Till the mid 90s, banks used to rely on the judgement of their credit managers. It was they who decided who would get a loan and who would not. Hence the credit appraisal process became a matter of individual judgement. There were two major issues with his model of lending Firstly, it relied on the credit manager's subjective judgement which was not an accurate way of determining which customer would pay on time and which customer would default. Secondly it tended to be discriminatory with respect to gender, race, caste etc. However the advent of Credit bureaus (CIBIL & Rating Agencies) changed the entire scenario. Now banks have refined their lending model and ensure that the right person, Firms and Companies get the required credit.

a) Explain the role of the credit bureaus in lending.?(10 MARKS)

b)What are the factors that impact the credit score.?(10 MARKS)