Shri M Rajeshwar Rao, Deputy Governor, Reserve Bank of India was invited to deliver the keynote address on the occasion of the 25th anniversary of Trans Union, (TU CIBIL) and credit reporting in India and congratulate CIBIL for its glorious service to India. While gladly appreciating the systematic and regular introduction of credit reporting from the incessant stage in Indian economic scene, he narrated its contribution in the credit rating systems and its evolution. He made us aware that credit reporting systems today operate as a key element in the national financial architecture, encouraging greater credit access, supporting financial inclusion, enabling effective supervision, and enhancing financial stability.
How far the requirements of the credit institutions and the borrowers had been met by introduction of various measures like the Evolution of Credit Information Companies in India, CERSAI and CRILC, Digital Public Infrastructure (DPI), Unified Lending Interface (ULI), Improved access to credit, Digital initiatives for MSME sector, Rise of FinTech Ecosystem, Open Credit Enablement Network and Open Network for Digital Commerce, Central Bank Digital Currency (CBDC) for credit disbursement, Leveraging Tokenisation for Credit Delivery, Role of AI/ ML in facilitating credit delivery, Grameen Credit Score, and the role played by RBI as the regulatory authority were explained in detail by the respected Deputy Governor of RBI.
This gives us an opportunity to update our knowledge in credit reporting areas and other developments to serve all stakeholders better.
What were the hindrances to the acceptance of the credit information provided by credit institutions? Can we have some information?
Based on the working group established by RBI and its wise counsel, Credit Information Bureau (India) Ltd. (CIBIL) was thereafter incorporated in 2000, and over the years, three other Credit Information Companies (CICs) have also started their operations in India. A variety of challenges had hindered wider acceptance of credit information companies over the years like inconsistent quality in data submitted by lenders and shortcomings in consumer protection mechanisms. Significant improvements in the working of institutions based on again a committee set up by RBI in 2013 and its recommendations like standardisation of data formats for individual, corporate and micro finance borrower segments, institutionalizing the mechanism of Technical Working Group comprising of representatives from various regulated entities and introduction of Data Quality Index for improving data quality were made.
Some of the regulatory measures quoted by the Deputy Governor of RBI included——–
- mandating availability of free full credit report (FFCR) to individuals,
- appointment of internal ombudsman by CICs,
- extending the Reserve Bank’s Integrated Ombudsman Scheme to CICs,
- introduction of a framework for granting compensation to customers for delayed rectification of their credit information and
- increasing frequency of credit reporting.
RBI directions have also mandated the CICs to display the list of suit-filed accounts of large defaulters and wilful defaulters on their website. This gave an opportunity for lenders to really know the financial character of large defaulters who attempted to avail same finance from various lenders offering the same assets and other securities.
Now let us briefly understand various measures mentioned by the learned speaker in his speech.
CERSAI and CRILC
“In 2011, the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) was incorporated, initially for operating a registration process under the provisions of SARFAESI Act. Over a period of time, it has a complete registry containing security interest of immovable, movable, intangible properties and assignment of receivables. In a nutshell, we may say by providing access to all kinds of creditors and the facility for filing of attachment orders and court orders, CERSAI delivers a comprehensive status of any encumbered / attached property.” These feelings emerge in us after reading the speech.
The Central Repository of Information on Large Credits (CRILC), was set up in 2013 by the Reserve Bank to collect, store and disseminate information on large credits of scheduled commercial banks, all India financial institutions and certain non-banking financial companies.
The above set up of institutions had been serving the requirements of banks and financial institutions of all kinds who need credit information about borrowers of all kinds.
The other notable institutions mentioned by him and their useful roles in short were mentioned by him as enumerated below:
1. Digital Public Infrastructure (DPI): A framework that incorporated technology, markets, and governance to serve the public in a coherent manner.
2. Others got the respect, like Unified Payments Interface (UPI, Aadhaar Digital ID, Aadhaar Payment Bridge, Aadhaar Enabled Payments System (AEPS), Digi Locker, Bharat Bill Payments System, now called Bharat Connect for bill fetch & pay, and FastTag etc. As indicated, Aadhar card plays an important role in various ways.
