Seeking a home loan at a lesser rate?

MUMBAI: Can’t figure out why your bank rejected the personal loan application despite paying your credit card and home loan instalments regularly?

Or just want to know how good a borrower you are? The Credit Information Bureau of India Limited (CIBIL) can help you.
Starting November, Indian banking, especially the loan segment, is set for a big change with the CIBIL-Trans Union Score. It will give a generic score of your borrowing history.

“The CIBIL-Trans Union Score would be out by November. The scores could be in a range of 100 to 1,000, with 1,000 being the best,” Arun Thukral, managing director, CIBIL, said.

While the score card will help banks in deciding whether a customer is a safe borrower or not, for customers it would give a chance to bargain for a good rate on their strong credit history.

“Right now, all customers, regardless of their credit history, pay the same rate on any loan because banks try to balance out the risky borrowers with an equal number of good ones. But once this score is launched, people can bargain for a good rate, just like in the US,” said CIBIL chairman S Santhanakrishnan.

The system is in vogue in Europe as well. In the next six months, customers in India can ask for individual scores.

CIBIL, which is the only credit information bureau in the country, collects data from banks and non-banking finance companies (NBFCs) and prepares a credit history of commercial and retail borrowers.

Right now, this information is provided to CIBIL’s members through ‘credit information reports’. These online reports are available for member-banks, strictly for credit appraisal, at Rs 10 per report or more, depending on the frequency.

CIBIL is banking on its vast database for success in the future. “We started in 2004, but we have caught up really quickly. We have records of more than 100 million customers and this new system will bring down interest costs for banks by 0.50 to 0.75% and will lower rates for customers. It will also help them make decisions better,” Santhanakrishnan said.

The score card, in association with CIBIL shareholder and US-based credit information agency, Trans Union, is just the beginning of a range of plans by CIBIL in the next one year

Talks are already on with the Reserve Bank of India (RBI) for a rural credit bureau. “We are just awaiting the guidelines from the RBI. The Credit Information Companies Act, 2005, is in place, and, once the guidelines come, we will know how to go phase by phase,” Thukral said.

Currently, CIBIL’s mandate is only for the urban and semi-urban areas, but with the government taking keen interest in financial inclusion, they hope to start a rural credit bureau in association with regional rural banks in a year.

“It is not easy to collect the data of so many people. Also, in India, unlike in countries like the US, there is no permanent uniform identity like a social security number. Added to that, agricultural income is not taxed, so there are few pan cards in rural areas. But we are working on some kind of an identity mechanism,” Thukral said.

After the score card, CIBIL plans to introduce a separate score for each type of loan. Fraud alerts and escape data of customers are also a part of the different services in the pipeline.

In 2008, CIBIL also expects to start tracking data from telecom and rent utilities to help companies understand customer behaviour better.

CIBIL officials are aware that the nascent credit information business in India is set to explode in the coming years. Already, UK-based credit information major Experian has set up shop in India.

“We are not afraid of competition as long as we provide customer service and value. Our data is our strength, we have a headstart because it is the life line of our business. In fact, competition will only expand the market,” Thukral said.

From four shareholders in the beginning CIBIL has 16 at present, with HDFC, ICICI Bank, SBI, Trans Union and Dun & Bradstreet holding 10% shares each.