RBI Asks Lenders To Report More Information On Commercial Borrowers
Banks must submit all related party data on commercial loans, says RBI
The Reserve Bank of India on Thursday asked banks and other lenders to start reporting more in-depth data on commercial borrowers to credit information companies.
According to a notification on the regulator's website, lenders to commercial borrowers are required to provide more detail on directors, office holders, shareholders of the borrowing company. Similar information is required for subsidiary companies as well.
While this disclosure was always required, the RBI found that inadequate information was being submitted.
This information is very important for establishing cross-linkages between consumer credit bureaus, commercial credit bureaus and microfinance bureaus, the RBI said in its circular.
According to Parijat Garg, a digital finance expert and a former credit bureau official, the move will help lenders get a clearer understanding of the borrowing and repayment patterns of promoters and partners of partnership and proprietorship firms.
"A majority of the businesses in India are either partnerships or sole proprietership," Garg said. "This move will help lenders get a full spread of exposure across the personal and business side, especially if someone borrowing a personal loan is a partner in a firm which is in default."
The RBI, in its circular, has asked lenders to report the additional data on all fresh commercial loans extended from July 1, 2022. As the data collection process is likely going to be a long drawn one, the banking regulator has given time to lenders to submit historical data.