RADHIKA MERWIN Interview with Harshala Chandorkar, COO, TransUnion CIBIL
Published on February 25, 2018 | The Hindu Business Line
Arguably no single data point determines your credit-worthiness, or your prospect as an entity worthy of a consumer loan or a business loan, as your credit score. TransUnion CIBIL is one of four credit bureaus in India that assess you for that. There are currently about 37 crore retail borrowers and about 1.3 crore commercial borrowers on the TransUnion CIBIL Consumer and Commercial bureau. That portfolio also gives it a vantage view of the banking and economic landscape. Excerpts from an interview with Harshala Chandorkar, Chief Operating Officer, Transunion CIBIL:
What is your sense of corporate lending trends, which appear to be recovering?
The NPA woes of the banking industry in the commercial lending space indicate that the mid-corporate and larger SME segments have taken the biggest hit. TransUnion CIBIL Commercial Data analysis highlights a significant chunk of accounts that are bad in one bank but not bad in another. The latest FIBAC report on Productivity in Indian Banking states that a significant part of latent NPAs could slip in the next few quarters. The revenue pool of mid and large corporates will probably stay subdued for the next 4-5 years due to stress in the portfolio.
The banking industry needs to invest in new credit models for commercial customers that rely on commercial credit information from TransUnion CIBIL and analytics to complement banks’ capabilities in credit assessment and detecting early warning signals.
What’s the outlook on retail credit? Consumer loans seem to be driving overall lending.
With the availability of credit information and progressive policies on financial inclusion, retail lending has grown profitably. Over the past five years, there has been an estimated 16 per cent annual growth in disbursement and over 30 per cent annual growth in bureau enquiries. At the same time NPAs and delinquencies on retail lending have been historically low.
The nature of retail credit is changing rapidly in India as the share of products in new accounts opened has evolved, with gold loans and consumer durables gaining significant volumes and accounting for almost 50 per cent of all new accounts opened. This growth has been accompanied by a significant drop in ticket sizes as financial institutions are becoming more and more willing to extend low-value loans. With certain other retail products, the ticket sizes have actually increased, prominent among them being personal loans — indicative of the increasing credit-willingness of the Indian borrower and a supply-side push — and home loans and auto/two-wheeler loans – indicative of the overall increase in the values of the underlying assets funded. In addition, the share of youth in retail credit is growing: millennials’ share of accounts opened has increased to 40 per cent.
How do you see the bureau evolving in the near future?
The next stage of evolution of India’s credit information infrastructure will be the usage of credit information data, insights and solutions for further expanding access to credit, driving credit penetration and financial inclusion.
Demonetisation has paved the way for a cashless and digitised economy. Bureau solutions for instant verification and ‘decisioning’ are paving the path for driving digitised, quick, easy and affordable access to finance. Verification solution enables credit institutions to authenticate the identity of the consumer in real time at the point of application. As a result consumers are able to get the loan approval within minutes of applying. Yet another advantage is cost-effectiveness while establishing a consumer’s identity. Bringing down this cost can help banks and credit institutions make lending decisions quickly, at cheaper KYC costs, and thereby increase business growth and credit penetration.
The potential of alternative data usage for credit decisions is another significant domain. To expand and increase the breadth of information for making lending decisions even more comprehensive, we are in discussions with regulators to allow for contribution of ‘post-paid’ information on telecom customers. Several World Bank studies have indicated that inclusion of reporting of non-financial payment data (alternative data) proves extremely beneficial for making lending decisions, specifically for the segment that does not have access to credit. With access to affordable credit, new credit consumers are able to build assets. Those financially underserved consumers who have a positive payment records in non-financial obligations like telecom will have the ability to access affordable credit.
The extension of the credit information bureau to cover a larger population will enable a majority of Indians who are self-employed, or employed in the unorganised sector, to get a credit history and enhance their eligibility for credit from banks. Incorporation of telecom and electricity bill payment records into the credit information bureau can unleash this enormous potential to extend the penetration of banking in India. There is compelling business logic for utility and telecommunications firms to begin fully reporting customer payment data to credit bureaus.
But only a few banks use credit score to offer differentiated rates to customers.
Risk-based pricing in still at a nascent stage in our country. Both in the commercial as well as retail segments, pricing offers an opportunity to strengthen performance in the short term. Some progressive lenders have initiated a disciplined approach to risk-based pricing and this could improve banking profitability by 20-30 basis points. Further, at the bank level, banks need to deploy models to estimate customer price elasticity to introduce value-based pricing.
