piggy bank

Credit information bureaus have asked the Reserve Bank of India (RBI) to make payments banks members to that they can share data on transactions, reports Press Trust of India. Payments banks are not allowed to undertake any lending operations, Mohan Jayaraman, managing director of Experian Credit Information Company, believes the transactions which they undertake will help understand borrowers.

The report added that CIBIL, India’s largest credit information bureau, is in initial talks with the RBI to get payments banks to sign up.

Currently, there are four credit bureaus operating in India – High Mark, Expreian, CIBIL and Equifax. Credit information companies can collect all types of information (positive as well as negative) from their member credit institutions and disseminate the same in the form of credit reports to the specified users/individuals.

These were designed by the RBI to improve the quality of credit, reducing the transaction cost and improving the flow of credit to the SME sector. However, in recent times, they have been used to reduce the number of bad loans in the retail segment.

Kotak Mahindra Bank said the credit bureaus and a stable job environment has helped the bank in bringing down default rates in its unsecured loans and credit card portfolios, as indicated by this Economic Times report. 

Recharge information used to build credit history

In Kenya, telecom operator Vodafone’swallet service M-Pesa is used to build a credit history based on a user’s transactions. That reflects a customer’s ability to meet credit obligations. KCB Bank and Commercial Bank of Africa are already lending using M-Pesa score.

Similarly, payment gateway Citrus Pay keeps a track of user’s spends and underwrites transactions so that they can use the pay later option.

Equifax India acquired  NettPositive, an analytics and business intelligence solutions company. NettPositive servesd financial, insurance and retail businesses in India, Middle East and Africa, and Equifax used NettPositive’s expertise to increase its own market reach.