Know how CIBIL score calculation is done?

Today almost no loan or credit card application gets approved without checking the applicant’s CIBIL report and CIBIL TransUnion Score. Ever wondered how a person’s credit score is calculated? 

Here’s a quick glimpse into what goes into the making of a person’s CIBIL TransUnion Score:


What is a CIBIL TransUnion score?


CIBIL calculates an individual’s credit score through advanced analytics and assigns a number between 300 and 900 to a borrower, based on his/her credit history. The closer your score to 900, the more confidence the credit institution will have in your ability to repay the loan and hence, the better the chances of your application getting approved. While each bank will have its own credit scoring cut-off based on the credit sanctioning policies, it has been observed that most banks are lending to consumers with a CIBIL TransUnion Score of 750 and above.

How is the score calculated?


While each credit information company has its own proprietary algorithm to calculate an individual’s credit score, the most important elements of the score composition are centric around the loan payment behavior of the individual. Your CIBIL TransUnion Score is calculated based on the information in the “Accounts” and “Enquiry” section of your CIBIL Report. The score is calculated based on the following factors:

  • Credit Utilization: How much credit is the consumer using?
  • Defaulting/Delinquency: How many accounts are past due and by how many days?
  • Trade Attributes: How old are this consumer’s lines of credit? What type of credit does he have? Does the consumer have a good mix or balance of credit or is it all credit cards?

Here is a breakup of the various factors that impact the CIBIL Transunion Score:


CIBIL score calculation

1. Past Performance: Individuals past performance on their debt obligations is the most important criterion and contributes approximately 30 per cent weightage to the score.

2. Credit Type & Duration: Type of loan availed whether secured or unsecured loan, and the duration of credit history established contributes an additional 25 per cent to the score.

3. Credit Exposure: The total amount of credit exposure contributes another 25 per cent

4. Other factors: Other factors such as credit utilization, recent credit behavior contribute the remaining 20 per cent to the score.

Your CIBIL Report and CIBIL TransUnion Score not only determine whether or not you qualify for a loan, but it may also have an impact on the terms and conditions on which you can avail the loan. The higher the credit score, the better your chances of availing the loan faster and on favorable terms. It is advisable to check your CIBIL Report and CIBIL TransUnion Score before applying for a loan. Timely payments of loan EMIs is most important for maintaining a good credit history and a healthy credit score.

Guide to the Home Loan Process

Buying a home is one of the major decisions a person has to take during his life. It is rare to find someone who pays the entire cost of home at one go. A home loan is an essential part of any home buying endeavor. Taking a home loan is a long journey, which involves many stages. The key to getting your home loan in a smooth way is being familiar with the entire home loan process.

home-loan-process_loanyantra-com
Know the home loan process before-hand
Beginning the home loan process in India

The process of getting a home loan starts with a formal application for the loan. The application form requires certain basic information about you. This will include your personal, residential, income, employment, educational details and details about the property, estimated costs and current means of financing the property. Though the requirements may vary from bank to bank but there are certain things which every bank will ask.

The application form must be supported with valid documents to substantiate the facts. Generally the banks will ask you to submit following documents.

  • Income proof
  • Age proof
  • Identity proof
  • Address proof
  • Employment details
  • Proof of educational qualifications
  • Details about the property if finalized
  • Bank statements

Proof of income : This will need to be backed up by proof such as copies of last three years’ Income Tax returns (along with copies of Computation of Income/Annual accounts, if any), Form 16/Form 16A, last three months’ salary slips, copies of the last 6 months’ statements of all your active bank accounts in which your salary/business income details are reflected, etc. Other documents that you need to provide with your application form include age proof, address proof and identification proof. You may also be asked to give your employment details.

Age proof : Copy of your school leaving certificate/Driving license/Passport/ration card/PAN card/Election Commission’s card/etc.

Identification proof : Same as above, but with photograph. Sometimes, the same document if it contains a photograph, the current residential address and the correct age can be the proof for all 3 things.

