Description
The ppt explaining Curbing NPA's through the use of IT
Curbing NPAs: IT Implications
Content
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What are NPAs? Pre CIBIL Scenario How can IT enabled services come handy? What is CIBIL? How CIBIL works? CIR Reports Challenges in offering IT based solutions Current Scenario Future trends Conclusion References
What is a Non Performing Asset ?
In India, an asset is classified as Non-Performing Asset (NPA) if interest or
installments of principal due remain unpaid for more than 180 days.
However, with effect from March, 2004, default status would be given to a borrower if dues are not paid for 90 days.
If any advance or credit facilities granted by a bank to a borrower becomes
non-performing, then the bank will have to treat all the advances/credit facilities granted to that borrower as non-performing without having any
regard to the fact that there may still exist certain advances / credit facilities
having performing status.
How does NPAs effect the profitability of Banks?
?
The interest applied on such accounts are not taken into account unless
realized.
?
It requires to make provisions for NPAs, which further tells upon the income earned by the banks on performing assets.
Pre CIBIL scenario
The trend shows the decrease in the amount of NPAs as a percentage of total advances and net advances from year 98-99 to 2000-01. But, there is a increase in the amount of NPAs in absolute terms fro 50815 crores in year 97-98 to 63883 crores in 2000-01.
How can IT enabled services come handy?
It can help curtailing the problem of NPAs at three levels: 1. Inception level (while extending credit) -In order to check the creditworthiness of the customer various Data Warehousing tools and Data mining techniques may prove effective.
2.
Maturity level (during the term of the loan) -At this level various DBMS and RDBMS may be instrumental, which automatically reminds about the correct status on correct time so that correct measures ca be taken. Identification level (once asset is identified as non performing) -At this level IT may be helpful in finding generic profile of defaulters. Also the list of defaulters ca be extended to credit bureaus on real time basis .
3.
A step in required direction…… …establishment of CIBIL.
The major objectives for establishing CIBIL includes:
(a) the need for comprehensive credit information by gathering credit related information regarding commercial and consumer borrowers,
(b) maintaining a database of this information and selling the information in
the form of credit reports to a closed user group of Members
What is CIBIL?
•India's first credit information bureau •It is a repository of information, which contains the credit history of commercial and consumer borrowers.
•CIBIL provides this information to its Members in the form of credit information
reports. •Members are Banks, Financial Institutions, Non Banking Financial Companies,
Housing Finance Companies and Credit Card Companies use CIBIL’s services
•Data sharing is based on the Principle of Reciprocity
Who owns CIBIL?
Initially CIBIL's equity was held by State Bank of India, Housing Development Finance Corporation Limited, Dun & Bradstreet Information Services India Private Limited and Trans Union International Inc. The shareholding pattern was in the proportion of 40:40:10:10 respectively. Later SBI and HDFC decided to reduce their stakes so that new members can be accommodated.
How CIBIL works?
C
•Details of borrowers •Defaulters data
bank FI NBFC
I
B I
•Credit Report
L
Centralized database
•Defaulters report on request
HFC CCC
Arrows denote two way exchange of data with satellite connectivity •Customized data from bank to CIBIL monthly/ quarterly •Credit response from CIBIL to banks on real time basis
FI : financial institutions NBFC :non banking financial institutions HFC :housing finance corporations CCC : credit card companies
The CIR includes the following information:
?
Basic borrower information like: ? Name ? Address In case of individuals: Identification numbers Passport ID Voters ID Date of birth
? ? ?
?
? ? ? ?
?
In case of non-individuals ? D-U-N-S® Number ? Registration Number ? Legal Constitution Records of all the credit facilities availed by the borrower Past payment history Amount overdue Number of inquiries made on that borrower, by different Members Suit-filed status.
Phase wise operations
CIBIL initially started with the list of willful defaulters with an account
of more than Rs. 1 crore and than boiled down to accounts of more than Rs. 25 lakhs. In subsequent stage the limit was further reduced to 10 lakhs and above.
1.
2. Before CIBIL several such initiatives were taken but CIBIL surpassed them all in term of scope and scale. Among 90 sources,
CIBIL has sought data from 70 sources. Thus had a batter chance
of success.
Challenges in offering IT based solutions
1. 2.
Low P.C. penetration and telecom infrastructure Different banks in different parts of the country are at different level of computerization. Some banks have access to latest computers while some still work on old technologies which can not be used for speedier decision making and analysis. Different banks use different operating systems. Low computer literacy and non learning attitude of bank employees. Power shortage and power failures. The personal identification numbers used to track individuals like the passport no., PAN no. etc are not foolproof.
3.
4. 5. 6. 7.
*Introduction of forensic science tools such as fingerprint, face, voice recognition techniques can act as a foolproof personal identification code for the customer.
Current Scenario
?
CIBIL consumer bureau has a data base of over 85 million records and
commercial bureau has a data base of 12 million records.
?
Generation of macro reports - Report to facilitate strategic decision by providing a closer review of the entire customer base
?
Consumer credit score - A 3 digit no. representing the amount of risk a consumer brings to a
particular transaction.
Recent NPA of SCBs
Future trends
Offer services to: ? Life Insurance Industry ? General Insurance Industry ? Utilities such as: ? Telecom ? Electricity ? Water supply
Conclusion
The banking sector is adapting itself to rapid innovation in technology particularly on the information based technology front to impart efficiency in providing wide range of products and services to the public at large.
References
?
? ? ?
www.cibil.com
www.indiabudget.ac.in www.dunandbradstreet.com www.transunion.com
doc_182083444.ppt
The ppt explaining Curbing NPA's through the use of IT
Curbing NPAs: IT Implications
Content
?
