Satish Pillai, new MD & CEO of CIBIL

Credit Information Bureau India Ltd (CIBIL), India’s leader in credit information, has appointed Satish Pillai as its new Managing Director and Chief Executive Officer on Thursday.

Pillai succeeds Arun Thukral who retires this year after a decade.

Satish Pillai has been serving CIBIL in the capacity of Chief Operating Officer for more than four years where he was responsible for product development and bureau operations. Earlier, Pillai led TransUnion’s operations in India overlooking the creation of the solutions team that supported generic and custom analytics and decisioning technologies, including the launch of the CIBIL TransUnion Score- India’s first generic scoring model, CIBIL said in a statement.

Pillai said, “A growing and thriving middle class is the key to a strong and vibrant economy for India. CIBIL’s commitment is to be the underlying credit infrastructure to this growth, enabling faster and cheaper access to credit by accelerating our investment in solutions across retail and commercial lending and partner in the national momentum of helping drive higher financial literacy, inclusion and protection. We are also working closely with the Reserve Bank of India and other Regulators to make the credit information infrastructure even more comprehensive and enhance our content to better serve the needs of our customers.”

CIBIL, India’s largest credit information bureau, maintains credit information on more than 406 million consumer accounts and 22 million business accounts and has a membership base of over 1400 banks and credit institutions.

Author: THe Hindu - Business Line

Reposted By: Credit 4 Loan

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Banks to start cross-checking KYC scores, too

Apart from checking credit history, banks and financial institutions have also started checking identity score as part of Know Your Customer (KYC) procedure..

If you would filled in the wrong date of birth in a bank application form or not filled in the correct address then there is a chance that your loan application may be rejected or it will take longer to process. This is because now apart from checking your credit history banks and financial institutions have also started checking your identity score as a part of the Know Your Customer (KYC) procedure. 

Mohan Jayaraman, Managing Director, Experian says that now lenders are taking the help of credit bureaus to ascertain the identity parameters. In this apart from ascertaining the identity other factors such as location is also taking in to account. 

“As part of this we will check if the address that you have provided is correct or not. Apart from this suppose if in the same house there are other people who have defaulted onloans or don’t have a sound credit history then it can raise a red-alert for banks,” he explained. 

Also, if you change your house very often then even that may even ring a warning signal for lenders, explains Kalpana Pandey, CEO & MD, CRIF High Mark Credit Information Services. 

“The idea is to also verify the address stability. Suppose if you have a home loan in another address and for your personal loan you have given another address, then it may be a concern for banks. Or if there are times when in one form a customer has mentioned a different birth date than the actual one then even that can lower the KYC score,” she added. 

Experts explain that these scores and checks by credit bureaus can help in weeding out KYC or Anti Money Laundering Frauds. Recently, in April Reserve Bank of India slapped a penalty of Rs 1.5 crore each on three public sector banks - Bank of Maharashtra, Dena Bank and Oriental Bank of Commerce - for violating KYC-AML rules. Apart from this, the regulator had also asked eight other public sector banks - Bank of India, Punjab National Bank, State Bank of Bikaner & Jaipur, Union Bank of India, Central Bank of India, UCO Bank, Vijaya Bank and Punjab & Sindh Bank - to ensure strict compliance with KYC rules. 

RBI had pointed out that instances of banks opening fixed deposits and granting overdrafts without due diligence were detected. The credit bureaus say that such instances can be reduced by such identity scores. 

“We have a solution to authenticate the identity of the applicant which is now being used by banks and credit institutions. This is a unique solution that allows banks and credit institutions to authenticate a customer in real time by leveraging CIBIL’s vast credit information database, thereby helping drive process efficiency for faster and smoother on boarding of customers" – said Harshala Chandorkar, Sr. VP- Consumer Services and Communication, CIBIL. 

Jayaraman also said that part from identity check and location even the tenure of one’s previous loans will affect these background check scores. He explains that if the tenure of loan that a customer has been repaying from a particular address is longer then it will help in affirming the veracity of his address. 

Credit bureaus said that not only banks but even Non Banking Financial Companies, Insurance players and even telecom companies are using these background checks. However, considering that these services are limited the number of players using the score is still limited. 

