RBI asks High Mark exec chairman Anil Pandya to step down
Reserve Bank of India (RBI) is understood to have asked Prof Dr Anil Pandya to step down as executive chairman of troubled and cash strapped credit bureau High Mark Credit Information Services Pvt Ltd. Subsequently, Prof Dr Pandya has reportedly resigned from High Mark after the Board meeting and gone back to the US. Prof Dr Pandya was a tenured full professor at the College of Business, Northeastern Illinois University in Chicago, and an adjunct professor at Northwestern University Kellogg Graduate School of Management, according to High Mark's website.
Our mail sent to High Mark remained unanswered till writing the story. We would incorporate their response as and when we receive it.
In response to a Right to Information (RTI) application, the central bank had said, “Following complaints and adverse reports in media (mainly Moneylife) the RBI conducted an inspection of High Mark during May 2013.”
Earlier in August, the Central Vigilance Commission (CVC) has sought a factual report from the chief vigilance officer (CVO) of RBI in granting licence to High Mark.
This follows complaints from former executives of High Mark over the appointment of Prof Dr Pandya. They claimed while appointing Prof Dr Pandya, High Mark has violated Credit Information Companies Regulations (CICR) Act, 2005 (CICRA) as well as Companies Act.
While High Mark never appointed Prof Dr Pandya on a whole-time basis, he was able to continue teaching in the US as well was working with the credit bureau on a part-time basis. As per the CICR Act, when a credit bureau appoints chairman on a part-time basis, it then must have a managing director or full-time director to look after the management and affairs of the bureau.
Prof Dr Pandya has an employment contract with High Mark under which he was to devote his full time for the services of the company and was paid a salary of Rs60 lakh per annum. "However, over and above this, he was also entitled to a huge sum of money (Rs12.5 million or about $230,000) towards 'procurement of the in–principle license from RBI' (clause 4(b). Further payment of Rs30.25 million (around $560,000) was also made to him under clause 4(c)," said one of the executives who worked at High Mark.
High Mark, the only bureau started by individuals, has been under severe financial stress following the exit of several of its top managers and the failure of its rights issue. According to sources, the company has almost run through the Rs43 crore, it raised and was about to cease operations in couple of months, unless it finds a new investor. Last year, the credit bureau was negotiating with Italy-based credit bureau CRIF SpA for a bailout. High Mark was offered Rs30 per share by CRIF, which owns 9.09% stake in the Indian credit bureau. However, RBI rejected the proposal because of its reservations about CRIF’s ownership pattern.
Experian Credit Information Company of India Pvt Ltd (Experian India), one of the four credit information companies (CICs) in India, was in talks with High Mark and reportedly had also completed the due diligence process. According to the sources, Experian has increased its bid to Rs27 from Rs25 to buy minimum 26% stake in troubled and cash-strapped High Mark.
As Moneylife has been pointing out there is a dire need to have checks and balances in the quality of technology or data-matching algorithms used by credit bureaus in India. In addition, there is need to have proper redressal process for users, especially when these systems fail.
According to sources, the Reserve Bank has initiated an inspection of Credit Information Bureau (India) Ltd (CIBIL), following several complaints and media reports.
At Moneylife’s ‘Open House’ with RBI deputy governor Dr KC Chakrabarty on 3 June 2013, an angry customer stood up to complain about CIBIL, which practically enjoys a monopoly of the credit bureau business. On 4th June, we received an angry letter from one Umesh Dhawan whose Rs5-lakh loan was rejected because he was shown as a defaulter by CIBIL. He was under the impression that his banker had reported him. But we discovered that the problem was far worse. CIBIL apparently used its own algorithm to match data and ended up mixing his data with that of another person called Umesh Uhawan.
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