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CREDIT INFORMATION BUREAU (INDIA) LIMITED
IN ASSOCIATION WITH DUN & BRADSTREET AND TRANS UNION
Role of Credit bureau Role of Credit bureau information in credit information in credit
managementmanagement
The Concept
Wish list of a credit grantor Make informed and objective credit decisions Minimise adverse selection Deter concurrent borrowings & serial defaulters Improve asset quality and reduce NPAs Increase market penetration Reduce turn around time
Will happen …with complete & reliable credit information
What is a Credit Bureau?An organization that: Collects data pertaining to
Identity data about Consumer (Individual) and Commercial (Business) entities
Credit Information Payment History
Compiles Credit Information Reports on consumer and commercial borrowers and makes these available to members on request.
Is a third-party service provider for the financial sector
International Scenario
In developed countries, Bureaus have been in existence for a long time.
In USA
Dun & Bradstreet - 1841 Equifax - 1946 Trans Union – 1968
In other countries
Germany - 1934 Turkey - 1951 Belgium -1967
Credit Bureaus improve efficiency
By improving loan processing speed
By reducing operational costs
Benefits of a Credit Bureau
Credit Penetration ratios worldwide
Credit penetration ratios
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
Au
str
alia
Ch
ile
Eg
yp
t
Ire
lan
d
Ind
ia
Ge
rma
ny
Ja
pa
n
Sin
ga
po
re
So
uth
Ko
rea
Sw
itze
rla
nd
Un
ite
d
Kin
gd
om
Un
ite
d
Sta
tes
Pri
vate
cre
dit
as a
perc
en
tag
e o
f G
DP
Source: Djankov,McLiesh and Shleifer (2004)
Credit penetration is higher in countries with credit bureaus
Benefits of a Credit Bureau
International Scenario
In developing countries Different factors spurred the growth of bureaus
Recognition of bureaus as integral to a maturing financial sector
Lengthening loan terms following stabilisation of previously volatile economies
Economic crisis in the financial sector
Mexico Argentina Brazil Chile Hong Kong Thailand Singapore Sri Lanka Bangladesh
… and now
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CREDIT INFORMATION BUREAU (INDIA) LIMITED
IN ASSOCIATION WITH DUN & BRADSTREET AND TRANS UNION
India’s First Credit Information Bureau
CIBIL
Provides Credit Information Centralised Comprehensive Reliable
Facilitates credit grantors in deciding on Whom not to give credit Whom to give credit and what extent
Provides objective tools for risk management
… from a Neutral Service Provider
World’s leading provider of B2B credit information
Dun & BradstreetAmongst the world’s largest consumer bureaus
India’s largest bank India’s largest HFC
CIBIL – The Promoters
40% 40%
10% 10%
CIBIL was established by
CIBIL – The Shareholders
The shareholding pattern now is as follows: - Shareholding Distribution (%)
Standard Chartered Bank
5%
GE Strategic Investments India
2.5%State Bank of India
10%
Bank of Baroda5%
Trans Union International Inc. 10%
Dun & Bradstreet Information Services
India Pvt. Ltd10%
The HongKong and Sanghai Banking Corporation Ltd.
5%
Bank of India5%
Indian Overseas Bank5%
Sundaram Finance Ltd.2.5%Housing Development
Finance Corporation Ltd.10%
Punjab National Bank5%
Citicorp Finance (India) Ltd 5%
Union Bank of India5%
ICICI Bank Ltd.10%
Central Bank of India5%
CIBIL – a unique business model
Members Banks All-India Financial Institutions Non-Banking Financial Companies Credit Card Companies Housing Finance Companies State Financial Corporations
CIBIL – a unique business model
CIBIL and its Members A close interdependent relationship
CIBIL to give prompt and meaningful credit information
This will depend upon Reach of Membership Quality and timeliness of data provided by Members
CIBIL
A centralised Database for sharing information
A world class credit bureau dealing with Commercial & Consumer credit information Positive & Negative credit information
Offers Risk Management Solutions Scoring Fraud Detection
Relationship Based Lending Information Based Lending
Functioning of CIBIL
Data SecurityData Security
Data Security @ CIBIL
Information is accessed on a strictly “Need to know” basis.
