The US administration has objected to the Reserve Bank of India’s (RBI) move to create a new public credit registry (PCR), on the grounds that the non-profit credit information company will be anti-competitive for private credit bureaus (PCBs). The PCR is planned as a repository of loan information of individuals and corporate borrowers to curb bad loans.
A PCR will help banks distinguish between good and bad borrowers and accordingly offer attractive interest rates to good borrowers and lend to bad borrowers at higher interest rates.
The move is based on the recommendations of a task force set up in 2017, headed by Y.M. Deosthalee. The committee submitted its report in April 2018 and the central bank made it public in June last year.
In October last year, the RBI had invited expressions of interest (EOI) for developing the registry from companies with a turnover of more than ₹100 crore in the last three years. It has shortlisted six major technology companies, including TCS, Wipro and IBM India.
Four PCBs are operating in India, of which TransUnion CIBIL Ltd and Equifax Credit Information Services Pvt. Ltd are US-owned companies. The other two PCBs are Experian Credit Information Co. of India Pvt. Ltd and CRIF High Mark.
A government official with knowledge of the matter said the US has complained that the PCR will limit PCBs’ access to data and hinder their scope and ability to operate optimally in the country. Instead, it wants India to create a PCR to provide regulators with data to perform supervisory duties. However, India in its response to the US has said that its concerns are misplaced and PCR will not affect the functioning of PCBs in India. The official said India has informed the US that PCBs will have access to the PCR data as required to carry out their mandate and as decided by the RBI.
“Private credit bureaus will have to focus on and generate value from analytics, rather than from the unique access to data enshrined by regulation. A PCR, limited to regulatory and supervisory usage only, will not be a ‘public’ credit registry in the true sense of the term and defeat the purpose of democratization of credit information," the official said under condition of anonymity.
RBI deputy governor Viral Acharya had said in January this year that globally, PCBs and PCRs both operate in the same space. “PCBs can be legislatively authorized to receive credit data. However, being for-profit enterprises, they may focus primarily on those data segments around which it is most profitable to build a business model. Indeed, it is found internationally that a PCR, being a non-profit enterprise, is able to ensure much better data coverage than PCBs," he added.
The PCR is proposed to cover all regulated financial entities in phases and in this way get a 360-degree view of borrowers. It will facilitate linkages with related ancillary information systems outside the banking system including corporate filings, tax systems (including the goods and services tax network or GSTN), and utility payments.
“The PCR will have to be backed and governed by a comprehensive Public Credit Registry Act to be brought in consultation with the government. It will have to follow the latest privacy guidelines based on a laid down consent framework," Acharya said.
At present, institutions that report credit information to PCBs include all scheduled commercial banks and cooperative banks, non-banking financial companies, housing finance companies, state financial corporations, all India financial institutions, and credit card companies.
The US has also raised objection to the Draft Personal Data Protection Bill that mandates that either the personal data or at least a copy of it needs to be stored on a server located in India. The US has complained that the proposal would harm companies that rely on cross-border data flows to conduct business, including small and medium-sized enterprises.
The US suggested that India allow companies to transfer data across borders when they certify to binding international codes of conduct, such as the APEC Cross-Border Privacy Rules System. India has informed the US that the draft bill is under consideration and will evolve over time.