Central Idea

When you apply for a loan, your credit score becomes a crucial factor. It’s determined by your debt and your history of repayments.
In a significant move, the Reserve Bank of India (RBI) has issued directives to credit information companies (CICs) regarding the transparency of accessing your Credit Information Report (CIR).

RBI’s Directive on CIR Access

Notification to Customers: CICs are now mandated to notify customers via SMS or email when banks and non-banking finance companies (NBFCs) access their Credit Information Report (CIR).
Alerts on Default Information: Credit institutions, including banks and NBFCs, must also send SMS or email alerts to customers when they submit information to CICs regarding defaults or Days Past Due (DPD) on existing credit.
Implementation Timeline: These new rules are set to take effect within six months.

CIC Function: CICs maintain and analyze credit information of individuals and businesses, which is provided by banks and NBFCs.
Credit Scores and Ranks: Based on this data, CICs calculate credit scores for individuals and credit ranks for companies to assess their creditworthiness and credit history.
Impact on Loan Approval: A high credit score often leads to more favorable loan terms, while a low score, possibly due to previous loan defaults, can hinder loan or credit card approval.

Payment Requirement: Typically, individuals can obtain their credit scores from CICs for a fee.
RBI’s Directive: The RBI has now directed CICs to provide a “Free Full Credit Report (FFCR),” which includes the credit score, once every calendar year to individuals whose credit history is available with the CIC.
Convenient Access: The link to access the FFCR must be prominently displayed on the CIC’s website for easy access.

Correction of Data: If a customer believes that their credit information is incorrect, they can request a correction.
Reason for Rejection: Banks and NBFCs are required to inform customers about the reasons for rejecting their data correction requests, facilitating a better understanding of the issues in the CIR.

Review of ‘Search & Match’ Logic: CICs must conduct a periodic review, at least semi-annually, of their ‘search & match’ logic algorithm used to generate borrowers’ CIRs.
Root Cause Analysis: A “root cause analysis” of complaints should identify issues in the algorithm.
Board Approval: Results and changes resulting from the analysis should be presented to the CIC’s Board of Directors for review.
Timely Data Ingestion: CICs must ingest credit information data from banks and NBFCs within seven calendar days of receipt.
Disclosure of Complaints: CICs are required to disclose details of complaints registered against them and credit institutions on their websites.

RBI’s recent directives aim to enhance transparency, accountability, and consumer empowerment in the credit information ecosystem.
Customers will receive alerts regarding access to their credit information, and CICs are encouraged to ensure data accuracy and promptly address customer concerns.
These changes will likely improve the credit assessment process and provide individuals with better control over their financial data.