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Financial Literacy workshop; first time in Goa

The full-day seminar delved in to a complete range of issues on money such as how not to lose...

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Life Exclusive
Credit Crossroads: The importance of maintaining a good credit score

Mohan Jayaraman, MD, Experian Credit Information Co of India spoke on the role of a credit bureau, understanding credit rating and the consequences of a bad credit score

Moneylife Foundation conducted yet another successful and highly informative seminar on financial literacy. The event, which again witnessed a packed audience, was held at the International Centre, Goa. The first few sessions were conducted by the Moneylife Foundation trustees, Sucheta Dalal and Debashis Basu. Mohan Jayaraman, MD, Experian Credit Information Co of India spoke on the role of a credit bureau, understanding credit rating and the consequences of a bad credit score in a unique session titled ‘Credit Crossroads’.

Even today, many people are unaware about credit bureaus and the way they function. These organizations collate information on an individual's finances and assign a credit score to each person, and this consumer information is provided to banks and other financial agencies. The credit information report is an individual's loan repayment track record. Mr Jayaraman also emphasized the need to maintain a good credit history record by settling repayment matters with banks and lenders on time.

He stressed the importance of having a healthy credit score and how this is assigned. He explained what constitutes a credit history and how one can improve upon his score.

"If you regularly check your credit history, you could spot mistakes in case there are any, and you can contact your bank, or lender, to correct them," he added. He also busted some credit myths and clarified what is not included in a credit report.

In the session he identified several life events that we are likely to face as individuals and how to deal with our finances, especially our credit/ borrowings during those times—for example, if one plans to buy a house with a bank loan. He said one should check out the interest rates of the banks prior to applying and then when one has shortlisted a particular bank he should apply to avoid making multiple ‘enquiries, which could affect the credit score. Mr Jayaraman also focused on life events that are more likely to be faced by women. In the same way he spoke of other different life events like getting married, in case of a serious illness, divorce, etc.

For young students and the youth, he focused on the importance of a credit score when they plan to go ahead with further studies or in their first job. Many apply for an education loan and this becomes the foundation of their credit history; therefore they should manage it carefully.

In case one has been turned down for a loan they should stay calm and find out the reason for rejection. If the lender refuses a loan on account of a low credit score one should apply for a copy of their credit report to see where the fault lies and should try to rectify it immediately.

Mr Jayaraman pointed out that different credit bureaus had different ways of evaluating credit history and assigning scores, but it depended on the banks—how they used the information to grade the viability and reliability of the credit seeker. He underlined the need to settle all matters with banks and other lenders to ensure that the credit history is more accurate.

He said it was necessary to have a good credit history record, as it would help getting a loan easier and also prevent “identity theft”. In the session he also discussed on how one could manage the credit report and get it corrected in case of any error.



N Y Nadkarni

5 years ago

Mohan Jayaraman, MD, Experian Credit Information Co of India spoke very clearly and in depth on importance on maintaining good credit score.
Please let us know whom to approach out of four rating cos to get individual score card, the mail adresses and the charges for the same.

RBI debt buys come as bonus for banks at quarter-end

The RBI is expected to continue to buy bonds heavily in the coming fiscal year to help smooth the way for the government's increased borrowing

Mumbai: The Reserve Bank of India's debt purchases in the current quarter have come as a blessing for state-run banks, which are making large profits on the transactions, reports PTI.

The problem, analysts say, is that they are not using those profits to buy at government bond auctions. That, in turn, is keeping yields elevated and making it more costly for the government to fund its huge fiscal deficit.

The RBI has bought about 1.13 trillion rupees ($22.6 billion) of bonds in 12 rounds of bond purchases through open market operations since late November, aiming to ease tight cash conditions and make room for banks to buy the bonds the government is selling.

In theory the RBI's purchases should pull down yields. But this has not happened, in part because of the reluctance of state-run banks to load up on government paper ahead of next Friday's budget and the RBI policy announcement the day before.

"There is strong resistance for the 10-year bond yield below 8.20% as no buying is coming from public sector banks," said a dealer with a foreign bank in Mumbai. The yield on the 10-year government bond has risen 15 basis points since the start of February as rising oil prices dampened expectations of an interest rate cut in March.

Most of the bonds that the banks are selling to the RBI are less-liquid securities that are normally held to maturity. The fact the RBI is targeting these bonds has resulted in a windfall for the banks and will help banks avoid showing losses on these bonds when they close their books at the end of the fiscal year on March 31.

Banks can sell up to 5% of their held-to-maturity bonds without the need to declare it on their balance sheet. Bonds sold through an OMO do not need to be declared at all. "The net effect will be positive (for them)," said Anjan Barua, deputy managing director at government-controlled State Bank of India, the country's biggest lender.

In meantime, the banks are avoiding buying heavily at auctions to prepare for an expected jump in borrowing by the government to be announced in the 2012/13 budget. "The idea is to sit light before the budget because yields may be higher three months from now," said a trader with a state-owned bank.

A Reuters poll last week showed the government is expected to announce total borrowings of Rs5.3 trillion for the new fiscal year, up from Rs5.1 trillion in the current year.

However, many in the market expect that borrowing figure to rise over the course of the year, just as it did this year. Some traders expect the 10-year yield to rise to 8.50% by the end of March, a level last seen in early January, if the central bank does not cut interest rates next week.

The RBI is expected to continue to buy bonds heavily in the coming fiscal year to help smooth the way for the government's increased borrowing.

But it will be more difficult for banks to turn a profit in the months ahead because they will have to start buying bonds to meet statutory requirements for the new year and yields are likely to rise, dealers said.


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