For a better tomorrow

The way loans are given out is about to be reshaped, reports c

- he Reserve Bank of India (RBI) diktat that credit information companies' (CICs) data be updated on a fortnightly basis (15th and last day of the month) will reshape the manner in which credit is dispensed and monitored.

The Reserve Bank of India (RBI) diktat that credit information companies' (CICs) data be updated on a fortnightly basis (15th and last day of the month) will reshape the manner in which credit is dispensed and monitored.

It takes off from the Aditya Puri Committee report (2014) which made a case for rehauling the way data is captured by CICs. The overall systemic impact would be better quality of credit portfolios, freeing capital for further credit growth. It will promote objective and transparent scrutiny and processing of credit, making it less expensive and it will aid bank supervisors to monitor build-up of systemic risks.

Ask Shyam Srinivasan how he views Mint Road's move and he says: "It is to address the issue of information asymmetry. As we know, any asymmetry may result in arbitrage opportunities". The managing director (MD) and chief executive officer (CEO) of Federal Bank adds, "My sense is that this may now be plugged by reducing the time to upgrade the data to CICs." To illustrate, credit is being given out in less than 30 minutes these days but the data upgrade happens well after a month, by which time the customer may be in default on another loan. This play is set to end.