Reserve Bank of India, in its Monetary Policy Review meeting held on 6th June 2018, has announced setting up a Public Credit Registry (PCR) in a phased manner. If you have just been wondering what PCR is all about or how does it impact you as a borrower, this article is the right place for you to know more about it.
Under the present loan, reporting structure set up by RBI, CRILC (Central Repository of Information on Large Credits) has been set up for loans with aggregate exposure (loan outstanding plus undisbursed sanctioned loan) of more than Rs.5 crores. Further, all the RBI regulated entities are also required to submit credit information (including loan sanctioned, current repayment status etc.) in respect of all the loans to Credit Information Companies (CICs) which can offer credit scoring and other data analytics on the basis of such data. CRIF High Mark is also one of the four CICs operating in the country.
What is Public Credit Registry (PCR)?
Public Credit Registry (PCR) is expected to be a National database centrally and directly managed by RBI or one of its subsidiaries covering all the loans and borrowings by an individual or corporate or any other legal entity. While RBI is yet to issue detailed modalities with respect to PCR, it can reasonably be expected to act as a single point of reporting of all the material events occurring in respect of each loan, irrespective of whether such an event is adverse (negative data) or a favorable one (positive data). A typical example in respect of a favorable event can be the proper closure of a housing loan taken for a 2 RKH house. Similarly, an adverse event can be delay or default in respect of the loan repayment.
Salient Features of PCR
Here are the salient features of Public Credit Registry as can be inferred from the High-Level Task Force Report, which recommended setting up of such PCR:
1. To cover all loans and borrowings – PCR will encapsulate all the types of loans and borrowings including corporate loans.
2. No minimum threshold on loan size – PCR intends to cover all the loans irrespective of any minimum threshold and thus, will reflect the entire indebtedness of the borrower at one single place.
3. Information in respect of borrowers in all legal forms – PCR will cover the borrowers in all legal forms, whether an individual consumer or an MSME or a corporate or any other kind of legal entity (MSMEs etc)
4. Interlinkage with external data sources – The scope of PCR is expected to act like a comprehensive database for the information of the borrower and will also include information with external data sources like MCA for company information, CERSAI for property information, GSTN for an idea on revenues etc. for a more complete view of the borrower.
Benefits of PCR
1. Single Window for Complete Information in respect of Borrower – Under the present setup, loan related information in respect of large borrowers is not available in a single window. For example, inter corporate borrowing, External Commercial Borrowings (ECBs), Foreign Currency Convertible Bonds (FCCBs), Masala Bonds (Bonds issued outside India but denominated in Rupees) etc. are not available in a single database in public domain. Banks and financial institutions will need to just search for the borrower to get all the related information there itself.
2. Reduction in Compliance Burden of Reporting Entities – The information in respect of loans gets reported to multiple agencies in multiple formats leading to inefficiency and duplication in reporting as well as increased reporting burden for the reporting entities. As and when PCR is implemented, it will result in single-window reporting system and thus help in reduction of compliance burden of banks and financial institutions reporting such information.
3. Prevention of Multiple pledging of Collaterals by Borrowers – In case of a loan to Deccan Chronicle Holdings Ltd. By Canara Bank, it came into notice that the borrower had raised funds from different banks against the same. Such instances can be eliminated if all the collateral related information is available to all the lenders/ prospective lenders in an unbiased manner. PCR will aim to fulfill that objective.
4. Complete data available for Supervision and Research – A central and complete database will provide a timely and holistic view to the RBI to carry out supervision on the banking sector, and also carry out periodic economic research to support policy-making.
Since the PCR will be an extensive database of all credit information belonging to the customers at one place, it a welcome step in improving the information access for the lenders. PCR may not include its Credit Scoring Model services under its ambit and may just act as the main repository of data.