Address proof : Similar documents need to be provided to prove that you are actually staying at your current address.

Your employment details: If your company is not well‐known, then a short summary about the nature of the company, its business lines, its main customers, its competitors, number of offices, number of employees, turnover, profit, etc may be needed. Usually, the company profile that is available on the standard website of the company is enough.

Educational qualification : The copy of certificates of your higher educational qualification needs to be submitted.

The purpose of the entire exercise is to ascertain the suitability of an applicant for a home loan. The income documents and bank statements provide vital clues to the bank regarding your financial health.

Processing fees for home loans in India. : An important thing to note about home loans is the processing fee. Banks charge a processing fee for every home loan application. This fees is non refundable. This fees is used by the bank to start and maintain the home loan process including completing the various formalities during the entire period.

Evaluation and verification of home loan applicant : After applying successfully for the home loan and submitting the processing fees, the bank evaluates your application, decides in principal about your home loan and requires a personal meeting with the bank officials. This decision for personal interaction can be taken within 2-3 days of submitting a complete application. The purpose of this personal interaction is to know more about the borrower and his repayment capacity. Being satisfied by your application and personal interaction, the bank proceeds to verify all the facts that you mentioned in your application for home loan. A field investigation process is initiated – to confirm and validate everything stated in the application form. Qualified representatives are sent by the bank to your office and place of residence to ascertain the facts. The references provided in the application are cross checked and verified.

Verification of repayment capacity : Once the field investigations over, the bank now goes ahead to verify your repayment capacity. This is the most vital part of any home loan process. If the bank finds that you’ll not be able to repay the money back with interest on time, it will simply deny you any home loan offer. On the other hand if the bank finds that all’s well and is convinced by your repayment capacity, it sanctions your home loan. Based on how well the bank is satisfied by your financial conditions and repayment capacity the bank can issue a conditional sanction or unconditional sanction. If the sanction is conditional, you’ll have to fulfill the conditions imposed before the loan is disbursed.

Sanction letter for home loan : The bank then prepares a sanction letter which contains the following detail:

  • The amount of home loan sanctioned
  • The interest rate applicable on your home loan
  • Whether the interest rate is fixed or floating
  • Your home loan tenure
  • The mode of repayment of the home loan
  • If any special scheme applies to the home loan, its details
  • The terms and conditions associated with the home loan

If you find the offer attractive and agree with all the facts mentioned in the sanction letter, you will have to provide an acceptance copy to the bank. This is generally a duplicate of the sanction letter signed by you, provided to the bank for its records. If the bank charges any administrative fee, it will have to be submitted at this stage.

Verification of the property : Now the bank will verify the property in question. The home loan is a secured loan with the property being used as the security or collateral. So, to get the home loan you must submit the original documents of the property to the bank. The title deeds, no-objection certificates and other documents required by the bank are to be submitted in original and the bank keeps them safely until you repay the entire loan amount. After taking the papers, bank conducts a legal check so as to verify that the property has a clear title and the home loan is being disbursed to the right person and for the right reasons. Banks don’t lend for disputed properties and for titles where ownership cannot be easily enforced.

Along with the legal check, banks also send experts to the location of your property to conduct a technical valuation. If the property is under construction, the banks verify the stage of construction, quality of construction, progress of construction, locality etc. and evaluate the property on established parameters. In case where the property is ready or is being resold the bank verifies the ownership, maintenance, age of property, quality of construction, locality and required legal clearances. The banks have qualified valuators, which assess the value of property on various parameters and decide on the amount of loan

The sole purpose of all this exercise is to ensure that the property has a clear title, is technically sound and meets the valuation standards of the bank.

Note: Verification is not necessary if loan is being sanctioned by a tie-up Bank.

The disbursal of home loan : Once the formalities are completed and the bank is satisfied with the legal, technical and financial valuation of the property, the registration process for the home loan begins. The legal documents are to be prepared on stamp papers of required denominations in a format approved by the bank’s lawyer. The home loan agreement is then signed and you need to submit the post dated cheques for the agreed term. After the home loan agreement the loan disbursal process begins. Depending on the home loan purpose, and the agreed type of disbursal (lump sum or in stages), banks disburse the home loan amount.

