NEW DELHI, February 8: Banks which issue credit-cards will soon share information on outstandings, making it almost impossible for defaulters with one bank to get fresh credit cards from other banks. The move is expected to be put in place by the third week of March.Databases on personal accounts are common in the United States where there are a host of such rating agencies, known as ``credit bureaus.''
In India under the aegis of Mastercard, 18 banks which issue credit cards have got together and are setting up the first credit bureau which will get operational next month.To begin with, the database will only do `negative filing', Citibank global consumer bank head Ashoke Dutt said. ``White-collar crime is an issue of grave concern to banks as such crimes are increasing and are expected to grow in the coming years,'' he said.
The system will enable any of the 18 banks to check the antecedents of an applicant. All personal details about the customer will be logged into the system so that in the caseof persons having the same name, other details as address and occupation will enable the bank to differentiate between confusing cases.Banks issuing credit cards have historically had a default rate of three to four per cent which damages their margins substantially. ``Margins in the credit-card business are wafer-thin, therefore it is not possible to suffer defaults and live under the possibility of defaults growing,'' Dutt said. After the loading operating and delivery costs which amount to about two to three per cent on to the cost of money which is about 12 to 13 per cent, banks are not in a position to have a cushion for large defaults.
While the willingness amongst banks has existed for a long time to set up an information pooling arrangement it has been the knotty problem of linking banks' databases which has held up the start of the India's first credit bureau. The credit bureau is expected to enlarge its scope of activities in the future. In the US, banks buy information from credit bureaus toseize new business opportunities on the strength of ``positive information.''
Knowledge about a customer's credit profile helps banks to know exactly what products can be sold to a client. However, to put such exhaustive data on the computer a host of hurdles exist at the moment. Problems in the form of legal implications and creating a suitable computer platform to hold such a networked system have to be solved.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
