AIAI Seeks Credit Rating services for SSIs - The Observer of Business & Politics
	Experian to set up consumer credit bureau  - Economic Times
	Banks join hands to share defaulter information on credit cards - Economic Times

	The pace of implementation of the Nayak Report should be reviewed.
	Banks/financial institutions may concentrate upon the cluster approach and set up specialised branches in clusters having concentration of SSIs.

ONICRA in the News -1997

	Move to give ONICRA a fresh lease of life - The  Hindu Business Line
	Venture Infotech, Equifax JV for credit cards - Hindustan Times
	ONICRA Seeking tie-up for credit rating system - Economic Times

While credit rating is a big industry in developed countries, Indian companies are likely to face a handicap in collecting data. According to analysis, it is easier for the credit rating industry to flourish in countries such as the US as each individual has a social security number, which makes tracking data much easier. Also, information on individuals is totally computerized, which facilitates the process of going through records. Besides, the US law makes it mandatory for the public organizations to disclose information.

Among the majors in this segment are international agencies such as Dun & Bradsheet. The Madras-based First Leasing has already tied-up with Equifax of the US to rate the credit worthiness of individuals.

ONICRA in the News -1995 EquiFirst to set up credit bureau services - Economic Times ONICRA all set for commercialization - Economic Times  Will credit ratings help the consumer? - Business Standard Personalizing Credit Rating - Business Standard Individual ratings to aid Loan Seekers - Financial Express Credit marketing: the new buzz world in banking - Financial Express Individual credit rating to help consumers - Press Trust of  India ONICRA - Business Standard  Giving Credit where it is due - The Pioneer ONICRA Takes Credit for blazing trail in individual Rating - Observer of Business & Politics  Individual Credit Rating Introduced - The Pioneer EquiFirst to set up credit bureau services Economic Times 3rd October 1995 Equifirst, a joint venture between First Leasing Company of India LTD and Equifax Inc. of the US, hopes to launch credit bureau services for the first time in the country for commercial banks, credit card firms and non-banking finance companies. Mr. Stewart A Searle, senior vice president of Equifax, and his executives held a meeting with senior bankers and credit card firms in Madras on Saturday to explain the advantages of tying up with a credit bureau, which will help them know the loan applicants and avoid bad credit risks. They stressed the need for building a strong data bank through maximum participation of banks so that the bureau could provide adequate and proper information. He said already three banks had offered to join the bureau. Mr. Irani indicated that the investment level would be around $ 5 million. In the RS 50 lakhs equity of Equifirst, the US firm has picked up 49 per cent against 40 per cent initially, while first leasing holds 51 per cent against 60 per cent earlier. ONICRA all set for commercialisation Economic Times 25th June 1995 The country's first individual credit rating agency, ONICRA (ONICRA individual credit rating agency) is all set to begin 'phased commercialization' by the beginning of next year. The company is currently engaged in developing its commercial product while simultaneously creating awareness about the concept of individual credit rating, collecting feedback from the user environment and monitoring the degree of the concept's acceptance. Says ONICRA spokesperson "The acceptance level is beginning to grow and once that is complete the commercial product can be introduced successfully." In the past five months, ONICRA has received tremendous response particularly from the telecom sector (for rating, authentication and external systematization), foreign banks and consumer finance companies. According to him: "till date no one has said that it is a bad concept and that it won't work. There's a need for it and the awareness is on the rise." Five months down the line, the company is already entertaining inquiries from a number of companies. Among them are BPL cellular mobile and whirlpool finance. "It is a RS. 6000 crore market and covers the country's 40 million middle-class households," says ONICRA Spokesperson And as awareness among consumer finance companies rises, individual credit rating will become an integral part of the credit industry in the country. Will credit ratings help the consumer? Business Standard 24th March 1995 Credit ratings for the individual consumer is an imported system concept. Ritwika Chaudhuri examines the feasibility of ONICRA in the Indian context. Individual seeking lona, beware! The next time you venture towards a finance company to buy credit for a house, a credit card or even a refrigerator, you may find your self under a microscope. In future, persons will be rated for their creditworthiness just as companies are at present. ONICRA intends to be for personal loan seekers what credit-rating agencies such a Credit Rating and information Services of India Limited (Crisil), Investment Information and Credit Rating Agency of India Ltd (ICRA) or Credit Analysis and Research Limited (CARE) are to investment companies.  