Credit information firms failed to warn on asset quality: RBI

Suggests them to create credit database on loans below Rs 5 cr

The Credit The Reserve Bank of India (RBI) on Thursday rapped credit information companies (CICs) for failing to provide early warnings on the impending deterioration in banks’ asset quality.

“There is credit information about individuals. But credit information companies have not able to give us any clue for policy-level changes. At the level of the regulator, CICs can play a role in providing insights that can drive effective policy changes,” RBI Deputy Governor K C Chakrabarty said, while addressing an annual credit information conference here.

“They (CICs) can also provide important inputs to banking supervisors in monitoring-system risks that could be helpful for decisions on aspects such as provisioning. At present, there is no adequate feedback in these areas,” he said. “In fact, it was never envisaged the credit quality in the system would deteriorate so sharply. If we had a good credit-quality information system, it should have been envisaged that there was some risk....Now, we say all banks are saddled with non-performing assets.”

“Why didn’t this (feedback from CICs) happen? We must analyse and introspect. We (CICs) have 10 years of experience…there are a host of issues we will be discussing,” he added.

Earlier, RBI had appointed a committee under the chairmanship of HDFC Bank chief executive Aditya Puri to look into matters related to CICs. Chakrabarty said though the panel had given a report, it was yet to be placed in the public domain.

On the scope for better information on corporate and commercial loans, Chakrabarty said RBI was setting up the Central Repository of Information on Large Credits (CRILC), which would be effective April 1, 2014.

“CICs can collect information on exposures of less than ~5 crore. Later, we can mark both the databases (CRILC and data on small loans) and have reliable information on corporate lending,” Chakrabarty said.

Non-performing assets (NPAs) and standard restructured assets of banks have seen a sharp rise. For public sector banks, which account for 70 per cent of India’s banking sector, gross NPAs rose from 2.32 per cent in March 2011 to 5.17 per cent in December 2013, according to finance ministry data.

Currently, there are four CICs in India—-Credit Information Bureau (India) Ltd, Experian India, Highmark and Equifax Credit Information Services Private Ltd.