Income Tax certificate

Every bank issues an income tax certificate that serves as requisite proof to let you avail of tax benefits that accrue on repayment of a home loan. This will typically contain the total amount of interest and capital repaid during the year. This is mandatory to claim the tax benefit in respect of self-occupied property. You will have to file this with your tax returns and submit this to your employer or chartered accountant to calculate your tax liability.

How Loanyantra Works During the Home Loan Process :

It is our work to make you feel at ease during the process. We are here to make you select the best and your favourite bank. We ensure that your process is smooth as we send you alerts and remainders about each step before even the agent comes to you. You can always contact our relationship manager for any queries.

Home Loan Process For a Resale Apartment

Home loan process for a resale apartment is usually quite lengthy with respect to the documents. Though getting a resale apartment has many advantages, one should be careful while collecting documents from the previous owner of the apartment. Here are some points,one should be aware off while going for a home loan from either nationalized banks or financial institutions.

Know Your Customer Documentation:

  1. Income proof
  2. ID and Address Proof (Ration card/Telephone bill/electricity bill/voters ID card/passport/driving licence.)
  3. PAN Card
  4. Salary slip for the last 3 months
  5. Bank statement for the last 6 months
  6. Two copies of passport size photographs of borrower and guarantor

Required Set of Documents :

  1. Sale deed
  2. Mother deed
  3. Encumbrance certificate
  4. Latest Property Tax receipt
  5. Khata Certificate and Khata Extract
  6. Occupancy Certificate
  7. Building Approval Plan
  8. Commencement Certificate / Possession Certificate

If the resale flat is being purchased in a registered co-operative society, look for the following list of documents:

  1. Original share certificate of the Society.
  2. Allotment letter from the society in your name.
  3. Copy of the lease deed, if executed.
  4. Certificate of the registration of the society.
  5. Copy of the byelaws of the society.
  6. No-objection certificate (NOC) from the society.
  7. 7/12 extract or property register card in the society’s name.
  8. Copy of N.A permission for the land from the collector.
  9. Search and title report (with the details of documents) for the last 30 years.
  10. Copy of order under the Urban Land ceiling Act.
  11. Original Agreement to assign/Deed of assignment.

buying-a-resale-flat_loanyantra

Documents may slightly vary if the house is in a :

  • Society that has not been registered or
  • Originally allotted by a development authority.

Check for the following documents in the above two cases:

  1. Previous chain of agreements with past owners in original with original receipt of registration (if any).
  2. Original letter of allotment issued to the first owner by the development authority.
  3. In case the latest agreement is pending the registration, obtain the original receipt issued by the sub-registrar acknowledging the pending registration needs to be taken along with a certified true copy of that agreement.
  4. Original stamped receipts of payments issued to the previous and present owners by the builder/development authority/society.
  5. Transfer permission from the respective authority (development authority/society)
  6. Copy of the approved plan and ‘Occupation Certificate’ (OC) issued by a competent authority like the Municipal Corporation, specifying the user permission of the premises

Resale Apartment Home Loan Approval Process :

With any home loan lender, either a nationalised bank or an NBFC, the home loan process is usually same. It is recommended for the borrower to have all the documents in hand. The lender has the right to ask for a any document mentioned above. So, it is advisable for the borrower to collect all the documents as a priority.

The process of home loan starts with application, documentation, legal check, approval and loan disbursal.

home-loan-process-for-resale-of-apartment_loanyantra

Loan Application Stage : 

Choose the best fit loan provider. Get the application, fill it and submit the required documents. Once the loan application is submitted, you can expect a response within 10 days after the bank or NBFC does the valuation check and decide how much amount can be sanctioned.

loan-application_loanyantraTip : Usually nationalized banks sanction 80% of the property value. Also these banks do not include the stamp and registration charges. Whereas the NBFCs might include the stamp and duty charges and also sanction the 90% of the final value. But you end up paying comparatively higher interest rate, but assured better services and faster process.

