About CIBIL: a quick view
CIBIL stands for Credit Information Bureau (India) Limited and by status quo it is an ISO 27001:2005 company. It is one of the most appraised Credit Information Company (CIC) in India and it was established in the year 2000. Since last decade, CIBIL has established as an integral part of Indian retail banking system. CIBIL records credit aligned information of all Indian citizens as submitted by registered member institutions. CIBIL works in alliance with TransUnion International Inc. and Dun & Bradstreet.
How CIBIL operates
CIBIL operates in two segments. These two are Consumer Bureau and the Commercial Bureau. The Commercial Bureau maintains credit records of institutions/companies and the Consumer Bureau maintains credit records of individuals. Being one of the leading CIC, CIBIL enjoys potential importance as it offers the most reliable credit history of an individual that helps banks and financial institutions to evaluate and analyze credit credential of the same.
Major stakeholder of CIBIL is Trans Union International Inc. with 66% total share. TransUnion deals in data analytics to help businesses in decision taking processes for better risk management.
- Trans Union International Inc. 66%
- ICICI Bank Ltd. 6%
- Bank of Baroda 5%
- Bank of India 5%
- Union Bank of India 5%
- Indian Overseas Bank 5%
- Aditya Birla Trustee Co. Pvt. Ltd. 4%
- India Alternatives Pvt. Equity Fund 9%
- India Infoline Finance Ltd. 1%
How CIBIL generates credit history
An individual’s or company’s credit history is evaluated to generate a Credit Information Report (CIR) from which is resulting a credit score known as the CIBIL TransUnion Score. This report and score performs as an integral part of a lender’s credit endorsement procedure. Credit scores range between 300 and 900: 300 is the lowest one and 900 is the highest point. Higher the score, more creditworthy the borrower is, and that initiates faster approvals of loans along with facility of lower interest rates.
CIBIL offers credit reports and scores to those who request for them. This includes individuals, financial institutions, and lenders. When an application for a loan or credit card is submitted, lenders check the applicant’s credit scores to determine if it satisfies eligibility criteria to sanction the loan. In general, credit score of 750 or higher is considered as good.
Formation and growth
Prior to the inception of credit information bureaus in India, credit was dispersed based on the superficial creditworthiness of customers. Neither there was tracking facilities of credit histories nor was there any beneficial analysis or assembling of credit data of different borrowing entities. This anomaly in collating credit history caused loss-making propositions for lending institutions.
As time passed, regulators began highlighting on the necessity of stringent credit approval mechanisms. Based on approvals by the Siddiqui Committee, India’s first credit information company was created. CIBIL is operating in market since the year 2000 and already CIBIL has introduced much-needed transparency to Indian credit system. In 2004, consumer bureau services were launched, and then in 2006, commercial bureau services were introduced.
The CIBIL TransUnion score was first brought to banks in 2007 and later to individuals in 2011. Two remarkable services were introduced in the year 2010 viz. CIBIL Detect and CIBIL Mortgage Check. These were info databases on activities considered highly risky in nature and mortgages, respectively.
CIBIL’s Impact on the Indian Economy
Today, almost all banks rely deeply on credit scores and credit history track from credit bureaus to analyze borrowers’ credit solvency. By studying credit information reports (CIRs), lending institutions can assess and manage lending risk better. This helps in lessening of NPAs (non-performing assets) which results into a healthier credit system in the country.
Borrowers can access their personal credit reports and scores to better understand their strength to get a loan sanctioned. They can build their credibility before applying for a loan and that help in avoidance of humiliation of loan rejection. Awareness on CIBIL and its services has created a mass awareness to maintain a descent CIBIL score in order to maintain a good credit credential.
CIBIL works with a mission and a clear vision to offer customers solutions to facilitate loan approval decisions, supported by appropriate technology and services to make the essential information available to them. Although there are other credit score analyzing companies in Indian, CIBIL is counted as the most reliable one for credit related decision.