Recently, RBI Deputy Governor Viral Acharya made a case for setting up a Public Credit Registry (PCR), ncorporating unique identifiers: Aadhaar for individual borrowers and Corporate Identification Number for firms.
Details on Public Credit Registry:
- A public credit registry is an information repository that collates all loan information
of individuals and corporate borrowers.
- A credit repository helps banks distinguish between a bad and a good borrower and accordingly offer attractive interest rates to good borrowers and higher interest rates to bad borrowers.
- PCR will address issues such as information asymmetry, improve access to credit and strengthen the credit culture among consumers.
- It can also address the bad loan problem staring at banks, as corporate debtors will not be able to borrow across banks without disclosing existing debt.
- A PCR may also help raise India’s rank in the global ease of doing business index.
- Data is to be made available to stakeholders such as banks, on a need-to-know basis.Data privacy will be protected.
- Credit information is now available across multiple systems in bits and pieces and not in one window. Data on borrowings from banks, non-banking financial companies, corporate bonds or debentures from the market, external commercial borrowings (ECBs), foreign currency convertible bonds(FCCBs), masala bonds, and inter-corporate borrowings are not available in one data repository.
- PCR will help capture all relevant information about a borrower, across different borrowing products in one place. It can flag early warnings on asset quality by tracking performance on other credits.
- PCR in other countries now include other transactional data such as payments to utilities like power and telecom for retail consumers and trade credit data for businesses. Regularity in making payments to utilities and trade creditors provides an indication of the credit quality of such customers.