Credit scoring system can be widened

Urban co-operative banks, the Regional Rural Banks and the smaller Non Banking Finance Companies should also be brought into the system of credit rating, in order to increase the asset quality, said J Sadakkadulla, regional director of RBI, Chennai.

Sadakkadulla said this while delivering an address on the importance of credit information to financial institutions in the Fourth Annual Credit Information Conference in Chennai, organised by Credit Information Bureau (India) Ltd and Trans Union Software Services.

He added, while private sector and foreign banks have been using the credit scoring extensively before the approval of a loan, public sector banks have adopted it recently.

He said that the public sector banks should also make use of the credit scoring from the credit information agencies for better performance.

Besides, the information is available for every individual and it is good for each one to know their own credit rating.

The agencies like CIBIL should make individuals and financial entities credit information literate, which would help a healthy credit system in the country, he added.

Sadakkadulla said there is a need to collate information of the non-banking system as well, for instance the payment behaviour of an individual for various bills such as the electricity bill to show the payment nature of the individual.

Scoring would be better if this is also incorporated, as first time borrowers may not have a credit history on which the lender can conduct an assessment.

This could also act as a credit collateral for the individual or the establishment, if awareness is created on this among the individuals.