Access control devices, surveillance cameras installed at strategic locations.
Biometric access system at our Data Center.
Firewall, Intrusion Detection and Vulnerability Assessment System to secure our network infrastructure from external security risk.
Anti - Virus software installed on all servers in the Data Center.
Necessary configuration and updates continuously applied on our Servers and Network appliances.
Security – Data transmission
128-bit SSL encryption for all Web-based transactions including FTP.
Cryptographic solutions for all information sent or received through any physical media i.e. CD, DAT and DLT.
Security measures aligned with stringent information security management standards (BS7799).
Membership
121 credit grantors have accepted membership
75 Banks
16 NBFCs
10 FIs
13 HFCs
5 SFCs 2CCCs
75 Banks – Over 90% total credit outstanding amongst Commercial Banks 13 HFCs – Over 80% total credit outstanding amongst HFCs 10 FIs – Over 90% total credit outstanding amongst FIs 16 NBFCs – Substantial portion of the credit outstanding amongst NBFCs 5 SFCs Substantial portion of the credit outstanding amongst SFCs 2 CCCs - 100% total credit outstanding amongst Credit Card Companies
Legal Environment - Master Legislation
Cleared by Parliament
President’s Assent
Obtained
Awaiting official
Notification
Enable Banks / FIs / SFCs to share all data without consent
Establish the regulatory framework for Credit Bureaus in India
Enunciate the rights and responsibilities of Members and Bureaus
CONSUMERCONSUMER BUREAU BUREAU
LAUNCHED ONLAUNCHED ON
APRIL 5, 2004APRIL 5, 2004
Consumer Bureau
The Consumer Bureau was launched on April 5, 2004 with a database of 4 million accounts contributed by 13 Members.
Subsequently, our database has grown over 48 million accounts contributed by 48 Members.
The Consumer Bureau reports are available to Members, who have submitted all their data to CIBIL in an acceptable format (Principle of Reciprocity).
CASE 1: An individual, who had applied to one of our members for a loan of
Rs. 10 lacs, was found to have 8 loans of the same type from a single bank and one credit card outstanding, totalling approx. Rs. 14 lacs. This was revealed in the CIBIL CIR.
CASE 2: A member recently asked a new applicant about his previous loans
and the payment history of those loans. The borrower mentioned that he had one previous loan on which he had recently delayed the payment by a month. However the Credit Report accessed on the borrower from CIBIL reflected that payment was delayed by 8 months.
Success Stories
Success Stories
CASE 3: One of India’s leading newspapers reported, "Four banks had turned down a
Pune businessman’s housing loan application based on his payment data. He apparently had a history of frequent defaults on his credit card payments".
CASE 4: A borrower recently approached a member for a housing loan of Rs. 1
crore. During the preliminary discussion, the member asked the borrower if he had previously taken any other loans. The borrower said that he had never borrowed in the past. However a Credit Report accessed on the borrower from CIBIL reflected one closed housing loan taken by the borrower in the past from another Credit Grantor.
SME SECTORSME SECTOR
Importance of SMEs in India The Government of India targeted the Indian economy to grow at
8% per annum, as stated in its Tenth Five Year Plan
The Government reiterated the importance of SMEs in India in achieving and sustaining strong economic growth, high employment and poverty reduction
It has been estimated that the SME sector contributes 40% of domestic production and 50% of total exports by India
“SMEs form potentially a key engine of economic growth, job creation and greater prosperity”
The introduction of the Small and Medium Enterprises (Development) Bill and the policy on credit.
The new thrust is towards up-scaling the size and technological upgradation.
Recognization of SMEs in the services sector, and treating them on par with the small scale enterprises in the manufacturing sector.