ONICRA Individual Credit Rating Agency of India Limited, in technical collaboration with James Martin & Co of the US, is all set to be the first in the country to hand out credit ratings for the individual in order to make it easier for finance companies to find reliable clients. The concept of an individual rating system hinges on assessing people through their bank balance and net worth based on earnings and repaying capacity. Unlike, say in the United States where the social security number allows easy access to information about an individual, here ONICRA will act on information volunteered by the individual. Since ONICRA services institutions, as of now, you cannot hire its services in the hope of a good rating to help land a bigger loan. This is how the system, which will operate in the four metro cities, will work. An additional page will be attached to the loan application form handed out by a financier to the loan-seeker who has to jot down some extra details. On the basis of that information, ONICRA with the help of different statistical models will note its ratings. Data Details: What are the details you may have to furnish next time you apply for a housing or car loan? well, the agency will check personal profile and details of income and assets and liabilities. Give your address, qualifications, hometown, occupation, income under which would feature the value of transaction, stability of income (which is implied by assessor) and the projected growth income plus details of club membership and any awards won. Other information which you may consider sensitive but is nevertheless required by the agency would include existing liabilities, including repayment obligations, existing assets covering net asset value and liquid net worth (shares owned, houses bought, etc.) and financial records of the individual. Field checks would be done to confirm social status along with the past financial history of the person and it a criminal record or civil litigation history exist. Final ratings: These factors will be given their absolute and weighted scores to arrive at a final rating. The agency will use one of 4-5 different statistical models, depending upon the specific needs and perceptions of their client, that is, the finance company. If the finance company you have approached is a client of ONICRA's then here is an example of how the rating agency may be looking at data. 'Qualification' and 'occupation' are taken as independent parameters while 'personal strength' (abilities) are taken in association. Parameters are also tagged with negative and positive scores. A 'red signal' parameter (a history of default or a criminal record, maybe?) will convey a warning to the company. An address in a politically disturbed location may bring down an otherwise high rating. And so on. Like other credit rating agencies, ONICRA gives its verdict through symbols. These extend from A, A plus A double Plus upto D double plus. The rating is parallel to a 10-point scale, which gives scores on the information furnished by the individual. Before assessing how this concept will affect the individual, should the system catch on, it is necessary to gauge what are the chances of its efficacy in the Indian context. Accessing secondary information: To begin with, a lot will depend on how successful the agency is at extracting secondary information. This is particularly relevant since field checks will depend on access to sources such as bank records and employee records. Initially, at least, the going will be uphill. Bank, for one, will want to maintain client confidentiality. "No disclosure of the financial details about or client unless they want it." Says Ravi Bhatia of Citibank, which engages heavily in consumer financing. This was echoed by several other banks. In effect, the agency will be relying on the first-hand information from the borrowers themselves in the absence of a feedback of other institutions. As ONICRA Spokesperson, pointed out, "We are not an investigating agency." The cost of engaging such services also left others cool. Srinivas Maheshi of GIC Housing Finance feels, "We are not keen on such a rating agency as this means additional cost to us. We have a low processing charge which leaves us with hardly any margin. If we do go to ONICRA for the rating of individuals, there is no way but to pass on the additional costs to the applicants, which would be unfair." These apart, ignorance of finance agencies and banks about this type of an agency, how they operate and the utility and relevance of such ratings, has made prospective clients react gingerly to the concept. Consumer credibility: So, why should the consumer bother about such a rating considering that finance will be available in the same manner as before at least in the foreseeable future? It will help consumers to build credibility as reliable borrowers and help in conducting future financial transactions, says a spokesperson for ONICRA. That does not necessarily translate into higher loans for a higher rating. The basic benefit that a consumer derives is greater credibility. The credit-rating of a consumer may prove helpful in areas like credit cards as purchases on the card are unsecured and there is a risk of default by the cardholder. Those engaged in leasing and hire-purchase, housing finance where the applicant's long-term repayment prospects are important, issue of overdrafts, construction (where the firm wants to assess whether the individual's commitment to taking possession) are al potential users of ONICRA. Take-off or tailspin: According to ONICRA spokesperson, "The concept is unique, no doubt, but it will definitely catch on as such information is needed with the development of matured consumer credit market". A part