Loan Disbursement Stage :(Before Registration) :

Once you get the approval, you should submit the following papers for the further process.

  1.  Original Receipts of own contribution paid – on plain paper with Rs.1 revenue stamp.
  2. Copy of bank statement showing Bank debit entry of own contribution paid.
  3. Source of own contribution – details on plain paper mentioning from where you are paying own contribution. So it may be MF statement from CAMS, copy of FD receipts etc.
  4. Original search and title report of last 13 years from lawyer.
  5. Cancelled cheque from the seller (of a bank where used to deposit the bank’s loan DD )

Registration Stage : 

Once you submit the above set of documents, the process for the disbursement cheque needs atleast 10 days. So, get the registration paper work ready. Once the disbursement cheque is ready, you will get a copy of it so that you can put cheque number and other details in your sale deed. Then complete your sale deed registration with sub-registrar.

Loan Disbursement Stage : (After Registration)

After the registration, visit the bank again with the following set of documents.

  1. Newly registered Original sale deed between you and seller.
  2. Original old/previous chain of sale deed (Between builder and first buyer)
  3. Seller and buyers PAN card copies.
  4. Two photographs of buyer and one photograph of seller (For sale deed registration only).
  5. Stamp duty cheque for home loan. Stamp duty that needs to be apid to the bank.

Sign the loan agreement and submit the documents. Then you get the actual disbursement cheque. So, now all the original documents are with the bank. Ensure that they keep everything in a folder safe.

Tip : Carry a cheque book, if you want to pay the post dated cheques to the bank.

Post Disbursal Services :

After the disbursal, the home loan EMI starts. The bank starts deducting the EMI amount from you your account. If there is a change in interest rate, the bank/ NBFC sends you an e-mail about the change in interest rate details. Until and unless you ask for a change in EMI, it doesn’t happen. Rather, with the change in interest rate the tenure changes automatically.

Tip : When the interest rate increases, the tenure also increases. So try to reduce the tenure either by increasing your EMI or get down your interest rate to the lower interest rate.

With the rising technology in the financial sector, everything has become online. You can witness everything online by using your username and id in the respective website.

 

 

How Banks evaluate loan eligibility using Risk Rating Parameters.


All home loan applications are subject to Risk Rating Parameters & Model Table. Total maximum marks a person can get is 168 and the cutoff is set at 96. 

Risk rating parametersThe details of the various ‘Rating Parameters and Risk Rating Model’ are given here. Most of the Banks in India, take the decision, whether the borrower is loan eligible or not, based on number of points the borrower gets  from the below table.

‘Rating Parameters and Risk Rating Model  Table’

Sr.

No.

Variable Score Max Min
1 Borrower Age (in Year)

