Initial Steps Towards the Setting up of a Public Credit Registry for India
Viral V Acharya
Deputy Governor, Reserve Bank of India
Inauguration of Data Analytics Stack, IIT Madras 5th November 2017
State of Economic Research on India
♦ A vibrant network is slowly but steadily emerging
> University and business school professors
> Analysts at banks, non-bank finance companies (NBFCs), rating agencies, among others
> Researchers at policy institutions and think tanks
> Probing inquiries and fact discovery by media
> Seminars, conferences, forums, panels, deputations
> Global interest in studying India is surging
> More undergraduate and post-graduate (MS, PhD) students interested in pursuing Economics and Finance!
> Miles to go before we sleep… on a good, firm trajectory
A HUGE opportunity!
♣ Alongside banks and other financial intermediaries, need a parallel ecosystem of economic and financial data and information services that
> Collects, collates and generates new data points on the economy and financial markets
> Disseminates publicly or sells the data
> Analyzes, aggregates and researches data to provide information analytics
> Creates information-based business opportunities
> Aids analysis-driven policy-making and thinking
♣ Given our core human resource strength in computing and information systems, this is a low hanging fruit that has not yet been plucked
♣ Real-time inflation and consumption metrics:
> E-commerce sites
> What are the sustained temporal and geographic variations in prices and quantities?
♣ Employment statistics:
> Payments data; bank and NBFC KYC data; tax filing data
> Can Big Data help us compute quarterly unemployment rate?
♣ Rural and informal economy:
> NBFCs; MFIs; FMCG companies; Night luminosity measures
> Do omissions of rural / informal economy in formal statistics mask economically relevant growth / inflation outcomes?
♣ State finances:
> Implied credit rating/risk using RBI State Finances report
> What is the implied subsidy in borrowing costs?
♣ Hot money flows and external sector vulnerability:
> Corporate bond, commercial paper, External commercial borrowings, Masala bonds – FPI investments (maturity/location)
> Which of the flows are “carry trades” and which are long-term?
♣ Governance and corporate finance of pyramids and group companies:
> Consolidate individual company/subsidiary filings
> Are internal transfers tunneling or internal capital markets in response to credit constraints?
> Are foreign transactions round-tripping / tax-arbitrage or genuine investments?
♣ Bank lending boom and bust cycles:
> Let me elaborate on this as a leading example as to how it could be done better
> Initial steps undertake n for Public Credit Registry (PCR)
Public Credit Registry for India
Tracking a credit transaction from source to destination, all through its life…
High Level Task Force
Announced at RBI’s August 2017 Monetary Policy Meeting
Held its 1st Meeting on 24th October 2017
Report Due by the 1st week of April 2018
Large Borrower Credit information in India
– Set up in 2014-15
– SCBs report credit information quarterly on large borrowers (threshold INR 50 mn)
– Covers around 60% of loan portfolio and 80% of NPAs
– Slippages in asset quality (restructuring, continued non-performance) reported on as-and-when basis
– Borrower level data set
– Designed entirely for supervisory purposes with focus on the reporting entity’s exposure to the borrower
– Pooled information shared with reporting banks only
– Steps underway to provide group-level exposure
Credit information in India – Contd.
– From 1972
– Account level credit information from March 2013
– Quarterly statistical return capturing spatial, temporal and sectoral metadata
– No borrower identification
– Information published at aggregate level, granular data shared with researchers on a case-by-case basis with appropriate safeguard
Advantages of a Public Credit Registry
– Impact could be the greatest for MSME financing
– Flow-based credit origination, Fin Tech, …
– Efficient credit assessment and pricing by banks
– Sound risk management and financial stability
Terms of reference for the Task Force
Task Force will look at
– Bank-borrower loan-level data detailing loan terms at time of origination along with data on borrower’s economic and financial health
– The internal and external ratings and their evolution
– Bank-borrower loan-level restructuring data with all details
– Secondary loan sales and price information
– Borrower-debt level Default and Recovery data
– To build a new comprehensive information system from bottom-up or linking existing systems and building on top of that?
– LEI reporting has been made mandatory in CRILC along with ongoing PAN
– Wherever available, Aadhaar, PAN, CIN, LEI reporting is being mandated in BSR-1
– Tapping the credit bureaus
– Modular project implementation with timeline to attain the goal
Constitution of the Task Force
– credit bureaus, and
– credit rating agencies,
which are not directly part of the Task Force for technical reasons
♣ Public Credit Registry won’t be a panacea…
“Not everything that counts can be counted; and not everything that can be counted counts.”
– Albert Einstein
It is a sobering thought for economists!
But it should nevertheless induce innovations to count better what really counts!!
Public Credit Registry for India is a step in this direction.