of their optimism stems from the fact that when Crisil first started operations in 1987 the concept of credit rating was virtually unknown in India but, today, a Crisil rating for companies is perhaps the most reliable parameter to judge the performance of the company. Crisil itself predicts a dull future for individual rating services, recalling that it had explored this idea before dropping its as unfeasible. ONICRA has its work cut out as it will have to create some credibility in the market for a novel idea Besides the agency has to convince the companies regarding the usefulness of the rating. Apart from that, a developed credit market is also a prerequisite for such rating system to work properly. Nevertheless, south-based First Leasing, is set to follow ONICRA and is believed to have tied-up with Equity Facts of US for a similar individual credit rating agency. While an "in debt" way of life is quickly catching on, individuals are still tight-lipped about details of their personal finance unless the rating is directly linked to getting loans. Until this changes, individual applications will continue to be processed ad hoc. Personalising Credit Rating Business Standard 10th February 1995 It's a common problem faced by finance companies - recovering dues from defaulters. Very often the only solution left is to use local goons to intimidate the defaulter. The eager - to - lend companies fall into this trap in the first place because they fail to correctly assess the credit worthiness of their borrowers. Hoping to cash in on this gap in the consumer finance business are two agencies, ONICRA [ONICRA individual Credit Rating Agency] and Madras based Equifax. Set up six months ago, ONICRA claims to be the first agency to start a rating service for individuals. As ONICRA spokesperson points out "Till now there have been rating for corporate bodies, but no rating services for individuals". In a year's time the agency expects to collects data on at least a million individuals. Equifax in Madras has similar plans. A joint venture between Madras - based Faroukh Irani's First leasing and US firm, Equifax, the agency will be soon setting up a credit bureau. It will begin operations in June, by which time it estimates to have collected data on "200 products" ONICRA, on the other hand, is all set to take off. By the end of this month, the agency will begin operations from Delhi and Madras. And in three months time it will open shop in Bombay and Calcutta as well. In a sense ONICRA's name is a bit of a misnomer. For, it will not really be rating individuals. To start with, the agency will be doing only transaction - based rating, i.e. assessing the degree of risk attached to a financial transaction. The transaction may be for credit cards, leasing, HP, housing finance, loans and overdrafts. Obviously then the users will be the credit extending companies - banks, finance companies, credit card companies and other such companies. Already, according to ONICRA spokesperson there has been a tremendous response from banks and financial services companies. Among those who have showed interest are Kotak Mahindra, Tata Finance Limited, Gujarat leasing. The finance companies stand to benefit. As a senior executive of a finance company, which is planning to use ONICRA's facilities, points out, credit appraisal is usually a time consuming job. And if my agency is willing to provide this service and help identify good clients, his company will be all too happy. For its services ONICRA will be charging a fee, of course. Although he didn't specify the terms, ONICRA will be working either on a retainership for a specific period, or on the basis of the number of cases referred. In certain cases like housing finance, the fees will be a certain percentage of the loan amount. There is no denying that ONICRA is on a good wicket. With consumerism galloping and the new generation willing to spend first and earn later, the market for finance companies is booming. For instance, just two years ago only 15 percent of automobile sales were under a hire purchase system. Today, more than 60 percent of the automobile buyers go in for loans. This kind of growth is expected in every consumer product. And could very well lead to an increase in the rate of defaults. As ONICRA spokesperson points out: "earlier credit appraisal was not such a big problem as the target was on the higher end of the market where level of risk was low. Now with more players entering this highly competitive market, the market has spread over new segments, having higher risk level." So how exactly will ONICRA appraise an individual's credit-worthiness? Whenever a user refers a customer to the agency, it will conduct a detailed verification of the applicant. It will collect and compile information along with the supporting documents from the applicant. A credit rating report will be then delivered to the user. But apart from this, the agency will also be maintaining customer databases. It will maintain a list of defaulters obtained from banks, Fis and insurance companies. Besides it will also try and obtain credit history of individuals from other institutions. But will finance and leasing companies be willing to let go information of their clientele? He exudes confidence. "This information is no longer a marketing data. One has to be transparent or the companies may harm themselves if they deal with compulsive defaulters," he says. On the other side of the fence, SRF's manager finance, Rajesh Kochchar is not so sure. As he points out, "Finance companies