e-ISSN : 2347 - 9671, p- ISSN : 2349 - 0187

EPRA International Journal of Economic and Business Review Vol - 4, Issue- 3, March 2016
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A STUDY ON CREDIT INFORMATION

BUREAU (INDIA) LIMITED (CIBIL)

Daisy P.K1
1
Research Scholar, Department of Economics, University of Calicut, Dr.John Matthai centre,
Aranattukkara, Thrissur-680618, Kerala, India.

ABSTRACT

T oday bank Loan plays a very crucial role in fulfilling our cherished needs without the worry of
financial shortage. Since bank loans are based on reciprocal relationship between lender and
the borrower, banks will consider the creditworthiness of the borrower by gathering a Credit Information
Report (CIR) of the borrower from Credit Information Bureau (India) Limited which is popularly known as
CIBIL. CIBIL is India’s first Credit Information Company (CIC) founded in August 2000. CIBIL collects and
maintains records of an individual’s payments pertaining to loans and credit cards. These records are
submitted to CIBIL by member banks and credit institutions, on a monthly basis. This information is then
used to create Credit Information Reports (CIR) and credit scores which are provided to credit institutions
in order to help evaluate and approve loan applications. This paper is an attempt to analyze the structure
and functioning of CIBIL.
KEY WORDS: CIBIL, CIBIL Transunion credit score, Credit Information Report CIR), Company Credit
Report (CCR)

