What is a Credit Bureau?

Have you heard of Credit Bureau and wonder what is a Credit Bureau? If yes, read on. In the next 7 mins you will know all you need to, about Credit Bureaus.

Credit Bureau in IndiaLenders (both formal and informal) have since times immemorial understood the importance of borrower behaviour (on old and existing loans) in evaluating new loan applications. Even your parents gave you relaxation in rules based on whether you honoured your previous promise.

There were mechanisms of informal sharing of information about the borrower between the lenders – bilateral or multilateral exchange of customer behaviour information. There were rudimentary formal mechanisms like Mastercard Negative File also in use.

The challenges with these informal data sharing were manifold:

  • Limited information about the customer was shared mainly default information and that too severe and continuing defaults only were shared.
  • Information sharing was totally voluntary
  • Did not ensure level playing field for all lenders especially those who could not participate in bilateral / multilateral agreements
  • Information was usually updated only once when the default happened, there was no follow-up data sharing about the customer's default
  • No information shared about the overall debt that the customer has availed

With the expected increase in lending to retail customers, increasing importance of bank lending to the economy and the stress seen in the bank's loan portfolios in late 1990s, it was realised that there needs to be a formal mechanism to share borrower behaviour between lenders.

CIBIL is the name of the first credit bureau set up in India. It stands for Credit Information Bureau of India Limited. CIBIL was set up in the year 2000, though its adoption and growth started in real earnest once the CICRA came into force.

Credit Bureaus in India are credit information companies whose objective is to collate information about borrower behaviour and share it amongst lenders like banks, NBFCs etc. Credit information companies are governed by CICRA (Credit Information Companies (Regulation) Act) which was passed in June 2005. RBI issued the regulations under this act in Dec 2006. As a result of the enabling provisions of CICRA, more licenses have been granted to set up credit bureaus.

Apart from CIBIL, there are 3 more credit bureaus active in India – Equifax, Experian and CRIF-High Mark

Secured Credit Cards in India

Secured Credit Card = Fixed Deposit + Credit Card

Secured Credit CardsA secured Credit Card in India is a combo product where in an applicant opens up a fixed deposit with the bank and is then issued a credit card from the same bank.

Secured Credit Cards India

Secured Credit Cards are a unique product which allow banks to issue an unsecured line of credit to an otherwise High credit-risk applicant. Secured credit cards are issued by ICICI bank, Axis Bank, DCB Bank amongst others in India.

If you have a poor Credit score or no CIBIL score, FinTiger can help you improve your score, by getting you a Secured Credit card from one of its partner banks. Join / Learn more about our program here.

The minimum fixed deposit required for the Secured card and the percentage multiplier used for deciding the credit card limit is something that varies from bank to bank.. Please make sure to choose the best option that works best for you.

BHIM app for UPI payments

 

The BHIM – Bharat Interface for Money – app was launched by the PM on 30th Dec 2016 at the Digidhan Mela as the Domestic home grown solution for catalyzing digital payments. The BHIM app is powered by NPCI and uses the IMPS and UPI frameworks to allow payments between consumers.

BHIM is ideally poised to take over the P2P (peer-to-peer) or small merchant payments by storm because of its deep integration with more than 35 partnering banks.

Here are some of the prominent features of the BHIM app:

  • Easy consumer on-boarding – if you have your mobile number (on which you download the Android version of BHIM app) registered with a participating bank, then the app just directly checks with the bank and shows you the corresponding account. You do NOT need to remember the account details to get started.
  • Creating the UPI alias inside the BHIM app – most consumers have not created a UPI alias. And the BHIM app creates one for you automatically (it is by default YOURMOBILENUMBER@UPI.COM) . This means that as many consumers who download and use the BHIM app, so many UPI aliases would get created. This solves the need for separately driving UPI alias volumes.
  • Easily send money to a mobile number – Now all you need to send money to someone is to just know their mobile number. If your account has sufficient balance and the recipient has a UPI alias created and mapped to their mobile number, the funds would flow through.
  • Ask money from those who owe you – it is now easy to even ask people who you money. Just send a request through the BHIM app and it starts showing as a pending payment request in the other person’s BHIM app screen. They in turn just need to authorise the payment for the money to flow into your bank account.
  • Easily change the bank account mapped to your UPI handle – this feature where you can easily request and within seconds change the account which is mapped to your existing UPI handle, provides immense flexibility to the consumers. Many people want to use funds across multiple accounts at different times. It also means you do not need to rely on the specific bank’s app to manage payment or receipt of funds.
  • One app across banks – IMPS and UPI were both reliant on individual banks for driving adoption. This meant that each bank had to build these solutions into their own digital platforms. NPCI would have faced two serious challenges in the previous approach – they would need to nudge each bank to build an drive adoption for these solutions and secondly the UI/UX from each bank would be very different. With BHIM, both these problems get solved in one go. The banks just need to do an integration with IMPS in the backend, no front-end changes are needed from their side.

