Public credit registry: RBI Task Force

Public credit registry: RBI Task Force

RBI, the Central Bank of India was forced to come up with the public credit registry due to the twin balance sheet problem of the banking sector of India. RBI Recently created a Task force named Public credit registry to overcome from the twin balance sheet issues.

What do you mean by Public Credit Registry?

• Public Credit Registry is such kind of an institution that is supposed to collect information from those to whom money are owing (that is creditors) based on the credit history of the one who takes money while promising to return it back (that is a borrower). 
• Public Credit Registry collects information of particular organizations from various sources like payment history, debts, any cases of bankruptcy, court cases and other such issues after which they form a report and supply it to the creditors.
• It also responsible to maintain a credit score. Now, a credit score is basically a value or a number that is assigned by the bank to the one who is borrowing based on his ability to clear the debt. Actually this number is calculated based on some kind of an algorithm. Moreover,the higher the score the more worthy he would be considered as a borrower. 
• There can be such cases when a person needs help regarding the rules of loan process where this registry can be extremely helpful.
• Public Credit Registry is very helpful for credit markets. Without such an organization the financial institutions would be a complete fail.
• This registry provides a list of firms whose records of repayment history, debts and credit debt are easily available to them in record.
• All the financial problems in such markets can easily be addressed to the registry. Moreover, it is said that the borrower is well aware of the chances of repaying the debt than the lender itself.
• If a lender is unable to identify the worthiness of a borrower correctly that would affect the organization of the lender in return.

Why is Public Credit Registry necessary?
Public Credit Registry can provide complete details of those which have been pledged as security(also known as collaterals) and avoid any cases of over pledging by the borrower. Often the lender not being able to judge the borrower correctly takes measure of charging for greater amount of collateral than required just as a precaution to dilution. This can very badly affect the business.

A Public Credit Registry can be of following help to the banks:

1. It can help to assess the credit and pricing by banks.
2. It can provide information regarding the provisioning of banks that have been kept to be used during downfalls.
3. It helps to supervise and provide help with all kinds of necessary regulations.
4. It helps the bank to identify those places where the problem is arising and also give them a clear idea of whether their policy is working properly.
5. It can help banks with different kinds of strategies to restructure the entire system for better growth and improvement.

A public credit registry is such a perfect institution on whom the banks can totally rely while making  decisions based on credit systems and also provide them with proper evidence while subjected to market scrutiny.

Users of Public Credit Registry:

Public Credit Registry focusses mainly on banks and micro finance institutions. Some other types like the ones given below also comes under its target.

1. Companies that provide financial benefits.
2. Companies providing mortgage loans.
3. Leasing companies
4. Institutions that provide credit to MSME(Micro Small and Medium Enterprises)
5. Factoring companies
6. Goods and Services Retailer providing direct credit
7. CIB/s licensed by the Bank
8. Public agencies administering data like the Civil Registry, Commercial Registry, Property Registry, Collateral Registry, Voters Roll, etc.
9. Public utility companies
10. Telephone Providers
11. Courts and Tribunals
12. Those institutions which can serve the purpose of credit reporting.

• The Bank of Afghanistan to open Public Credit registry for better market performance and reduced credit risk. This suggestion was made by the World Bank in the year 2005.
• RBI s topmost decision was the creation of this PCR panel as an initiative for development. RBI has also advised the bureaus and agencies to provide up to date information and maintain proper records to develop the structure of the debt  market.
• The Public credit registry is responsible to hold all kinds of information regarding a borrower and his history that should be available to stakeholders at any time. Basically, the PCR will be operating as a large database.