"KYC procedure was always being followed by banks but now it is getting integrated with the credit score checks as well. Banks and other institutions are opting to go via credit bureaus like Equifax because it helps in solving logistical issues for the lenders and more over now credit bureaus are coming up as a one-stop shop to do credit and identity checks,” said Nimilita Chatterjee, Senior VP – Products, Analytics and Data Operations at Equifax.

Author: Business Standard

Reposted By: Credit 4 Loan

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Cibil credit score not to your rescue

Lenders use these scores only as a preliminary filter. Actual loan sanctions depend on their internal mechanism.

Until now, the Credit Information Bureau or Cibil provided consumers access to just their credit information report (CIR), withholding their credit scores. However, this is set to change. Borrowers can now access their credit scores and know how their credit performance is being rated, as well.

The rating is done on a scale of 300-900 — 300 being the lowest and 900 being the highest. The scores are calculated according to the proprietary model created by Cibil. Harshala Chandorkar, senior vice-president, consumer relations, Cibil, lists out the broad parameters used for calculating the score — loan value, delinquencies in loan repayments, loan types: secured and unsecured, queries made for loans, loan request rejections, frequency of opening loan accounts, etc.

PUT TO TEST

Score presented on a scale of 300 - 900; 300 being lowest and 900, highest Parameters used to determine score - loan value, delinquencies in loan repayments, loan types - secured and unsecured, queries made for loans, loan request rejections and frequency of opening loan accounts Credit Information Report updated on a regular basis (whenever data is received); score calculated only when an enquiry is placed Banks are more interested in the regularity of loan repayments than the score while evaluating eligibility for credit

BANK’S INTERPRETATION OF THE SCORE
Each bank’s interpretation of the score will vary and would be based on its risk appetite. It would also differ across ‘assets’ or types of lending. Simply put, each bank will determine its own cutoffs for sanctioning loans. So, Bank A may require a minimum 700 score for approving a home loan, while Bank B may accept even a 600 score. Having said this, typically, banks require a higher score for unsecured loans such as personal loans or credit cards. While for secured loans, it could be slightly lower.

However, all banks do not rely on these scores for sanctioning loans. As S Rajendran, general manager, Union Bank of India, says, “We have an internal model for determining credit scores that is used while taking lending decisions, mainly for home and auto, both securitised products.” He also adds pricing decisions are not taken on the basis of the credit score. And, loan sanctions are governed by other factors such as individual’s income, age, experience, etc.

Many banks would consult the Cibil report only for the borrower’s repayment track record. “More than the cumulative score, we are interested in how many times he has defaulted on the repayment of his dues,” says Nandan Srivatsava, general manager, retail banking, Bank of Baroda.

Thus, lenders use these scores only as a preliminary filter in the process. “The parameters used by Cibil as well as credit institutions for determining one’s credit worthiness are roughly the same. Despite this, no lender will ever rely solely on their scores,” says Sanjay Agarwal, senior vice-president and group head (retail strategy and branding), Arcil.

Besides, in the absence of risk-based pricing in the retail segment, a high credit score does not give you an edge either to negotiate a better interest rate. Risk-based pricing essentially means the interest rate on a loan is also determined by the lender’s estimate on whether the borrower would default on the loan. So, while it is done for individual product categories, the sheer number of retail customers makes it difficult for such a large client base.

NEW ENTRANTS
Besides Cibil, there are other credit rating companies such as Equifax and Experian in the fray, as well. These companies are still building on their database. At a later date, most banks may either align themselves with one of these agencies or work out a system for taking an average of all scores. Irrespective of what option they pick, a perfect score from these agencies will still not guarantee credit, at least in the current scenario.

ACCESS IT
Your CIR reflects the credit history over a three-year period and is updated on a regular basis. The score, however, will be calculated only when an enquiry is made, says Chandorkar.

Consumers must pay Rs 450 for the score plus CIR. Alternatively, they can pay Rs 142 for just CIR each time they want to access the information from Cibil. The application process for getting the score is the same as applying for CIR — you can pay online, through the Cibil website, take a print out of the form and mail it to the company, along with documents providing address and identity proof.

So, despite paying a higher amount for getting your score, there seems to be no clear advantage in sight. A CIR may serve you just as well.

