Want to trick a bank into giving loans by palming off same title deed? Possible.
Want to con a bank into giving loan by showing a fake salary certificate? Possible.
Want to take a vehicle loan by showing bogus dealer invoice/ registration certificate from the road transport office? Possible.
With overzealous banks falling over each other to push retail loans, all these devious possibilities and more exist for now.
Waking up to the threat posed by ingenious fraudsters and also to contain 'collateral damage' in the future, banks, housing finance companies, non-banking finance companies and credit card companies are all set to exchange credit information for the first time ever under the aegis of the Credit Information Bureau India Ltd.
Come April, habitual credit card defaulters and concurrent home loan borrowers beware! Your game is up.
The bureau aims to mitigate the perennial fear of bankers that their credit decisions might go awry. All that a member-bank will need to do is to run a background check with the bureau on past financial transactions and creditworthiness of prospective borrowers before processing their loan applications.
The bureau will be a repository of positive and negative credit information. Credit grantors can get reports on prospective borrowers from us to overcome the problem of serial defaults and concurrent borrowings, according to Satish Mehta, managing director, CIBIL.
Exchange of credit information will be based purely on the principle reciprocity. Just becoming a member of the bureau doesn't entitle the credit grantor to source information. The credit grantor has to feed information to the bureau at regular intervals.
Past credit history is a fair indicator of a borrower's future credit behaviour. So, if a borrower has a good credit track record, a credit grantor could extend benefits such as finer interest rates.
Else, the creditor will do well to avoid the borrower and save itself being saddled with a non-performing asset.
Elaborating on the frauds taking place in retail loans, V S R Murthy, general manager, Union Bank of India, pointed out that the most common modus operandi adopted by unscrupulous borrowers is to avail of credit facilities by submitting forged/ fake documents in respect of properties offered to banks as securities.
In a number of cases it was found that builders/ developers had defrauded banks by pocketing housing loans, which they managed to obtain in the names of fictitious persons by submitting forged documents.
Vehicle/ consumer loans were obtained by submitting fake/ forged invoices/ quotations and were misappropriated without creating charge on the security.
"Beginning April, credit information assimilation/ dissemination will be in respect of consumer/ retail loans. Once the system pertaining to exchange of credit information on small loans stabilises, the bureau will take up credit information exchange relating to corporate and SME loans," Mehta said.
Currently, over 80 credit grantors in India, accounting for nearly 90 per cent of loans disbursed by the formal financial system, have become members of the bureau.
Mehta feels that at Rs 10 per report, the price is too small to pay to avoid sticky assets. Indications are that the price could go up to Rs 17 per report as the bureau's database as well as the number of reports generated grows manifold.
CIBIL is a four-way venture between the State Bank of India, HDFC, Dun & Bradstreet Information Services (India) Pvt. Ltd and Trans Union International Inc.
CIBIL is already maintaining the database of suit-filed accounts of Rs 1 crore (Rs 10 million) and above and suit-filed accounts (wilful defaulters) of Rs 25 lakh (Rs 2.5 million) and above.
The central bank has instructed all credit grantors that as a prudential requirement they must incorporate a 'consent clause' in all loan documents, enabling them to share data with the bureau.