public credit registry ( pcr ) and goods and services tax network ( gstn ) : giant strides to democratise and formalise credit in india by dr. viral v. acharya 1 it is a pleasure to be with you all and share with you my thoughts on some recent developments that are expected to have transformative implications for our country. in particular, i wish to draw your attention to some major initiatives in gathering and analysing better credit data that can potentially have a huge impact in creating a financially healthy india. it is a known fact that a large part of the indian economy is informal. this year ’ s economic survey has given us an estimate, sourced in large part from the implementation of the goods and services tax network ( gstn ). about 0. 6 percent of firms – accounting for 38 percent of total turnover, 87 percent of exports, and 63 percent of gst 2 liability – are in what might be called the ‘ hard core ’ formal sector in the sense of being both in the tax and social security net. estimates also suggest that the informal economy employs nearly 50 per cent of the workforce in india 3. the earnings of some in the informal economy may be at par with their formal economy counterparts, but due to its informal nature, people and businesses in this part of the economy are rendered ‘ invisible ’ to the formal banking system. this ‘ invisibility ’ adversely affects their ability to grow current income level because of lack of access to formal credit. it is no surprise, then, that india's credit - to - gdp ratio stands at a modest 55. 7 per cent, compared to china's 208. 7 per cent, united kingdom's 170. 5 per cent and united states ’ 152. 2 per cent ( bank for international settlements, q4 2017 data, see chart 1 ). 4 in other words, there is financial under - penetration in india. speech delivered at the annual global banking conference – fibac 2018 organised by federation of indian chambers of commerce and industry ( ficci ) and indian banks ’ association ( iba ) on august 20, 2018 at mumbai. a theme talk was also delivered on the subject at the 12th annual statistics day conference organised by the reserve bank of india at mumbai on july 23, 2018. economic survey 2017 - 18, vol 1. ibid. data from https : / / stats. bis. org / statx / srs / table / j? m = a chart 1

of data subjects by ensuring that the data is accessible only to the data consumer, only for stipulated period of time and only for a stipulated purpose, as consented to by the user. 3. pcr act : having regard to the complexities discussed above, it is desirable to have a special comprehensive legislation, overriding the prohibitions contained in all other legislations on sharing of information required for the pcr. otherwise, all such legislations will have to be amended separately, providing an exemption for sharing of information with pcr. it is to be see : section 17 ( 8 - aa ) of the reserve bank of india act, 1934. see : section 17 ( 16 ) of the reserve bank of india act, 1934. noted that almost everywhere pcrs are backed by a specific enactment of a pcr act. in india, a pcr act can enable us transparently address the entire gamut of governance issues including data acquisition and its dissemination through access rights by various users. pcr – linkages to other datasets in my speech in july last year, i talked about how the power of information can be substantially enhanced if we can link crilc data with the ministry of corporate affairs ( mca ) database containing financial results of the corporate sector. pcr should help in connecting to and referencing other databases. a portion of the envisioned pcr ’ s power would derive from these linkages with ancillary information repositories. chart 2 shows the schematics of how pcr proposes to augment the core credit information reported by regulated entities with linkage to other information sources and deliver the full potential of information to the stakeholders. for example, through the cin it may connect to the company ’ s financial statements. it should make alternate data, like utility bill payments records, available for credit decisions. this can significantly help to foster financial inclusion and democratise credit by allowing lending decisions to be based on all cash - flow activity of a borrower, even when physical asset creation has not yet taken place. goods and services tax network let me now turn to a seemingly unrelated second stride being undertaken that can help directly address the information asymmetry problem in the credit market. it is one that most of you already know. so i don ’ t want to spend time explaining it, but instead focus on how it can move in lock - step with the pcr in completing a rich journey for formalising credit in india i am talking, of course, about the