Risk-based pricing of loans helps both the lenders and borrowers alike: the lender can assess the risk value of a customer before deciding to offer a loan at a particular rate, while customers with a higher CIBIL score benefit by getting lower rates as compared to customers with a low scores. The benefits thus ensure that customers work towards keeping their scores and credit-worthiness high.
Paytm will give a rating to users on its platform based on their digital transactions online.
M Devan | Monday, February 26, 2018 – 09:04 | The News Minute
The Digital India push may receive a fillip through the efforts by Paytm to launch its own credit score Paytm Score, very much on the lines of the CIBIL credit rating that has been the only parameter on which the Indian banking system has been approving loan applications.
The record of digital transactions users have carried out within the digital payments major’s ecosystem will be the basis on which it will make the evaluation of creditworthiness of an individual. Paytm has its e-wallet, Paytm Mall and also the booking platform across which customers use their digital payment modes to make payments.
These transactions will form the basic data which will be fed into the appraisal system and the ratings given. These ratings can then be shared by Paytm with lending agencies with whom it has already entered into partnerships and it has already added to its stable, a lending vertical Creditmate, which it acquired organically a few months ago.
Apart from this, Paytm has an agreement with ICICI Bank for offering short-term credits on an interest-free basis and these loans are sanctioned without any delay.
The credit rating program may itself become a financial product for Paytm and it is learnt that it has offered this to some online lending agencies and NBFCs interested in moving away from CIBIL.
The demonetization move by the Indian government, in late 2016, has helped Paytm expand its business and that has, in turn, brought in high profile investors, such as SoftBank. With that backing, the company is now able to focus its attention on growing all the verticals under its management.
With Paytm Mall and Paytm Payments Bank already doing well Paytm has expanded into new segments such as insurance, online grocery delivery with BigBasket, online ticket booking, initiatives to set up a money market fund, the partnership with PVR and more. The firm might want to evolve into a large conglomerate of services.
It helps to know exactly how a single missed payment can affect your finances and your CIBIL Score.
By Hrushikesh Mehta | Feb 23, 2018 10:10 AM IST | Source: Moneycontrol.com
If you ever wondered whether a single failed credit card payment can pull down your entire credit score, the answer is YES. While a failed payment may be a mistake or the inability to pay (we all go through financial difficulties), lenders view this negatively and it can impact your access to credit in the future. Note that this doesn’t just apply to your credit cards; it holds true for add-on cards, where you’re accountable for others’ spending habits.
Impact on your finances and your CIBIL Score
It helps to know exactly how a single missed payment can affect your finances and your CIBIL Score.
Firstly, always remember that the interest on your missed payments (including the late payment fee) is compounded daily. Monthly interest rates on credit cards can range from 3-4% per month on the outstanding balance (principal, interest and late fees). So, even though you think you missed your payment by a day or a week, your interest liability may be larger than you anticipated. Paying just the minimum due or not paying for a few months will see your amount due balloon significantly.
Let’s take an example of only paying the minimum due for 6 months. On May 1, you make a purchase of Rs. 1,000 on your credit card that has a 3% per month interest rate. You then choose to only make minimum payments due (5% of the outstanding amount at the end of the month) for the next 6 months and spend no additional money on that credit card.
When clearing your balance at the end of 6 months (December), you will end up paying Rs. 1,560 — 56% more than the original amount spent.
Even without making any more purchases on the card, opting for minimum payments will stretch your repayment period to almost 9 years!
If you choose not to pay minimums, not only will you be delinquent and affect your CIBIL Score, but you will end up paying more than double the amount you had spent.
This is why it’s critical to read the fine print whenever you avail of a credit card, and it’s even more important to always pay on time.
On the other hand, your CIBIL Score is calculated based on the last 24 months of your credit history, and the four major factors that can affect your Score are as follows:
A missed payment can impact your score for as far ahead as the next two years. While it will remain visible on your credit report for 36 months, remember that it will always be a part of your credit history. This is why a credit score is like a reputation that takes years of discipline and patience to build, and just a single instant to get impacted.
Rebuilding your Score
There are ways to get back on the road to good credit health. Here are two ways to help build your credit score:
1. Ensure you clear outstanding dues on credit cards fully. Part-payments or minimum payments indicate difficulties in repaying dues. What’s more, if your amount overdue snowballs it will not only negatively affect your CIBIL Score but you also risk falling into a debt trap. Also, if a pending credit card payment is reported as “Settled” or “Written off”, this will affect your access to credit in the future.