Updates on India's Currency Demonetization 2016

Background of Currency Demonetization (2016)

On the 8th of November 2016, the Prime Minister Mr Narendra Modi announced on national television the immediate (effective midnight) discontinuity of Rs 500 and Rs 1000/- currency notes as legal tender. These notes corresponded to almost 86% of the currency in circulation.

The reasoning given by the government was that this was the biggest and boldest step ever to curb the black money economy. What happened over the subsequent weeks and months is very interesting from a macro economy and retail banking perspective.

Here are the key events as they unfolded in the world’s largest democracy following this demonetization.

  • Toll-collection – Toll was suspended immediately after the demonetization due to queues that were building up
  • Wallets have seen a tremendous increase in downloads and activations
  • Government initiated multiple taskforces to mobilize digital payments on a war footing

 

SlashEMI – Reduce Home Loan EMIs

SlashEMI.com – Reduce Home Loan EMIs. Hasslefree.

Most of us who have a mortgage understand that the monthly EMIs that we pay on our outstanding Home Loans is probably one of the single largest monthly expense in our budgets. While we have come to understand the reality of having a home loan to buy that dream house, nothing prevents us from doing our best to reduce the home loan EMIs.

And this is where SlashEMI – a home loan optimization service comes in.

Launched in 2016, the service helps you track the home loan rates in the market and gives you the confidence that you are always running your home loan at the most optimal rates.

How?

SlashEMI has a simple process

  • step1: Register your loan details on the portal
  • step2: Get an instant analysis (as on that day) of what a home loan transfer can do to reduce EMIs.
  • step3: Activate your account by paying the annual or 3 year fees
  • Step4: Sit back and get monthly alerts/updates on rate changes across banks in India.
slashEMI advantages
Slash EMI advantage

Pricing for SlashEMI

  • Rs 99/- for 1 year
  • Rs 199/- for 3 years

Should you activate your SlashEMI account?

It is definitely a good idea to pay the small fees for either the annual of the 3 yearly account as this allows you (the home loan taker) to rest assured that you would not miss any opportunity to reduce your home loan EMIs. Given the high ticket size of a Home Loan, it makes a lot of sense to have this advantage on your side.

More questions on home loan transfers?

Surrenders on payment bank licenses begin

With Tech Mahindra also announcing its intent to surrender the payment bank license, the total count of no-gos has reached 3 amongst the 11 who were issued a license in the first round of payment banks. The other two who have decided not to go ahead with the launch of a payment bank includes Cholamandalam and IDFC/Sanghvi combine.

It seems there are multiple factors which have made these players rethink the value in a Payment bank model. The fact that the deposits will largely need to be invested in government securities means a wafer thin margins in the model. Some expect it to be around 3-4%. Add to this that the distribution network needed for building scale will be immense and if you dont already have a core business which can absorb some of these distribution costs, the economic viability of the overall model comes into question.

This current tone of re-evaluating the payment bank model is in extreme contrast to the initial euphoria expressed by the industry. The one category of players everyone is still gungho about are the telecom companies.  The telcos already have a committed distribution and this adds a neat clearly incremental opportunity over the telecom business.

Axis Bank Dining Delights

Dining Delights is the name of the overall dining program launched and managed by Axis bank for its debit and credit card customers. The benefits include exclusive offers at more than 3000+ restaurants across the country where Axis bank customers can get a 15% or more discount.

Apart from this, Axis bank has also tied up for some very exciting and exclusive experiential programs like Fine Dining Day. Fine Dining Day is also included in the overall dining platform of Axis Bank and has a 1+1 deal from more than 70+ 4 & 5 star restaurants across India. This includes the likes of Hyatt, Sheraton, Leela etc.

