More Credit Information Companies on the horizon
Sharing of information between banks about defaulters got a little bit more chaotic with two more companies being granted license to deal in credit information. The functioning of the existing company itself was a cause of much heart burn amongst innocent borrowers caught in cross wire of inefficacy of the bank and the company. The logic of granting license to many such companies has not been spelt out by the RBI.
All banks are required to provide information about their loan defaulters to a credit information company. The credit information companies host the data of bank defaulters and in turn provide it to any one wanting to check out if a person is a loan defaulter or not.
Till now Credit Information Bureau of India Ltd (CIBIL) was the only company in the business of collecting and providing information about defaulters of bank loans. CIBIL has been sponsored by a clutch of banks including SBI and ICICI amongst others. The functioning of CIBIL has been criticized in the past for continued hosting the names of people who have long since have repaid their loans and have clean records. On the other hand CIBIL retorted by holding that they just host the data provided by the bank and they cannot do any thing unless the concerned bank's updates the information. On the other hand the banks held that CIBIL updates the data once in six months only and thus even though they had provided the updated data the old one continued to be listed by CIBIL. There are a number of cases where borrower have gone to court seeking relief against their names appearing on the CIBIL data base thus spoiling their creditability for taking a loan from banks.
Now two more new credit information companies have been granted license. These are Experian Credit Information Company of India Private Ltd and Equifax Credit Information Services Pvt. Ltd. And these may not the last ones and we may be hearing of newer ones joining the fray. It will only add chaos and confusion all round. Earlier we had to look up just one company to ascertain whether a person was defaulter or not. Now one will have to go through the data bases two new companies and some time latter perhaps many more. This will add more cost for due-diligence and increase the costs of borrowing, especially to small ones.
Instead of allowing so many credit information companies to come up up, it would be better to have just one single company to be in place in which all banks are member owners. It will easier to manage for the banks as well as the general public. By having so many companies in the filed it would be chaotic days ahead.
All banks are required to provide information about their loan defaulters to a credit information company. The credit information companies host the data of bank defaulters and in turn provide it to any one wanting to check out if a person is a loan defaulter or not.
Till now Credit Information Bureau of India Ltd (CIBIL) was the only company in the business of collecting and providing information about defaulters of bank loans. CIBIL has been sponsored by a clutch of banks including SBI and ICICI amongst others. The functioning of CIBIL has been criticized in the past for continued hosting the names of people who have long since have repaid their loans and have clean records. On the other hand CIBIL retorted by holding that they just host the data provided by the bank and they cannot do any thing unless the concerned bank's updates the information. On the other hand the banks held that CIBIL updates the data once in six months only and thus even though they had provided the updated data the old one continued to be listed by CIBIL. There are a number of cases where borrower have gone to court seeking relief against their names appearing on the CIBIL data base thus spoiling their creditability for taking a loan from banks.
Now two more new credit information companies have been granted license. These are Experian Credit Information Company of India Private Ltd and Equifax Credit Information Services Pvt. Ltd. And these may not the last ones and we may be hearing of newer ones joining the fray. It will only add chaos and confusion all round. Earlier we had to look up just one company to ascertain whether a person was defaulter or not. Now one will have to go through the data bases two new companies and some time latter perhaps many more. This will add more cost for due-diligence and increase the costs of borrowing, especially to small ones.
Instead of allowing so many credit information companies to come up up, it would be better to have just one single company to be in place in which all banks are member owners. It will easier to manage for the banks as well as the general public. By having so many companies in the filed it would be chaotic days ahead.
