Credit bureaus play a vital role in supporting a growing economy by facilitating access to credit, reducing information asymmetry, and improving risk management. As India celebrates its 76th Republic Day today, let’s look back on a journey of transformation of the country’s financial ecosystem and the role played by responsible credit.
Over the past 25 years, TransUnion CIBIL has been at the heart of this transformation, building trust, enabling credit growth, fostering financial inclusion and driving the ease of doing business. This Republic Day, Bhavesh Jain, Managing Director (MD) and Chief Executive Officer (CEO) of TransUnion CIBIL, spoke about how TransUnion CIBIL continues to play a pivotal role in empowering millions of individuals and businesses as they drive India’s growth.
“For the last 25 years, we have been working with credit institutions, and with consumers to make sure that we solve information asymmetry. Through TransUnion CIBIL, we have ensured that the lenders get information about the consumer’s repayment history and their score, which helps them assess the consumer’s credit worthiness objectively and ensure that loans or credit facilities are provided objectively in the shortest possible time,” said Jain.
TransUnion CIBIL saw its genesis in 2000, post economic liberalisation and privatisation of banks to address a gap in the system, where lenders were looking for means to assess consumers asking for credit facilities. The process was time consuming and required a lot of data and documentation.
“We have been working with credit institutions, consumers and government bodies on a few key areas. The first one is credit growth, which is critical because credit growth and economic growth are interlinked. Credit growth has been enabled for the last 25 years because there is objectivity in the decision making process,” he said.
TransUnion CIBIL has enabled credit institutions to give loans and credit facilities on a near real time basis as they make informed decisions, and not subjective calls at branches. It has also helped democratise credit, which is no longer concentrated to individuals and businesses in Metros and urban areas.
“The second area is financial inclusion. We work with a lot of government bodies, banks, and semi regulated bodies to make sure that we are able to go to the last mile. We educate the consumer about moving to the formal trade sector and the importance of a good credit history,” he further added.
This has brought a much larger part of the society into the realm of formal credit, who now appreciate the importance of a good credit history and also gives them access to credit in the future, to fulfil both individual needs – like loan for a home, education, or a vehicle for commute; and business requirements.
The third area, he said, is helping with the ease of doing business. Today, Micro Small and Medium Enterprises (MSMEs) are the backbone of the Indian economy as they contribute to almost 30 per cent of India’s Gross Domestic Product (GDP), and provide employment to semi-skilled or unskilled labour, which is important for a growing economy like ours.
“Similar to the consumer credit report and the score for individuals, we have a commercial credit report, and a CIBIL MSME Rank, which ranges from 1 to 10, one being the best. This ensures that an MSME or a small merchant who is seeking credit to grow their business or get their stock or to meet any other business needs, approaches the formal trade sector. They get evaluated objectively and get the best terms and conditions from different banks or Non-Banking Financial Companies (NBFCs) on the basis of their trade performance or credit behaviour over the last few years,” he explained.
Today, there are about 7 crore MSMEs in the country of which nearly 3.5 crore MSMEs reported to TransUnion CIBIL by different credit institutions, after they have asked for credit. A good credit information report, repayment history and CMR, can translate into a lot of financial benefits from different credit institutions in form of lower rates of interest, and a green channel approach to avail credit. “We have around 90 lakh MSMEs who are quite active on credit. So, there is an opportunity to bring them into the formal credit system,” he said.
Businesses can access their commercial credit information report and CMR, which are analysed by credit institutions to decide the type of loan to be given and its extent. The commercial credit information report contains details about credit repayment behaviour, the type of credit facilities taken, tenure of those credit exposures, the firmographic information, information about the related parties like proprietor, partner, etc and credit applications made by the MSME. They also get a CIBIL MSME Rank, which ranges from one to 10, one being the best.
“I would encourage MSMEs to continue monitoring their credit report and the CMR. We work with a lot of government bodies, banks, NBFCs to create an awareness within MSMEs about availability of credit from the formal banking sector which can be deployed for their business needs,” he said.
A good CMR and commercial credit information report can translate into faster processing of credit applications, a better rate of interest, and additional benefits like tenure of loan and other small terms and conditions.
Today, CIBIL Score has become synonymous with your credit score. Simply put, a CIBIL Report for an individual is a simple representation of the different loans, credit cards taken from banks or NBFCs, along with the credit repayment history. It also contains additional information like contact details, address, etc and credit application information about the consumer. The CIBIL Score is a three digit number ranging from 300 to 900 – the higher the score the better is the risk profile of that customer.
For credit institutions, TransUnion CIBIL provides objectivity and the power to make informed decisions through various data driven insights tools and analytical solutions. For a country like India, every bank and NBFC gets a large number of applications for credit.
“We help them service these needs by leveraging data driven insights and analytical solutions across the consumer life cycle, whether at the time of application, underwriting, or managing a customer’s account at different stages of the consumer life cycle. Our endeavour has been to work with credit institutions to solve for information asymmetry,” said Jain.
While credit penetration has significantly improved post economic liberalisation, the country still has a long way to go in bringing credit within reach for a larger section of the population. TransUnion CIBIL is working towards this goal in multiple ways by educating both individuals and businesses about responsible credit.
“The first is working with credit institutions on creating awareness about accessing credit to the formal sector. Second is ensuring that once you take a loan or a credit card, you repay on a regular basis, and you ensure good repayment behaviour, maintain a good CIBIL Score, and take your report on a regular basis,” he said.
Every individual can access one free CIBIL Report every year from cibil.com or on the CIBIL app. Don’t get disheartened if your score is not up to the mark. Jain shared some tips to improve those credit ratings:
· Make sure that you start paying your loans or the credit card bills on timely basis
· Restrict your credit off take. Don’t apply on a regular basis to different institutions
· Make sure that you pay within the timelines
· Don’t max out the utilisation on your credit cards
Jain concluded the session with a message for people wanting to manage their credit profiles: “I would say, be within your means, monitor your credit report and your score on a regular basis along with your CMR if you are a business entity, and make sure that you continue to pay on time, you ensure that you take credit but are responsible about it.”
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