RBI introduces single line of reporting of bank loan defaulters
After liberalisation in 1991, new generation private sector banks/ foreign banks got banking license from RBI. It compelled the existing banks to change their approach and business process if they want to survive in the competitive market. On the other hand it also provided a lot of choices to the borrowers for bank finance and borrowers started availing banking facilities from multiple banks. As there was not any formal system to share the information about a borrower/ group among all the bankers so some smart borrowers availed loans from multiple banks and started defaulting.
To overcome this problem, on the initiative of Ministry of Finance, Government of India, RBI devised a scheme of collection and dissemination of information on defaulters of Rs 1 crores and above wef. 1st April 1994. The aim of the scheme was to alert the Banks and Financial Institutions (FIs) and put them on guard against borrowers who have defaulted in their dues to other lending institutions. Accordingly the Banks and FIs are required to submit in prescribed format to the Reserve Bank of India as on March 31 and September 30 every year the details of the non-suit filed borrowal accounts which have been classified as doubtful and loss accounts by them with outstandings (both under funded and non-funded) aggregating Rs.1 crore and above.
RBI used to circulate the data on defaulters so received from Banks / FIs, as mentioned above in a consolidated form to the Banks and FIs as on March 31 and September 30 every year for their confidential use. It is the responsibility of the Banks / FIs to ensure accuracy of their data so furnished to RBI.
In Feb, 1999, on pursuant to the instructions of the Central Vigilance Commission, RBI introduced the scheme of collection and dissemination of information on cases of Wilful Defaults of Rs.25 lakhs and above on a quarterly basis. Under the stated schemes, RBI was periodically collecting and disseminating credit information on suit-field account of defaulters until the year 2002.
Credit Information Bureau (India) Ltd (CIBIL) started function in 2002 and thereafter RBI decided that from 31st March, 2003, Banks and FIs will share information regarding defaulters in the following manner:
| Nature of Information | To Whom to be submitted | Periodicity | |
| I | Suit-filed Accounts | ||
| (a) | Particulars of suit-filed accounts of Rs 1 crore and above |
CIBIL |
Quarterly updates June 30, 2003 onward |
| (b) | List of suit-filed accounts of willful defaulters of Rs 25 lakhs and above | ||
| II | Non suit-filed Accounts | ||
| (a) | List of non-suit filed doubtful and loss accounts of Rs 1 crore and above |
RBI |
As on 31st March
and 30st September |
| (b) | List of willful defaulters of Rs 25 lakhs and above excluding suit-filed accounts |
RBI |
Quarterly- at the end March, June, September and December |
Since April, 2003 the above mechanism is working. All the Banks and FIs are submitting the above information to CIBIL and RBI respectively.
Credit Information Companies (Regulation) Act, 2005
After the enactment of Credit Information Companies (Regulation) Act, 2005 (CIC Act), all Credit Information Companies (CIC) has to get registration from RBI. RBI has issued the Certificate of Registration to the following four CICs:
- Credit Information Bureau of India Ltd,
- M/s Experian Credit Information Company of India Pvt Ltd,
- M/s Equifex Credit Information Services Pvt. Ltd,
- M/s High Mark Credit Information Services Pvt Ltd
All Banks and FIs have to take membership at least from one of the above CIC and submit the above information (table) to that CIC periodically. Most of the banks and financial institutions have taken membership from more than one CICs. Membership is also open CICs.
RBIs revised instructions regarding submission of data/ information
RBI formed a committee (Chairman: Shri Aditya Puri) to recommend data format for furnishing of Credit Information to Credit Information Companies, besides certain other suggestions, the committee suggested that the RBI’s following task of non-suit file account data collection (part II in the above table) and dissemination should be assigned to CICs
- List of defaulters (non-suit filed accounts) of Rs 1 crore and above, and
- Wilful Defaulters (non-suit filedaccounts) of Rs 25 lakhs.
Accordingly, all Banks and FIs will submit the above data to RBI till September, 2014 and thereafter they will submit the information to CICs from December, 2014 onward on monthly or more frequent basis.
Benefit of revised scheme
RBI has revamped the data submission format on the recommendation of Aditya Puri Committee. The data format has become more meaningful and exhaustive. Further, this new mechanism will facilitate aggregation of information. Till now banks are submitting information to RBI and CICs. Moreover, there was a long time gap between collection and dissemination of information from RBI, as RBI was collating this information manually. CICs are using latest state of technology and having more professional acumen, so it will enhance the quality of data and moreover, availability of data will be on real time basis, as now Banks and FIs have to submit data monthly or more frequent basis.
Conclusion
RBI has taken a right decision to delegate the responsibility of collection of non-suit filed accounts to CICs. CICs are more professional in this area of collection and dissemination of information defaulters. In fact there should not be any need of segregation of information on suit filed or non suit filed account. Once a borrower has defaulted this information should be available to all the banks and financial institutions. RBI has set up a Central Repository of Information on Large Credit (CRILC) to collect, store and disseminate credit data to lenders. In fact the task of CRILC should be assigned to CICs with a aim to have a single command of data bank.
About the Author
P C Saboo
AGM & Faculty
State Bank Academy, Gurgaon.
(Except RBI instructions, other views are personal not of my bank)