Initial Steps Towards the Setting up of a

    Public Credit Registry for India
                 Viral V Acharya
         Deputy Governor, Reserve Bank of India




  Inauguration of Data Analytics Stack, IIT Madras
                5th November 2017
  State of Economic Research on India
 A vibrant network is slowly but steadily emerging
   University and business school professors
   Analysts at banks, non-bank finance companies
    (NBFCs), rating agencies, among others
   Researchers at policy institutions and think tanks
   Probing inquiries and fact discovery by media
   Seminars, conferences, forums, panels, deputations
   Global interest in studying India is surging

 More undergraduate and post-graduate (MS, PhD)
 students interested in pursuing Economics and Finance!

 Miles to go before we sleep... on a good, firm trajectory

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             A HUGE opportunity!
 Alongside banks and other financial intermediaries,
 need a parallel ecosystem of economic and
 financial data and information services that
   Collects, collates and generates new data points
    on the economy and financial markets
   Disseminates publicly or sells the data
   Analyzes, aggregates and researches data to
    provide information analytics
   Creates information-based business opportunities
   Aids analysis-driven policy-making and thinking

 Given our core human resource strength in
 computing and information systems, this is a low-
 hanging fruit that has not yet been plucked

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                         Examples

 Real-time inflation and consumption metrics:
   E-commerce sites
   What are the sustained temporal and geographic
    variations in prices and quantities?
 Employment statistics:
   Payments data; bank and NBFC KYC data; tax filing data
   Can Big Data help us compute quarterly unemployment
    rate?
 Rural and informal economy:
   NBFCs; MFIs; FMCG companies; Night luminosity measures
   Do omissions of rural / informal economy in formal statistics
    mask economically relevant growth / inflation outcomes?
 State finances:
   Implied credit rating/risk using RBI State Finances report
   What is the implied subsidy in borrowing costs?

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              Examples (continued)
 Hot money flows and external sector vulnerability:
   Corporate bond, commercial paper, External
    commercial borrowings, Masala bonds ­ FPI
    investments (maturity/location)
   Which of the flows are "carry trades" and which are
    long-term?
 Governance and corporate finance of pyramids and
 group companies:
   Consolidate individual company/subsidiary filings
   Are internal transfers tunneling or internal capital
    markets in response to credit constraints?
   Are foreign transactions round-tripping / tax-arbitrage
    or genuine investments?
 Bank lending boom and bust cycles:
   Let me elaborate on this as a leading example as to
    how it could be done better
   Initial steps undertaken for Public Credit Registry (PCR)

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Public Credit Registry for India

  Tracking a credit transaction from source to
         destination, all through its life...


                 High Level Task Force

Announced at RBI's August 2017 Monetary Policy Meeting

        Held its 1st Meeting on 24th October 2017

        Report Due by the 1st week of April 2018
  Large Borrower Credit information in India

· CRILC (Central Repository for Information on Large
  Credits) is the nearest at the RBI to PCR
   ­ Set up in 2014-15
   ­ SCBs report credit information quarterly on large
     borrowers (threshold INR 50 mn)
   ­ Covers around 60% of loan portfolio and 80% of NPAs
   ­ Slippages in asset quality (restructuring, continued
     non-performance) reported on as-and-when basis
   ­ Borrower level data set
   ­ Designed entirely for supervisory purposes with focus
     on the reporting entity's exposure to the borrower
   ­ Pooled information shared with reporting banks only
   ­ Steps underway to provide group-level exposure
    Credit information in India ­ Contd.