may not be willing to expose their portfolios. To that extent there has to be an understanding between finance companies." Besides the finance companies ONICRA could also face objections from the individual himself. The agency's work will depend on the consent of the individual for looking into bank accounts. Says ONICRA spokesperson: "If the individual does not agree, to that extent rating gets affected. To get its database in place, ONICRA has signed on US information engineering consultancy firm, James Martin & Co. The firm will lend its expertise and information systems to develop the agency's rating model operations. Will ONICRA ultimately influence a company's credit decision? not necessarily. Even ONICRA spokesperson points out:" How can I influence? The final decision to lend or not will depend on corporate strategy." But there is no doubt that companies will take note of the agency's ratings. As an executive with Gujarat Leasing explains: "It is like having a second opinion about whether your customer is a safe bet." There may be some limitations to the rating system, however. As SRF's Kochchhar, points out the ratings may work for the salaried class but may not necessarily be correct when evaluating business persons, solely on the basis of their books of understate profits or under invoice, which will affect the quality of the ratings. It may take a couple of years before either of these agencies build up a big database and establish their credentials. On the other hand, the rating may also become another asset to flaunt as a status symbol. Individual ratings to aid Loan Seekers   Financial Express 7th February 1995 Assets, guarantors, salary certificate and documents like shares are not going to be the determining factors any more for a middle class individual to get a loan from a financier. Instead, the introduction of individual credit ratings (ICR) will make the process less complicated and more objective in India. The albeit unspoken system of placing an individual on the social status ladder for assessing creditworthiness is all set to fade out into history. The individual can still get a loan for buying a television or a refrigerator by acquiring what is slated to be status symbol of the future-ICR. "The lending institutions can give a better deal to the common man by deciding objectively on the financial exposure and assess their creditworthiness qualitatively," says ONICRA Spokesperson. ICR is an objective assessment of the risk attached to a financial transaction with respect to an individual at a given point of time-based on quantification of parameters influencing credit risk. With India moving rapidly towards a cashless society based on credit and rising trend of consumerism, ICR is going to be an index that the lending institutions will have to depend on to survive, financial experts say. This is one indication that the economic liberalisation is being driven to its logical conclusion with increasing orientation towards systematisation and evolution of a society that is more open towards change. ICR, which draws its inspiration from the credit bureaux in the west, "is a fantastic concept," says chairman and managing director Sanjeev Dutta of Intercard India. "If it can sustain for one year, it will sure be a success." Corporate credit rating, done by agencies like Crisil and ICRA, focuses on industry analysis, quality of management, competitive situation and financial performance. But ICR probes al altogether different dimension-it deals with a physical person against a legal person and the nature of transaction. Gone are the days of ostracisation of those who commit 'the sin' of taking credit. As credit-culture spreads and the tendency shifts from 'future expenditure on present savings' to 'present expenditure on future earnings,' the consumer financing market in a marketing-oriented economy is poised to grow exponentially. It leads to an increase in large, multinational players with the prime objective of getting entrenched into the market and the demand for better, faster and convenient services by the customers. The market will also look for high volume low value transactions with large variety of segments and wide geographical spread, "credit appraisal-that too quick and objective-becomes extremely important," says ONICRA spokesperson. ONICRA has adopted a 100-point rating scale, which has individual factors (85 points), transaction factors (10), and environmental factors mostly relating to economy(5). According to him, who has pioneered the first ICR model in India, every aspect of credit seeker's history-like age, qualification, occupation, stability at work and residence, marital status, assets, repaying capacity, saving and earning potential-will come under microscopic examination before rating a person. For instance, education and occupation forms an important input and brings a sense of discipline within an individual. "An educated person takes pride in being responsible citizen and tries to behave as per societal norms," he says. Hence, the weight age increases as an individual qualifies higher on an academic and occupational ladder characterized by discipline, earning capability, stability, care for reputation and statutory obligation to fulfill commitments. Leaving the weaker and priority sections, ICR is a revolutionizing idea in India where credit till now has been decided on a person's repaying capacity, says state bank of India's deputy general manager K Vikram. Banks, bound by confidentiality of accounts, will not reveal the details unless