2. If you have amounts pending on multiple cards, taking a personal loan at a lower interest rate to pay off your cumulative dues can be an economical option to avoid ballooning debt balances. Alternatively, you can borrow money against your gold, take a loan against your fixed deposit (without breaking it), or even get a loan of 50-80% of your asset value from investments in LIC, mutual funds and securities. The lower interest rate will make for more manageable monthly payments without the problem of an exponentially ballooning debt burden.
While these measures help rebuild your credit health after missed payments, adopting a proactive approach to financial discipline is always more prudent:
1. Make sure you always pay on time.
2. Don’t take on more debt than you can reasonably afford.
Why maintaining a high CIBIL Score is important
A higher credit score can lead to better loan offers at competitive interest rates primarily because lenders are keen to reward consumers who have demonstrated financial discipline. In addition, emergencies don’t always announce themselves before they arrive and having a high CIBIL Score will ensure that you are able to secure funding quickly (especially in a medical emergency). So, while missed payments can negatively affect your score, regular payments and credit-healthy habits can improve it.
The writer is VP & Head – Direct to Consumer Interactive of TransUnion CIBIL
Sukanya Kumar, Founder & Director, RetailLending.com | Aug 12, 2016, 10.28 AM | Source: Moneycontrol.com
The more we become ‘social’, the more we tend to show-off. It leads to more bad loans. It is time to shun bad loans and embrace good loans wherever required.
This is a very sensitive subject. Most of us in the financial broking business will shiver thinking what will happen, if this ever comes to of no one borrowing anymore. But let us overcome this superficial personal gain agenda and see what lies beneath.
A man in his late 20-s or early 30-s is bound to have a couple of small loans like credit cards, personal loans etc. here and there. They may be for shorter periods. As he progresses well in life and gains stability in his profession, he wants to settle himself. A big part of this ‘settlement’ is buying a home. And a home loan is generally taken for 20 years by most.
Given the current property prices across the world, buying a home with your own savings and liquidating your financial papers is not a possibility. You are bound to fall short way beyond the market price. Gone are those days when a man used to build a home with his retirement benefits and borrowing only from his provident fund account. He never used to enjoy the home fully as he has spent his hay-days staying at a rental home/company accommodation which never was his ‘own’.
The more we become ‘social’, the more we tend to show-off. If my colleague has got something which he boasts about, we have to get the better ones to overtake him. Our home-maker (to the true sense) spouse wants to buy a home with more number of bedrooms and amenities, her neighbouring friend could afford. Even our teenage children want to buy better gadgets to make sure they have their friends’ groups flocking around them and think they have the ‘latest’ ones.
There is no end to these needs, no end to loaning to purchase these, and hence the terms ‘financial slavery’. A man pays 70% of his net take home salary to pay off his monthly loan EMI-s and needs to survive with the balance 30% only, and with this lean sum pay for his home rent, children’s education and their extra-curricular activities, day-to-day expenses, food, clothing, entertainment, hobbies and also family trips and shopping.
We are afraid to start our own venture; afraid to opt for a better opportunity, if it requires us to take a study-break for a couple of months, we are even afraid to get married these days (I hear it from many 30-somethings frequently), since we are afraid to take more responsibility, given that we are already under so much debt.
Now, all of it is not that bad. There are two clear groups of loans. The good loans and the bad loans. One needs to let go of the bad loans to relieve himself / herself from being miserable, and continue happily with the good loans and feel good to have them.
Any item, bought with loan-money, which depreciates in time, is a bad loan. You never recover the sum you paid, plus you pay the interest on that sum too.
For example, you buy clothes or any electronic gadgets via a consumer durable loan or you buy a car with a car loan, or you buy just some books by swiping your credit card…….. The moment you are walking out of the shop, it depreciates by 30-50% to the least. It becomes a ‘second hand’ item. You never regain the price, unless of course your car becomes a vintage one and pays off (pun intended).
So, a loan on credit card, a personal loan, a consumer durable loan, a car loan- all these are bad loans. It only boosts your ego and gifts you a ‘rich’ lifestyle and only brings momentary joy with no permanent effect on yourself.
A loan which enhances the worth of the purchased product over time and even crosses the mark of it, to give a handsome return over the period, also absorbing the interest cost attached to it.
A home and an education loan are in this category. A home always appreciates in price, if bought wisely with proper research in good location, and will supersede the interest cost too. The percentage of people making a true loss while selling their property is negligible.
