RBI’s New Directives for Credit Information Access: Empowering Consumers

Introduction

• When applying for a loan, your credit score plays a pivotal role, determined by your debt and repayment history. Recently, the Reserve Bank of India (RBI) has taken significant steps towards enhancing transparency in accessing Credit Information Reports (CIRs).

RBI’s Directive on CIR Access

Notification to Customers

• CICs are now obligated to inform customers through SMS or email whenever banks or non-banking finance companies (NBFCs) access their Credit Information Report (CIR).

Alerts on Default Information

• Credit institutions, encompassing banks and NBFCs, must also send SMS or email alerts to customers when they report defaults or Days Past Due (DPD) on existing credit.

Implementation Timeline

• These new regulations are slated to take effect within six months, ushering in a new era of credit information accessibility.

Understanding Credit Information Companies (CICs)

CIC Function

• CICs play the crucial role of maintaining and analyzing credit information for both individuals and businesses, sourced from banks and NBFCs.

Credit Scores and Ranks

• Based on this data, CICs compute credit scores for individuals and credit ranks for companies, serving as benchmarks for assessing their creditworthiness and financial history.

Impact on Loan Approval

• A higher credit score often translates to more favorable loan terms, whereas a lower score, possibly owing to previous loan defaults, can impede loan or credit card approval.

Accessing Your Credit Score

Payment Requirement

• Traditionally, individuals could obtain their credit scores from CICs for a fee.

RBI’s Directive

• Now, in a proactive move, the RBI has mandated CICs to provide a “Free Full Credit Report (FFCR),” inclusive of the credit score, once every calendar year to individuals whose credit history is on record with the CIC.

Convenient Access

• The link for accessing the FFCR must be prominently displayed on the CIC’s website, ensuring easy accessibility for consumers.

Data Accuracy Concerns

Correction of Data

• In the event that a customer identifies inaccuracies in their credit information, they have the right to request a correction.

Reason for Rejection

• Banks and NBFCs are duty-bound to elucidate the reasons for rejecting data correction requests, fostering a better understanding of discrepancies in the CIR.

CIC Accountability and Transparency

Review of ‘Search & Match’ Logic

• CICs must conduct periodic reviews, at least semi-annually, of their ‘search & match’ algorithm used in generating borrowers’ CIRs.

Root Cause Analysis

• A comprehensive “root cause analysis” of complaints should pinpoint any issues in the algorithm.

Board Approval

• Results and changes emanating from the analysis should be presented to the CIC’s Board of Directors for thorough scrutiny.

Timely Data Ingestion

• CICs must promptly integrate credit information data from banks and NBFCs within seven calendar days of receipt.

Disclosure of Complaints

• CICs are now mandated to disclose details of complaints registered against them and credit institutions on their websites, ushering in a new era of transparency.

Conclusion

• RBI’s recent directives mark a significant stride towards bolstering transparency, accountability, and consumer empowerment within the credit information landscape. Customers will now receive alerts regarding access to their credit information, and CICs are encouraged to ensure data accuracy and promptly address customer concerns. These changes are poised to refine the credit assessment process, affording individuals greater control over their financial data.