Govt's amendments must to boost credit bureaus, says NS Vishwanathan

The Reserve Bank of India (RBI) wants to strengthen the credit bureaus, but to do that the government has to make some legislative amendments, RBI Deputy Governor NS Vishwanathan said on Monday.

"We have taken several measures in that direction (strengthening credit bureaus). Some of these are in terms of expanding the database that credit bureaus require, certain legal amendments and that is a work in progress," Vishwanathan said, while delivering the key note address at the national banking summit organised by IBA and Ficci. 

Telecom companies and power utilities have been demanding that their customers' payment history be shared with credit bureaus saying the definition of default has to be extended beyond the domain of pure financial sector alone. Referring to bringing in more and more MSMEs into the formal sector, Vishwanathan said formalisation of Medium, Small and Micro enterprises (MSMEs) is important for financial stability of the system.

The RBI has given relaxation to banks in asset quality recognition for MSME segment after rollout of Goods and Services Tax (GST). 

Also, MSMEs with loan limits up to Rs 250 million are excluded from the RBI’s new rules for restructuring issued on February 12, 2018, he said.

Vishwanathan said there is emphasis on systematically important financial institutions, especially “too big to fail” units, holding higher quantity and better quality of capital. Besides, Common Equity Tier I capital, regulator prescribe capital conservation buffer and countercyclical capital buffer to enhance loss absorption capacity.

The credit to MSME segment has shown robust growth in first quarter ended June 2018. The growth was 30 per cent for loan below Rs 1 million and 20 per cent for loans from Rs 10-50 million, he said.