The Public Credit Registry Will Transform How Loans Are Given, Says Viral Acharya
The Public Credit Registry, being envisaged by the central bank, will enable access to credit for micro-entrepreneurs by solving information asymmetries and paving the way for greater financial inclusion, said RBI Deputy Governor Viral Acharya.
The registry could enable sanction of small ticket loans of short maturities that may not require collateral. Such ‘sachetisation’ of credit can rapidly expand access to credit for those micro and small enterprises, which are currently not included in the formal credit market.
The argument for a credit registry was detailed by Acharya in a speech at the Indian Institute of Technology Bombay on Dec. 15, 2018. The full text of the speech was put up on the RBI’s website on Thursday.
In June 2018, the RBI said that it had decided to set up the PCR in a phased manner following recommendations of a committee headed by YM Deosthalee. The central bank has invited ‘Expressions of Interest’ from qualified vendors for implementing the PCR.
Once the credit registry is in place, it will help automate loan sanctions and devise disbursement mechanisms similar to those being attempted by fintech companies, Acharya said. Elaborating on its usage, Acharya said that an individual will be able to access their data and share it with lenders to avail credit. Lenders will also be able to monitor their customers data.
The registry would be governed by a Public Credit Registry Act and will follow all privacy guidelines. It will facilitate linkages with corporate, fraud, legal and tax information systems. Calling the PCR a database of core credit information, Acharya said it would strive to cover all regulated entities to enable a 360 degree view of the borrowers. In due course, it will even reach out to the smallest primary agricultural credit societies.
Borrowers and entrepreneurs will be able to build their credit history over a series of transactions. Eventually, if they maintain a good credit score, they will be able to take longer term loans at better terms to finance capital investments. This credit history can work as collateral, building the trust of the lenders, he explained.
In a speech on Aug. 20, 2018, Acharya spoke about how the PCR would democratise and formalise credit in India.