Microfinance institutions are now increasingly routing loan applications through credit bureaus. And, a number of these applications are being rejected on the grounds of defaults/higher outstanding and multiple loans.
A credit bureau collects information from various sources and provides information on an individual’s credit history for a variety of purposes. It needs a licence from the Reserve Bank of India to do so.
“As per the self-imposed mandate of Microfinance Institutions Network, all our member NBFC-MFIs are using credit bureau data from June 1, 2012,” Mr Alok Prasad, Chief Executive Officer of MFIN, told
MFIN members, who account for over 90 per cent micro-lending in the country, are regularly uploading data to credit bureaus — High Mark and Equifax.
“Use of credit bureau benefits the poor as well as MFIs. The general rate of rejection of loan applications is 8-14 per cent,” Mr S. Dilli Raj, Chief Financial Officer, SKS Microfinance Ltd, said.
As of now, the credit bureau records are being consulted to take a call on loan applications of 30 million MFI clients from across the country.
“As we move on, more data on defaulters will be available with increasing number of transactions,” Mr P. N. Vasudevan, Managing Director of Chennai-based Equitas Microfinance said.
The loan proposals are being turned down if the outstanding loan from any applicant is over Rs 50,000. “New loans are also not being extended if the applicant has more than two existing loans,” Mr Dilli Raj said.
Public sector banks, however, are not routing loans to self-help groups through credit bureaus.
As per MFIN data, the gross loan portfolio on the balance of MFIs was Rs 15,400 crore during 2011-12