Union Budget 2006 - 07
SME SECTOR
SME Sector in India
accounts for
SME Sector in India
accounts for35 % of exports
95% of all industrial units
40% of industrial output
45% of industrial employment
Prime driver of new employment
SMEs play an important role in promoting growth anddevelopment
SME sector
SME sector
Credit grantors have been reluctant to lend to the SME sector due to:
Perceived risk of this sector
Lack of comprehensive credit information
The credit bureau will create a database of SME borrowers in order to provide pre-screening of SME borrowers, in order to:
Provide comprehensive information, which will enable credit grantors to make informed credit decisions
Facilitate the flow of credit to the SME sector
Indian Experience in SME Banking
SMEs are vulnerable
Information about SMEs is scarce
SMEs are geographically dispersed
SMEs are transaction intensive
Credit bureaus reduce financing
Constraints for small firms
% of Small Firms ReportingHigh Financing constraints
Probability of obtaining aBank loan for a small firm
Estimates based on 5000 firms in 51 countries
Source: World Bank (2003)
Customer spectrum for Banks
Individuals as
Consumers
Individuals as
Consumers
Partnership & Family Owned
Businesses
Partnership & Family Owned
Businesses
Small & Medium
Sized Companies
Small & Medium
Sized Companies
Top TierLocal and
Global Corporates
Top TierLocal and
Global Corporates
Small and Medium Enterprises Corporat
e Banking
Consumer Banking
SME segment is an essential part of the customer spectrum for banks
Large Local
Corporates
Large Local
Corporates
Individuals in Business
Individuals in Business
Advantages of CIBIL for Banks
Independent, trusted third party opinion on capabilities & credit
worthiness of SMEs
Faster processing of SME applications for bank loans, thereby
leading to time and cost savings for each SME credit evaluation
Better credit pricing depending on borrower performance
Improved credit risk portfolios (this is especially important given
the increased focus on credit risk management and Basel II)
Increased profitability, through cost savings as well as improved
SME loan portfolios
Launching shortlyLaunching shortly
Commercial Bureau
Update Commercial Bureau
Systems & Infrastructure
Commercial System – Customised & Installed
Data Centre – Commissioned & Operational
Data on suit-filed accounts of Rs.1 Crore and above and suit-filed accounts (willful defaulters) of Rs.25 lacs and above available on our site - www.cibil.com
Launch of the Commercial Bureau
Launch of operations depends on receipt of critical mass of data
Data inflow from Credit Grantors has commenced
Launch operations in 1st quarter of the FY 2006 - 07
Commercial Bureau Report
Commercial Credit Report contains Non-Individual Borrower Information
Name and Address D-U-N-S® Number Other Identification numbers e.g. PAN Legal Constitution Relationship details e.g. major shareholders, directors etc.
and their addresses, D-U-N-S® Numbers Number of inquiries made on that borrower
Commercial Bureau Report
Commercial Credit Report contains Account details
Number of credit facilities Credit type Loan amount Outstanding amount History of credit outstanding - short, medium and long
term Asset classification Wilful defaulter and suit filed status Guarantor details
Benefits of CIBIL
Provides access to better credit information by allowing credit grantors to
exchange credit information while ensuring they do not lose their
competitive advantage
Automated decisioning system leading to lower cost of credit evaluation,
consistent decisioning and greater efficiency
Assists in evaluating and monitoring repayment ability and payment
diligence
Lowers default risk by assisting credit grantors improve their credit
portfolios
Allows credit grantors to price the risk appropriately
For Credit Grantor
Provides faster access to credit
Reduces cost of borrowing for borrowers with good credit records
Reduces subjectivity in the credit assessment process
Encourages borrowers to maintain greater self discipline in
acquiring financial commitments
Allows borrowers to build reputational collateral by following
correct repayment behaviour
Benefits of CIBIL
For Borrowers
Credit bureaus, over the medium term, benefit all market players
SME Lending is an untapped engine of growth for the Indian economy, its development will be accompanied by the establishment of a critical risk management infrastructure, i.e. CIBIL
CIBIL will create a win-win situation for credit grantors and consumers
3 Key Messages
We are the CATALYST!
