Enact law for public credit registry: RBI's Viral Acharya

The repository of trusted data will help banks and other lenders take better credit decisions, said RBI deputy governor.

Reserve Bank of India (RBI) deputy governor Viral V Acharya has called for a new law that can help set up the proposed public credit registry (PCR), which can fix wrongdoings in the financial data and, thus, can help resolve band loan crisis.
 
"At a broad level, the PCR increases the efficiency of lending institutions by reducing information asymmetry using a PCR, the lender can get a 360 degrees view of the borrower’s other outstanding credits and past performance, allowing better screening at time of credit origination and superior monitoring during the life of the credit," said Acharya.
 
As per him, PCR and private bureaus have been found to raise the ratio of private credit to GDP in many countries by 7 to 8 percentage points over a five-year period.
 
"Importantly, credit registries and bureaus do not just increase the amount of borrowing; they are also responsible for improving the quality of borrowing," added RBI deputy governor.
 
The repository of trusted data will help banks and other lenders take better credit decisions, he said. "It can help them recognize early warning signs of asset quality problems by being able to see performance on other credits."
 
Addressing national banking conference via Skype on Monday, organised jointly by Ficci-IBA in Mumbai, Acharya said "It's desirable to have a special comprehensive legislation, overriding the prohibitions contained in all other legislations on sharing of information required for the PCR. Otherwise, all such legislations will have to be amended separately, providing an exemption for sharing of information with PCR."
 
The PCR aims to be an extensive database of credit information for all credit products in the country, from point of origination of credit to its termination (repayments, restructuring, default, resolution, etc.), eventually covering all lender-borrower accounts without a size threshold. As of today, information on borrowings from banks, non-banking financial companies (NBFCs), corporate bonds or debentures from the market, external commercial borrowings (ECBs), foreign currency convertible bonds (FCCBs), Masala bonds, and inter-corporate borrowings are not available in a single data repository. 
 
The main objective of the PCR, as he says, is to fill this lacuna and capture all the relevant information about a borrower, across different borrowing products, in one place. 
 
Moreover, significant parts of this registry of borrowing contracts and repayment history will be accessible to all stakeholders provided they too share their data with the PCR, he added.
 

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