBIL is the major and largest Credit Information Company in India. There are other three Credit Information Companies which are approved by the Reserve Bank of India which are Equifax Credit Information Services Pvt Ltd, CRIF High Mark Credit Information Services Pvt Ltd and Experian Credit Information Company of India Private Limited in addition to CIBIL.
Credit Information Companies are engaged in maintaining the records of all Companies and Individuals related to their Debt Obligation and repayment capacity. The member Banks / FIs periodically submit their information to these Credit Information Companies and based on the data / input provided by the Banks / FIs and past repayment track records of the borrower, CIC issues a Credit Information Report (CIR) as well as Credit Score.
Currently, the Credit Information Report is based on the debt repayment track records of the Borrower.
In present era, where the banks / FIs are struggling with the steep rise in Non-Performing Assets (NPA), the credit decision should not only be based on the debt repayment capacity. Banks should verify the Financial discipline of the Borrower like their repayment history, Payment of Statutory Dues and their timely Returns like Income Tax, Goods and Service Tax (GST), payment of Electricity Bills, Payment of Micro, Small and Medium Suppliers etc. Although, the Banks take the certificate of Chartered Accountant as regard to the payment of Statutory Dues, but this certificate is no suffice.
There is no common portal or Information providing Agency to gather the Financial Discipline of the borrower at one time. One has to extract the report of the CIC as regard to the debt repayment history, Ministry of Corporate Affairs portal for the Annual Returns and Financials, GST portal to know the status of the returns. Further, the Income Tax never shares any details with the bankers. Bankers only have an option to rely on the Customer certification.
All the above things plays major role while taking the lending decision by the Banks/ FIs and also helpful to reduce the NPA.
The Government / Reserve Bank of India needs to create the common platform to the Financial Discipline of the borrower / prospective borrower based on their past repayment history, payment of Statutory dues and filing of Statutory returns, payment to MSME suppliers.
By: Sandeep Bisht, Co-Founder, Filing Samadhan