The Reserve Bank of India has asked banks and other lenders to start reporting more in-depth data on commercial borrowers to credit information companies.

According to a notification on the regulator’s website, lenders to commercial borrowers are required to provide more detail on directors, office holders, shareholders of the borrowing company. Similar information is required for subsidiary companies as well.  While this disclosure was always required, the RBI found that inadequate information was being submitted. This information is very important for establishing cross-linkages between consumer credit bureaus, commercial credit bureaus and microfinance bureaus, the RBI said in its circular.

According to Parijat Garg, a digital finance expert and a former credit bureau official, the move will help lenders get a clearer understanding of the borrowing and repayment patterns of promoters and partners of partnership and proprietorship firms.

“A majority of the businesses in India are either partnerships or sole proprietership,” Garg said. “This move will help lenders get a full spread of exposure across the personal and business side, especially if someone borrowing a personal loan is a partner in a firm which is in default.”

The RBI, in its circular, has asked lenders to report the additional data on all fresh commercial loans extended from July 1, 2022. As the data collection process is likely going to be a long drawn one, the banking regulator has given time to lenders to submit historical data.

Source: Bloombergquint news

On October 14, 2021 the RBI issued the following circular:

RBI/2021-22/111
DoR.FIN.REC.59/20.16.056/2021-221

All Commercial Banks (including Small Finance Banks, Local Area Banks and Regional Rural Banks)
All Primary (Urban) Co-operative Banks/State Co-operative Banks/ District Central Co-operative Banks
All-India Financial Institutions (Exim Bank, NABARD, NHB and SIDBI)
All Non-Banking Financial Companies (including Housing Finance Companies)
All Credit Information Companies

Data Format for Furnishing of Credit Information to Credit Information Companies

Please refer to our circular DBOD.No.CID.BC.127/20.16.056/2013-14 dated June 27, 2014, inter alia setting out a Uniform Credit Reporting Format for reporting credit information to the Credit Information Companies (CICs). The Uniform Credit Reporting Format has two Annexes, Annex-I contains two formats for credit reporting, viz., Consumer Bureau and Commercial Bureau, whereas Annex-II contains credit reporting format for Micro Finance Institution (MFI) segment.

2. The Relationship Segment (RS) in the Commercial Bureau format inter alia captures information on relationship fields of the corporates, viz., business category and type of relationship (i.e. contains information on directors, shareholders, proprietors, partners, trustees, holding companies, subsidiary companies and associated companies related to the borrower). It is observed that there is a low level of RS details in the databases of CICs.

3. The RS details are very important in establishing cross-linkages across the three modules, viz., Consumer, Commercial and MFI Bureaus, while providing comprehensive credit information of a borrower to Credit Institutions (CIs) by CICs. Accordingly, it has now been decided that the reporting of RS data by CIs to CICs would henceforth be mandatory. In order to ensure implementation in a non-disruptive manner, the reporting requirement may be staggered in the manner indicated below.

(i) The reporting would be mandatory in respect of new loan accounts opened after July 1, 2022.

(ii) A phased approach shall be followed for reporting of legacy data as detailed below:

  1. The accounts opened during the period (July 1, 2021 to June 30, 2022) have to be updated by January 1, 2023.
  2. The accounts opened in past three years (July 1, 2018 to June 30, 2021) have to be updated by July 1, 2023.
  3. A timeline for reporting of the remainder legacy data would be reviewed by the Technical Working Group and the CIs would be advised in due course.

4. The CIs are advised to commence reporting the aforesaid information as per the prescribed timelines to CICs.

Source:  Reserve Bank of India