CIBIL panic or peace for life ?

CIBIL (India's first credit information bureau) is a repository of information, which contains the credit history of commercial and consumer borrowers. CIBIL provides this information to its members in the form of credit information reports. As on February 2009, CIBIL has an information base on over 132 million consumer trades, and 2 million commercial trades which continues to grow at a fast pace. CIBIL shares credit information with its 169 strong member base on the principle of reciprocity. CIBIL’s members include all leading banks, financial institutions, non-banking financial companies, housing finance companies, state financial corporations and credit card companies. CIBIL creates value for financial institutions by providing objective information that helps them manage risk and devise appropriate lending strategies, thus reducing cost and maximizing portfolio profitability. CIBIL benefits both credit grantors and consumers by collecting, analyzing, and delivering information on credit histories of millions of consumers and businesses. With information from CIBIL, credit grantors are empowered to make sound and informed credit decision. Origin of CIBIL The need of credit information system was increasingly felt in order to enable informed credit decisions and aid fact based risk management. It was also imperative to arrest accretion of fresh NPAs in the banking system through an efficient system of credit information on borrowers as a first step in credit risk management. In this context, the requirement of an adequate, comprehensive and reliable information system on the borrowers through an efficient database system was keenly felt by the Reserve Bank of India/ Government as well as credit institutions. A Working Group (Chairman: Shri N.H. Siddiqui) with representatives from select public sector banks, IDBI, ICICI, Indian Banks’ Association and Reserve Bank was constituted by the Reserve Bank in the year 1999, to explore the possibilities of setting up a Credit Information Bureau (CIB). The Working Group had recommended setting up a CIB under the Companies Act, 1956 with equity participation from commercial banks, FIs and NBFCs registered with the Reserve Bank. As per the recommendations made by the Working Group, Credit Information Bureau (India) Ltd., (CIBIL) was set up in January 2001. CIBIL was promoted by the State Bank of India, Housing Development Finance Corporation Limited , Dun & Bradstreet Information Services India Private Limited and TransUnion International Inc. The shareholding pattern was as follows: SBI 40% HDFC 40% Dun & Bradstreet 10% TransUnion 10% TransUnion and Dun & Bradstreet are the technical and equity partners of CIBIL. TransUnion is one of the largest consumer credit bureaus in the world, and is recognized globally for its skills in advanced analytics and decisioning services. Dun & Bradstreet is world’s leading source of commercial information and insights on businesses. In 2004, SBI and HDFC divested a part of their stake in CIBIL to other shareholders comprising of leading banks and financial institutions in the country. •Business: CIBIL provides comprehensive credit information on consumer and commercial borrowers to credit grantors in India. CIBIL’s advanced analytic and risk management tools help credit grantors mitigate risk and ensure superior portfolio performance. CIBIL has two divisions- Consumer Bureau and Commercial Bureau. o Consumer Bureau was launched in 2004 with 4 million records o Commercial Bureau was launched in 2006 with 0.7 million records o CIBIL has grown phenomenally in the last five years, and houses credit histories on over 134 million trades across individuals and businesses Members: CIBIL’s 169 strong member base that includes all leading banks, financial institutions, non-banking financial companies and housing finance companies. Security Standards: CIBIL is ISO 27001:2005 certified- the most recognized security standard in the world. CIBIL is one of the 1000 companies in the world, which have achieved ISO 27001 certification, and one of the first few in India. Headquarter: Mumbai Managing Director: Mr. Arun Thukral Technical Partners: o TransUnion International- a leading global credit bureau with presence in over 30 countries o Dun & Bradstreet- a leading global provider of credit information and insights on businesses CIBIL’s Shareholders The promoters SBI and HDFC divested a part of their stake to other shareholders and the revised shareholding stands as follows: GE Strategic Investments India 2.5% State Bank of India 10% Bank of Baroda 5% TransUnion International Inc. 10% Dun & Bradstreet Information Services India Pvt Ltd.10% Bank of India 5.0% The Hongkong and Shanghai Banking Corporation Ltd 5% Indian Overseas Bank 5% Sundaram Finance 2.5% Housing Development Finance Corporation Ltd. 10% Punjab National Bank 5.0% Union Bank 5.0% Citicorp Finance (India) Ltd 5% ICICI Bank Ltd 10% Central Bank Ltd 5% Standard Chartered Bank 5% Total 100.0% CIBIL aides in improving credit environment in India ? god knows !!!

