'Triggers' will help banks and NBFCs by providing an automated daily notification about changes in a particular customer's financial situation, after which the lenders can take necessary action to minimise bad debt or increase the customer's revenue potential and retention
Experian India, a joint venture between UK-based Experian Plc and seven domestic lenders, on Tuesday launched 'Triggers', a unique product that would help lenders with quick and accurate information about a consumer's credit activity.
"This is the first time that a credit bureau is offering a daily alert mechanism to Indian lenders. According to our global experience, 'Triggers', is more used by lenders to control defaults and not to re-sell any product to the consumer," said Phil Nolan, managing director, Experian India.
'Triggers', which was launched today, helps banks and non-banking financial institutes (NBFCs) by providing an automated notification about changes in a customer's financial situation after which the lenders can take necessary action to minimise bad debt or increase the customer's revenue potential and retention.
"The Indian credit industry is in a high growth phase. With growth, however, comes risk, so it is essential that banks and NBFCs have a much clearer understanding of their existing customers' credit exposure with other lending institutions, any changes in their repayment behaviours and indeed if they are actively seeking new lines of credit," Mr Nolan explained.
In view of the rising interest rates in the county, even the Reserve Bank of India (RBI) has been asking banks to increase their loan monitoring mechanism for early detection of building up of stress. A report from the Press Trust of India quoted RBI deputy governor KC Chakrabarty as saying, "We are telling the banks to improve their risk management capabilities to manage the possible deterioration in asset quality because of high interest rates."
In a recent survey titled, 'Who is the typical fraudster', KPMG said frauds take longer to detect in Asia as compared to anywhere else in the world. "Companies are too focused on the front end (growing the business) rather than the back end (the support functions) so red flags get ignored or treated as one-offs. When frauds blow up, it's typically several years down the line, when the value of the deception has multiplied and all the warning signs have been missed," said Rohit Mahajan, executive director for forensic services, KPMG India.
Experian's 'Triggers' works on three types of events: collection, risk and activity."The collection triggers identify early delinquency signals and prioritise collections, the risk triggers manages risk via immediate identification and early notification, and the activity triggers monitor account activity to formulate account level strategies," said Mohan Jayaraman, chief operating officer, Experian India.
According to Mr Jayaraman, banks and NBFCs will supply them a portfolio of their existing customers to be monitored. Once selected, the credit bureau then can configure the triggers to suit business requirements of the lender and can deliver daily alerts based on the monitored customers. For example, if Mr X, a customer of ABC Bank is seeking credit from EFG Bank, which is also the member of the credit bureau, this will create an alert for ABC Bank, which can take necessary steps either to reduce its risks or offer similar product to Mr X.
While 'Triggers' would help lenders to cut down credit risks on existing customers, it would also help both the lender and the customer to grow in mutual relation. If the customer is a defaulter, then after receiving the 'trigger', the lender can reduce or cut down its exposure. Similarly, a good (non-defaulter or regular) customer can also demand better rates and services from his existing lender, if he is offered products for which he had approached other lenders.
Experian India said that at present one of its existing partners, Axis Bank, and one of its clients, Fullerton India Credit Co Ltd, have chosen 'Triggers'. In a statement, Jairam Sridharan, senior vice-president and head of consumer lending and payments, Axis Bank, said, "The launch of 'Triggers' represents a new dimension in account management for the Indian banking industry. The daily notifications will help Axis Bank in expanding its share of wallet, managing risk exposure and delinquency management."
Experian Credit Information Co of India, or Experian India, is a joint venture between Experian and Axis Bank, Punjab National Bank, Union Bank of India, Indian Bank, Federal Bank, Sundaram Finance and Magma Fincorp. Currently, the credit bureau offers its services to over 150 members, including banks and NBFCs.
Science and technology minister Pawan Kumar Bansal, however, discounted fears of its adverse impact, saying the distribution of rainfall across the country so far has been uniform and there could be even improvement given the model error margin of plus or minus 4%
New Delhi: Monsoon rains are expected to be below normal at 95% with an error of plus or minus 4%, science and technology minister Pawan Kumar Bansal said here today.
