The Reserve Bank of India has appointed a task force for developing a Public Credit Registry (PCR) in India. The idea was floated earlier this year by RBI deputy governor Viral Acharya in a speech. The task force will be headed by M Deosthalee, former Chairman and managing director, L&T Finance Holdings Limited. Other members include:
- Sharad Sharma, Co-founder and CEO, BrandSigma, iSPIRT
- Sekar Karnam, deputy managing editor and Chief Credit Officer, State Bank of India
- Vishaka Mulye, executive director, ICICI Bank
- Rashesh Shah, Chairman and CEO, Edelweiss Group
- Sriram Kalyanaraman, MD & CEO, National Housing Bank
- Bidisha Ganguly, Chief Economist, CII
- Vivek Srivastava, Sr. VP – Research and Innovation, ReBIT
- Parvathy V. Sundaram, CGM-in-Charge, DBS, RBI
- Anujit Mitra, Director, DSIM, RBI (who will also function as secretary)
The task force will have to have to determine the scope and target of the PCR and look at the types of information to be covered including a cut-off size of credit. It will also need to decide if the PCR will have to be a new information system or whether existing systems could be integrated or strengthened. The task force will also have to suggest a roadmap “for developing a transparent, comprehensive and near-real-time PCR for India.”
The public credit registry will have unique identifiers for borrowers: Aadhaar for individuals, and Corporate Identification Number for companies. The new PCR is also looking to build credit profiles using “reputation collateral” for first-time borrowers by keeping a track of their digital transactions. From Acharya’s earlier speech:
“In contrast, small and marginal aspirants, start-ups, new entrepreneurs, and small businesses in micro, small and medium enterprises (MSME) sector are disadvantaged as they lack many of those desired qualifications for credit. Transparency of credit information would serve as a “reputational collateral” for such borrowers. This would not only help promote financial inclusion but also reward the good borrowers thereby imparting credit discipline.
“We just have to look at our willingness to transact on eBay to understand how reputation builds up for effectively anonymous sellers from their transaction records captured on a website. Similarly, public credit registry would help create a level-playing field among different sizes of borrowers.”
Why it matters for India
In light of the data breach at US-based credit bureau Equifax, it’s worth pausing to build a proper credit registry which is not vulnerable to hacks. As we had pointed out before, government organizations alone have passively leaked over 130–135 million Aadhaar numbers, simply by not masking that information on their websites. A data protection law would require both companies and government organizations to better secure citizens’ data. Personal information like Aadhaar numbers and contact details are often stored by a large number of players, both in the private and the public sector, and a single breach can leave millions of citizens exposed to identity theft.
In India, Equifax operates as a joint venture with four public sector banks — SBI, Bank of Baroda, Bank of India, and the Union Bank of India — and three private banks, according to the company’s website. The company offers credit ratings reports for free to consumers in India, and requires users to submit their Aadhaar number to authenticate their identity for these reports. In the last few months, they have been expanding their microfinance offerings, and partnered with the International Finance Corporation to “deepen coverage” of credit reports of Self-Help Groups in India. The company has been involved in microfinancing in India since 2011, according to its website.