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what is CIBIL

What is CIBIL (Credit Bureau) and why is it so important today?
Most customers in India, who have Credit Cards and Personal Loans are unaware of the existence of CIBIL (Credit Information Bureau (India) Ltd.) which will definitely play a very important role in their financial planning in future.
Take for example case of Mr.Tomar who dropped his Credit Card Cheque on the Payment Due Date in the Skypak Dropbox. However, for some reason the payment got updated against his Credit Card a day late and he got levied a hefty late Payment Fee of Rs.300 in addition to service tax. Not someone to be taken for a ride he called the bank and registered a complaint for reversal.
Most Credit Card Issuers get several such reversals every month amounting to Crores of rupees. Based on some internal thumb rules, they reverse out some charges and decline other reversals. (I would like to highlight the policy adopted by HDFC and Deutsche Bank where they give the customer the benefit of doubt and confirm the reversal on the call itself – the first complaint on reversals is always resolved in the customers favour) Very often it is very difficult for the bank to judge if the customer is telling the truth or there has been some inefficiency at the cheque pickup agency. Mr.Tomars request was declined and he did not get the reversal. His next recourse was to write to the Head Service department in the bank and after 30 days write to the Banking Ombudsman. I completely agree with him.
However what Mr.Tomar does not realize is that in the intervening period his other statement has already got generated and as his complaint has not got resolved he has not paid the Rs.300 late payment Charge he has been levied. As a result in the following month he gets reported to CIBIL as a defaulter who has not paid his Credit Card Minimum Amount Due. Two more statements get generated and now the amount with Interest and service tax has inflated to Rs.600. He has been reported to CIBIL thrice for not paying his Minimum Due – the impact of which is as follows.
Next time Mr. Tomar applies for a Credit Card or a Personal Loan which he desperately requires, the changes of it getting declined are extremely high.
Why does this happen?
1. Every bank before giving you a Credit Card or Loan will check your CIBIL Record
2. The CBIL Record gives the performance of the current Cards and Loans that you hold
3. The following can ruin your CBIL record completely
a. Not paying your EMI / Credit card Minimum Due every month
b. Not paying the dues for a longer period of time
4. Every time you do not Pay your Credit Card or Personal Loan outstanding the CIBIL score dips further and the amount of outstanding and the number of days outstanding is visible to other banks as well
In the current scenario banks will think a million times before giving credit to a customer who has a bad record on CIBIL. If you have a bad record on 2 or more relationships or have not paid your Credit Card Outstanding for 6 months (write-off case) then please forget about it. This will definitely impact you as more and more banks start using CIBIL, which eventually may be used for Pre Employment checks, Utility Payment checks as well. The day when the interest rate given to you depends on your CIBIL score is also not very far away.
Please keep the following in mind!
1. Whatever happens, try to be regular with your payments
2. If you have a dispute on the Credit Cards, you can take up the issue, but please continue to pay your Minimum Amount Due every month. You can ask for the subsequent reversal later.
3. Head Service Departments as well Banking Ombudsman are useful authorities and my experience with them has been great, they do take fair decisions – so pursue your case with them while you continue to make the Minimum Payments to keep your Records from going to CIBIL
4. It is not worthwhile ruining your CIBIL record for a few hundred rupees of Late Payment Fee. Do realize that the bank does not care about the consequences of passing your records to CIBIL – it is only a file upload for them. You should definitely fight your case – but do not hurt yourself.
I think my details have already been reported in CIBIL. What do I do?
You can be reported to CIBIL because of 3 reasons
1. You have not paid your dues – You definitely need to be reported. Once you pay your dues over a period of 24 months your score will improve provided you start making regular payments again.
2. Erroneous updation by bank – Due to an error at the banks end due to inefficiencies in their Cheque Pickup agencies etc. they may not receive the payments in time and they incorrectly report your details to CIBIL, then they initiate the process to delete the name from CIBIL or sometimes the customer finds out when the application gets declined and needs to rush bank to the bank to get the record rectified
3. If you are currently in a dispute with the bank (especially payment not received etc) – I would suggest you settle it quickly and as a pre condition as for settlement, ask the bank to delete the reporting they have done to CIBIL.
Remember that your CIBIL score will improve over time once you start making regular payments. So do not worry, if your record is bad and CIBIL score is low, just continue making your Loan and Credit Card payments on time and it will pickup.
Personally, the biggest problem I have with the CIBIL system is that Customers cannot view this data and point out any incorrect reporting. Due to deficiencies and inefficiencies in bank there are several incorrect uploads on CIBIL and these uploads affect the customer’s Credit Record in a big way. There is no way the customers can get to know of these goof ups and rectify the same. They will get a rude shock one day when they go to seek Credit. This is a broader consumer battle that we will need to fight.