Monetary Policy and You

Credit information watchdogs on the prowl.

Banks might reject your loan application if you defaulted on your telephone or electricity bill, soon.

The Reserve Bank of India, in its Annual Monetary Policy, allowed four more credit information companies (CIC) to start operations. This will strengthen the credit appraisal system.

Bankers felt that soon electricity bill, telephone bill and other payments would become part of the credit appraisal system that banks use before sanctioning a loan to the customer.

“Just like in developed markets, such as the US and the UK, banks will get to evaluate a loan application based on transactions, other than banking,” said KVS Manian, group head, retail liabilities and branch banking, Kotak Mahindra Bank.

Currently, there is just one such agency, Credit Information Bureau (India) Limited (Cibil), that provides information to banks on a person’s loan and credit cards. The country’s largest bank, the State Bank of India, Housing Development Finance Corporation (HDFC) and ICICI Bank are shareholders in the company.

Of the four companies planning to set up business in country, the Reserve Bank of India (RBI) has allowed Experian Credit Information Company of India and Equifax Credit Information Services to commence their business from February 17, 2010 and March 26, 2010, respectively. The other two have received in-principal approval.

With the number of companies going up, the tools to evaluate a person’s credit-worthiness too will become more complex and all-encompassing, bankers said. “In fact, some may try to tap smaller and rural centres, where other agencies may not venture,” said Sushil Munhot, executive director, IDBI Bank.

Fund Transfer
Transfer of funds could also become faster. The banking regulator said it will enhance fund transfer system to shorten the transfer time. The upgraded system will clear funds on an hourly basis rather than daily settlements that existed earlier.

In National Electronic Funds Transfer (NEFT), banks earlier used to send transfers only during banking hours. RBI has increased the operating window by two hours on weekdays and one hour on Saturdays. This means, now a customer can transfer funds even after the banking hour. “This transfer can now happen within a few hours, if both the accounts are in the same city,” said Manian.

The central bank has also mandated banks to intimate the customer about transfers through text messages or emails. “The concept of positive confirmation to the remitter is perhaps unique across all retail electronic payment systems worldwide,” said RBI Governor D Subbarao in the Annual Policy statement.

Deposits
Retail customers who forget to claim their deposits on maturity can now breathe easy. The apex bank has asked banks to formulate policies whereby a customer will get interest for the period the deposit remains with the bank. “Many banks have already adopted this policy. In case a customer forgets to collect the fixed deposit on maturity, we send it for auto renewal,” Muhnot said.

Further, if a person wants to transfer money from one type of deposit to another, the bank will transfer it without any penalty. However, the deposit has to stay with the same bank for a period longer than the original deposit. This will help depositors who wants to transfer funds from, say a term deposit to a recurring deposit or from one term to another, when interest rates go up, because there will be no penalty on the transfer.