- HOW IT WORKS?
- Credit Score & Report
- Credit Bureaus
Present Scenario of Credit Information Industry in India
Prior to the establishment of credit rating agencies in India, banks and lending firms had no way to ascertain the creditworthiness of the loan applicants since defaulters could default with some banks while being creditworthy with other banks.
With the establishment of TransUnion CIBIL and later other three credit information agencies credit related data is recorded for individuals as soon as they make any credit related transaction in any bank.
At present, there are four credit information agencies operating in India which is approved by the Reserve Bank of India, and these are CIBIL, Equifax, Experian and Highmark. Among these CIBIL is the oldest. These credit information agencies collect data on borrowers sent to them by the various lending institutions including banks. They compile such data and generate credit scores and credit reports which enable the lending institutions to assess the creditworthiness of loan applicants.
Scope of Credit Information Services
Although all the four credit information agencies are serving the credit information segment, yet there is much scope for differentiation in this sector and more so as the credit economy in India picks up which at present is at a nascent stage as compared to that of the developed countries.
The major segment trends that are enhancing the scope of credit information agencies include:
- As per assessment by industry experts, the Indian credit market has a capacity of mobilizing billions of dollars per day
- The credit market in India is nascent and untapped, and potentially is immense
- At present bank, regulators rely on CIBIL mainly for maintaining credit reports of customers in the insurance and telecom sectors
- Lending institutions and companies now increasingly prefer to source credit information from multiple sources
- Lending institutions realize the greater need for curtailing risks due to recent reports on loan defaults
- Individuals and firms are seeking enhanced analytics and accurate insights on risks and trends
- Individuals and firms are seeking enhanced fraud detection and high-security.
Establishment and RBI License
- CIBIL was set up in the year 2000 and was granted RBI license in 2009
- Equifax was granted RBI license in 2010
- Experian was set up in 2006 and granted RBI license in 2010
- Highmark was established in 2007 and granted RBI license in 2010.
Origins of the Credit Information Agencies
CIBIL the oldest RBI approved credit information agency of India was promoted originally by State Bank of India, HDFC Bank, Dun & Bradstreet Information Services and Trans Union International. At the time of inception, SBI and HDFC held 40 % stake each whereas DBIS and TUI held 10 % stake each. Later on, more investors and promoters started joining CIBIL, and they include ICICI, Standard Chartered Bank, HSBC, Citicorp, Bank of Baroda, IOB, Sundaram Finance, Bank of India, GE, UBI and PNB.
Equifax is US based company, Experian is based in Ireland, and Highmark is a startup venture by entrepreneurs Anil Pandya and Anuj Desai.
As per Foreign Investment, Promotion Board regulations at present foreign partners can have up to 49% stake in credit information service agencies operating in India. Therefore the new overseas entrants are now scouting for suitable local partners.
Charges for Generating Reports and Scores
- CIBIL charges Rs 500 for credit report and credit score
- Equifax charges Rs 400 for credit report and credit score
- Experian charges Rs 399 for credit report and credit score
- Highmark charges Rs 399 for credit report and credit score.
Time Taken for Report Generation
- CIBIL takes seven days for report/score generation and dispatch
- Equifax takes 7 to 10 days for report/score generation and dispatch
- Experian takes 20 days for report generation and dispatch.
- CIBIL rates individual credit worthiness in the range of 300 to 900
- Equifax rates individual credit worthiness in the range of 1 to 999
- Experian rates individual credit worthiness in the range of 300 to 900
- Highmark rates individual credit worthiness in the range of 300 to 850.
Information provided by Credit Information Agencies
Individual Services: Individual credit reports and scores, insights related to market trends and opportunities.
Company Services: portfolio review and management, company credit report, company analysis, fraud prevention, customer targeting and customized solutions.
Individual Services: individual credit reports and scores, alerts, individual portfolio review, individual risk analysis and score.
Company Services: management of risks associated with credit, fraud guard, management of company portfolios, industry analysis reports.
Individual Services: individual credit information and score
Company Services: customer analysis and acquisition, collection and loan recovery, management of customers, Analytics and data, targeting of customers, customer relationship management.
Individual Services: CRIF advanced credit information, portfolio services, alerts, Geo analytics, consultations.
Company Services: company performance reports and scores, company portfolio services, CRIF advances company credit information and score, verification services, credit management, management of data quality.
Dispute and Discrepancy Resolution Methods
All the four credit information agencies have laid down methods to rectify errors in reports and resolve disputes and discrepancies in credit reports if any by online route.
Information Received by Credit Information Agencies
As per RBI regulations, all lending institutions need to send the same information to all the four credit information agencies. Hence there is no difference in the input data received by the four credit rating agencies.
Future Trends in Credit information Sector
On several aspects, the services of the credit information agencies will remain the same, and each will try to better and expand their services in their own ways. The increased competition will make the credit information sector more precise and focused and enable creditworthy people to access loans at customized rates instead of present slab rates. Also, the loan defaulter activities will become highly conspicuous due to the advanced digital systems, so they will be easily tracked down and denied loans and credits by the banks and lending institutions.
In future the following trends may be expected:
- Industry focus by credit information service providers
- Growth and expansion of Indian credit economy
- Enhanced fraud detection and security
- Lesser time in score and report generation
- Lesser time in dispute resolution
- Lesser fees for scores and reports
- Advanced and diverse analytics
- Digitalized, swift credit services
- Use of enhanced technologies by credit information industry
- Better credit management by individuals and companies.
- TransUnion CIBIL
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