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What is CIBIL?

CIBIL is the short form of Credit Information Bureau (India) Limited. It is an ISO 27001:2005 company. It was India’s first Credit Information Company (CIC) that was incorporated in the year 2000. Since then, CIBIL has become the key enabler of the Indian financial system by helping make lending easy. CIBIL collects and records all credit-related information of individuals who have taken a loan or a credit card. These reports are submitted by all lending financial services companies and banks to the credit information companies. CIBIL has been working in close association with TransUnion International Inc. as well as with Dun and Bradstreet.

CIBIL has two major focus areas 1) the Consumer Bureau 2) the Commercial Bureau. The Consumer Bureau maintains credit records of individuals to help the banks make lending decisions after evaluating the creditworthiness of individuals. The Commercial Bureau maintains credit records of institutions/companies, which are used by lenders to make corporate lending decisions as they are more complex and of higher value than lending to individual customers.

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CIBIL Share holding pattern

Trans Union Interantional Inc.

66%

ICICI Bank Ltd.

6%

Bank of Baroda

5%

Bank of India

5%

Indian Overseas Bank

5%

Union Bank of India

5%

Aditya Birla Trustee Co. Pvt. Ltd.

4%

India Alternatives Pvt. Equity Fund

2.9%

India Infoline Finance Ltd.

1%

Who owns CIBIL?

CIBIL was incorporated in a diverse ownership structure, primarily composed of banks and non-banking financial corporations. TransUnion, which brings in the technology that forms the bedrock for this scoring methodology, is the leading shareholder with a major ownership, and the rest is owned by other banks and non-banking financial services companies.

Why was CIBIL formed?

Before the advent of credit scores, the Indian financial system had no centralized way of tracking the creditworthiness of potential borrowers. The credit, in those days, was dispensed on the basis of self-declared income and obligations of the applicants. Income could be verified by the documents, but the lenders barely had many ways to know if the person had other loans, and how had they performed on those loans. Basically, there wasn't any centralized place where the entire credit history of an individual was available to the banks to check and evaluate before making their lending decision. This was leading to borrowers borrowing more than what they can pay back, and serial defaulters were taking loans and not paying back. Both of these led to very large defaults that were loss-making propositions for lenders, who, in turn, resorted to lending less and that affected people’s access to credit in the economy.

The regulators then stepped in, recommending that there be better and diligent credit approvals. Based on those recommendations, the first credit information company was setup in India in the year 2000. CIBIL was incorporated in the year 2000 and had brought in the much needed data to evaluate borrowers before lending to them. CIBIL set up the consumer credit score in 2004, and then launched the commercial credit score for evaluating companies in 2006. The CIBIL score is known as the CIBIL TransUnion score that was made available to the banks in 2007 .

How has CIBIL impacted the banking system?

CIBIL has had a great positive impact on the banking system. Nearly all the banks evaluate credit scores from credit bureaus to understand an applicant’s creditworthiness before taking the lending decision. This has helped all the banks to relatively manage risk better and reduce their defaulters. The reduction of defaults and non-performing assets has helped develop a healthier credit ecosystem in India.

Having a score has also created awareness among the customers that they need to behave responsibly and be good credit consumers. Customers since the year 2011 have access to their credit scores and can check their CIBIL scores. They can accordingly work towards improving their scores. The level of awareness has created the willingness and initiative for people to check and manage their credit score well. This level of responsibility has a positive impact on reducing the loan defaults for banks, thus helping them continue to give credit to people when they need it.