Page 26 - Banking Finance September 2022

ARTICLE

on all credit relationships in the country, from the point of banks and financial institutions to get a 360-degree profile
origination of credit to its termination. The registry will cover of the existing as well as prospective borrowers on a real-
payments, restructuring, defaults, resolutions and even the time basis.
altering terms of a contract midway during the life of a
credit relationship. All of this would be registered in a single The PCR has been envisaged as a database of core credit
data registry, which is being developed and maintained at information - an infrastructure of sorts on which users of
the RBI. credit data can build further analytics. It will strive to cover
all regulated entities (i.e., financiers) in phases. It will
What data does PCR capture? facilitate linkages with related ancillary information systems
outside the banking system including corporate filings, tax
The registry captures data on loans taken from all kinds of
systems (including the Goods and Services Network or
sources including from banks, NBFCs, corporate bonds,
GSTN), and utility payments. The PCR will have to be backed
External Commercial Borrowing, Inter-Corporate Lending,
and governed by a comprehensive Public Credit Registry Act
Masala Bonds etc. It also includes ancillary information like
to be brought in consultation with the Government. It will
any overdue utility payments, or tax payments data from
have to follow the latest privacy guidelines based on a laid
tax authorities, and other primary information sources.
down consent framework.
Where will the registry source data
What objective will the PCR achieve?
from?
Lack of information or information asymmetry (where one
The proposed PCR will include data from entities like party has more information than the other) is the key
Securities and Exchange Board of India, Corporate Affairs challenge faced by lenders while giving out loans. If banks
Ministry, Goods and Service Tax Network (GSTN) and the know that Person A is a good borrower, and has not
Insolvency and Bankruptcy Board of India (IBBI) to enable delayed repayment commitments in the past, has a source
of income with which to repay the loan, then perhaps the
bank could charge him a lower rate
The proposed Public Credit Registry (PCR) information
of interest.
architecture
Usually, the higher the risk of giving a
loan and not getting it back, the
higher is the interest charged by
lenders. A PCR aims to reduce this
asymmetry of information by giving
the lender a 360 degree view of the
prospective borrower's credit history.

But this is not where the utility of PCR
stops. As a borrower builds credit
history, the lender would want to
protect that information especially for
profitable borrowers and may not be
willing to share it with other lenders.
This would mean that the borrower
would get tied to a particular lender
and may not be able to move away
if, for instance, the lender faces its
own problems. A PCR can enable that

26 | 2022 | SEPTEMBER | BANKING FINANCE