RBI Directs CICs to Notify Customers About Credit Information Access

Introduction

• The Reserve Bank of India (RBI) has issued a directive to Credit Information Companies (CICs) regarding the notification of customers when their Credit Information Report (CIR) is accessed by banks and non-banking finance companies (NBFCs). Additionally, banks and NBFCs are mandated to inform customers via SMS or email when they submit information to CICs about defaults or Days Past Due (DPD) on existing credit. These new regulations are set to be enforced within a span of six months.

Understanding Credit Information Companies

• Credit Information Companies (CICs) play a crucial role in maintaining and analyzing credit information of individuals and businesses across the country. They receive this data from banks and NBFCs. Using this information, CICs calculate credit scores for individuals and credit ranks for companies, which are indicative of their creditworthiness and past credit history.

Significance of Credit Scores

• A high credit score opens doors to loans at attractive interest rates, while a low score, often a result of previous loan defaults, can lead to difficulties in obtaining a loan or a credit card. It’s worth noting that while a credit score is a significant factor, it is not the sole determinant in the loan approval process.

Prominent Credit Information Companies

• In India, notable CICs include TransUnion CIBIL Ltd, Equifax India, and CRIF High Mark. Credit scores are typically awarded within a range of 300 to 850, with a score of 700 generally considered favorable.

Accessing Credit Scores

• Customers can obtain their credit scores from CICs, typically for a fee. However, the RBI has taken a step to facilitate this process. It has mandated that CICs offer a “Free Full Credit Report (FFCR)” including the credit score once every calendar year. The link to access this report must be prominently displayed on the CIC’s website for convenient access.

Rectifying Inaccurate Data

• In cases where a customer believes that their data is incorrect, there is a process in place for applying for corrections in their Credit Information Report (CIR). The RBI has stipulated that banks and NBFCs should inform customers of the reasons for the rejection of their data correction requests, if any, enabling them to better understand the issues in their CIR.

Oversight and Accountability for CICs

• The RBI has emphasized that CICs should have a board-approved policy for a periodic review of the ‘search & match’ logic algorithm that they use to generate a borrower’s CIR. Additionally, CICs are required to conduct a “root cause analysis” of complaints and use the findings to identify and address issues in the algorithm. Results of this analysis should be presented before the Board of Directors for review.
• Furthermore, the RBI has directed CICs to promptly integrate credit information data received from banks and NBFCs into their databases within seven calendar days of receipt.

Conclusion

• The RBI’s directive regarding the notification of customers when their credit information is accessed and the obligation for banks and NBFCs to inform customers about defaults or DPD on existing credit marks a significant step towards enhancing transparency in the credit reporting process. These measures aim to empower individuals with better control over their credit information and ensure accuracy in credit reports. Adhering to these directives will further strengthen the credibility and effectiveness of Credit Information Companies in India.