Economy

KEY POINTS

PCR

·         A public credit registry is an information repository that collates all loan information of individuals and corporate borrowers.

·         Credit information is now available across multiple systems in bits and pieces and not in one window.

·         PCR will help capture all relevant information about a borrower, across different borrowing products in one place.

·         The move is based on the recommendations of a committee, headed by Y.M. Deosthalee.

Significance for India

·         PCR will address issues such as information asymmetry, improve access to credit and strengthen the credit culture among consumers.

·         It can also address the bad loan problem, as corporate debtors will not be able to borrow across banks without disclosing existing debt.

·         It helps banks distinguish between a bad and a good borrower and accordingly offer attractive interest rates to good borrowers and higher interest rates to bad borrowers.

·         It can flag early warnings on asset quality by tracking performance on other credits.

·         Access to credit information, including debt details and repayment history would drive innovation in lending.

·         For example, currently most banks focus on large companies for loans and consequently the MSMEs are left with limited options for borrowing.

·         With satisfactory payment history and validated debt details made available, it will increase the credit availability to MSME along with deepening of the financial markets.

·         This will support the policy of financial inclusion.

·         Setting up the PCR will help improve India’s rankings in the World Bank’s ease of doing business index.

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