RBI may give mutual funds, NBFCs access to large credit information

The Reserve Bank of India (RBI) plans to make its Central Repository of Information on Large Credits (CRILC) open to a wider audience of financial stakeholders. The move, when given effect to, will in one fell swoop do away with the current information asymmetry because of it being restricted to banks, and make sensitive data available to mutual funds (MFs) and non-banking financial companies (NBFCs), among others.

Set up in 2014-15, CRILC, an important database for offsite supervision of banks, captures the credit information of large borrowers defined as those having aggregate fund-based and non-fund-based exposure ofRs 5 crore and above.

While the need for a public registry on the health of borrowers’ credit facilities has been articulated in the past, most notably by former RBI deputy governor Viral Acharya, “the exercise to get this rolling out has started”, said a source, adding that “it is in the interest of everyone that there is as much information available to take informed decisions”.

Banks submit the CRILC-Main Report on a monthly basis, divided into four heads — Exposure to large borrowers, reporting of technically or prudentially written-off accounts, reporting of the balance in the current account, and reporting of non-cooperative borrowers. Then, on a “as-and-when basis”, whenever a large borrower’s account becomes overdue for 61 days in respect of special mention accounts (SMA-2)-classified borrowers. In addition, banks also furnish a weekly report of default by all borrowers (Rs 5 crore and above) by the close of business on every Friday, or the preceding working day if Friday happens to be a holiday.

CRILC data is collected under the provisions of the RBI Act, and non-adherence to reporting instructions attracts penal provisions.

The RBI’s proposed move must be seen in the context of recent developments wherein much heartburn was evident among various financial intermediaries – be it banks, NBFCs or MFs – coming to a resolution in distressed accounts. 

“A public registry may not directly aid such resolutions, but at least no entity will be placed in a privileged position with others being blind-sided,” explained another source. 

Simply put, it will do away with the prevailing situation wherein non-banks have no clue on the status of credit exposure of borrowers with banks.

It could not be ascertained whether CRILC in its new avatar will be open to non-banks the way it is for banks as on date — blanket access with no fees —or will be “query-driven” with perhaps access to the SMA-2 histories of borrowers. It was pointed out that an aspect which would have to be weighed is if the information has the potential to get misused by non-banks, and if it leads to stock market volatility — especially triggered by MFs, which may resort to selling the stock. And in what format is this information to be given by MFs to the retail investors at the secondary level. 

It was, however, pointed out that the recent Sebi diktat on declaration of defaults has the potential to anyway affect the bourses the way CRICL data being shared with non-banks would. Sebi had last week said a default in the servicing of principal or interest to lenders by listed firms beyond 30 days is to be disclosed to shareholders within 24 hours of the same.

Data sharing

• Access to the CRILC for non-banks may not be a blanket one
• It could be “query-driven” with perhaps access to special mention accounts (SMA-2) histories of borrowers
• Access to MFs could lead to stock market volatility, especially if MFs are to sell stocks
• Extent of sharing information by MFs with investors will have to be looked into
• CRILC data is collected under the provisions of the RBI Act