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Defaulters beware, banks might bar you!

Poornima Mohandas

Mumbai , March 2

DEFAULTING on one loan may land you in trouble. You might just find yourself unable to get another loan, a credit card or even a mobile phone connection!

Commercial banks and telecom companies in the country are gearing up to share negative data on individual customers.

So if you have defaulted on a housing loan with Bank X, Bank Y might just reject your two-wheeler loan application and the local telecom service provider might deprive you of a post-paid connection.

"We are trying to generate negative files or defaulters lists across banks. This list will include defaulters and written off cases of all retail loans right from home to car loans, personal and two-wheeler loans,'' said Mr Raghu Malhotra, Vice-President, South Asia, MasterCard International. MasterCard International already runs a negative file pertaining to credit card customers.

"Each bank has its internal list of defaulters; we have to now bring the different banks together and compile the lists. About 13-14 banks are already sharing data on various forms of retail lending, more are expected to join in another 2-3 months,'' he said.

Interestingly, two large telecom companies (the names of which MasterCard did not reveal) have in-principle signed up in order to be able to access the retail negative files. Banking privacy laws may not protect the customer since most of the loan agreements one signs nowadays includes a clause whereby the bank can share customer information with even non-financial agencies.

How the negative files will work: when a bank/telecom company wants to take on a new retail customer it can check on his/her background by raising a `query' with the credit bureau at a fee. If the customer is spotted on the defaulter list, the bank/company can at its discretion, decide whether or not to take on the customer. The fee structure for the same is being finalised by Satyam, which manages the entire database.

But will the MasterCard initiative be redundant once the country's first credit bureau, Credit Information Bureau (India) Ltd (CIBIL) promoted by HDFC and State Bank of India takes off possibly next month? Bankers feel that though the current MasterCard initiative is very useful, CIBIL could make it redundant based on pricing.

However, what is on offer from the two parties differs. While MasterCard will offer merely a defaulters list of retail customers, CIBIL intends to be more comprehensive with both positive and negative credit data for both retail and wholesale customers.

It may even derive a credit score number for customers as seen in developed markets.

At present, the only effort in credit information sharing between banks in the country is restricted to negative data on credit card customers through MasterCard.

About 28 banks including ICICI Bank, HDFC Bank, Citibank, HSBC, Standard Chartered, Central Bank of India, Bank of Baroda, Bank of India, Andhra Bank among others are part of this effort with State Bank of India, the country's largest bank expected to join soon.

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