The Reserve Bank of India (RBI) has always been at the forefront of ensuring the stability and efficiency of the financial sector. In line with this commitment, RBI has introduced a significant initiative to enhance data quality in the commercial and microfinance segments. The latest circular, dated September 20, 2023, outlines the introduction of a Data Quality Index (DQI) for these segments by Credit Information Companies (CICs).
Detailed Analysis:
Background on Data Quality Index (DQI): To assess the quality of data submissions by Credit Institutions (CIs) to Credit Information Companies (CICs), RBI had previously introduced a Data Quality Index (DQI) through a circular in 2014. This index aimed to improve the quality of data over time, particularly in the consumer segment.
Extension to Commercial and Microfinance Segments: Recognizing the need for further implementation of DQI, RBI has now mandated CICs to prepare DQIs for Commercial and Microfinance segments.
DQI Scores: CICs are required to provide DQIs for Commercial and Microfinance segments to all member credit institutions on a monthly basis. These DQI scores will be in numeric form.
Segment-Level Scores: The DQI scores for Commercial and Microfinance segments will be provided at both the CI and file levels. CI-level scores will be calculated as the weighted average of file-level DQI scores in the respective segments for each CI.
Industry-Level DQIs: CICs will compute industry-level DQIs for each of the three reporting segments (Consumer, Commercial, and Microfinance) as weighted averages of CI-level DQIs within their respective categories (e.g., Public Sector Banks, Private Sector Banks, Foreign Banks, Co-operative Banks, RRBs, NBFCs, etc.). These industry-level DQIs will be calculated on a monthly basis. Additionally, a half-yearly Industry Benchmark will be calculated as a rolling average of the preceding six months’ Industry-level DQI scores for respective categories of CIs.
Reasons for Decline: CICs are required to provide reasons to each CI if their CI-level score has declined compared to the previous month or if the CI-level score is lower than the half-yearly industry benchmark.
Reporting to RBI: CICs will provide monthly data of CI-level DQIs and industry-level DQIs of all segments to the RBI’s Department of Supervision, Central Office, at half-yearly intervals (as of September 30 and March 31 each year) for monitoring and information purposes.
CI’s Responsibility: Credit Institutions (CIs) are advised to conduct a half-yearly review of the DQI for all segments, aiming to enhance the quality of the data submitted to CICs. CIs are required to report corrective actions and their outcomes to their top management within two months from the end of that half-year.
Conclusion:
The introduction of the Data Quality Index (DQI) for Commercial and Microfinance segments by RBI is a significant step towards ensuring data quality and accuracy in the financial sector. By providing numeric scores and industry benchmarks, RBI aims to promote transparency and accountability in data reporting. Credit Institutions and Credit Information Companies must work collaboratively to meet these new requirements, ultimately contributing to a more robust and reliable financial ecosystem.
Reserve Bank of India
RBI/2023-24/62
DoR.FIN.REC.39/20.16.056/2023-24 Dated: September 20, 2023
All Commercial Banks (including Small Finance Banks, Local Area Banks and Regional Rural Banks)
All Primary (Urban) Co-operative Banks/State Co-operative Banks/ Central Co-operative Banks
All-India Financial Institutions (Exim Bank, NABARD, NHB, SIDBI and NaBFID)
All Non-Banking Financial Companies (including Housing Finance Companies)
All Asset Reconstruction Companies
All Credit Information Companies
Dear Sir/ Madam,
Data Quality Index for Commercial and Microfinance Segments by Credit Information Companies
Please refer to our circular DBOD.No.CID.BC.127/20.16.056/2013-14 dated June 27, 2014, inter alia setting out a common Data Quality Index (DQI) for assessing the quality of data submissions by Credit Institutions (CIs) to Credit Information Companies (CICs) and improving the same over a period of time. Currently, the DQI is being used for data submitted under the consumer segment.
2. With a view to enable further implementation of DQI, it has been decided that CICs shall prepare DQIs for Commercial and Microfinance segments also as per Annex I and II, respectively. CICs shall provide the DQIs for Commercial and Microfinance segments to all CIs latest by March 31, 2024.
3. Further, CICs are advised as under:
i. CICs shall provide DQIs for Commercial and Microfinance segments in the form of numeric scores on a monthly basis to all member credit institutions.
ii. DQI scores for Commercial and Microfinance segments shall be provided at CI and file level. The DQI scores for Commercial and Microfinance segments at CI level shall be computed as weighted average of file level DQI scores of commercial and microfinance segment respectively of that CI.
iii. CICs shall compute industry level DQIs for each of the three reporting segments1 as weighted average of the CI level DQI in their respective category (e.g. Public Sector Banks, Private Sector Banks, Foreign Banks, Co-operative Banks, RRBs, NBFCs etc.) on monthly basis. Further, a half yearly Industry Benchmark shall be calculated as a rolling average of preceding six months Industry level DQI score of respective category of CIs.
iv. CICs shall provide reasons for decline in score to each CI, if its (a) CI level score has declined over the previous month or (b) CI level score is lower than the half yearly industry benchmark.
v. CICs shall provide monthly data of CI level DQI and industry level DQI of all segments to Department of Supervision, Reserve Bank of India, Central Office at half yearly intervals as on September 30 and March 31 each year, for information and monitoring purposes.
4. CIs are advised to undertake half yearly review of the DQI for all segments to improve the quality of the data being submitted to CICs. Corrective steps taken on the above issues along with a report on the same shall be placed before its top management by each CI for review within two months from the end of that half-year.
Yours faithfully
(J. P. Sharma)
Chief General Manager
Encl: Annex I and II
1Viz. Consumer, Commercial and Microfinance segments
