UK credit info expert to set up shop here soon

NEW DELHI: Spending and borrowing habits of customers will now be tracked more closely. Credit information, a relatively nascent industry in India, will soon have a new entrant — UK-based Experian which plans to set up shop here. Credit information companies improve lending decisions of banks and financial institutions by assigning credit scores to customers.

The sector was thrown open to private and foreign investments in last December when the government enacted the Credit Information bill. The $3-billion company, world leader in profiling credit histories of customers, is setting up a credit information bureau. It is in talks with public and private sector banks to float a JV credit information firm where Experian plans to have at least 49% stake. The majority stake will be held by the Indian partner.Richard Fiddis, managing director, emerging markets development at Experian, told ET, “We are making a multi-million dollar investment. We hope to be market leaders in this space in India. We have been operating in developed credit markets as well, including the US and the UK.”

The RBI is expected to grant Experian the licence by July, and the company will begin operations over the next six months. According to the Credit Information Act, a credit information bureau is required to have a minimum authorised capital of Rs 100 crore. The company will service banks, financial instutions, and specified users like Sebi and IRDA by providing them credit scores of their borrowers.

Lenders can evaluate potential risk and mitigate chances of accruing bad debt. For borrowers, a good credit score will guarantee qualification for a loan, cheaper interest rates and enhancing credit limits on their own terms. Besides, a lender can even opt for cross selling across customer databases. Credit information is expected to revolutionise fraud detection and recoveries of default payments. “With credit growth at 35%, India is an important market for us,” Mr Fiddis said.