Author: Business Standard

Reposted By: Credit 4 Loan

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Depositors get some protection if bank fails

Deposits up to Rs 1 lakh are insured. Read on for ways to raise this cover..

Bank fixed deposits are among the safest of savings instruments. The principal and interest are guaranteed and depositors know exactly how much return they can expect at maturity. But, what if the bank goes bankrupt? Or it merged with another bank? What happens to your deposits in that case?

The latest Financial Stability Report (FSR) of the Reserve Bank of India raises concerns about the soundness of public sector banks due to their high level of non-performing assets (NPAs).

"The decline in their (PSBs') soundness (measured in terms of CRAR, the capital to risk weighted assets ratio) by 1.8 percentage points between March 2011 and March 2015 was the (highest), followed by foreign banks at 1.5 percentage points and PVBs (private banks) at 1.1 percentage points," the report said.

Global deposit shield

The International Association of Deposit Insurers (IADI) was formed in May 2002. The aim is to enhance the effectiveness of deposit insurance systems, by promoting guidance and international cooperation. IADI currently represents 79 deposit insurers from 76 jurisdictions. It is a non-profit body, constituted under Swiss law and domiciled at the Bank for International Settlements in Basel. India's DICGC is a member of IADI.

The level of stressed assets was highest for PSBs at 13.5 per cent of total advances as of this March, while the net NPA ratio increased from 3.1 per cent to 3.1 per cent, it added.

Given this, is there a need for those with deposits in PSBs to worry? Since the government is the majority shareholder here, chances of bankruptcy are slim. If it fails on all financial parameters, it could get merged with a stronger bank, in which case there might be no real reason to worry.

If you have bank deposits up to Rs 1 lakh, your money is protected by the Deposit Insurance and Credit Guarantee Corporation (DICGC). It insures all deposits.

According to the FSR, as on March 31, the number of fully protected accounts was 1,345 million. This constitutes 92.3 per cent of the total number of accounts, 1,456 million. The international benchmark is 80 per cent.

Amount-wise, insured deposits at Rs 26 lakh crore as at end-March constituted 30.8 per cent of assessable deposits at Rs 84.75 crore, against the international benchmark of 20 to 30 per cent, the report said.

Some PSBs face severe stress and the main reasons are the high NPAs and the slow growth of last year, says Vibha Batra, senior vice-president at ratings agency ICRA.

"Some banks might not be able to grow and, ultimately, you need to grow to get out of the stress. This might take time to shape up. That is why capital infusion for PSBs is critical. But on the reported capital adequacy, banks might not require merger, as yet," she says.

Merger among PSBs can also be contentious because of the strong bank unions. It is a possibility in case the government feels the need to bail out weak banks.

"The last forced merger was when Global Trust Bank merged with Oriental Bank of Commerce. The government has been stressing that merger among PSBs should be voluntary and not forced. Capital infusion in weak PSBs seems more likely," says Batra.

Deposits guaranteed
Deposits up to Rs 1 lakh per depositor, across one bank, are insured under the DICGC scheme. All banks pay premium to DICGC for this insurance. There have been several cases of co-operative banks going bust. In such cases, deposits up to Rs 1 lakh are protected. So, if you have deposits with co-operative banks, restrict the amount to Rs 1 lakh per bank, so that even if there is a problem with the lender, your money will be protected, says V N Kulkarni, of Abhay, a Bank of India-promoted debt counselling centre.

Using joint a/cs
All deposits held in your single name, in one bank, will together be covered up to Rs 1 lakh. If you hold deposits jointly with your spouse or child or if you hold deposits as sole proprietor of a firm or as a partner in a firm, then each of those deposits will be guaranteed separately up to a limit of Rs 1 lakh.

Multiple joint accounts of the same persons in the same bank, but with different names as first applicant, will be also be covered separately up to Rs 1 lakh. So, a joint account with A as first applicant and B as second applicant will be covered up to Rs 1 lakh. Another joint account with B as first applicant and A as second will also be covered up to Rs 1 lakh, even if both are in the same bank.

