Pay all your telephone, electricity bills on time to increase credit score. Timely payment of telephone and electricity bills and even insurance premiums will soon be an input for determining the credit worthiness of a borrower by credit information bureaus with the Reserve Bank of India pushing for an expansion of data on borrowers. According to the central bank, this will improve credit bureau coverage from 20% to 70% of prospective borrowers and will enable those in remote areas to get loans.
At present, when a borrower seeks a personal loan or a credit card, the lending institution checks his credit score from credit information bureaus like Cibil, which gives it an idea of his record in repayments. Based on the score, the institution decides whether to lend and at what rate.
Although RBI cannot direct telecom companies, insurers or utilities to share customer data, globally such companies have voluntarily pooled information as they have seen an improvement in payments after they started sharing information.
"The RBI has introduced positive data sharing in India, which allows good repayment behaviour in one product to be of use in predicting behaviour of the consumer in other areas. Telecom and utilities positive data is, hence, likely to help support making credit-worthiness decisions on the segment of the population that does not have access to banking credit," said R Gandhi, deputy governor, RBI.
A positive data is information on timely payment as against reporting of defaults, which is considered negative data. Gandhi was speaking at the seventh annual Cibil TransUnion Credit Information Conference.
Pointing out that India has fallen two ranks from 140 in 2014 to 142 in 2015 in the Ease of Doing Business index, Gandhi said that the country does well in respect of depth of credit information where it scores 7 on a total of 8 score. "Where we did not score was in respect of our retailers / utilities companies not distributing the data to the CICs (credit information companies)," Gandhi said.
Incidentally, the Nachiket Mor committee on financial inclusion had recommended that the RBI should constitute a working group involving the various stakeholders, such as Trai, CERC and CICs to develop a framework for sharing of data between telecom companies, electrical utilities, and CICs. "The underlying acts, rules and regulations governing CICs, electric and telecom sectors need to be examined to make suitable legislative and regulatory changes for this purpose," Gandhi said.
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