The added advantage of taking a home loan is also the tax benefit you get under a couple of sections. There are subsidies available on affordable housing too.
An education loan while taken will be with a moratorium so that it is easy on the pocket of the student. This loan enriches you as a person and helps you get a well-paid job or find a business solution for yourself, after getting trained professionally. The return on this is lifelong. You keep reaping the benefit of you educating yourself, till your last day. The interest you pay while taking this loan is negligible, of course.
Strangely enough, the bad loans are the ones which are more expensive too!
So, to avoid enslaving yourself from paying high monthly debts, please relieve yourself of the high-interest rate loans which are eating away your month’s pay and giving no returns other than being depreciated day by day.
One last thing, many people feel themselves under a ‘burden’ of home loan and tends to close that first. Do not make that mistake ever. If you have spare money, invest in retirement plans, SIP and other low-risk debt-funds to reap the benefit when you are old and retired. By foreclosing your home loan early with the liquid cash and hence not having any money left for investment anywhere, will leave you only with a house post-retirement with no money in hand. And, you can’t eat, enjoy and spend the house for next 20-25 years of your retired life. You need money for that.
Be wise. Live a life without any bad loans. No loans at all may not be financially a good choice for the modern generation, since you want to enjoy yourself when you are young. Ultimately, we live longer now than earlier with all the medial attention we get these days.
Happy Good Loaning! Happy Freedom from Bad Loans!!
Though most of us have heard about CIBIL score, there are so many things many individuals are not aware of.
Rajiv Raj Founder & Director, Creditvidya.com | Aug 01, 2016, 08.06 PM | Source: Moneycontrol.com
Awareness about credit score is quite low in India and the few who know about it also might not be aware of the finer details of the process of ascertaining the credit score or its importance and what impacts the credit score of an individual. As we move towards a more digital world, everything is more linked, which means that soon the importance of a CIBIL score will go up while taking a loan; it may impact employment prospects, insurance premiums and so on. Thus being aware of credit score nitty-gritty can be use full.
Q. Are credit report and credit score the same thing?
The first thing that we need to know is that credit report (CIR: Credit Information Report) and credit score are not synonymous. While the credit score is a three digit number or sometimes it can be NA/NH or -1, the credit report is a much more detailed document. The credit report carries the details of all the loans and credit card one holds, it lists personal information, contact and employment details, status of dues, credit enquiries etc. Lenders look at the report and not only the score to get a comprehensive picture about the debt status of an individual.
Q. Is CIBIL the only credit score company in India?
CIBIL is the oldest credit score agency for individuals in India. Since it was the first one and was the only one for a long time it is the most well known and almost synonymous to credit score in India. Apart from CIBIL there are three more agencies that provide credit score for individuals; they are Equifax Credit Information Services Private Limited, Experian Credit Information Company and High Mark Credit Information Services.
Q. Will my score across agencies be same?
No, the CIBIL score against various credit agencies will not be same. There may be a slight difference due to the scoring model of each agency. While the basics of calculating the credit score remains the same, each agency may use a different algorithm for calculating the score which can cause some variation. However if an individual follows the basic tenets of responsible borrowing then his/her score is expected to be good across all agencies.
Q. What impact does settling an account have on the Credit Score?
If one settles an overdue amount by paying a lesser amount then actually what was originally due then it will be reported in the CIR. How this is reported will impact the score either positively or negatively. If it is simply reported as paid then the impact will be positive as the overdue no longer exists. However if the lender reports it as “settled” then it could lower your score. While negotiating with the lender, make sure you clarify this aspect.
Q. Does checking your own score impact in negatively?
When a financial institution asks for the CIR of an individual it is known as a hard enquiry and impacts the score negatively. However, when an individual seeks his/her report it is known as a soft enquiry and has no impact on the credit score whatsoever.
Q. What does NA or NH mean?
A score of NA or 0 means that the individual has a credit history of less than six months which is not sufficient for a credit score for 300 to 900. NH or no history means there is no credit history so obviously no rating can be provided. Score of NA/NH is not a bad thing but may cause hiccups in trying to get a loan.
Q. At what CIBIL Score can I get a loan?
As per the CIBIL website 79% of the loans get approved for a score of 750 and above. Having said that there may be some flexibility as per the rules of the lender, the kind of loan, special tie-up with corporate and so on. Banks may be willing to consider a lower score for employees of a company with they have tie-up or some co-operative banks may be willing to lend at lowers score at higher interest. While a score of 750 and above is generally considered good, there is still some room for flexibility at lower scores and sometimes a score of 750 may also not be sufficient as the applicant may be overleveraged or there may be some negative comments in the report.