He, however, discounted fears of its adverse impact, saying the distribution of rainfall across the country so far has been uniform and there could be even improvement given the model error margin of plus or minus 4%.
"It is not a reason to worry," he told reporters here.
"Quantitatively, monsoon season rainfall for the country as a whole is likely to be 95% of the long period average with a model error of plus or minus 4%," he told reporters here today.
In April, during the first monsoon forecast, the government had said the monsoon would be normal, with the rainfall is likely to be 98% of the Long Period Average (LPA) with a model error of plus or minus 5%.
IMD director general Ajit Tyagi attributed the revised forecast to factors like weakening of the La Nina condition (associated with monsoon) which has become neutral, the below temperature over Indian ocean and the pressure over the North Atlantic which has become unfavourable.
Over the four broad geographical regions of the country, rainfall this season is likely to be 97% of its long period average over North-West India, 95% over North East India, 95% over Central India and 94% over South peninsula, with a model error of plus or minus 8%.
Experts say it is too optimistic to hope that FDI will curb inflation which is the outcome of restrictive laws, poor infrastructure and wastage
The chief economic advisor to the government and the National Planning Commission have said that allowing foreign direct investment (FDI) in retail will help tame inflation. However, a section of experts are not so sure that allowing FDI will bring about any changes.
"Most retailers are suffering losses and are having problems with staffing and cost management. FDI may bring some relief, but overall neither will it have any impact on inflation or change the retailing scene," said an analyst. He was commenting on the government allowing foreign investment in Delhi, Mumbai, Kolkata, Hyderabad, Bangalore and Chennai.
The Confederation of All India Traders (CTAI) has raised serious objections to FDI in retail, saying that the idea that FDI in retail will tame inflation in imaginary.
"The argument that FDI in retail will tame inflation is nothing but an imaginary exercise by the people who have the tendency to ignore the ground realities," CTAI said in a statement last week, in view of the poor infrastructure and archaic laws that have hampered effective distribution and marketing of goods in the country.
At a meeting last month, Dr Kaushik Basu, the government's chief economic advisor, said, "The gap between farm gate prices of agricultural produce and the retail prices (in India) are amongst the highest in the world as also amongst the emerging markets. China, which opened its retail sector to FDI in 2004, has shown the benefits of opening of the sector and having in more players." This idea that FDI-backed modern retail could curb inflation has been repeated by big global retail chains like Wal Mart and Carrefour, who are trying to enter the Indian market.
According to some sector experts, the idea that FDI will bring in advanced business acumen and management know-how, does not answer how it will eliminate the problems which has plagued the public distribution system, and the supply of goods-problems of corruption, wastage and the lack of legal and infrastructure facilities.
According to a study published by Nielsen, sales at modern retail stores grew by 34% in 2006 and 29.3% in 2010. Traditional kirana stores could increase sales by only 1.5% in 2006, but improved growth to 6.2% last year. Organised retail makes up less than 10% of the retail market in India, which is estimated at close to $400 million. The Boston Consulting Group has estimated the size of the organised retail market at $28 billion and expects it to grow nine times to $260 billion in 10 years.
"It is well known that organised retail constitutes a very small space in India's retail sector. Allowing FDI in that space will not constitute any major upheaval," another analyst said. "Moreover, companies like HUL are reaching out to rural customers themselves, often in the absence of modern retail. So it may be too soon to perceive that the kirana sector is under a threat."
Shortage of retail space, a steep rise in rents at premium locations, problems with inventory and goods management have emerged as the main concerns for retailers. FDI could help them in a sort of financial recovery and aid their expansion plans.
In the next 18 months, the Future Group plans to open 250-300 stores, Aditya Birla's More and Reliance Retail are looking at more hypermarkets and 150 stores each. By 2013, Spencers wants to add 1 million square feet of retailing space to the chain.
While the suggestion that the presence of FDI in retail could help reduce inflation appears unconvincing, it could give hope to retailers who are looking for financers during a lull in the market.