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What is CIBIL?

CIBIL is the short form for Credit Information Bureau (India) Limited, an ISO 27001:2005 company. It was India’s premier Credit Information Company (CIC) and 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 that is submitted by all lending financial services companies and banks. CIBIL has been working in works in close association with TransUnion International Inc. and 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 that helps the banks make decisions on credit worthiness of individuals and lending to individuals. The Commercial Bureau maintains credit records of institutions/companies. These are used by lenders to make corporate lending decisions as they are more complex and high 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 that is primarily composed of banks and non banking financial corporations. Transition who brings in the technology that is the bedrock for this scoring methodology is the leading share holder with 66% ownership and the rest of the 34% is owned by other banks and non banking financial services companies.

Why was CIBIL formed?

Indian financial system before the advent of credit scores had no centralized way of tracking the credit worthiness of the borrowers or 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 had few ways to know if the person had other loans and how had they performed on those loans. Basically there was not centralized place where all the credit history was available to the banks to check and evaluate before making their decision. This was leading to borrowers borrowing more than what they can pay back and serial defaulters that were taking loans and not paying back. Both of these led to very large defaults that were loss making proposition for lenders who inturn stated lending less and that affected the access that people had to credit in the economy.

The regulators then stepped in requiring that there be better and well diligence credit approvals. Based on those recommendations the first credit information company in India was setup 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 first in 2004 and then launched the commercial credit score for evaluating companies in 2006. The CIBIL score is known as the CIBIL transition score and was 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 the applicants credit worthiness before taking the lending decision. This has helped all the banks to relatively manage risk better and reduce their defaults. Reduction of defaults and NPA 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 check CIBIL scores and work towards taking steps to improving 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 bans and helping them continue to give credit to people when they need it.