Loan rates in merger
If you have a loan from one bank and it gets merged with another, the new loan will depend on the agreement between the two banks. It is unlikely that rates will change suddenly. For instance, if your original bank's loan book is smaller compared to the bank that takes it over, it is possible that the bank will offer you the lower loan rate. Otherwise, it is possible that the bank might ask you to continue with your original contracted loan rate, says Kulkarni.

Financial health
To check if your bank is financially healthy or not, customers must check some parameters. These include the ratio of net NPAs, restructured accounts and provision allocated for bad assets. "Customers of small co-operative banks must particularly keep track of these parameters on a regular basis. If you feel your bank is in trouble, keep only the minimum balance in your account. In the case of PSBs, since the government is the majority stakeholder, there is no real need to worry," says Kulkarni.

Author: Business Standrad

Reposted By: Credit 4 Loan

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DSG backs IndiaLends to make it easier and faster to get loans

There’s a big gap between the haves and have-nots among borrowers in India. The gilt-edged ones with ready collateral and guarantors are chased by banks to take loans. Others have to run from pillar to post to process their loan applications in time for an urgent need, be it for a property purchase or a medical emergency.

CIBIL (Credit Information Bureau India Limited) was set up in 2000 to assess customer data from banks and other financial institutions. The CIBIL score has now become the gold standard for loans to be approved. But this has ended up excluding large numbers of people – CIBIL scores range from 300 to 900, but 80 percent of loans go to those with a score above 750.

Many of the sub-750 lot might be deemed credit-worthy if only the parameters to assess them were broadened. New technology employing big data and analytics now enables this. So Delhi-based fintech startupIndiaLends set out in March this year to capture and analyze a variety of data points for newer risk models and credit scoring. With loans depending more on data than securities and guarantees, financial institutions also get a much larger pool of potential customers.

“In India, organized lending is available only to a lucky few – mainly those with high CIBIL scores. The remaining borrowers are at the mercy of unorganized lenders and loan sharks, and end up paying outrageously high interest rates. We are here to change that and help both borrowers and lenders make better credit decisions,” says Gaurav Chopra, co-founder of IndiaLends.

Chopra, who has an MBA from the London Business School, and his co-founder, Mayank Kachhwaha, who graduated from IIT Madras, both worked earlier at international financial corporation Capital One.

Alternative data points

IndiaLends borrows some of the practices the co-founders found to be effective while working in London. “At Capital One, we used a lot of alternative data points like bank transactions and utility payments to build credit risk models that enabled instantaneous underwriting decisions,” Kachhwaha tells Tech in Asia. The scene in India was very different with lending primarily based on a single credit score from CIBIL, which made it hard for a majority of people to secure loans. So the Capital One colleagues decided to change the rules of the game with a new model.

After tying up with lending institutions and catering to 1,500 customers in the first four months of operation in Delhi, IndiaLends is now ready to expand to Mumbai and Bangalore. Today, it announced its first round of funding from Singapore-headquartered DSG Consumer Partners and angel investors, including Siddharth Parekh, son of Deepak Parekh, chairman of HDFC, India’s leading housing finance corporation.

Deepak Shahdadpuri, managing director of DSG, which has earlier invested in successful startups in India such as Zipdial and GOQii, says IndiaLends could transform a key part of the country’s financial services infrastructure. He adds:

 This will reduce the cost, provide a better mechanism to price risk, and reduce time to assess credit. 

The IndiaLends website promises to respond to loan applications in minutes. Those cleared for loans can expect to receive the money within two days. If IndiaLends stays true to these promises, it will reduce heartache for millions of borrowers in India who are used to running around for weeks, if not months, in pursuit of their loans.

Tech startups can play a big role in making the system more efficient by becoming a lending platform for large banks and financial institutions. The IndiaLends model is that of an online marketplace. It doesn’t take credit risk on its own books. “This ensures an unlimited amount of funds that can be provided to borrowers having different credit risk profiles,” says Kachhwaha.

Earlier this year, Capital Float raised US$13 million to give startups in India easier access to loans. Aye Finance is another new player serving startups, who typically lack the collateral to access institutional loans.

For now, IndiaLends is focusing on salaried and self-employed borrowers. But it may soon serve startups as well. “Analyzing the credit behavior of our self-employed customers will help us enter the SME space,” says Kachhwaha.

Author: TechInAsia.Com

Reposted By: Credit 4 Loan

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