the customer gives a written mandate for verification of transactions by rating agencies, he says. Credit marketing: the new buzz world in banking   Financial Express 24th January 1995 In the days of monopoly and regulated markets, banks never really needed to market their services. Marketing was considered as a term to be associated with industry, not banking services. But banking is no longer a seller's market. And with their balance sheets looking a little unsteady, banks had to go out and drum up business: in short, work out marketing strategy. Initially, all marketing effort was directed at deposits; the assumption was that borrowers would never be in short supply. And it is true, there aren't' it is just that they are becoming a choosy lot now. Like any other commodity, credit too had to be marketed. Credit marketing may be defined as scouting for good borrowers and profitably deploying lendable resources by meeting the customer needs through appropriate credit packages. The most sought after customers have access to a well-developed capital market, from which they can raise the required resources with little pain, at a reasonable cost, and in a time -frame that is more manageable. The result is a dual impact on banking I n terms of shrinking of the size of the cake through Disintermediation, and an increase in players who want a share of he cake. (The newer players have sharper knives to slice up the cake!). It is against this backdrop that professionalism in dispensing of credit has assumed urgency and hence the marketing approach to credit. The new buzz word is credit marketing. In addition to overall corporate marketing strategy and brand management, credit marketing would require the following: Defining corporate credit philosophy on crediting and capitalising market opportunities and identifying niche areas. Decentralizing and empowering line managers for quick decisions as in days to come the time factor will be the more important of the two factors that will make a customer decide in favour of a bank, the other being the cost of funds. A scientific database. Industry profiles when combined with economic intelligence, both inland and international, should help policy makers to predict with reasonable certainty the growth areas. This will enable the field functionaries to position themselves in order to achieve sustainable competitive advantage. One of the most important factors in terms of practical utility is a dissemination of information, both vertically and horizontally, without much time lag, and clarity in the communication; ambiguity will lead to delays that would be costly. Market segmentation. Segmentation is dividing the markets into more or less homogeneous subjects of borrowers. Once this is done, the next step is understanding, identifying and anticipating the present and future needs of the command area. The third step would be coming out with appropriate credit products to take care of the identified gamut of need. To do this successfully, focus is necessary and that is why specialized branches for industrial finance, SSI, overseas finance, merchant banking, hi-tech agriculture, export finance have come into being. Of paramount importance in credit marketing is proper identification and appraisal of the borrower. Pre-sanction appraisal skills are therefore a must for a professional credit officer. Although traditional tools like balance sheet and ratio analysis will continue to play a role, increasingly credit decisions will be made on risk perception, risk analysis and risk forecasting. The credit package. Gone are the days when a borrower was satisfied with a cash credit or an overdraft or a bills limit. In days to come, a host of client-specific needs have to be taken care of by the bank through its various operations. Non fund-based and other related services may be required to support market stabilization and market expansion, both inland and international. Fee-based services support and above all consultancy services on various issues, as wide as capital restructuring to supply of market intelligence, have to be made available. "Empathy" with the borrower will, however, remain the key parameter, which would help the banker in delivering an appropriate credit package to the borrower. Timely disbursal. The differential advantage over competitors can be had only through prompt and efficient credit delivery. Time and timing will be of crucial importance in credit marketing. Post-sanction servicing. This important area has so far received scant attention. It is this apathy that has affected the recovery and resulted in build up of non-performing assets. It is this indifferent attitude that has made assets go bad as bankers felt that once credit limits are sanctioned and disbursed, it is the borrower's responsibility to pay back the banks money. A paradigm shift is therefore necessary. The bank which perceives its role as a partner of the unit and follows the spirit of post-sanction servicing will not only improve the recovery aspect, but also the expansion of business is certain. Because of prospering borrower will come back for additional limits and financing a known borrower is a lot easier than financing a new one. The author is a faculty member, The Vysya Bank Ltd., Bangalore. Individual credit rating to help consumers Press Trust of  India 24th January 1995 Consumer seeking loans will have a better deals in future with individual credit ratings (ICR) expected to make the process less complicated and more regulated in the country. The albeit unspoken