Credit information bureau to be formed by Aug

NEW DELHI: Lenders may no longer have to leap in the dark. As part of the big ticket banking sector reforms, the Finance Ministry is pushing for getting the Credit Information Bureau operational in a couple of months.
The Credit Information Bureau will work as a centralised agency which will keep a credit history of all borrowers from banks and financial institutions, process the information and make it available to the lending institutions.
The idea is to block any further loan assistance to those borrowers whose creditworthiness is suspect. The bureau will work on a large technical database and would have centralised information flow from banks and financial institution.
Finance ministry sources said that this, along with the creation of an Asset Reconstruction Company, was high priority, with the Centre keen on it taking shape by August. While the CIB is being anchored by HDFC Bank, the ARC is being piloted by ICICI Bank. The Cabinet recently paved the way for enabling foreclosures of assets and securitisation to create a conducive climate for the ARC to start functioning.
After initial hiccups, the CIB is now poised to take off and it would work as a company with stakeholding from HDFC Bank, SBI and foreign partners Dun & Bradstreet and Trans Union International. As per the shareholding pattern cleared, the Indian partners will hold 40 per cent each and the foreign companies will hold the balance. For long, the creation of the CIB was held up on account of doubts if information sharing was in violation of the banking regulations’ secrecy cla-use. An RBI technical group has resolved the issue paving the way for banks and financial institutions to share borrowers’ information with the bureau.
The finance ministry’s immediacy in getting the CIB and the ARC operational stems from the whopping NPAs which stand at over Rs 60,000 crore. The bureau is expected to address the high NPA levels as it has been found that poor recovery was mostly on account of defaulters. And, the banking system has no way of plugging this loophole in the absence of a credit check of borrowers.