(a)0–8

(b)Above 18–upto 25

(c)Above 25–upto 40

(d)Above 40–upto 50

(e)More than 50


0
1
4
5
0
5 0
2 Education Qualifications

(a)Doctorate/Post Graduate

(b)Graduate

(c)Diploma

(d)Higher Secondary

(e)Less than Higher Secondar


5
3
2
1
0
5 0
3 Marital Status

(a)Married

(b)Single


12
3
12 3
4 Mobility of Individual-Location

(a)Has not changed location in past 3 years

(b)Changed location once in past 3 years

(c)Changed location more than once in past 3 years


10
3
0
10 0
5 Number of dependents

(a)Zero

(b)One

(c)Two

(d)More than two


8
5
2
0
8 0
6 Number of join applicants

(a)0

(b)1

(c)2 or more


0
5
9
9 0
7 Relationship with bank

(a)All banking done through bank

(b)Good track record of banking with bank

(c)Short term relationship

(d)No existing relationship


14
12
3
-4
14 -4
8 Employer type

(a)Govt./Public sector

(b)MNC

(c)Listed private sector companies

(d)Professional

(e)Unlisted private companies

(f)Own business

(g)Self Employed

(h)Pensioner drawing pension through Bank of Baroda

(i)Pensioner drawing pension from others

(j)Others


9
9
9
4
8
2
2
0
0
0
9 0
9 Designation

(a)Senior Management

(b)Middle Management or Self employed

(c)Junior/Clerical/Pensioner


5
3
0
5 0
10 Stability of Income

(a)Income has been steadily increasing over the last 3

years

(b)Income has been almost the same over the last 3

years

(c)Income has beenunstable over the last 3 years

(d)Income has been steadily decreasing over the last 3years


12
7

0
-5

12 -5
11 Proof of Income of borrower

(a)Income tax returns

(b)Salary slip

(c)Letterhead

(d)No proof


3
3
1
0
3 0
12 Marketability of property (Marketability will increase if

significant developments are happening in nearby areas,also it will depend on the condition of the property etc.)

(a)Very good

(b)Good

(c)Fair

(d)Poor

 

15
10
5
-8

15 -8
13 Housing loan purpose category

(a)Construction (New)

(b)Purchase (Old construction)

(c)Improvement

(d)Foreclosure (for borrowers who borrow in order to

repay a previous housing loan)

(e)Loan given under the rural housing scheme


4
0
8
8
2
8 0
14 Loan to value ratio

(a)Less than 0.5

(b)0.5–0.7

(c)Above 0.7–upto 0.9

(d)More than 0.9


18
12
7
0
18
0
15 Net worth to loan ratio

(a)0–0.5

(b)Above 0.5–upto 0.75

(c)Above 0.75–upto 1.0

(d)Above 1.0–upto 1.5

(e)Above 1.5–upto 2.5

(f)More than 2.5


0
1
2
3
4
5
5 0
16 Net annual income of the borrower (in)

(a)Lessthan 1,00,000

(b)1,00,000–2,00,000

(c)Above 2.00,000-upto 3,50,000

(d)Above 3,50,000–upto 6,00,000

(e)More than 6,00,000


-5
2
4
6
10
10 -5
17 Fixed obligations to income ratio

(a)0-0.3

(b)Above 0.3–upto 0.5

(c)Above 0.5–upto 0.7

(d)More than 0.7


12
8
4
0
12 0
18 Guarantor’s net worth to loan ratio

(a)0–0.5

(b)Above 0.5–upto 1

(c)More than 1


-4
4
8
8 -4
Sum 168 -23


So, 


Did you calculate your Risk Rating Points?


Where do you stand?

Who can be a home loan co-applicant ? What are the advantages & disadvantages?

In the present day, when the cost of living is going up and usually both spouses work, having a home loan co-applicant becomes more of a necessity than a requirement. There is no legal requirement to have a home loan co-applicant.

home loan co-applicant


In order to enhance the loan eligibility, a borrower has an option to resort to by having a home loan co-applicant. This way, the total eligible income for the purpose of computing the housing loan increases, thereby resulting in higher loan eligibility.


Home loan co-applicant is a person who shares the equal responsibility towards the repayment of the home loan. Such type of home loans are called Joint home loans. Whereas a co-owner is the person who has a share in the property and rights on the property too. A co-owner of a property can be the co-applicant in home loan. But it is not necessary that the co-applicant of the home loan is the co-owner of the property.


Who can be a home loan co-applicant 


A bank does not permit friends or relatives who are not blood relatives to take a loan jointly. Only if the co-applicant receives income from a regular source will that income be considered for determining the loan eligibility.


In most cases, spouse is the most common and preferred combination.



In case of parents and children , these rules will apply:

  • Father/ Mother and son

If the applicant is the only son, he can jointly apply with his father with both the incomes being considered. The property should be in their names jointly and it does not matter who the main owner is. This is because in any case the son is the legal heir of the father’s property.

  • Father/ Mother and sons

In case a person has two or more sons and if he wants to apply jointly with one of them, he should not be the main owner of the property. This is because, on his death, his children should inherit the property jointly and may cause an inheritance dispute.

