Data Quality Index for Commercial and Microfinance Segments by Credit Information Companies
In a move to further enhance the quality of data submissions by Credit Institutions (CIs) to Credit Information Companies (CICs), the Reserve Bank of India (RBI) has extended the Data Quality Index (DQI) framework to include the Commercial and Microfinance segments. This extension builds on the existing framework outlined in the circular DBOD.No.CID.BC.127/20.16.056/2013-14 dated June 27, 2014, which originally set out a common DQI for the consumer segment.
Implementation and Deadlines
As per the new directives, CICs are required to prepare DQIs for the Commercial and Microfinance segments, following the guidelines in Annex I and II of the circular. These DQIs must be made available to all CIs by March 31, 2024. The move aims to standardize the assessment of data quality and encourage continuous improvement.
Monthly Reporting and Computation
CICs are instructed to provide DQIs in the form of numeric scores on a monthly basis to all member credit institutions. These scores will be provided at both the CI and file levels. Specifically, the DQI scores for Commercial and Microfinance segments at the CI level will be computed as a weighted average of the file-level DQI scores for each respective segment.
Industry Level DQIs
To ensure a comprehensive overview, CICs will compute industry-level DQIs for each reporting segment. These segments include various categories such as Public Sector Banks, Private Sector Banks, Foreign Banks, Co-operative Banks, Regional Rural Banks (RRBs), and Non-Banking Financial Companies (NBFCs). The industry-level DQIs will be calculated as the weighted average of the CI-level DQIs within each category on a monthly basis. Additionally, a half-yearly Industry Benchmark will be established, calculated as a rolling average of the preceding six months’ industry-level DQI scores for each category.
Addressing Declines in DQI Scores
If a CI’s DQI score declines over the previous month or falls below the half-yearly industry benchmark, CICs must provide explanations for the decline. This transparency aims to help CIs identify areas for improvement and take corrective measures.
Reporting to RBI
CICs are required to submit monthly data on CI-level DQI and industry-level DQI for all segments to the Department of Supervision, Reserve Bank of India, Central Office. This data must be submitted at half-yearly intervals, specifically on September 30 and March 31 each year. This requirement ensures that the RBI can monitor and oversee the data quality improvements across different segments.
Half-Yearly Reviews by CIs
CIs are advised to conduct half-yearly reviews of their DQI scores for all segments to enhance the quality of data submitted to CICs. These reviews should be comprehensive and aim to identify and rectify any issues affecting data quality. The findings and corrective actions taken should be reported to the top management of each CI for further review within two months from the end of each half-year.
Conclusion
The implementation of the DQI framework for Commercial and Microfinance segments marks a significant step towards improving data quality in the financial sector. By standardizing the assessment of data quality and ensuring regular reviews and reporting, the RBI aims to foster a more transparent and efficient data submission process, ultimately enhancing the reliability and integrity of credit information in India.
Access the full RBI circular here