system of placing an individual on the social status ladder for determining credit worthiness is all set to fade out into history with the launching of ONICRA Credit Rating Agency Of India Ltd.  last week. According to ONICRA Spokesperson, ICR is an objective assessment of the risk attached to a financial transaction with respect to an individual at a given point of time based on quantification of parameters influencing credit risk. With India moving rapidly towards a cashless society based on credit and rising trend of consumerism, ICR is going to be an index that the lending institutions will have to depend on ICR to survive, he says. This is one indication that the economic liberalization is being driven to its logical conclusion with increasing orientation towards systematization and evolution of a society that is more open towards change. ICR, with a council of trustees headed by former cabinet secretary Mr. P. K. Kaul, draws its inspiration from the 'credit bureaux' prevalent in the West. While corporate credit rating is done by agencies like Crisil and Icra, there was no firm before ONICRA to rate the individual for personal transactions like credit card membership, leasing and hire purchase, housing finance, trade credit financing and personal bank loans. Corporate credit rating focuses on industry analysis, quality of management, competitive situation and financial performance. But ICR "deals with an altogether different dimension primarily because it concerns a physical person as against a legal person and the nature of transaction." The parameters, on a 100-point scale, are divided into three heads: Individual factors (85 points), transaction factors (10) and environmental factors, which are mostly relating to economy (5). Every aspect of credit seeker's history - like age, qualification, occupation, stability at work and residence, marital status, assets, repaying capacity, savings and earning potential - will come under microscopic examination before rating a person, ONICRA Spokesperson says. ONICRA plans to form a database and has entered into a technical collaboration with the information technology specialists James Martin Company and worked out a comprehensive model for credit rating. Unlike in the west where all information about an individual are accessible on vast computer networks, while in India, with the lack of proper infrastructure, ICR will help lending agencies take precautionary measures in the beginning itself by assessing two important factors - 'ability to pay' and willingness to pay'. ONICRA   Business Standard 24th January 1995 ONICRA has decided to provide credit ratings of individual for the user of lending institutions. The core of ONICRA's credit rating system is the rating model and software developed by James Martin & Co. One the world's largest information engineering consultancy company, James Martin & Co., has brought in the rating methodology. Lending institutions can now use the credit appraisal of ONICRA. Giving Credit where it is due The Pioneer 22nd January 1995 With a system of individual credit ratings having finally arrived in India, hitherto apprehensive consumer finance firms and borrowers with a good track record of repayments have reason to be pleased, says Ravi Rajan Many a lending institution must have heaved a sigh of relief on hearing that the concept of individual credit rating is finally taking off in India. Though it may take between three to four years for ONICRA to establish a comprehensive database of all consumer creditors in the country, it is nevertheless the right step in the right direction for the relatively new Indian credit culture. In fact, it has been the rising demand for credit-whether it be for durables, automobiles, houses, bank loans/overdrafts or similar consumer debt-that has given individual credit rating a raison d'etre. One can even say that is a natural corollary to the corporate credit ratings introduced by CRISIL and ICRA. Why is individual credit rating required? To begin with, it will give lenders a one-stop shop to source information on a potential customer in the form of a rating. "A centralized system will allow lenders to concentrate on their main business of fund management and marketing rather than squander their efforts on assessing credit worthiness, particularly at a time when the credit culture is fast catching on," says ONICRA Spokesperson. Besides that, an individual credit rating also allows lenders to decide on risks attached to an exposure since the credit history of the borrower is automatically reflected in the rating." The rating system is a continuous one which keeps track of an individual's repayments, outstanding and defaults, if any. Though we don't reveal the information, the data is used to arrive at a rating," adds ONICRA Spokesperson. Consumers, on the other hand, may feel that an individual rating could bring down their chances to acquire loan. ONICRA spokesperson doesn't agree. "There is no doubt that the majority of borrowers have every intention of repaying their loans. But there is a minority that continuously defaults. In that sense, an individual credit rating system will act as an effective deterrent," observes ONICRA spokesperson. Moreover, according to ONICRA Spokesperson, "credit is not a one-time game". In fact, an individual credit rating may ultimately benefit the prompt payers. Take auto financing, for example. According to a survey conducted by ONICRA, rates of interest vary between 14 per cent and 40 per cent for car loans. Therefore, in the long run, a