Consolidated SME, corporate data with banks to improve lending: CII

Demonetisation has created opportunity to channelise public savings into productive assets, said CII

Demonetisation has created an enormous opportunity to channelise public savings into productive assets, and consolidating data of SMEs and corporates can provide banks with the necessary information to assess the credit-worthiness of borrowers, CII said on Sunday.

It said measures like these can enable banks to devise a tailored interest rate policy by differentiating borrowers.

"Data is present in the system, though the ownership is with different government bodies. It is possible to thread these data accesses together for a well-connected digital infrastructure that can enable banks to lend to credible borrowers. Naturally, this is also a mechanism to avoid creation of NPAs at a later date," CII Director General Chandrajit Banerjee said.

The chamber suggested that abundant data on SMEs and corporates through various sources can be made available to banks and other lending institutions, pointing out that banks will benefit from authentic financial and other data to accurately identify the right customers.

"Customers will gain from hurdle-less access to credit. Banks may choose to offer loans at varied interest rates depending on the strength of data of the customer," said CII.

The data for identification of the borrowing entity can be procured through PAN, TIN/CIN/GSTIN (post launch of GST), Articles of Association and Memorandum of Association.

Financial information required by the banks to assess the liquidity condition of the entity can be availed from sources like annual returns which are available with Ministry of Corporate Affairs (MCA) as scanned documents, Form 26 AS with Income Tax authorities, and Provident Fund data with Employees Provident Fund Organisation (EPFO), CII said.

"A robust credit data infrastructure will allow banks to better analyse the financial data by way of triangulation of information and also provide greater industry insights.

"While for larger corporates this would enhance banks' ability to access credit worthiness, it would also lower costs and potentially ease the flow of credit to MSME segment," said Shikha Sharma, Chairperson, CII National Committee on Banking and MD & CEO, Axis Bank.

"Creating suitable and comprehensive digital data infrastructure will provide banks the ability to identify fraud/data manipulation and stress early while help corporates get access to cheaper credit," said Arun Tiwari, CMD, Union Bank of India.

Such a system is used in some other countries and can greatly facilitate financial institutions to avoid undue risk in disbursing loans in the wake of demonetisation, said CII.