Chinese banks have completed a database that provides
information on consumer credit, a major move to better manage risks
and cultivate a credit culture.
The People's Bank of China (PBC), the nation's
central bank, said yesterday that a personal credit information
system that connects all local commercial banks and some rural
credit cooperatives (RCCs) was formally established earlier this
month.
"People with good credit records will now find it easier to get
loans and get more favorable loan terms. It will provide a basis
for banks to calculate risk," Su Ning, deputy governor of the PBC,
said.
The system includes credit records for 340 million Chinese
residents, and covers 97.5 per cent of all consumer loans granted
by Chinese banks, worth 2.2 trillion yuan (US$271 billion). It is
capable of generating personal credit reports that will provide
information on a person's borrowing from different banks, including
credit card transactions.
The lack of such a complete credit information system has until
now limited the ability of Chinese banks that want to increase
consumer lending, particularly for cars and houses.
The high default ratio on car loans, partly as a result of
banks' inability to check a borrower's credit history, has already
made them cautious in this promising business area.
The new system, which is expected to expand to include
information from more RCCs, will also help the government tighten
lending in the property sector by enabling banks to identify
whether a loan is to finance a borrower's first or second
property.
After operating on a trial basis last year, the system has
gained popularity as daily requests from financial institutions
jumped from around only 1,000 at the beginning of last year to
around 110,000, Su said.
Banks said around 10 percent of loan applications from personal
clients were turned down last year as a result of the new
system.
A broad range of information will eventually be included in the
new system to include other items as tax payments, legal disputes
and social security payments.
It is currently free to use, but the central bank said an
appropriate fee might be imposed in the future to cover expenses,
although the system is not intended to make a profit.
Browsing personal credit information or downloading personal
credit reports will normally require authorization by the person
concerned, and will be restricted to loans and guarantees, although
banks will be able to check the credit history of existing
borrowers.
(China Daily January 17, 2006)