The Reserve Bank of India (RBI) has called for legalising and enactment of public credit registry (PCR) in India to overcome organisational and confidentiality constraints.

PCR is an extensive database of credit information accessible to all stakeholders to help banks distinguish between bad and good borrowers.

"It is desirable to have a special comprehensive legislation, overriding the prohibitions contained in all other legislations on sharing of information required for the PCR. Otherwise, all such legislations will have to be amended separately, providing an exemption for sharing of information with PCR," said RBI's Deputy Governor Viral Acharya in a speech.

According to him, almost everywhere PCRs are backed by a specific enactment of a PCR Act. In India, a PCR Act can enable transparent address of the entire gamut of governance issues including data acquisition and its dissemination through access rights by various users.

Acharya spoke through video conferencing at the annual banking conference FIBAC 2018 jointly organised by industry body FICCI and Indian Banks' Association (IBA).

He first mooted the idea of PCR in July 2017 and within a year, in October, the RBI decided to establish it and set up a high-level task force under the Chairmanship of YM Deosthalee in April this year.

The PCR is initially being set up within the existing RBI infrastructure.

He said one can find many provisions in different enactments which enable the Reserve Bank to collect credit information from its regulated entities as part of its regulatory and supervisory functions.

The interplay of PCR and GSTN

The central bank deputy also said PCR and Goods and Services Tax Network (GSTN) together is a digital infrastructure that can reduce costs on small borrowers and improve the stability of India's national financial system.

GSTN is a trusted repository of matched invoices.

In a country like ours with a low credit to GDP, efficiently increasing affordability and access to credit are paramount goals.

"The PCR can aggregate the information of a borrower using the core credit information repository and information lying in a set of sub-systems spread across multiple agencies (e.g. MCA database, GSTN etc.), to aggregate information of a borrower. Together, these sub-systems create a universe of verifiable information and allow safe access to the data for all important stakeholders in the financial system," Acharya said.

Other public digital infrastructures such as eKYC for knowing your customer or Unified Payments Interface (UPI) for digital payments are nudging users towards creating larger data footprints and helping them indirectly improve their creditworthiness.

He believes with this infrastructure in place, the costs for onboarding users who are currently excluded by formal credit to nosedive. It will become feasible to serve a large number of customers, operating at a much lower average transaction size.

"Just like in the Fast-moving Consumer Goods (FMCG) sector, banking and access to credit too will be ‘sachetized’ to make it more accessible and affordable for the masses.

"If you ask me my dream, we want that even a small paan wala or tea shop vendor should be able to take a 500 rupee loan at fair rates, say, for only a week, based on such data," he added.