The Reserve Bank of India’s (RBI) deputy governor Viral Acharya said that the central bank is preparing a public credit registry. This means that RBI will very soon be able to tell the credit score of an individual or the firm.
Acharya talked about how it will prove to be beneficial for small traders and industrialists to procure credit. Acharya said that the registry will help reduce interest rates for borrowers because of easier risk assessment.
As of now, private companies such as CIBIL works on the mandate to tell the credit score, which helps banks assess the amount of loan which can be sanctioned and the tenure of the credit. According to Cibil.com, the CIBIL score is “a three-digit numeric summary of your credit history. The score is derived using the credit history found in the CIBIL Report (also known as CIR i.e Credit Information Report).”
“A CIR is an individual’s credit payment history across loan types and credit institutions over a period of time. A CIR does not contain details of your savings, investments or fixed deposits.”
The New RBI Plan
The news of public registry comes up almost a month after the central board “advised” the financial authority to take into consideration a restructuring scheme for loans up to Rs 25 crore for stressed assets of borrowers belonging to the micro, small and medium scaled units. They have been hit adversely post the disturbance caused by demonetisation and GST.
The government had also pitched for easing the corrective action regulations, under which the RBI had placed 11 of the 21 state-run banks, to help banks to lend more.
“At the RBI, we are quite excited about how we can solve the credit problems at the grassroots for micro-entrepreneurs in a fundamental way rather than saying that when they default we will just give them forbearance and give them another six or nine months to pay up,” Acharya said while addressing IIT-Bombay’s annual Techfest.