If you are looking for a bank loan to purchase a house, or even a car, you may need to get your credit worthiness — which shows your loan repayment capacity — assessed by more than one rating agency.
Banks were recently directed by the Reserve Bank of India (RBI) to assess the credit worthiness scores of borrowers by multiple agencies before drawing its own assessment and deciding on the loan amount.
So even if you have got a “high” score from one rating agency but this was not matched by another agency, it may dent the overall assessment of your repayment capacity.
The central bank has advised banks not to depend on the assment of only one credit rating agency to determine the real repayment capacity of a borrower. The move would help banks to keep under control NPAs (non-performing assets or loans that turn bad) arising from their retail loan portfolio.
“A thorough assessment of a borrower is critical and to seek their credit information from more than one rating agency will make things much easier for the lender,” TM Bhasin, chairman, Indian Banks’ Association, said.
Banks have also been asked to regularly share information about the borrowers’ repayment track record with credit rating agencies — a move that would help these agencies in making more accurate assessment.
An internal study conducted by rating agency Credit Information Bureau India Limited (Cibil) last year revealed that over 60% first time borrowers sought loans for purchasing a house or a car, while in 2006, 69% first-time borrowers had gone in for unsecured loans — either personal or credit cards.
“There has been a change in the purchase pattern of consumers too with the economy registering a slower growth rate, so banks have to be very careful as it is also difficult to have a credit history about them,” a senior executive at a large private sector bank, who is not authorised to speak to the media, told HT.
Cibil, Experian Credit Information Company of India, High Mark Credit Information Services, Equifax Credit Information Services are among the main credit rating companies operating in India.