Role of Credit bureau information in credit management

2. Role of Credit bureau information in credit management

3. The Concept Wish list of a credit grantor Make informed and objective credit decisions Minimise adverse selection Deter concurrent borrowings & serial defaulters Improve asset quality and reduce NPAs Increase market penetration Reduce turn around time

4. What is a Credit Bureau? An organization that: Collects data pertaining to Identity data about Consumer (Individual) and Commercial (Business) entities Credit Information Payment History Compiles Credit Information Reports on consumer and commercial borrowers and makes these available to members on request. Is a third-party service provider for the financial sector

5. International Scenario In developed countries, Bureaus have been in existence for a long time. In USA Dun & Bradstreet - 1841 Equifax - 1946 Trans Union � 1968 In other countries Germany - 1934 Turkey - 1951 Belgium -1967

6. Credit Bureaus improve efficiency

7. Credit Penetration ratios worldwide

8. Benefits of a Credit Bureau

9. International Scenario In developing countries Different factors spurred the growth of bureaus Recognition of bureaus as integral to a maturing financial sector Lengthening loan terms following stabilisation of previously volatile economies Economic crisis in the financial sector

11. CIBIL Provides Credit Information Centralised Comprehensive Reliable Facilitates credit grantors in deciding on Whom not to give credit Whom to give credit and what extent Provides objective tools for risk management

12. CIBIL � The Promoters

13. CIBIL � The Shareholders

14. CIBIL � a unique business model Members Banks All-India Financial Institutions Non-Banking Financial Companies Credit Card Companies Housing Finance Companies State Financial Corporations

15. CIBIL � a unique business model CIBIL and its Members A close interdependent relationship CIBIL to give prompt and meaningful credit information This will depend upon Reach of Membership Quality and timeliness of data provided by Members

16. CIBIL  A centralised Database for sharing information A world class credit bureau dealing with Commercial & Consumer credit information Positive & Negative credit information �Offers Risk Management Solutions Scoring Fraud Detection

17. Functioning of CIBIL

18. Data Security

19. Data Security @ CIBIL Information is accessed on a strictly �Need to know� basis. Access control devices, surveillance cameras installed at strategic locations. Biometric access system at our Data Center. Firewall, Intrusion Detection and Vulnerability Assessment System to secure our network infrastructure from external security risk. Anti - Virus software installed on all servers in the Data Center. Necessary configuration and updates continuously applied on our Servers and Network appliances.

20. Security � Data transmission 128-bit SSL encryption for all Web-based transactions including FTP. Cryptographic solutions for all information sent or received through any physical media i.e. CD, DAT and DLT. Security measures aligned with stringent information security management standards (BS7799).

21. Membership  121 credit grantors have accepted membership

22. Legal Environment - Master Legislation

24. Consumer Bureau The Consumer Bureau was launched on April 5, 2004 with a database of 4 million accounts contributed by 13 Members. Subsequently, our database has grown over 48 million accounts contributed by 48 Members. The Consumer Bureau reports are available to Members, who have submitted all their data to CIBIL in an acceptable format (Principle of Reciprocity).

25. CASE 1: An individual, who had applied to one of our members for a loan of Rs. 10 lacs, was found to have 8 loans of the same type from a single bank and one credit card outstanding, totalling approx. Rs. 14 lacs. This was revealed in the CIBIL CIR. CASE 2: A member recently asked a new applicant about his previous loans and the payment history of those loans. The borrower mentioned that he had one previous loan on which he had recently delayed the payment by a month. However the Credit Report accessed on the borrower from CIBIL reflected that payment was delayed by 8 months. Success Stories

26. Success Stories CASE 3: One of India�s leading newspapers reported, "Four banks had turned down a Pune businessman�s housing loan application based on his payment data. He apparently had a history of frequent defaults on his credit card payments". CASE 4: A borrower recently approached a member for a housing loan of Rs. 1 crore. During the preliminary discussion, the member asked the borrower if he had previously taken any other loans. The borrower said that he had never borrowed in the past. However a Credit Report accessed on the borrower from CIBIL reflected one closed housing loan taken by the borrower in the past from another Credit Grantor.

27. SME SECTOR

28. Importance of SMEs in India The Government of India targeted the Indian economy to grow at 8% per annum, as stated in its Tenth Five Year Plan The Government reiterated the importance of SMEs in India in achieving and sustaining strong economic growth, high employment and poverty reduction It has been estimated that the SME sector contributes 40% of domestic production and 50% of total exports by India

29. The introduction of the Small and Medium Enterprises (Development) Bill and the policy on credit. The new thrust is towards up-scaling the size and technological upgradation. Recognization of SMEs in the services sector, and treating them on par with the small scale enterprises in the manufacturing sector. Union Budget 2006 - 07

30. SME SECTOR

31. SMEs play an important role in promoting growth anddevelopment

32. SME sector Credit grantors have been reluctant to lend to the SME sector due to: Perceived risk of this sector Lack of comprehensive credit information The credit bureau will create a database of SME borrowers in order to provide pre-screening of SME borrowers, in order to: Provide comprehensive information, which will enable credit grantors to make informed credit decisions Facilitate the flow of credit to the SME sector

33. Indian Experience in SME Banking

35. Customer spectrum for Banks

36. Advantages of CIBIL for Banks Independent, trusted third party opinion on capabilities & credit worthiness of SMEs Faster processing of SME applications for bank loans, thereby leading to time and cost savings for each SME credit evaluation Better credit pricing depending on borrower performance Improved credit risk portfolios (this is especially important given the increased focus on credit risk management and Basel II) Increased profitability, through cost savings as well as improved SME loan portfolios

38. Update Commercial Bureau  Systems & Infrastructure Commercial System � Customised & Installed Data Centre � Commissioned & Operational Data on suit-filed accounts of Rs.1 Crore and above and suit-filed accounts (willful defaulters) of Rs.25 lacs and above available on our site - www.cibil.com

40. Commercial Bureau Report Commercial Credit Report contains Non-Individual Borrower Information Name and Address D-U-N-S� Number Other Identification numbers e.g. PAN Legal Constitution Relationship details e.g. major shareholders, directors etc. and their addresses, D-U-N-S� Numbers Number of inquiries made on that borrower

41. Commercial Bureau Report Commercial Credit Report contains Account details Number of credit facilities Credit type Loan amount Outstanding amount History of credit outstanding - short, medium and long term Asset classification Wilful defaulter and suit filed status Guarantor details

42. Benefits of CIBIL Provides access to better credit information by allowing credit grantors to exchange credit information while ensuring they do not lose their competitive advantage Automated decisioning system leading to lower cost of credit evaluation, consistent decisioning and greater efficiency Assists in evaluating and monitoring repayment ability and payment diligence Lowers default risk by assisting credit grantors improve their credit portfolios Allows credit grantors to price the risk appropriately

43. Provides faster access to credit Reduces cost of borrowing for borrowers with good credit records Reduces subjectivity in the credit assessment process Encourages borrowers to maintain greater self discipline in acquiring financial commitments Allows borrowers to build reputational collateral by following correct repayment behaviour

44. 3 Key Messages

45. THANK YOU