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Wednesday, May 18, 2005

Indian Banks dump shares in CIBIL

From "The Business Standard" May-17-2005

State Bank of India (SBI) and Housing Development Finance Corporation (HDFC) today divested 47.5 per cent in Credit Information Bureau (India) Ltd (Cibil) to a consortium of banks.

With this, the SBI-HDFC combined has brought down their stake in Cibil from 80 per cent to 32.5 per cent.

It is understood that the two entities sold their holdings shares at Rs 20 per share.

SBI and HDFC have pared their stake following the Reserve Bank of India (RBI) governor Y V Reddy’s announcement in the annual policy for the year 2004-2005 stating that its desirable that credit bureaus have diversified ownership with no single entity owning more than 10 per cent of the paid-up capital in the first stage, and 5 per cent later.

ICICI Bank now holds 10 per cent in the entity; Punjab National Bank, Bank of India, Central Bank of India, Union Bank of India, Bank of Baroda, Citibank, HSBC hold five per cent each; and Sundaram Finance holds 2.5 per cent stake in Cibil.

Cibil, India’s first credit information bureau which was established by SBI and HDFC with shareholding of 40 per cent each, while Dun & Bradstreet Information Services India Pvt Ltd (D&B) and Trans Union International Inc hold 10 per cent each.

D&B and Trans Union have also provided the necessary technical and software support to Cibil.

Cibil had launched its consumer bureau operations in 2004 with a database size of 4 million records from 12 members. Today, around 30 banks access data and share reports.

Credit information reports from Cibil enable banks to offer differential pricing to customers with a good credit record and reduce defaulters, thereby decreasing potential non-performing assets.
Have Indian banks dumped their profitable stakes in CIBIL knowing that senior "CIBIL"ians may go to jail? Trawl this blog to discover more.

"Recovery Raj" and RBI India's impotent Banking Regulator

From "The Indian Express" 17-April-2005

MUMBAI, APRIL 17: As banks get more competitive on the loan front with disbursements touching new highs, the customer is the winner and the loser at the same time.

While getting a loan may have become easier, a wee bit delay in payment can unleash a volley of abuses and intimidation at the hands of the recovery agents appointed by various banks.

More and more consumers are taking the legal route to restrain the banks. Things have come to such a pass that in a recent public interest litigation (PIL) filed in the Mumbai High Court against the high-handedness of the recovery agents, the court observed verbally that agents and their activities could be “illegal”.

In response to the court’s observation, the Reserve Bank of India (RBI) has said that it is legal for the bank to appoint such private agencies to recover money.

The RBI argument is that the appointment of such agencies are not violative of the Banking Regulation Act.

‘‘The role of RBI is limited/restricted to ensuring that the banks do not subvert the regulations,’’ says Rahul Narvekar, an advocate for RBI.

When contacted, an RBI official said the IBA is responsible for framing the code of conduct for recovery agents. Banks are subject to the guidelines laid down by the Indian Banks Association (IBA).

But when recovery agents resort to questionable methods, shouldn’t banks which employ them be taken to task?

According to noted criminal lawyer Shrikant Bhat, not only do the acts of the recovery agents amount to violation of the Indian Penal Code, the banks could also be guilty of ‘aiding and abetting’ the act.

‘‘If the agent gives a direct or indirect threat to recover money owed to him (read: bank), it amounts to offence of criminal intimidation. Added to that if the employer (banks) has knowledge that its employees (the recovery agents) are routinely using threat to recover money, then the employer is also guilty of aiding and abetting the act and of common intention,’’ Bhat says.

Since in most such cases, the consumers have spoken to at least one bank official regarding the agents, which would qualify the bank for the second violation.

According to Bhat, this would make the RBI guilty of uttering a shameful half-truth. “Therefore the RBI stand should be corrected. It should be probed by the court to ask if it knows or not that the agents are employing muscle power and threats to recover the money,” clarifies Bhat.

When the issue was put to HSBC, after repeated attempts, the bank refused to comment on the recovery process, saying, ‘‘That it could be under the contract law.”

Shifting the obligation to the IBA, the RBI says that the Indian Banks Association (IBA) has been already entrusted with the task of writing down code of conduct for the recovery agents.

‘‘Yes, we already have a Model Code of conduct for Collection of Dues and Repossession of Security (CDRS code). The code was prepared late 2003, and it basically speaks about how to deal with customers in a civil manner,’’ says K Unnikrishnan, senior V-P (policy), IBA.

But there’s a problem. ‘‘The code of conduct is voluntary, not statutory. There is no compulsion on banks to enforce the code of conduct, it’s is totally voluntary,’’ he adds.

So, where does the buck stop? If there is a code of conduct for recovery agents, why has it not been enforced? “These acts do not violate any provisions of the Banking Regulation Act,” says Rahul Narvekar, advocate for RBI.

But who takes the blame when things go wrong?

‘‘The banks must undertake extensive due diligence before disbursing loans,’’ thinks S. Santhanakrishnan, chairman of The Credit Information Bureau India Ltd (CIBIL).

According to him the incremental non-performing assets of banks are less than 2 per cent. ‘‘In fact, in recent reports, the RBI has sounded an alarm to the banks asking them to be more careful about loan disbursements,’’ he adds.

Right now, that just doesn’t seem to be the case.
Read the Convenor's Complaint and Rejoinders to learn why RBI clamped down from the night of November 6th 2004.

Cibil plans commercial bureau

From "The Telegraph" Kolkatta edn. 17-May-2005

OUR SPECIAL CORRESPONDENT

Mumbai, May 16: Credit Information Bureau India Ltd (Cibil) plans to launch a commercial bureau, which will collate data on the credit records of business enterprises, chief operating officer Arun Thukral said.

“We will try to launch a commercial bureau as soon as possible,” Thukral said.

Cibil will launch the bureau after it has a minimum of 3-4 lakh records on business enterprises, Thukral said.

Cibil currently has a full-fledged consumer bureau of 20 million records. When it started operations last year, the credit information bureau had a database size of 4 million records from 12 members. It now has grown significantly to over 20 million from approximately 30 members.

While Dun & Bradstreet was the technical partner providing knowledge for the consumer bureau, Thukral said the commercial bureau will be supported by Trans Union International.
Does CIBIl have over 20 million illegally garnered and hacked records? Watch this space.