Credit bureau to classify borrowers

Credit Information Bureau (India) Ltd (CIBIL) and U.S.-based TransUnion have launched a new scoring system for individual as well as commercial borrowers, top CIBIL officials said on Wednesday.

It will give a score to each borrower of its member institutions based on the individual’s credit history and outstanding debt positions, CIBIL Chairman, S. Santhanakrishnan told reporters.

The data will be collected from 143 members including banks, housing finance companies and credit card companies, among others, he said. CIBIL also plans to have insurance and telecom firms as its members and use their data in future.

The score will predict a customer’s likelihood of becoming a defaulter in more than 91 days within the next one year, thereby reducing the chances of delinquencies, he said.

TransUnion, which will provide the technical assistance to the scoring system, has implemented similar models in South Korea, China and South Africa, its President (Asia & Europe), Larry K Howell said.

With the increase in available credit options in India, borrowers have taken advantage of the system by moving from one institution to another, even though they have defaulted in earlier cases, Santhananakrishnan said.

Banks and other financial institutions can use this generic score along with their internal assessment before extending credit to an individual, CIBIL Managing Director Arun Thukral said.

Demand for loans has been rising fast in India and so are the worries about defaults as the central bank had raised interest rates multiple times since mid-2006.

“We also plan individual product score such as home loan score and auto loan score as well as other types of products such as fraud alerts and limit alerts,” Santhanakrishnan said.

CIBIL’s main shareholders include State Bank of India, ICICI Bank, Bank of Baroda, Housing Development Finance Corp, HSBC and Standard Chartered Bank.