Consent of borrowers must for NFIR to share data, says DEA secy

Borrowers’ consent will be a must for the proposed National Financial Information Registry (NFIR) to share the data at its disposal with the lenders, economic affairs secretary Ajay Seth told FE. The lenders will be owners of the registry, aimed at quicker and more streamlined credit appraisal and better pricing of loans.

According to Seth, “The data may belong to an individual or an enterprise. Unless the individual or enterprise gives consent to sharing his/enterprise’s data, data will not be shared by NFIR with lenders.”

He added: “If an individual or enterprise wants a lower interest rate, the bank will ask for the consent of the borrower to access data about business volume, electricity consumed, GST paid, etc, from NFIR. If consent for data is not given, banks will likely ask for collateral and loans may be costlier.”

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The consent condition implies that privacy concerns that have arisen after the Budget proposal to set up NFIR will be addressed.

The Bill to set up NFIR will likely be taken up in the Monsoon session of Parliament, Seth said, adding that its shares will be jointly held by lenders like in the case of the National Payments Corporation of India (NPCI).

The proposed financial data registry is considered to be a public good for the stakeholders.

With regard to the NFIR Bill, Reserve Bank of India governor Shaktikanta Das had said on February 11 that “the idea is to create one registry to provide a 360-degree kind of information system which will be readily available to the lending institutions to ensure that it quickens the process of credit”.

Seth said if banks or other lenders are unable to assess the risk properly, they will inevitably assume more risk. So, NFIR helps in a better assessment of the risk with all the requisite information, which at the moment lies scattered at several places. “Borrowers’ data helps in assessing the risk better as well as the business needs of the enterprises better,” Seth said.

NFIR will be a company with banks and other financial institutions as shareholders and would be regulated by the RBI. In the Budget for 2023-24, finance minister Nirmala Sitharaman said: “A national financial information registry will be set up to serve as the central repository of financial and ancillary information. This will facilitate the efficient flow of credit, promote financial inclusion, and foster financial stability. A new legislative framework will govern this credit public infrastructure, and it will be designed in consultation with the RBI.”