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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