?
? ? ?
?
? ? ?
?
?
What are NPAs? Pre CIBIL Scenario How can IT enabled services come handy? What is CIBIL? How CIBIL works? CIR Reports Challenges in offering IT based solutions Current Scenario Future trends Conclusion References
What is a Non Performing Asset ?
In India, an asset is classified as Non-Performing Asset (NPA) if interest or
installments of principal due remain unpaid for more than 180 days.
However, with effect from March, 2004, default status would be given to a borrower if dues are not paid for 90 days.
If any advance or credit facilities granted by a bank to a borrower becomes
non-performing, then the bank will have to treat all the advances/credit facilities granted to that borrower as non-performing without having any
regard to the fact that there may still exist certain advances / credit facilities
having performing status.
How does NPAs effect the profitability of Banks?
?
The interest applied on such accounts are not taken into account unless
realized.
?
It requires to make provisions for NPAs, which further tells upon the income earned by the banks on performing assets.
Pre CIBIL scenario
The trend shows the decrease in the amount of NPAs as a percentage of total advances and net advances from year 98-99 to 2000-01. But, there is a increase in the amount of NPAs in absolute terms fro 50815 crores in year 97-98 to 63883 crores in 2000-01.
How can IT enabled services come handy?
It can help curtailing the problem of NPAs at three levels: 1. Inception level (while extending credit) -In order to check the creditworthiness of the customer various Data Warehousing tools and Data mining techniques may prove effective.
2.
Maturity level (during the term of the loan) -At this level various DBMS and RDBMS may be instrumental, which automatically reminds about the correct status on correct time so that correct measures ca be taken. Identification level (once asset is identified as non performing) -At this level IT may be helpful in finding generic profile of defaulters. Also the list of defaulters ca be extended to credit bureaus on real time basis .
3.
A step in required direction…… …establishment of CIBIL.
The major objectives for establishing CIBIL includes:
(a) the need for comprehensive credit information by gathering credit related information regarding commercial and consumer borrowers,
(b) maintaining a database of this information and selling the information in
the form of credit reports to a closed user group of Members
What is CIBIL?
•India's first credit information bureau •It is a repository of information, which contains the credit history of commercial and consumer borrowers.
•CIBIL provides this information to its Members in the form of credit information
reports. •Members are Banks, Financial Institutions, Non Banking Financial Companies,
Housing Finance Companies and Credit Card Companies use CIBIL’s services
•Data sharing is based on the Principle of Reciprocity
Who owns CIBIL?
Initially CIBIL's equity was held by State Bank of India, Housing Development Finance Corporation Limited, Dun & Bradstreet Information Services India Private Limited and Trans Union International Inc. The shareholding pattern was in the proportion of 40:40:10:10 respectively. Later SBI and HDFC decided to reduce their stakes so that new members can be accommodated.
How CIBIL works?
C
•Details of borrowers •Defaulters data
bank FI NBFC
I
B I
•Credit Report
L
Centralized database
•Defaulters report on request
HFC CCC
Arrows denote two way exchange of data with satellite connectivity •Customized data from bank to CIBIL monthly/ quarterly •Credit response from CIBIL to banks on real time basis
FI : financial institutions NBFC :non banking financial institutions HFC :housing finance corporations CCC : credit card companies
The CIR includes the following information:
?
Basic borrower information like: ? Name ? Address In case of individuals: Identification numbers Passport ID Voters ID Date of birth
? ? ?
?
? ? ? ?
?
In case of non-individuals ? D-U-N-S® Number ? Registration Number ? Legal Constitution Records of all the credit facilities availed by the borrower Past payment history Amount overdue Number of inquiries made on that borrower, by different Members Suit-filed status.
Phase wise operations
CIBIL initially started with the list of willful defaulters with an account
of more than Rs. 1 crore and than boiled down to accounts of more than Rs. 25 lakhs. In subsequent stage the limit was further reduced to 10 lakhs and above.
1.
2. Before CIBIL several such initiatives were taken but CIBIL surpassed them all in term of scope and scale. Among 90 sources,
CIBIL has sought data from 70 sources. Thus had a batter chance
of success.
Challenges in offering IT based solutions
1. 2.
Low P.C. penetration and telecom infrastructure Different banks in different parts of the country are at different level of computerization. Some banks have access to latest computers while some still work on old technologies which can not be used for speedier decision making and analysis. Different banks use different operating systems. Low computer literacy and non learning attitude of bank employees. Power shortage and power failures. The personal identification numbers used to track individuals like the passport no., PAN no. etc are not foolproof.
3.
4. 5. 6. 7.
*Introduction of forensic science tools such as fingerprint, face, voice recognition techniques can act as a foolproof personal identification code for the customer.
Current Scenario
?
CIBIL consumer bureau has a data base of over 85 million records and
commercial bureau has a data base of 12 million records.
?
Generation of macro reports - Report to facilitate strategic decision by providing a closer review of the entire customer base
?
Consumer credit score - A 3 digit no. representing the amount of risk a consumer brings to a
particular transaction.
Recent NPA of SCBs
Future trends
Offer services to: ? Life Insurance Industry ? General Insurance Industry ? Utilities such as: ? Telecom ? Electricity ? Water supply
Conclusion
The banking sector is adapting itself to rapid innovation in technology particularly on the information based technology front to impart efficiency in providing wide range of products and services to the public at large.
References
?
? ? ?
www.cibil.com
www.indiabudget.ac.in www.dunandbradstreet.com www.transunion.com
doc_182083444.ppt