INTRODUCTION
Banking is reputed as a profession of Trust and information on both consumer and commercial borrowers,
Confidence. In fact the term ‘credit’ denotes ‘confidence’. thus enabling them make sound credit decisions across
Since bank loans are based on reciprocal relationship both individuals and businesses. It also provides services
between lender and the borrower, banks will consider the and education to consumers to help them better manage
creditworthiness of the borrower by gathering a Credit their finances. This paper is an attempt to analyze the
Information Report (CIR) of the borrower from Credit structure and functioning of CIBIL.
Information Bureau (India) Limited which is popularly OBJECTIVES OF THE STUDY
known as CIBIL. CIBIL is India’s first credit information
1. To examine the relationship between CIBIL score
company. It creates immense value for financial institutions
and loan sanctioning of banks.
by providing objective data and tools to help them manage
2. To find out the factors that affect CIBIL credit
risk, and devise appropriate lending strategies thus
score and to identify the tips to improve the credit
reducing cost and maximizing portfolio profitability. CIBIL
score.
benefits both credit grantors and consumers by collecting,
SCOPE AND METHODOLOGY
analyzing, and delivering information on credit histories
The study mainly depends upon the secondary
of millions of borrowers. It provides its members with
data. RBI reports, CIBIL reports, and the website of CIBIL
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EPRA International Journal of Economic and Business Review
contribute the major source of the study. Besides these was launched in 2004 with 4 million records, and now
various books, news papers and related websites have been maintains more than 460 million records. The Commercial
used for the study. Suitable tools like percentages, tables, Bureau was launched in 2006 with 0.7 million records,
and figures are also used in this study for the analysis. and now maintains more than 22 million records. CIBIL
CREDIT INFORMATION COMPANIES counts TransUnion International and Dun and Bradstreet
IN INDIA as its technical partners, both of which are leading global
Setting up of credit bureaus in Asia really took credit agencies.
off only after the Asian crisis of 1997. Even in India there Credit institutions check an applicant’s CIBIL
was need for putting in place an institutional mechanism report and CIBIL-TransUnion Score before making lending
for collecting and furnishing, on request, information on decisions. Today, banks and credit institutions can lend to
both the existing and prospective borrowers of banks and consumers confidently based on the information received
other institutions. This would go a long way in arresting from CIBIL on the consumer’s past credit behavior as well
the growth of non-performing advances of banks and as anticipate likelihood of default based on the CIBIL-
financial institutions. Therefore, a “Working Group to TransUnion Score. CIBIL has also benefitted the consumers
explore the possibilities of setting up a Credit Information by helping make access to credit opportunities faster and
Bureau in India” (Chairman: N.H. Siddiqui) was set up in easier while driving credit penetration.
1999. The Group reaffirmed the urgent need for Shareholding pattern:-
establishment of a credit bureau in India in its report of When originally established in year 2001, its share
November 1999. Accordingly, Credit Information Bureau holding was among –
(India) Ltd. (CIBIL) was incorporated in August 2000. CIBIL 1. SBI-40%
launched its credit bureau operations in April 2004 and 2. HDFC- 40%
its commercial bureau operations in May 2006. 3. Dun&Bradstreet-10%
The Working Group had also felt that a master 4. Trans Union-10%
legislation should be enacted for facilitating collection and The share holding pattern has now been
sharing of information by the proposed Bureau. This would diversified to include the following entities representing
take care of the need for making amendments to various varied categories of credit grantors. They are:
banking legislations, the provisions of which prohibited 1. Trans Union International Inc- 66.1%
disclosure of information. Accordingly, the Credit 2. Bank of Baroda- 5%
Information Companies (Regulation) Act (CICRA) was 3. Union Bank of India- 5%
enacted in the year 2005with a view to regulate Credit 4. Indian Overseas Bank- 5%
Information Companies and to facilitate efficient 5. Adithya Birla Trustee Company Pvt Ltd- 4%
distribution of credit. The Rules and Regulations for the 6. India Alternative Private Equity Fund- 2.9%
implementation of the CICRA were notified on December 7. ICICI Bank-6%
14, 2006. Subsequent to the enactment of CICRA 2005, the 8. Bank of India- 5%
following three credit information companies (CICs) were 9. India Infoline Finance Ltd-1%
given in-principle Certificates of Registration in April 2009 Importance of CIBIL reports:-
to commence the business of credit information. A CIBIL report is a highly valued credit report
a. Equifax Credit Information Services Pvt. Ltd. that helps banks and financial institutions analyse a
b. Experian Credit Information Company of India person’s credit worthiness based on his/her repayment
Pvt. Ltd. discipline and borrowing history. Major importance of CIBIL
c. High Mark Credit Information Services Pvt. Ltd. reports are:
 A unified report with all your previous and
CREDIT INFORMATION BUREAU
current credit history.
(INDIA) LTD. (CIBIL)
 CIBIL reports form the basis of releasing loans
CIBIL is the highest agency in India providing
to a borrower.
credit reports and ratings to individuals and businesses.
 Helps in staying clear of debt traps.
It is the only one of about 1000 companies in the world
 An exhaustive report to help you nurture better
with an ISO 27001 rating, which is the highest security
financial discipline.
standard in the world. CIBIL, India’s largest credit
 Better score on the credit report provides
information bureau, maintains two divisions: Consumer
leverage when negotiating interest rates.
Bureau and Commercial Bureau. The Consumer Bureau
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e-ISSN : 2347 - 9671, p- ISSN : 2349 - 0187 Daisy P.K
Database for CIBIL Information:-
Informational details are submitted to CIBIL by compulsorily required to become member of CIBIL. Others
member banks and credit institutions, on a monthly basis. with assets below Rs.100crore may be encouraged to
It takes generally 45-60 days from the month-end to become member of CIBIL. The information collected then
update the record in CIBIL’s database .All commercial processed to create Credit Information Reports (CIR) and
banks, Regional Rural Banks, Local Area Banks and credit scores which are provided to credit institutions in
financial institutions, including HFCs and SFCs, order to evaluate and approve loan applications. The
Cooperative banks and Non-Banking Finance Companies following figure shows the data processing mechanism of
with an asset base of Rs. 100 crore and above may be CIBIL.
Figure- 1 CIBIL data processing Mechanism

