The number of people affected by bad credit scores has been rather thin because more than half the data at the country’s largest bank is rejected by CIBIL’s database as it is incomplete
It is 10 years since the Credit Information Bureau (India) Ltd (CIBIL) was incorporated. Yet, fewer than 10% of those who attend Moneylife Foundation’s financial literacy workshops are usually aware of the role of credit bureaus or the implications of a negative credit history. In theory, all your financial actions—late payments of credit card dues or equated monthly instalments (EMIs)—blend into a numerical credit score that reflects your creditworthiness.
For the past year, we have been warning people that their financial behaviour has consequences. A good record gets swifter loans, higher credit and the ability to bargain down interest rates and charges, while defaults can throw you out of the financial system. Yet, the number of people affected by bad scores is rather thin. The mystery behind this was solved by a conversation with Siddharth Das, CEO of High Mark Credit Information Services, the fourth credit bureau cleared by the Reserve Bank of India (RBI). Explaining how High Mark hopes to find a business niche, he says, well over half the data at India’s largest bank is rejected by CIBIL’s database because it is incomplete. Ditto for the records of most other public sector banks, most of which have old customer records that do not have all the details. This really means that a decade after RBI set up a credit bureau, half the people who have bank accounts—especially with public sector banks—needn’t worry about being on any defaulter’s list!
Banks now hope that Nandan Nilekani’s Unique Identification (UID) Number will give them a shortcut to tagging and listing their account holders by their fingerprints and iris patterns. It is one reason why all banks are waiting to make UID numbers mandatory for their account holders. Why are records incomplete when all of us file identification documents under know your customer (KYC) rules? According to High Mark, it is because these documents (as PAN, driving licence number, passport number, ration card & voter’s ID card) “are neither widely, nor consistently available.” The result is that the name, address and possibly age/date of birth are the only real identification elements.
Is UID the only way forward? Well, High Mark claims a heuristic algorithm, which can read and match various data elements of varying reliability (including salutations and abbreviations) and a unique “homophone name-matching solution for Indian names” that would allow it to cut through multiple languages as well as regional and community conventions. These tools allow High Mark to clean a significant chunk of data that has been rejected by CIBIL for want of clear identifiers. But even with the entry of High Mark and others, it will be five to seven years before every Indian really has to worry about low credit scores or defaults.— Sucheta Dalal