Digital Public Credit Registry: What it means for businesses and lenders?
Capturing essential information about borrowers is a key aspect of the loan underwriting process. However, despite all the due diligence, there have been cases of defaults in the past. Worse, there are wilful defaulters, both individuals and business entities, who borrow huge sums of money from lenders, never to return.
No wonderfinancial institutions have witnessed a significant jump in non-performing assets (NPAs) over the years. NPAs not only retard economic growth, but also make it difficult for genuine borrowers to obtain funds.
Digital Public Credit Registry: A repository of information
Taking note of the situation, the Reserve Bank of India (RBI) has initiated the process of setting up a Digital Public Credit Registry to capture critical borrower information, including wilful defaulters and any pending legal suit to check for financial wrongdoings.
The registry will have data from organisations like SEBI, GST network, Insolvency and Bankruptcy Board of India, and the Ministry of Corporate Affairs to give a holistic view of borrowers on a real-time basis.
What it means for businesses?
Sonow, as a business entity, lenders will have a 360-degree view of your financial habits with the Digital Public Credit Registry. With integrated information from regulators, risk assessment will become easy for lenders.
If you have served past debts well and have a sound financial track record, it will be documented in the registry and it will become easier for you to avail loans from lenders. At the same time, you, as a borrower, can seek information from the credit registry and in case of any anomaly can get it corrected.
What it means for lenders?
The Digital Public Credit Registry will serve act as a one-stop destination for lenders to gauge borrowing habits. Right now, there are several agencies that capture credit behaviour of borrowers. However, there’s the lack of a central repository where data from each agency is collected and kept.
Hence, lenders are not able to get a complete picture of borrowers and end up lending to borrowers with a dubious track record.
Easy integration of ancillary information from a range of agencies makes it easy for lenders to access the exact information they need from a single place.
An important move to counter bad loans
Setting up of the registry comes at a time when financial institutions are grappling from the issue of bad loans. These loans weaken the internal financial health of lenders, making it difficult for them to book profits, affecting their operations. It will ease the process of underwriting and offer them a 360-degree view of the borrower before committing.
The apex bank has already invited an expression of interest (EOI) from firms with a turnover of Rs.100 crore in the last three years for developing this registry. The bank had earlier set a high-level task force to review the present information on credit and identify existing loopholes in the system that could be plugged by the Digital Public Credit Registry.
Not only will it remove the current information asymmetry but also strengthen credit culture in the days to come. Strengthen your business and improve your cashflows with easy-to-avail loans from Reliance Money.