The father may only be taken as co-applicant and his income may be considered for the loan. He may be a co-owner or not own the property at all. Under no condition should he be the main owner of the property.

  • Unmarried daughter and Father/ Mother

An unmarried daughter can apply jointly with their father. However, the property should only be in the name of the daughter and the income of the father should not be considered . This is to avoid any legal complications on the subsequent marriage of the applicant .

Where applicant is the owner and has a son and a daughter, an affidavit may be obtained from the daughter that she has no claim on the property.


In case of Brother and brother/sister 

Home loan co-applicant approval is subject to certain terms and conditions like address of both should be same which means a joint family and intent to stay together in joint family in future. It is at the sole discretion of the bank.


Who cannot be a home loan co-applicant :

  • Father / Mother and Married Daughter 
  • Brother and Sister 
  • Sister and Sister

Documents Needed : Documents are needed from both the applicant and co-applicant. 


General home loan documents needed are :

  1. Identity proof
  2. Address proof
  3. Salary slips
  4. Bank statements

Loan Eligibility

A common doubt is – ‘Will the home loan eligibility amount increase if we opt for a joint home loan?’  Yes, it will. Banks will be ready to offer you higher loan amounts if you opt for a joint home loan. The reason for it is that your repayment capacity increases as there are now two people who repay this loan. How much it would increase depends on the income of co-applicant. Apart from income, organization reputation is also considered. Be sure that you compare multiple loan offers before deciding on loan eligibility.

Benefits of being a Home Loan Applicant 

  • Increase Home Loan Eligibility :

If you are not the co-owner of property but would like to help your spouse or relative to increase their Home Loan eligibility. In this case, you may consider being home loan co-applicant. It is absolutely necessary that you should be aware of all the risks and legal liabilities.

  • Taxation Benefits :

From a taxation point of view, a joint home loan is also beneficial as all co-borrowers can claim tax deductions under section 24 (upto Rs. 1.5 lakh) of the Income Tax Act against interest paid and under Section 80C (up to Rs. 1 lakh ) against principal repaid. 


The tax benefits that can be claimed would be in proportion of the share that the individuals have in the loan.

Dis-advantages of being a Co-applicant 

  • CIBIL score of the co-applicant will be impacted.
  • Reduced credit eligibility : Being a co-applicant will reduce the credit eligibility to the extent of 50% of home loan value. It may impact approval of any future credit requirement of co-applicant.
  • Operational Hassle : It is an operational nightmare  for home loan co-applicant at the time of availing or closing the home loan.

Repayment Options 
The repayment process for joint home loan is similar to that of a regular home loan. The payment, however, has to be made through one cheque. 


Renu Sud Karnad, manging director, HDFC, explains, “Payments can be from a single or joint account by way of cheques or Electronic Clearing System (ECS).” 


“Another way of repayment could be that the co-borrowers share the number of EMIs between them such that a specific number of cheques can be issued by one borrower and the balance by the other,”  says Suvrat Saigal of Barclays Corporate India.


What if Dispute Arises
home loan co-applicantThe problem arises when one of the co-borrowers refuses to repay the loan. Be warned that  each party would be liable for part of repayment or up to as much as all of the repayments.


Renu Sud Karnad of HDFC says, “It does not matter whether the payment is made in the normal course by only one of the joint borrowers as long as the full EMI is paid as per schedule”.


In the event of default, the lender will proceed with the normal recovery process  which may include a legal recourse against all joint borrowers.

Solution 

home loan co-applicant

  • Agreement between all Home Loan Applicants  – 

To avoid any legal dispute in future, it is advisable to all home loan applicants to sign a separate legal liability agreement on a stamp paper. And get the paper notarized. This agreement will clearly segregate the liability of each party. 

  • Online Term insurance Plan – 

What if bank insists on a co-applicant. If the bank insists only to hedge risk against home loan repayment, then a simple solution is that the primary borrower can buy an online term insurance plan and can submit a copy of a that policy assuring bank that bank that he is insured against home loan.


