It was the beginning of the new millennium and the India Shining story was just about to get started. Middle-class folks everywhere were hungry to spend and private banks were just too willing to feed their new found addiction to spend.
It was only a matter of time before many loans went sour and the private banks resorted to other ways, reminiscent of 80's Bollywood movies, to get their money back. It opened the gates for a credit information system that would help financial institutions better decide who to give loans to.
That was when The Credit Information Bureau (India) or CIBIL, came into existence. Launched in 2001, it started providing banking and financial institutions with credit reports, which soon morphed into a CIBIL score, making it easier for banks to evaluate a loan applicant.
And today, keeping with its tradition of bringing path-breaking solutions to financial institutions, CIBIL has become India's first company to provide decision support system to banks and other NBFCs.
Filling the Gaps
Sudesh Puthran is a man used to playing with large numbers. The current CIO of CIBIL, he worked at OTC, India’s first Automated Stock Exchange, and CRISIL (Credit Rating and Information Services of India) before joining CIBIL in 2002. In the 7TB of data CIBIL had built over the years, he saw a business idea that could lend CIBIL competitive edge and create a new revenue channel.
The idea was sparked by changes in the environment. Puthran noticed the strong emergence of NBFCs (non-banking financial companies) and MFIs (microfinance institutions). As of March 2011, for example, there were 12,409 registered NBFCs with the RBI.
"NBFCs and MFI are still bullish about growth, and are gunning for rural penetration and expansion. To us, they were a whole new market we could partner with," says Puthran.
While NBFCs nurtured big dreams, they generally lacked the resources to support and fuel such growth. "The smaller institutions normally lack the skill sets of an analytical team and don't have large risk management teams who can scrutinize reports," he says.
So if a small NBFC from the south wanted to expand its gold loan business to the north, it required in-house analysts to figure out the viability of such a move. Even if it managed to fund such a team, its analysts would only have a small amount of data—provided by the NBFC—to work with.
Puthran learnt that every time these institutions got a report, they needed time to analyze it (it takes time even for an extremely experienced banker.) He figured that what they really needed was a solution, not a report.
"With our existing database, we could help them figure out how borrowers from the north perform on gold loans, whether people tend to default on loans, and the age bracket of most defaulters," Puthran says. He says that CIBIL could go as far as predict what the next loan of an existing client was likely to be.
CIBIL could go as far as predict what the next loan of an existing client was likely to be.
This was in addition to CIBIL's previous offering: Delivering scores. With the decision support system, CIBIL could transform itself into a strategic partner, understanding the risk appetite of its partners and helping them make decisions.
The service, launched in 2011, helps CIBIL extend a plethora of services to its member banks, including consulting services. CIBIL could advise its clients at every stage of their lifecycle—from acquiring customers to strengthening and expanding relationships with them, and from market-sizing, and competition benchmarking to 'decisioning' services.
This decision support system which CIBIL now offers—through their technical partner TUSSPL—on a SaaS model to smaller organizations, helps them make faster decisions and save manpower cost.
For Puthran, getting to this point is a dream that started in 2002. "The foundation of a good credit reporting system and BI solution is a clean database and quality data. Gaining access to data and ensuring it is standardized was a tough nut to crack," he says.
Since 2002, CIBIL had managed to successfully convince banks to share their data. But when data started to flow in, Puthran realized that the lack of standard identifiers made entire datasets almost redundant. "Some banks used voters ID cards, while others used PAN numbers or passport details" to identify people who had taken a loan, he says.
Over time, CIBIL got banks to follow a set of acceptable norms. "We convinced them by making them understand that only when they identified a customer across various product portfolios, could we identify them across various banks," says Puthran.
That work has accumulated into a central repository of 220 million trade lines (accounts like credit cards, personal loans, auto loans, etcetera) and 150 million subjects (people holding those accounts). CIBIL's systems currently handle about 80,000 to 90,000 credit score requests everyday. It takes only three minutes for them to deliver a credit score or report.
So when Puthran wanted to plug in his analytics solution to the system, he chose not to rock the boat. "Credit scoring has been our biggest strength and we didn't want anything to interfere with that. So we added the analytics solution as a separate application infrastructure, drawing data from the same database but operating as a separate entity," he says.
The single biggest challenge Puthran faced with buying an off-the-shelf BI software and plugging it into the CIBIL systems was the immense amount of customization. It had to uniquely identify an individual among over 150 million subjects and provide a credit score within three seconds. "Things as basic as the name nomenclature and identifier are very diverse in India. It took a lot of effort to adjust the nuts-and-bolts to Indian conditions," he says.
If imitation is truly the sincerest form of flattery, Puthran should be pleased. CIBIL’s success formula has been emulated by several other Indian credit bureaus including Experian India, Equifax Credit Information Services, and High Mark Credit Information Services.
What sets CIBIL apart, though, is its constant need to bring something innovative to the market and help its partners gain value. "One can't eliminate competition," says Puthran. "In a way, that's good because they continuously push you to keep thinking, innovating, and getting better."