RBI to set up Public Credit Registry to help differentiate between good & bad borrowers

New Delhi, June 8 (KNN) The Reserve Bank of India (RBI) has recently announced to set up a Public Credit Registry, an information repository that will provide all the information of individuals and corporate borrowers.

With the help of this credit repository, banks will be able to differentiate between a bad and a good borrower and thus can accordingly offer attractive interest rates to good borrowers and higher interest rates to bad borrowers.

The repository will be set up in a modular and phased manner and for this, RBI will be setting up an implementation task force to undertake the logistics.

Further, this repository will address issues of information asymmetry, improve access to credit and strengthen the credit culture among consumers and also help improve India’s ranking in the World Bank’s Ease of Doing Business Index.

It will also help in addressing the bad loans problem being faced in the banking system, as corporate borrowers will not be able to lend from multiple banks without disclosing their existing debt.

The move is based on the recommendations of a committee headed by Y.M. Deosthalee that was set up in 2017. The committee submitted its report in April 2018 and publically announced on June 6, 2018.

The task force recommended that the registry should be set up by RBI and in due course, the RBI may consider moving the registry to a separate non-profit entity.

It has envisaged that Public Credit Registry shall be set up as a registry of all credit contracts duly verified by reporting institutions, for lending in India and any lending by Indian financial institution to Indian person.

The task force committee recommended that the PCR shall serve as a registry of all credit contracts irrespective of any threshold amount and shall be backed by a legal framework.

Further it suggested that the registry should also capture data such as external commercial borrowings, market borrowing and all contingent liabilities.

Addressing the concerns related to asymmetric information about the borrowers, it also recommended that the PCR shall capture both positive and negative information for all loans and borrowers and data will be available to stakeholders like banks on a need-to-know basis strictly and privacy of data will be protected.

It also proposed linkages with other defaulter databases like the willful defaulter’s list and that maintained by Export Credit Guarantee Corporation of India.