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The role of CIBIL

Know CIBIL in a better way

Basha Shaikh

29 May 2008

Nowadays when we discuss loans whether as a borrower or as a lender we find mention of a new term - CIBIL. "Credit Information Bureau (India) Limited". CIBIL is India's first credit information bureau. But there is little clarity about this newly founded body that's the reason masses misunderstands it most of the time.

Our article throws light on the role and ambit of CIBIL

What is CIBIL?

CIBIL a credit information bureau was formed on the basis of recommendations of a Working Group constituted by RBI to establish a world class bureau in India in private sector which would be technology driven service provider.

CIBIL helps banks, financial institutions and other financiers to share credit histories of retail and commercial customers. . The bureau provides both positive and negative information about bank's borrowers which empowers lenders in assessing credit worthiness of potential customers.

How does CIBIL work?

CIBIL shares a reciprocate relationship with its members. CIBIL collates the credit information available from all the financing institutions which are its members, and gives back an informed report which takes into consideration all the financial activities of a consumer or commercial institution.

For example, if X has taken a personal loan with one bank and paid his EMIs promptly but defaulted on a home loan taken with another bank, CIBIL will collate both these information and provide the member bank with a credit report.

Credit information:

Credit information is financial information relating to the nature and amount of:

  • Funded and non-funded credit facilities
  • Security or collateral for credit facilities
  • Past credit history of the borrower

In short, the core of credit information is the past payment history of the borrower.

What does CIBIL do?

CIBIL's primary function is to collate complete and reliable credit information and make it available to its members. CIBIL is a neutral service provider and has a centralised database which will provide credit information in the form of reports on borrowers-individuals or businesses-to its members. A consumer can not get his credit information directly from CIBIL but can ask his/her bank to provide him/her with one.

Members of CIBIL:

CIBIL is promoted by State Bank of India (SBI), Housing Development Finance Corporation Limited (HDFC), Dun & Bradstreet Information Services India Private Limited and Trans Union International. Now it has about 16 banks and financial institutions as its share holders. Its membership is not limited to shareholders and has nearly all major banks, financial institutions, non-banking finance companies operating in India as its members.

How would it affect the borrower?

Banks will now be able to access the borrower's full credit history. They will have information on whether the borrower has ever defaulted; have a perfect repayment record and who are the lenders etc. This holds good across loan products, credit cards and card withdrawals.

Depending on your credit history, and other factors collated from a consumer's application, the credit officer may offer you an interest rate different from the advertised rate. If your record is good, this rate could be much lower than the prevailing rates. If it is bad, it means a far higher rate or even denial.