Conclusion


Joint home loans are definitely beneficial as compared to normal home loans. In case you are looking for a home loan and you can speak to your blood relatives to get a joint home loan, be sure that the EMIs are paid as per schedule.

Know about CIBIL Score- It’s growth & impact!

About CIBIL 

Credit Information Bureau (India) Limited, CIBIL, is India’s first credit information company. It creates immense value for financial institutions by providing objective, data and tools to help them manage risk, and devise appropriate lending strategies thus reducing cost and maximizing portfolio profitability. CIBIL benefits both credit grantors and consumers by collecting, analyzing, and delivering information on credit histories of millions of borrowers. It provides its members with information on both consumer and commercial borrowers, thus enabling them make sound credit decisions across both individuals and businesses. It also provides services and education to consumers to help them better manage their finances.

CIBIL’S Growth 

In May 2006, CIBIL commenced commercial credit bureau operations.

In November 2007, CIBIL  TransUnion Score is introduced to banks.

In April 2011, the score is made available to individuals.

“CIBIL today is one the fastest growing credit bureaus globally as it has established its leadership in India’s high potential credit sector within a decade of operations”, said Mr. Satish Pillai- CIBIL’s new Managing Director and CEO. “Over the years, CIBIL has achieved several milestones of growth and is the partner of choice on credit risk management for banks and credit institutions in India. 

CIBIL, India’s largest credit information bureau, maintains credit information on more than 406 million consumer accounts and 22 million business accounts and has a membership base of over 1400 banks and credit institutions. Credit institutions check an applicant’s CIBIL report and CIBIL-TransUnion Score before making lending decisions. Today, banks and credit institutions can lend to consumers confidently based on the information received from CIBIL on the consumer’s past credit behavior as well as anticipate likelihood of default based on the CIBIL-TransUnion Score. CIBIL has also benefitted the consumers by helping make access to credit opportunities faster and easier while driving credit penetration. Anyone who has 750 or more CIBIL TransUnion score can get loan from banks easily, though each bank has its own policy.

Impact of CIBIL 

Home Loans and credit card accounts have witnessed a positive trend in the recent past. The credit demand too has witnessed significant growth during the past five years. 

CIBIL Senior Vice-President-Customer Relations, Harshala Chandorkar said over 3.9 lakh home loans were disbursed between April and June, 2015.

The delinquency of repayments (90 days and more) had come down from 1.06 per cent by end of 2010, to 0.57 per cent by this year’s first quarter, she said, adding that home loan growth was driven by higher demand in Mumbai, Pune, Bengaluru and New Delhi.

As for credit cards, 10.8 lakh new credit card accounts were opened this quarter, against 8 lakh accounts in the first quarter of the last financial year. Delinquency on credit card payments too had come down from 3.27 per cent at the end of 2010, to 1.06 per cent this quarter.

The maximum number of credit card applications came from Mumbai, New Delhi and Bengaluru, she pointed out. The growth, she said was driven by the increased growth by increased availability of credit information.

Quoting from CIBIL’s latest data trends report, Ms. Harshala said that 79 per cent of retail loans were approved for individuals whose CIBIL TransUnion rating were beyond 750. She said the number of disputes every month, arising out of incorrect information furnished to the CIBIL by banks were in hundreds, while the CIBIL Reports and TransUnion Scores were being given in crores.

The credit information support received from CIBIL has made lending objective, information oriented and therefore much reliable and less risk prone. On the other side consumers with a good CIBIL TransUnion Score have benefits for accessing credit quickly and conveniently.

e-KYC – Electronic Know Your Customer

Know your customer policies are becoming much more important globally to prevent identity theft, financial fraud, money laundering, terrorist financing.


