Financial information registry will help expedite credit flows: RBI Governor

The national financial information registry announced in the 2023-24 Union Budget is aimed at expediting loan sanctions and credit flows by offering lenders a “360 degree” perspective on potential borrowers, Reserve Bank of India (RBI) Governor Shaktikanta Das said on Saturday. 

“A lot of information is required by a bank, before a loan is sanctioned. The idea is to create one registry where, to the extent possible considering issues of privacy and other things, the idea is to provide a 360 degree kind of information system which will be readily available to the lending institutions to ensure that it quickens the process of credit flow,” Mr. Das said. 

Speaking after a meeting of the central bank’s board with Union Finance Minister Nirmala Sitharaman, Mr. Das said the registry will be backed by law, the draft Bill for which is likely to be finalised soon. 

On successive interest rate increases denting demand for rate-sensitive consumption like homes, Mr. Das emphasised that real interest rates (after factoring in inflation) had only just moved into “positive territory”. Stressing that RBI’s rate increases were driven by its mandate to maintain price stability, Mr. Das said market forces decide deposit and lending rates. 

“We had negative interest rates for the last three years and persistent continuation of negative interest rates for far too long can create instability in the financial system and have a lot of risks that have to be avoided.. When interest rates are rising, there is also somebody called the depositor, his interest has to be taken into account,” he pointed out. 

Referring to the Budget’s request to regulators to hold public consultations before framing regulations and set timelines for regulatory processes, the Governor said the central bank already does consultations on several issues and has some timelines in place which can prescribed for more processes. 

“It’s not as if consultations do not happen… But there are certain announcements, which are of strategic nature, or have some arbitrage and other issues involved. The budget speech is suggesting that wherever feasible, it should be done. It brings in the perspectives that after issuance of a circular, the need for corrections or amendments will get significantly reduced,” he explained. 

The central bank, he said, faces a challenge in timely clearance of applications to start a bank or a non-banking finance company or a payment system aggregator, because it requires them to establish the ‘fit and proper’ criteria for the entities concerned with inputs from regulators and agencies within the country, and in some cases, outside India.   

“Now, that takes time. We do really remind the regulators or the other agencies in foreign countries to get their inputs… So it will be our endeavor to adhere to the timelines but sometimes, there is delay mainly because we don’t get the inputs, particularly from overseas regulators and agencies from whom we need to get the required information,” Mr. Das noted. 

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