CIBIL –Introduction and Importance

Credit Information Bureau (India) Limited is India’s first Credit Information Company (CIC) founded in August 2000. CIBIL collects and maintains records of an individual’s payments pertaining to loans and credit cards. These records are submitted to CIBIL by member banks and credit institutions, on a monthly basis. This information is then used to create Credit Information Reports (CIR) and credit scores which are provided to credit institutions in order to help evaluate and approve loan applications. CIBIL was created to play a critical role in India’s financial system, helping loan providers manage their business and helping consumers secure credit quicker and on better terms.

CIBIL was founded in August 2000 by Trans Union International Inc. , an international credit bureau with presence in more than 30 countries alongwith some Indian banks i.e. ICICI, SBI, HSBC, Indian Overseas Bank, Union Bank of India, Bank of India, Allahabad Bank and Bank of Baroda.

Main Object of CIBIL is to help credit grantors to gain a complete picture of the payment history of a credit applicant Credit grantors should be able to gain access to the applicant's complete credit record that may be spread over different institutions. CIBIL collects commercial and consumer credit-related data and collates such data to create and distribute credit reports to its Members which are credit institutions and banks in India. CIBIL’s over 900 strong member base includes all leading public & private sector banks, financial institutions, non-banking financial companies and housing finance companies.

The record in CIBIL is the most important factor in deciding the credibility of a borrower. Once the borrower defaults, the score gets downgraded and ultimately the name spoils to such an extent that no lender will lend willingly. The score gets reflected to all the 900 plus member lenders of CIBIL which covers almost all NBFCs, Banks and Financial Institutions.

The process to improve the credibility is quite long and it may take upto 3-12 months. Borrowers who are passing through tough time gets severe beating from CIBIL score as it closes almost all the doors to raise funds. The debarment of further credit puts the borrower into fix instead of getting any relief. The CIBIL score is the unavoidable factor for every lender. Any avoidance may lead to severe punishment to the concerned officer and hence it leaves no other option of borrowing.

Although it is an important agency and almost all lenders are dependent on this , the sole criteria for lending is also not justified. In my view, the lenders should look beyond CIBIL report considering the other factors also like security value, business potential, certainty of recovery and all.

CP