Electronic know your customerKnow your customer (KYC) is the process of a business verifying the identity of its clients. The term is also used to refer to the bank regulation which governs these activities. Know your customer processes are also employed by companies of all sizes for the purpose of ensuring their proposed agents’, consultants’ or distributors’ anti-bribery compliance. Banks, insurers and export credit insurers agencies are increasingly demanding that customers provide detailed anti-corruption due-diligence information, to verify their probity and integrity.


Banks are often criticized for using know-your-customer (KYC) norms as an excuse to complicate the process of opening accounts. Many have registered complaints on Grahak Seva, the government’s customer-grievances portal, alleging banks repeatedly seek KYC documents, even after these are provided.

Yet, time to time, banks are penalised by the regulator for violating KYC instructions. On December 17, the Reserve Bank of India (RBI) imposed monetary penalties on ICICI Bankand Bank of Baroda for non-adherence to certain aspects of KYC norms, which allowed fraudsters to open fictitious accounts in the name of a reputed statutory organisation and use those for illegal transactions. The regulator also cautioned three other banks — Axis Bank, State Bankof India (SBI) and State Bank of Patiala — for failing to adhere to its KYC directives. We know it is difficult because there are constraints such as a large population and an inadequate database.


Recently RBI simplified KYC norms, saying a single document will suffice as proof of identity and address. It added no separate KYC documentation would be needed while transferring accounts from one branch to another branch of the same bank. Those who don’t have any “officially valid document” are allowed to open “small accounts” with banks. Intervals between periodic updating of KYC documents have also been increased.

But challenges remain. Bankers say if an account is used for conducting a large transaction, they sometimes seek additional documents, fearing misuse. This, however, happens on a case-to-case basis. “The entire KYC process becomes difficult to negotiate when a customer has multiple accounts with different banks. If the accounts are split with different holders, it becomes even more difficult to carry out proper background checks. Banks need stronger technology platforms to weed out these discrepancies,” said a senior official of a private bank. Also, in India, the lack of a unique national identifier is a key issue in implementing KYC rules. 


e-KYC explained : 


HDFC bank has created buzz in the recent times as it introduced the e-KYC (electronic Know Your Customer) norm in collaboration with National Payments Corporation in all of the branches. HDFC also claimed that the bank is all set to install biometric readers for scanning fingerprints to make the process even easier.

What exactly is e-KYC? It could be defined as a procedure that would enable a customer to walk in to the bank with an Aadhaar number and open an account by only by getting his fingerprint scanned. With the help of Unique Identification Authority of India (UIDAI), bank’s system will pull out all data of the customer that is stored online which includes name, address, age and other relevant data necessary and it will also save a copy of the KYC document that remain stored in UIDAI’ servers. The bank will only print out the account opening form with all the details of the customers already in it.

Electronic know your customer

Before HDFC, Axis bank had launched e-KYC using Visa’s connectivity along with the UIDAI. With the e-KYC facilities, it will become easy for the customers to open accounts without any data entry. Moreover, the entire matter will become paperless as a soft copy of all the necessary documents will be saved in the bank’s systems. Banks are also coming up with the insta-account facilities which help the customers get their account opened within no time and also get them the whole account kit- cheque book, debit card and PIN number across the counter.

However, it is not just opening bank accounts, it has become easy to buy insurance policies with e-KYC. The Insurance Regulatory and Development Authority (IRDA) confirmed it recently that the e-KYC services that are stored in the Unique Identification Authority of India (UIDAI) would be considered acceptable by the insurance process. Aadhaar card has become the sole document fir customer identification as that contains all the necessary details for the identification of an individual along with biometric identification. Almost all the insurance giants across the nation are in the process of updating their systems to e-KYC.

Be it opening banking accounts or buying insurance policies, as the e-KYC becomes mandatory, the complete documentation procedure becomes faster, which eventually helps the banks, insurers , customers and the policy holders. Apart from that, the procedure is entirely paperless and it also takes the least turn around time for the insurance companies and the banks, which eventually makes the service better. With time, as e-KYC becomes compulsory everywhere in the banking and the insurance scenario all forms will be in the electronic form and their will be absolutely no physical documents.