· BSR (Basic Statistical Return)-1 : comprehensive but not
  borrower-centric
   ­ From 1972
   ­ Account level credit information from March 2013
   ­ Quarterly statistical return capturing spatial, temporal
     and sectoral metadata
   ­ No borrower identification
   ­ Information published at aggregate level, granular
     data shared with researchers on a case-by-case basis
     with appropriate safeguards
· Missing out on borrowing from other sources as well as
  important financial parameters of the borrowers to
  gauge their financial health
· 360 degree view not available in any system
 Advantages of a Public Credit Registry

· Removal of information asymmetry, resulting in an
  efficient and optimum credit market
   ­ Impact could be the greatest for MSME financing
   ­ Flow-based credit origination, Fin Tech, ...
· Transparent credit information: pre-requisite for
   ­ Efficient credit assessment and pricing by banks
   ­ Sound risk management and financial stability
· Risk-based, dynamic and counter-cyclical provisioning
  at banks
· Effective supervision and early intervention by regulators
· Effective re-structuring of stressed bank credits
· Understanding workings of monetary policy transmission
  and identifying bottlenecks, if any
              International Practice

· World Bank Survey 2012 ­ 87 out of 195 countries
  surveyed had PCR
· Private credit bureaus co-exist with PCRs ­
  complementary role
· Banks voluntarily provide credit data at the time of
  origination itself ­ near real time data ­ change in credit
  market conditions can be identified with little lag
· Credit Register regularly provides reporting institutions
  with consolidated borrower exposure reports
· Major credit information repositories - Spain, Germany,
  Portugal, Belgium, AnaCredit project of ECB
· Credit register of Spain also includes records of loan
  applications to all banks with lender and borrower
  identity and characteristics
   Terms of reference for the Task Force

· To review the current availability of information on credit
  in India.
· To assess the gaps in India that could be filled by a
  comprehensive PCR.
· To study the best international practices on PCR.
· To determine the scope / target of the comprehensive
  PCR: type of information to be covered along with cut-
  off size of credit, if any.
· To decide the structure of the new information system or
  whether the existing systems can be strengthened /
  integrated to get a comprehensive PCR.
· To suggest a roadmap, including the priority areas, for
  developing a transparent, comprehensive and near-
  real-time PCR for India.
              Task Force will look at

· Scope / target of the comprehensive PCR: type of
  information to be covered along with cut-off size of
  credit, if any
   ­ Bank-borrower loan-level data detailing loan terms at
     time of origination along with data on borrower's
     economic and financial health
   ­ The internal and external ratings and their evolution
   ­ Bank-borrower loan-level restructuring data with all
     details
   ­ Secondary loan sales and price information
   ­ Borrower-debt level Default and Recovery data
· How to cover all important financial parameters of the
  borrowers that are relevant to the financial health ­
  assets, trade credits, utility bill payments?
· Task Force needs to closely look at Credit Bureaus ­
  potential for symbiosis with the proposed PCR
                   Deliberations

· Structure of the new information system or whether the
  existing systems can be strengthened / integrated to get
  a comprehensive PCR
   ­ To build a new comprehensive information system
     from bottom-up or linking existing systems and
     building on top of that?
   ­ LEI reporting has been made mandatory in CRILC
     along with ongoing PAN
   ­ Wherever available, Aadhaar, PAN, CIN, LEI reporting
     is being mandated in BSR-1
   ­ Tapping the credit bureaus
· Roadmap, including priority areas
   ­ Modular project implementation with timeline to
     attain the goal
        Constitution of the Task Force

· Represents, subject to size constraints, major
  stakeholders including banks, non-banks, industry
  bodies, IT experts, besides the banking supervisor
· Task Force will consult a much larger set of entities,
  especially
   ­ credit bureaus, and
   ­ credit rating agencies,
   which are not directly part of the Task Force for
   technical reasons
· It will consult International bodies (World Bank,
  Central banks with PCRs) and academics
· Its proposals need to pass through the legal scrutiny
  as well as be endorsed by cyber security experts
Public Credit Registry won't be a panacea...


"Not everything that counts can be counted; and not
everything that can be counted counts."

                           -   Albert Einstein


It is a sobering thought for economists!

But it should nevertheless induce innovations to count
better what really counts!!

Public Credit Registry for India is a step in this direction.


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