Credit institutions check an applicant’s CIBIL 1. Credit Information Report (CIR) – This
report and CIBIL-TransUnion Score before making lending report is available for individuals and contains all their
decisions. Today, banks and credit institutions can lend to credit history, and a statistically derived figure called
consumers confidently based on the information received credit score.
from CIBIL on the consumer’s past credit behavior as well 2. Company Credit Report (CCR) -A CCR is a
as anticipate likelihood of default based on the CIBIL- report outlining a company’s credit history,
TransUnion Score. CIBIL has also benefitted the consumers consolidated from the data forwarded by various banks
by helping make access to credit opportunities faster and and financial institutions in India.
easier while driving credit penetration. CIBIL Report and Sectional division of Credit Information
CIBIL TransUnion Score not only determine whether or Report (CIR):-
not a person qualify for a loan, but it may also have an CIBIL credit information report (CIR) is divided in to six
impact on the terms and conditions on which he can avail sections;
the loan. The higher the credit score, the better the 1. CIBIL TransUnion Score- CIBIL
chances of availing the loan faster and on favorable terms. TransUnion Score is a three digit number
CIBIL Report or Credit Information assigned by the credit bureau based upon the
Report (CIR):- details found in the accounts and enquiry
sections of credit information report. The score
CIBIL report is a highly valued credit report that
can range from 300 to 900 in India and Banks in
helps banks and financial institutions analyse a person’s
India tend to target customers with a score of
credit worthiness based on his/her repayment discipline
750 or above.
and borrowing history. Following are the types of credit
report of CIBIL
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EPRA International Journal of Economic and Business Review
2. Personal information- This section sanctioned or not. Against each account, the credit report
includes the borrower’s personal details like shows borrower’s payment track record, sanctioned
name, Date of Birth, sex, proof of identification amount, current outstanding balance, date of opening of
etc. account, last payment and track record of any delays in
3. Contact information- It includes the paying installments.
addresses, phone numbers, email id etc.of the CIBIL Transunion Score, on the other hand is a
borrower three digit number assigned by the credit bureau based
4. Employment information- includes upon all the above information. A credit score is a statistical
occupation and income details figure ranging from 300 to 900. It is derived through
5. Account information- include the advanced statistical analysis of a credit report. The score
details of loans and credit cards ( recent 36 can range from 300 to 900 in India and better the past
months report). repayment record, higher the score. More recent credit
6. Enquiry information- provides you the activity tends to have a higher weightage than that in the
details regarding the enquiry made by the lender past.
for your credit application. A CIBIL Report is an important document. It is
referred by financial institutions and recruiters’ to judge
Difference between CIBIL reports and
how good or bad the person has been in creating a
CIBIL scores:-
discipline with his credits. Based on it the bank will decide
CIBIL report is a complete record of all loans
the eligibility to avail loan A highly poor CIBIL Trans
and credit cards availed by a person in the past compiled
union score can become the reason for loan application
by one of the credit bureaus such as CIBIL, Experian,
rejection or the borrower might have to pay a higher
Equifax or Highmark. The credit report also contains
interest rates . The following table shows the meaning of
personal information and a record of all loans and
CIBIL Trans Union score range.
creditcards applied irrespective of whether those were
Table -1 Meaning of CIBIL Trans Union Score Range

Range of score Meaning of score

750 - 900 Excellent score, easy to get credit at low rate of
interest
700-750 Fairly good score, likely to get loans at
competitive interest rates
550-700 Lower score, lenders may avoid sanctioning you
loans except with significant credit check
300-550 Poor score, Extremely difficult to obtain loans
from organized lenders
Source: compiled from the Reports of Banks

Calculation of CIBIL Trans union

Score:-
CIBIL TransUnion Score is calculated based on
 Defaulting/Delinquency: How many accounts are
the information in the “Accounts” and “Enquiry” section
past due and by how many days?
of the CIBIL Report. The score is calculated based on the
 Trade Attributes: How old are this consumer’s
following factors:
lines of credit? What type of credit does he have?
 Credit Utilization: How much credit is the
Does the consumer have a good mix or balance
consumer using?
of credit or is it all credit cards

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e-ISSN : 2347 - 9671, p- ISSN : 2349 - 0187 Daisy P.K
Figure -2 Break up of the various factors that impact the CIBIL Transunion Score

1. Past Performance: Individuals past 3. Credit Exposure: The total amount of

performance on their debt obligations is the most credit exposure contributes another 25 per cent.
important criterion and contributes 4. Other factors: Other factors such as credit
approximately 30 per cent weightage to the utilization, recent credit behavior contribute the
score. remaining 20 % to the score.
2. Credit Type & Duration: Type of loan The following figure -3 shows the present status
availed whether secured or unsecured loan, of CIBIL Score. From the Figure, it is seen that nearly
andthe duration of credit history established 79.8% of the customers who check their CIBIL Credit Score
contributes an additional 25 per cent to the score. come under the Score 750 and above

