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N.S. Vageesh

Banks may be able to offer interest rate cuts, fee waivers

Chennai , Oct. 11

Imagine a situation where banks give you a sizeable cut in interest rate, because you have a good loan repayment record. Or give a fee waiver because you have been a valuable customer. All this pampering and more may happen soon, says Mr S. Santhanakrishnan, Chairman, Credit Information Bureau of India Ltd (CIBIL).

Till now the focus with regard to using the CIBIL database had been more on spotting the defaulters and avoiding the possibility of refunding such delinquents. CIBIL is coming out with a couple of new products that will enable banks to spot their good customers and reward them.

Giving a preview of the products to be launched soon, Mr Santhanakrishnan said that a portfolio review analysis product would be launched this month.

Risk profiles

A member-bank could undertake an overview of the risk profiles of its existing customer accounts comprehensively through this product. Asked how this would help banks, Mr Santhanakrishan said, that based on this information, banks could choose to reduce rates or waive fees. For customers whose risk profile seems to be deteriorating, the information would help banks mitigate risks in a variety of ways. They could, for instance, ask borrowers to bring in additional collateral security or extend the loan tenors for genuine cases. Or they could take appropriate insurance or bring in more guarantors and increase collecting pressure.

Other products

Another product, `Macro analysis of the bureau data', sliced product-wise, geography-wise, is to be launched in December. With this, banks can thus compare their own profile vis-à-vis the industry profile as thrown up by the bureau data and take suitable corrective measures to shore up the risk profile of their books. Apart from a set of standardised product outputs, macro analysis output can be customised to suit the requirements of an individual bank, according to Mr Santhanakrishnan.

Using this product, a bank for instance, can find out if lending to a particular set of customers is more risky. For instance, the use of this product may reveal that lending to a particular segment of customers may be a risky proposition, even if conventional wisdom says otherwise. Or again, the product could tell you if lending to customers in a particular city is more risky.

CIBIL would also be launching "Bureau Credit Scores" for individual borrowers by February 2007. This is a product that is getting introduced in India for the first time. Using this product a bank could take a well-informed credit decision quickly, Mr Santhanakrishnan said.

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