Bad loans Current Affairs - 2019
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RBI initiates steps to set up digital Public Credit Registry (PCR) to capture details of all borrowers
Reserve Bank of India (RBI) has initiated steps to set up wide-based digital Public Credit Registry (PCR) to capture loan information of individuals and corporate borrowers. In this regard, RBI has invited expression of interest (EOI) for developing PSC from companies with turnover of over Rs 100 crore in last three years. Setting up of PCR assumes significance amidst rising bad loans in financial system. The non-performing assets (NPAs) in Indian banking system is about Rs 10 lakh crore.
Public Credit Registry (PCR)
PCR is digital registry of authenticated granular credit information. It will work as financial information infrastructure providing access to various stakeholders and enrich the existing credit information ecosystem. It seeks to serve as single point of mandatory reporting for all material events for each loan, notwithstanding any threshold in the loan amount or type of borrower.
PCR will capture all details of borrowers, including wilful defaulters and also pending legal suits in order to check financial delinquencies. It will also include data from entities like market regulator SEBI, Corporate Affairs Ministry, Goods and Service Tax Network (GSTN) and Insolvency and Bankruptcy Board of India (IBBI) to enable banks and financial institutions to get 360 degree profile of existing and prospective borrowers on real-time basis.
In June 2018, RBI had announced to set up PCR for India with view to address information asymmetry, foster access to credit and strengthen the credit culture in the economy. This decision was taken based on recommendation of high-level task force (HTF) i.e. YM Deosthalee committee which was constituted by RBI to review current availability of information on credit, adequacy of existing information utilities, and identify gaps that could be filled by PCR.
Currently, there are multiple granular credit information repositories in India, with each having somewhat distinct objectives and coverage. Within RBI, CRILC is borrower level supervisory dataset with threshold in aggregate exposure of Rs 5 crore. Moreover, there are four privately owned credit information companies (CICs) operating in India. RBI has mandated all its regulated entities to submit credit information individually to all four CICs.
The Reserve Bank of India (RBI) has announced that it will set up a Public Credit Registry (PCR) as a repository of information regarding loan information of individuals and corporate borrowers. This decision has been taken as per recommendations of Y.M. Deosthalee committee set up by the central bank.
Y.M. Deosthalee Committee Recommendations
The Y.M. Deosthalee committee was set up by RBI and had submitted its report in April, 2018. The major recommendations of this committee report are as follows:
- RBI should set up a Public Credit Registry in due course and this should be backed by a legal framework. The central bank may also consider moving such registry to a separate non-profit entity.
- PCR will work as a repository of all loan contracts, duly verified by reporting institutions for all / any lending in India, regardless of the amount of the loan.
- PCR should also capture data such as external commercial borrowings, market borrowings, and all contingent liabilities; and should provide an holistic picture about the borrower’s indebtedness.
- The registry should capture both positive and negative information about all loans. The borrowers should also be able to access their own history.
- The PCR data should be available to all stakeholders such as banks on a need-to-know basis. There should be adequate safeguards on privacy protection.
- Onus of data quality should be on reporting agencies and institutions and action should be taken against the institutions in case of any violations in rules.
- The database should also be linked to defaulter databases such as those maintained by Export Credit Guarantee Corp. of India, GST network etc.
On 6 June,2018, RBI has disclosed the plans to establish the PCR in modular and phased manner. This registry will distinguish between bad borrowers and good borrowers and will offer interest rates accordingly. It will help in improving access to credit, strengthen the credit culture and strengthen the banking system because at present, the corporate borrowers lend from multiple banks without disclosing their existing debt.