Hopefully the above discussion has helped you in getting better insight into the credit process. As stated earlier the importance of this statistical tool is increasing as we move towards a more credit driven and digital economy.
Source : http://goo.gl/a7sCtz
Currently, an individual has to shell out Rs 550 for a report and a onetime credit score in the PDF format from CIBIL
BS Web Team | Mumbai | July 22, 2016 Last Updated at 10:53 IST | Business Standard
The Credit Information Bureau of India (CIBIL) has decided to provide individuals with one free credit report a year, the Reserve Bank of India chief Raghuram Rajan said.
“Going forward, by the end of the year, the Credit Information Bureau of India will start providing individuals with one free credit report a year, so that they can check their credit rating and petition if they see possible discrepancies,” Rajan said.
Currently, an individual has to shell out Rs 550 for a report and a onetime credit score in the PDF format from CIBIL.
Most Indians are unaware of their credit score and have never bothered to check their credit report either. Consequently, they may not know that there may or may not be issues present in their report.
Financial institutions, including banks, check the credit worthiness of an individual before extending credit or loan, through these credit reports. “When an individual knows that a default will spoil their credit rating and cut off future access to credit, they have strong incentives to make timely payments,” Raghuram Rajan said at a seminar on ‘Transforming Rural India through Financial Inclusion’.
Other than CIBIL, there are two other credit bureaus in India — Experian and Equifax. But at the moment, the governor has only talked about CIBIL providing a free report.
Praising the credit bureaus further, Rajan also said: “Credit information bureaus have helped tremendously in solving both the information and incentive problem in retail credit.”
Rajan also pitched for the need to expand the reach of credit bureaus in rural India, even bringing borrowing under Self Help Groups (SHG) into their ambit.
Creditvidya.com | Last Updated: June 13, 2016 10:38 (IST) | NDTV Profit
Credit utilisation is the ratio between the credit card spending and the sanctioned limit for the card. This is calculated cumulatively as well as individually which means that it is calculated for each card that one might have and also for all the cards put together. Thus, the overall spending on your card versus the total sanctioned limit is the cumulative credit utilisation.
Why is this ratio important? This ratio is important because after the repayment history this is the biggest contributor that makes or breaks the CIBIL score of an individual.
How does it make a difference if the credit utilisation is high or low? High credit utilisation is indicative of being credit hungry and also poor debt management, both indicate risky borrowing behaviour which makes the CIBIL score low. Then does it mean that zero credit utilisation is good?
No. While a high credit utilisation ratio is definitely not good for the CIBIL rating a nil one is also not good either.
Smart ways to manage credit utilisation ratio
Reduce expenditure: Well, to be honest it is not the smartest way but definitely the most obvious and the simplest way. Yet this is something that might not be the easiest thing to do. If expenditure on credit card is high because of unplanned and impulsive buying then yes you could try to reduce the spending.
Get a bigger credit limit: Either one could decrease the numerator (spending) or increase the denominator (limit) to reduce the ratio. Getting a bigger limit is one of the options. Often for cards that were issued a few years back, card holders forget to revise the sanctioned credit limit even though they are eligible for it. Thus one could check with the card company and find out if they are eligible for a higher limit. If the eligibility allows then one could get a bigger limit sanctioned for their existing card.
Opt for an additional card: If a higher limit is not possible due to the rules by the credit card issuer or you already having a high limit, then one could explore the option of getting an additional card. An additional card will raise the overall available credit limit thus making it possible for you to control a high credit utilisation ratio. However this option will work only if the expenditure is spread smartly over all cards and if one easily manages paying the dues on all cards.
Distribute expenditure smartly between cards: An additional card will not work if the expenditure is not distributed judiciously over all cards. It also makes sense to time the spending depending on the billing cycle and due date and charge it to the appropriate card accordingly. If the credit utilisation ratio is low overall but is too high for one card then also it is not a good indicator for the credit score.
Try paying mid-cycle once a while: If in one billing cycle due to some festivities or unforeseen circumstances there is very high spending on the credit card, then one could consider paying before the actual due date to keep the credit utilisation in check. Paying mid-cycle some amount will ensure that the ratio does not become too high.
Disclaimer: All information in this article has been provided by Creditvidya.com and NDTV Profit is not responsible for the accuracy and completeness of the same.
Source : http://goo.gl/Cxof7c