consumer who has a higher rating will automatically be accorded a lower interest rate. What is in it for lenders? For instance, a lender may argue that a rating is assigned at a 'point in time' whereas lending takes place over a 'period of time'. "Our system keeps a track of everything. For example, if a lender reports to us that an individual is not paying up in time, the model will automatically downgrade the rating," says ONICRA Spokesperson. Therefore, the lender will have the option of increasing the rate of borrowing provided the initial contract has an in-built clause to that effect. In other words, the lender can juggle between risks and exposures. More importantly, an individual credit rating system will provide lenders with some level of confidence about a borrower, which so far doesn't exist. That's not the only positive aspect. "Till now, a borrower could go to two or three lenders and obtain loans based on a single salary certificate. Each lender has no idea about the borrower's status with other lenders. When we network and integrate the credit information, every lender will have a basis for lending," says ONICRA Spokesperson. Moreover, ONICRA will offer two types of ratings. For instance, if an individual approaches only a single lender, the rating will be an absolute one. On the other hand, if a borrower goes to two or more lenders, a relative rating is assigned. To cite an example, if an individual has acquired a B+ rating while borrowing from one lender but simultaneously approaches other lender, the rating in all likelihood will go down, to say B, which will be applicable to all lenders. Isn't is possible for one person to apply in two names and beat the system? "Not really. In that sense, Mr. Seshan has made out job easier. The evolving I-card system will permit the allocation of a single number to every individual. This is something like the social security number, which all US residents possess. Duplication will be tough," feels President & Chief Executive Officer Satish Jha of James Martin & Company (ONICRA's technical collaborators and the developers of the ratings software). Another significant gain for lenders, of course, is that the number of defaults will decrease while the throughput of transactions will increase. In monetary terms, that can work out to higher savings as well as better profits. It is estimated that consumer lending is of the order of RS. 35000 crore today and if one considers only a 1 per cent drop in defaults, the figure works out to RS. 350 crore. Similarly, since a lender doesn't have to rate an individual on his own he can concentrate on pushing more deals through. But then, what will ONICRA charge to lenders for services rendered. "We have a three-tier structure. For small lenders, there will be a periodical retainer. Secondly, for companies whose sales are based on volumes, we will have a fixed charge for every individual. Finally, on exposures of over RS. 1 lakh, the charge would be a percentage of the exposure amount," explains ONICRA Spokesperson. Will it be viable for lenders? "One has to look at the order of things. The savings on the default front will by far outweigh the processing costs. One might even go far as to say that the difference may be two zeroes," says Mr. Jha. Many may ask on what basis an individual credit rating is assigned. "There are two basic parameters that our model looks at: the strength and the willingness to pay. We work out the degrees of strength and willingness through our software before we arrive at a rating," says ONICRA Spokesperson. However, ONICRA Spokesperson admits that there will be teething troubles. Calling them "weak areas", ONICRA Spokesperson believes that there is a possibility that wrong information may be filed by individuals. "But over the long run, it will sort itself out," he feels. On the other hand, Mr. Jha feels that the system his company has developed is more advanced than any other in the world. According to him, the advantage was that "we learnt on the shoulders of the old US system". In fact, James Martin is known as a company that "manages chaos in the information technology industry". Initially, ONICRA is offering its individuals credit rating system in New Delhi and Madras. According to ONICRA Spokesperson, the credit revolution is much more advanced in the south than the north. Moreover, ONICRA doesn't plan to expand its operations on its own steam. At a later stage, it will look for franchisee set-ups in smaller towns and cities. What about competition? "I admit that many more may jump onto the bandwagon. But the most important aspect of an individual credit rating system is networking. Therefore, even if more players enter the fray, all of us will have to be networked for the system to succeed," observes ONICRA Spokesperson. Any system that asks for personal individual information on financial and other matters always throws up the question of confidentiality and biases. ONICRA feels it has taken care of this aspect since there will be a council of trustees comprising of "people of stature"-that will overview the board of directors as well as the firm's operations. In fact, the promoters from the ONICRA group have taken it upon themselves to limit their equity initially to 25 per cent of the RS. 10 crore equity base. The balance is being offered to institutions, which may be the lenders, themselves. "In fact, I see this as a company whose equity will continue to increase for a long time to come," says Mr. Jha. ONICRA Takes Credit for blazing trail in individual Rating