Figure- 3 Status of CIBIL Tran Union score as on 18/01/2015

Factors that negatively affect CIBIL

score:-
 Late payment of Loans or default in the recent  settlement of previous loans at concessional rate
past(Recent 3 years) and run away behaviour
 Utilizing full credit limit of credit cards each  Being a guarantor without thought.
month
Factors that do not impact CIBIL
 Mix of credit with high percentage of unsecured
score:-
loans
There are a lot of myths regarding the some
 Too much enquiries within a short span of time
factors which do not affect CIBIL Trans Union Score but
 Short duration of credit history or no credit
misinterupted as CIBIL impact factors. They are;
history
1. Income – Your income has nothing to do with
your credit score
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EPRA International Journal of Economic and Business Review
2. Age - Whether you are young, old or middle 2. According to a CIBIL record, 79% of loans
age it hardly matters for your credit score approved are of customers with a credit score of
3. Too Many Credit Cards – What matters to CIBIL 750 or above.
is how you use them. Owning too many cards is 3. Credit demand has witnessed a significant
not negative but utilization of credit limits for so growth during the past five years. CIBIL record
many may be looked suspiciously. also shows that, a growth of 25% in credit demand
4. Checking Your Report- Many have a myth that over the previous financial year was registered
checking your credit scores yourself brings the in 2014-15.
score down. You can check it as number of times 4. Home loans as well as credit card accounts have
you want as it is not a factor for consideration. witnessed a positive trend in the recent past.
5. Name in CIBIL - It’s also a myth that name in 5. According to the CIBIL report, among the top
CIBIL means you are defaulter. CIBIL maintains five states which contribute to 55% of credit
credit record whether good or bad of all demand Maharashtra (18%) accounted for most
individuals and does not have any categorization enquiries from lending institutions followed by
of defaulters. (10%) and Andrapradesh (9%).
6. working Organization CONCLUSION
7. Saving and investment CIBIL ratings are becoming increasingly
Methods to improve CIBIL credit prominent in our financial system. While member
score:- institutions, currently, largely comprise banks and credit
By maintaining a good credit history, one can card issuers and other financial institutions extending
improve his credit score. In order to improve the credit credit, it is likely that insurance companies and telecom
score, the following points need to be maintained: companies may soon join the fray. Many employers are
 Make sure you pay all your debts on time. Late also leaning towards credit checks as a way to assess new
payments are frowned upon by banks. hires, especially in case of high-level recruits. With credit
 Try to maintain a healthy combination of credit becoming an indispensable part of people’s lives, it is
which includes a healthy mix of secured and essential all individuals make CIBIL Credit Information
unsecured loans. Reports a part of their financial planning and review
 Opt for new credit in moderation and cautiously. process for easy availability of credit to achieve personal
 Monitor your single and joint accounts regularly financial goals. CIBIL scores are the deciding factor for
to ensure no payment is missed by either you or many banks when it comes to considering your application.
your partner. The higher the score, the higher the chance your loan
 Review your credit history from time to time application will be reviewed and approved. However, the
which you can do by purchasing your credit decision to approve your loan application is completely
information reports from time to time and rectify dependent on the bank; CIBIL as an institution does not
errors or issues. play any role here. It is advisable to maintain a good credit
 Avoid credit hungry behaviour and applying tto history as it is the most important financial report card
much loans in short period of time that can help you avail loans without difficulty.
 Avoid the habit of providing guarantee to less REFERENCES
creditworthy persons. 1. S. Subrahmanya ( 1986) Trends and progress of
 Manage your credit cards well. Use only 30-40% banking in India, Deep &Deep publications, New Delhi.
of available credit limit. 2. Richard S. Thorn (1976) Introduction to money &
 Pay your dues in full and never opt for settlement banking, Harper and Row publishers, New York,
London.
 Whenever you close credit cards then take a
3. The Times of India 26 th June 2015
NOC from credit card provider. 4. Business standard 26 th June 2015
FINDINGS OF THE STUDY 5. http://kannanpersonal.com/index.html
1. CIBIL report is an important document in judging 6. https://www.rbi.org.in/scripts/
the credit worthiness of a person and the banks PublicationReportDetails.
and Financial Institutions make the loan 7. https://www.cibil.com
8. Things which you won’t find in CIBIL Report _
sanctioning decision on the basis of CIBIL report.
BankBazaar.com.
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