By Ubaid Parkar
Credit Information Bureau (India) Limited, CIBIL, a credit bureau which maintains credit records of the public, with its strategy is inadvertently fashioning stringent measures to curb the liquidity flow for loans. This spells out tougher guidelines through which credit can be acquired and includes housing loans as well. CIBIL is a tongue in cheek establishment of various banks and financial institutions and operates mutually with them.
With the recent reduction in home loans, SBI got it to as low as 8% p.a, it would seem that the Real Estate sector is showing signs of sanity. There has been an observant watch by the Government to ensure that equilibrium levels are reached and the economy incisively disjoints itself from the global recessionary trend and continue, although a tad cautious, to ride on the growth train.
The drop in interest rates have been a welcome change propped up by the demand of banks towards the housing industry for calls of affordable housing and their social responsibility towards the masses. Recently one such proposal was put forth in at an interactive session on ‘Opportunities & Challenges in Finance and Banking for Real Estate Sector’, jointly organised by Gujarat Chamber of Commerce and Industry (GCCI)and Gujarat Institute of Housing and Estate Developers.
But herein lay the paradox, affordable housing has hidden demons. Be it obscure locations or less-than Spartan infrastructural developments. Bankers seem unequivocal towards their practices. A lovely fresh picture is painted which portraits the banking industry as levitating nymphs from Botticelli’s The Birth of Venus. But with the practices they intend to follow, they might as well be dressed in red, pitch forking you as they swish their slimy tails.
Credit Information Bureau (India) Limited, (CIBIL), is the offspring of such banks. CIBIL is owned by SBI, HDFC, ICICI Bank and a ‘lucky’ thirteen financial institutions. SBI, HDFC and ICICI Bank have a 10% share each and along with Trans Union International Inc and Dun & Bradstreet Information Services constitute 50% of the shareholdings. What it unconsciously intends to do is choke the so called availability of credit at lower interest rates, and invalidating calls by the Government for injecting more liquidity in the economy.
A major daily reported recently that getting a bank loan would be much tougher if you have defaulted even on a meagre amount several years ago. This just goes to show the cautious approach in the banks’ risk management strategies.
ICICI Bank has a tarnished image in recovering bad loans from defaulters even resorting to lumpen elements for their purposes. CIBIL now serves as another tool to corner credit-seekers even before the individual is assessed.
Borrowers are to be ideally assessed on a case-by-case basis in assessing creditworthiness. The Credit Information Reports (CIR) maintained by CIBIL, updated by banks and financial institutions, serve as a history of loan acquisitions and payments by the borrower over a period of time. It shows a trend of sorts of the borrowers capacity to repay loans. However, CIBIL maintains a positive and a negative list which may deter financial institutions from allotting loans to anyone who may be listed in the negative.
Right to Information: violated?
Furthermore, if you have a spark of curiosity to know what your CIR looks like, you won’t be able to access the Report directly This is because CIBIL, a private institution, who ironically hold public information, does not fall under the Right to Information Act, 2005 as defined in Section 2(h). You may only access the report once you have applied a credit with a bank and can obtain the copy of the Report from the creditor bank itself.
This also means that you are not at liberty to assess the credit file as and when you deem fit. You may, however, analyse the Report at the time of applying for a much required and urgent loan. And reschedule your time as per the rectifications required.
Experian, the credit bureau in UK, offers all consumers access to their credit file with a nominal fee directly through Experian itself, as and when required by the concerned member of the public. The compliance is as per the Data Protection Act 1998, a United Kingdom Act of Parliament, which states that the information cannot be obtained by any entity other than the borrower himself.
Justice delayed is justice denied: Quarterly updates on CIR
Moving on, if you do come across an anomaly in your credit report, you have a marathon to run, from the credit grantors, who have reported information as incongruous, all the way to CIBIL. And to place a wreath on the podium, so to speak, CIBIL updates its credit files on a quarterly basis. This leaves the consumer to pray that the interest rates of his current loan requirement don’t inflate. Experian, on the other hand, takes a couple of working days to update the credit file in circumstances of successful pleas of dispute.
It is learnt that CIBIL has not carried out any such practice wherein instances of entries in the Report have been reversed in cases of dispute. This ensures that once a credit-seeker is engraved on the tombstone of the negative list, the prospects of future acquisitions of credits by the individual are buried with it.
Process restructuring required
These are hard times and CIBIL does not make it any easier for borrowers. It is laced not with extremities but high levels of deference. CIBIL is meant for the banking system and is a contrivance for banks. It is a credit monitoring system of checks and balances. Although the very concept of CIBIL is commendable it is peppered with only one perspective. It overlooks the other facet of the system, borrowers, both consumer and commercial. CIBIL and the banking system should be wary of the inconveniences of borrowers in tandem with monetary policies of the Government.
To label borrowers as negative through trends which can only be intermittent, places tons of pressure on borrowers’ records. And information which can only be best described as withheld and the time taken to update credit histories, can only guarantee a barrage of unnecessary commas in the sentence of economic growth.
HDFC and ICICI, major shareholders of the Bureau, and CIBIL themselves trivialized these practices and remained impassive when contacted them.