Observer of Business & Politics 21st January 1995 You better watch out if you are still planning future expenditure on present savings. For, times are changing and most present expenditure will soon be on future earnings. As the Indian society gets driven more by debt and less by cash, the hour will arrive when the creditworthiness of each individual will become his true worth. Just as the ubiquitous "credit bureaux" define the worth of each US citizen by following his credit trail. A large MNC like GE capital has tied up with HDFC to galvanize the consumer market. ONICRA has begun its pioneering venture of credit-rating Indians. The timing could not have been better, for the country is on threshold of a consumer boom. While corporate credit rating is done by expert agencies like CRISIL and ICRA, there was no agency before ONICRA to rate the individual for personal transactions like credit card membership, leasing and hire purchase, housing finance, trade credit financing, personal bank loans, including overdraft and exposure with broking firms. ONICRA's maiden effort received a special mention from the finance ministry in the economic survey for 1993-94. How soon can the company network its database about individual credit history remains to be seen. But, it is certain that the effort, if successful, will replace the present basis of individual credit, which is mostly private recommendation by universal parameters. The ONICRA parameter tree of 100 points is disaggregated at first under three heads: The individual factor, given 85 points; the transaction factor, 10 points; and the environmental factor, including the expected growth of economy, which is assigned the remaining five points. The individual factor carries with it the credit-seeker's age, qualification and occupation, his stability at residence and work, marital status etc. A married person, for example, scores one point whereas a divorcee gets 0.2. A charted accountant scores five when a lawyer scores 2.5. the individual factor also rates the debtor's capacity for repayment in relation to the reliability of his income potential, and the strength of the debtor's assets. Standard assets like fixed deposits and provident fund accretions are entered into the score card without any discount, but shares, which may lose in value are taken with a 40 per cent discount. The 'strength' factor is further scrutinized in terms of asset value cover, which compares the market value of the asset for which credit is sought with the credit-seeker's outstanding loan for the transaction period. Under the credit-rating microscope, the rating of a job-hopper will suffer in comparison to a stable employee. A club member will be rewarded because, being in the public eye, he is less likely to default. Winners of awards have a rating advantage. The agency may discreetly ask neighbors for their opinion. The success of individual credit rating depends on its networking and its acceptability. Networking will become easier as the I-card drive, initiated by the election commission, as signs a fixed number to each Indian. However, the acceptability of the rating will depend on its objectivity. Individual Credit Rating Introduced The Pioneer 21st January 1995 The next time you think of going in for a consumer loan, beware. You may be asked to fill up a credit rating form seeking details not only about your financial position but also your social status. If you feel you can avoid the experience by going to the next lender, do not be surprised if the form crops up again. Once you have filled in the form, all the information will be logged into a centralized data base and you will be assigned a rating, such as A+. Based on this, the lender will decide your credit worthiness and process your loan. The database will now track your credit history for the rest of your life. And, if you still think you can beat the system, rest assured that every major lender will have access to this rating. This rating will make life difficult for defaulters. "Today, there are more individual lending institutions than banks. Further, the number of consumers approaching such loan outlets is multiplying at a pace that will make it impossible to lenders to appraise loans on an individual basis. Moreover, there is no networking between lenders of say of houses, cars, consumer durables and so on. We plan to systemize the credit rating for individuals." Says ONICRA Spokesperson, which launched their individual credit rating system on Friday. The system provides for a continuous assessment of your credit worthiness. For example, if your are going in for a car loan and have been assigned a rating of A+ it will not be possible for you to go in for a house loan simultaneously with the same rating. The rating will come down as the debt amount goes up. Today, lenders do now know whether the consumer has approached other lenders. The service is being offered to lenders only. "The credit culture is spreading so fast that lenders will find that the time and money saved through individual credit rating will allow them to concentrate on core business areas like fund management and marketing," explains ONICRA Spokesperson. Apart from getting all credit information of an individual under one roof, one direct result will be a dramatic drop in defaulters. " I don't guarantee defaults will be brought to zero, but considering that consumer lending of the order of RS. 35000 crore is taking place, imagine just what a 1 per cent will do. Take auto finance, for example, sixty per cent of 8000 crore in sale