Risk Management and Credit Bureau in India

In India, Risk Management is done by Financial Institutions only to small extent and most of the banks are hardly looking at it. They are growing and their focus and priority is set there. But with the Banks facing problems with their forceful collections strategy and higher default rates, they are slowly strengthening the Risk Management process.

India has quite a few Bureaus as of now.
1. Commercial Bureaus
a. CRISIL
b. CARE
c. FITCH INDIA
d. CIBIL
e. ICRA

2. Consumer Bureau
a. ONICRA
b. CIBIL

3. Rural Credit Bureau
a. CIBIL (Dec 2007)

Among all these, the major players are ONICRA and CIBIL. CIBIL which was initially launched by Transunion and HDFC has been the leading player so far and they have currently launched Generic Consumer Credit Score in India.
It is yet to be seen that how far CIBIL goes as Transunion has so far been very unsuccessful in scoring globally. Also a bigger challenge is the entry of Experian to India and Fair Isaac, owner of the most successful Credit Score (FICO Score in US) may not remain far away from Indian story for long. Once these two players come actively into the Bureau and Generic Scoring business, India is expected to see a remarkable change in Risk Management practices.

ONICRA

• Started in 1996 but attained critical mass in 2000
• Largely into Customer/employee verification
• Pan India Presence

CIBIL

• Jointly promoted by the banking community, Dun & Bradstreet and TransUnion International
• Repository of consumer and commercial information
• Provides output in form of Consumer Information Report (CIR)
• BS 7799 (ISO17799) Certified emphasising focus on data security and integrity
• In the process of providing value added products like Credit Decisioning and Fraud Detection Tools

Current Scenario

• Bureaus still acting largely as repositories without much value-add (except CIBIL currently launched Credit Score)
• Banks relying on own resources or third parties for Decisioning and Risk Management, etc.
• Regional and especially Cooperative banks not being aptly serviced
• Member banks still not providing updated information to CIBIL thus reducing its effectiveness

(Originally published in Global Thougtz India)