The monetary issues involving the financial /digital requirements of MSME borrowers, processing of financial requirements of borrowers for less than Rs 1 lac by not having physical presence but by on – line technology, making informed credit decisions by utilizing alternative data sources, such as cash flow information, the use of kissan credit cards for tenants of lands in agriculture and the necessary follow-up by digital observations, the use of Tokenisation i.e. generating and recording a digital representation of financial or real assets on a programmable platform, using artificial intelligence (AI) and machine learning (ML), algorithms that can evaluate alternative data from diverse sources to determine creditworthiness more accurately for under privileged borrowers with no credit history were some of the urgent needs of credit worthiness of borrowers and monitoring their past conduct , dealt in details by the deputy governor in his speech.
- Grameen Credit Score
- Role of AI/ ML in facilitating credit delivery
- Leveraging Tokenisation for Credit Delivery
- Central Bank Digital Currency (CBDC) for credit disbursement
- Open Credit Enablement Network and Open Network for Digital Commerce
- Rise of FinTech Ecosystem
- Digital initiatives for MSME sector
- Improved access to credit
- Unified lending interface.
Apart from starting the discussions from the starting of the TU CIBIL, the learned speaker drew our attention to a litany of advanced monetary measures totally thought of as out of the box approach by many institutions which got evolved by the timely action taken by the Government of India/RBI to serve social dispensation of credit to the under privileged population, the vast emergence of MSME units which may not have any tangible assets to offer as collaterals, and the complete supporting of various institutions which catered to these sectors normally considered as unusual or may be, those who would fail in normal course.
Concluding remarks by the worthy speaker
Before concluding his praiseworthy speech, the deputy governor of the RBI, drew our attention to the notable regulatory role played by RBI such as establishing a framework for Fin Techs to continue to encourage their creative potential to the maximum extent while minimising the idiosyncratic risk they pose to the financial system by issuing a framework for self- regulatory organisations in the Fin Tech sector in 2024.
The Reserve Bank of India innovation hub, its wholly owned subsidiary commenced a vibrant infrastructure to facilitate the immense progress of Fin Techs in the nation.
Other initiatives included Fintech and Startup Acceleration (FAST) – aiming to connect the stakeholders, viz., the startups, incubators, accelerators, investors, regulators and banks and financial institutions to accelerate innovation and financial inclusion, through the HaRBInger initiative, to enable the global innovation community to solve real-world problems with a special focus on inclusive design and accessibility for differently abled persons in the digital finance journey.
With a view to put in place a regulatory framework for FinTechs that maintains a balance between maximising their creative potential while minimising the idiosyncratic risks they pose to the financial system; the Reserve Bank issued a Framework for Self-Regulatory Organisation(s) in the FinTech Sector in 2024. The Reserve Bank Innovation hub, a wholly owned subsidiary of RBI, commenced an initiative to foster a vibrant infrastructure for facilitating the progress of FinTechs in the country.
The initiative – Fintech and Startup Acceleration (FAST) – aimed to connect the stakeholders, viz., the startups, incubators, accelerators, investors, regulators and banks and financial institutions to accelerate innovation and financial inclusion. Through the HaRBInger initiative, Reserve Bank has been encouraging the global innovation community to solve real-world problems with a special focus on inclusive design and accessibility for differently abled persons in the digital finance journey. To foster continuous innovation, it made the Regulatory Sandbox ‘on tap’ and ‘theme-neutral’.
Let me actually quote his words
“We stand on the cusp of a transformative financial era where technology, policy, and innovation converge to democratise credit access. Various initiatives, collaborative partnerships and sustained regulatory support are laying the foundation for a more inclusive, resilient, and sustainable economy.
While the institutions in the financial system have done commendable work, the journey is far from complete. The setting up of Credit Information Companies was in one sense the starting point of this journey of financial inclusion and democratisation of credit. Even as the journey continues, the role of the CICs remains integral and important in realizing the vision of Total Financial Inclusion.”
My final observations
Let us read the speech of one of the most learned monetary experts, the deputy governor of the Reserve Bank of India thoroughly several times to understand the revolutionary changes allowed and the actual day to day monitoring visualized by them to ensure the safety of the data acquired by the agencies and secure them enough from the misuse by new entrants trying to monetise the data for their own selfish needs. Let us pray that India at the cusp of revolutionary changes in securing data will protect an average Indian with his prosperity. His awareness is equally vital for his growth.
Caution
This is just an observation of mine on the golden speech of the deputy governor with laudatory information. If one wants to deal seriously with the data, an expert help may be needed. Just read the speech several times to get the real feel.
Reference
RBI website
https://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/CIBIL020720254A4A45E67EF64B09A2DD90B1D4AE6690.PDF
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