Since Dining is one of the most sought after category by most card issuers, we have seen many banks invest heavily in building a strong network of offers and deals from restaurants. E.g. Citibank was amongst the early entrants followed by American Express and subsequently ICICI bank’s Culinary Treats.

Axis bank Dining Delights, though a late entrant into the scene has been able to create a significant impact probably because of the high spends and sustained commitment shown by the bank to build this as a platform.

Bandhan bank raises fresh equity from IFC and GIC

Bandhan bank has just announced a fresh round of equity infusion to the tune of Rs 482 Cr from its existing investors IFC and GIC (Singapores Soverign Wealth Fund). SIDBI also participated in this round, which took the total capital at Bandhan bank to Rs 3052/- Crores – almost a 6X over the Rs 500 Cr capital norm for private banks as mandated by RBI.

The break-up of individual investments in this round is

  • GIC – 234.6 Crores
  • IFC – 232 Crores
  • SIDBI – 14.99 Crores

Bandhan which started its banking operations six months ago has shown promising results and has been able to mobilize Rs 7500 Crores of deposits through its 600 odd branches and its advances reached a Rs 13,000 Cr mark.

Uber to launch a closed loop wallet solution soon

Uber in India is working on launching its own wallet solution to provide a much smoother payment experience for consumers inside the Uber app.

Uber which competes head on with Ola in India, was forced to change its payment model in India, after RBIs mandate that foreign companies also need to have a two-factor-authentication for all payments from Indian consumers. This had forced Uber to also include multiple other wallet providers in its payment options given to consumers like PayTm and Airtel Money.

It is being reported that the Uber wallet will be a closed loop wallet.

What is a closed loop wallet?

A closed loop wallet (as per RBIs definitions) is one where payments are allowed to be made only at the same merchant who runs/owns the wallet. The wallet cannot be used for any other merchant payments. This would mean that any money uploaded onto an Uber wallet will remain available for transactions only at Uber or through Uber app. Running a closed loop wallet does not require RBI’s approval and can be assumed to be similar to a merchant running its own gift voucher program albeit on the mobile.

Why is Uber working on its own wallet?

Uber has always focused on a clean and lean payment experience after the ride is complete. With RBI’s two factor authentication mandate, this experience was compromised for Indian consumers (atleast by Uber standards). Having a wallet of its own will allow for a very smooth experience for Uber’s Indian consumers (similar to what they had in the early days of deep PayTm integration).

Also it makes sense to have its own wallet also. The uses who would use the Uber wallet will be locked in and given the scale of the Indian market and the challenge that Uber faces in Ola, it would be a wise step to lock in its loyal customers. Else there is not much that makes a customer choose Uber over Ola or vice versa.

HDFC ATMs to be like mini branches soon

Starting this month, HDFC Bank ATMs will have a much wider scope than the current one of cash dispensing and mini-statement generation. The bank is looking to add the following services at its ATM network:

  • Loans under 10 seconds at HDFC Bank ATMs – The bank has already tested this cross-selling capability for its existing customers wherein Personal Loans were disbursed to existing HDFC bank customers. This is a data-analytics driven offering where pre-approved customer bases are kept and the ATM is used as a touchpoint for a soft-sale. Given the number of monthly transactions that happen on any ATM, even a small percentage of conversion would mean this becomes a channel of interest for the bank.
  • Top-up to existing loans – Those bank customers who have an existing loan product can now top it up at the ATM by simply accepting the offer or checking if a top-up is available. This is again driven by pre-approving existing loan customers basis their past-repayment schedule and behavior.

The advantage of the two options mentioned above is that there is no rejection from the bank’s side. In most loan sourcing channels, there is a substantial reject of applicants by the bank as the applicant and its current profile do not match the risk norms that the bank works under. Here only those customers would be shown the loan offer, who have already been approved by the bank’s risk team. This means that the only hurdle left is to convince the customer. Again since customer is already at the ATM for some other transaction, the additional cost of pitching this product is minimal.

The HDFC ATMs will also be looking at sourcing Credit Card applications. While the details are not clear, it seems this will also not be for new-to-bank customers but for existing customers who have a savings or current account with the bank. And whose balances and transactions have confirmed that this is a customer who can manage a credit card well. Or these customers may be making regular payments to other credit cards they have from other banks.