Lack of clarity haunts RBI's credit database that eyes a transformation

It remains unclear how exactly will the PCR function, who will get access to the data, and where will credit bureaus go if their monopoly over individuals' credit data is diluted?

The country’s credit information industry will be transformed when the Reserve Bank of India’s Public Credit Registry (PCR) becomes operational. But the lack of clarity around the soon-to-be-launched credit database has left credit bureaus worried about whether they would still be relevant. 

The RBI has provided licences to four credit information companies (CICs), namely TransUnion CIBIL, CRIF High Mark, Equifax, and Experian, seeking to get a broad-based picture of individuals’ standing with regard to credit, which these bureaus are not able to provide at times. 

Last month the central bank published a report that information asymmetry in the lending space could be reduced by the use of technology, and a PCR would help aggregate data from multiple sources in real time to offer better access to insights to lenders.

Satish Pillai, MD & CEO, TransUnion CIBIL, said the big fear in his mind was that the RBI shouldn’t dilute and disrupt the lending market by forming new entities without much accountability and clear flow of command. 

“What we do shouldn’t be diluted. We are also custodians of the data. We do a whole lot of work to make sure that data is accurate. We have delivered on these promises,” Pillai said.

Through the PCR, the RBI can track an individual’s credit quality and also map the entire network of linked private entities (companies or otherwise), their common accounts and outstanding debt. Further, it will enable regulators to “look up” all securities' violations, legal suits and taxation history linked to an individual. 

However, it remains unclear how exactly will the PCR function, who will get access to this data, and where will credit bureaus go if their monopoly over individuals’ credit data is diluted? 

“The only unfortunate part is that in the PCR document, the inputs of CICs haven’t been taken in full,” said Kalpana Pandey, CEO, CRIF High Mark. “Now, we are discussing the implementation of the PCR with the RBI. The PCR is already talking about so many data elements but there’s lack of clarity on how that data will be used.” 

What Pandey said about the lack of clarity was repeated by at least five other people across different credit bureaus whom Business Standard spoke to. 

The PCR will be built to access the credit, legal and financial information of “hundreds of millions of users and to handle trillions of data records”, said the High Level Task Force (HTF) report on the PCR. 

Further, an executive from a credit rating company said they were worried that the PCR would take away the role of custodianship of user data away from the bureaus. 

They further said the formation of a central database could mean reduced gains for credit bureaus and stressed the need to evolve a regulatory protection so that their business was not eaten up by other players, which could enter the space now. 

“We want to make sure that it’s not diluted so that you don’t disrupt the lending market,” said Pillai. He said disruption could worsen the existing issues like the accuracy of information, providing insights to banks on the market level, and solving customer disputes. 

According to CIBIL, almost 14 million people apply for credit every month, of which 20 per cent are first-time borrowers. 

A source close to the RBI task force said India was heading towards credit proliferation and PCR was the only way to solve it, since credit bureaus didn’t prove too useful in the case of first-time borrowers. This person said the PCR would function with the help of account aggregators, which would be given licences by the RBI soon. These entities will collect customer consent and transfer data in encrypted form from the PCR to the lender. 

Meanwhile, credit bureaus wonder if the data proliferation is an opportunity in disguise.

“We believe that a synergistic relationship between credit bureaus and the regulator is the best model to follow. As long as access is made on an equitable level to the major credit bureaus, we don't see any immediate concerns,” a head of business development at a credit bureau told Business Standard. 

Pandey from CRIF High Mark added that business models of credit information bureaus were also up for a renewal if the PCR didn’t address the key concerns satisfactorily. “Obviously, our business model will also evolve and we’ll need to bring more innovation,” she said. 

Discomfort zone

• 14 million customers apply for credit  every month

• Of this, 2.8 million  are new to credit

• Public Credit Registry (PCR) will use Aadhaar, PAN, or passport to link individuals 

• Company and directors will be linked through MCA, Sebi, CERSAI, and other regulatory databases

• Credit bureaus want clarity on PCR to assess opportunities or threats