RBI Guidelines for Credit Information Report

 The Reserve Bank of India (RBI) has asked banks and non-banking finance companies (NBFCs) to share loan or credit card payment-related details of their customers with credit bureaus periodically. This information is checked by a lender before processing the loan/credit card application of an individual any further. This mandate has been issued under the Credit Information Companies (Regulation) Act (CICRA), 2005. The very same Act prohibits financial institutions from sharing credit-related information with third-parties to protect the financial information of Indian citizens. Read on to know more.

Confidentiality of Credit Information

Almost every individual has a bank account these days, and hence by design these banks have their credit-related information at their disposal. This information is sensitive and the customers trust them to keep it confidential. Hence, if such information is shared with a third party entity, such as Fintech companies, it can be considered to be an unlawful breach of trust.

But, back in 2019, the RBI observed that financial institutions have been sharing such information with Fintech companies in a bid to expand their business through the digital medium. In response, the apex financial institution issued a letter dated September 16, 2019, which stated that RBI found that banks and lending companies alike had appointed agents (Fintech companies). On top of that, these agents were granted access to credit-related information saved on the credit bureaus’ servers, by these finance companies. The RBI also reiterates through the letter that such acts are not allowed and goes against the laws stated under the CICRA Act of 2005. RBI warned the regulated finance bodies of sanctions if they are seen violating the order again while concluding the letter.

How the RBI Order Impacts the Fintech Companies?

The RBI’s order was expected to significantly impact the business model of Fintech companies as they relied on the credit information to assess the loan eligibility of its users. The order was expected to negatively impact the business model of such Fintech companies to a large extent.

RBI’s Circular on Providing the Moratorium

In March 2020, when the coronavirus pandemic hit the world, the RBI allowed all the banks and Non-Banking Finance Companies (NBFCs) to grant their customers a moratorium. The moratorium, in this particular context, allowed borrowers to delay their loan EMIs and credit card bills by three months. The moratorium period went on to be extended multiple times over up until December 31, 2021.

Current Guidelines on Sharing Credit Information

The guidelines for sharing credit information shared by RBI are still valid to this day and it allows only a handful of entities to access it. But, in November 2021, an amendment was made to the Credit Information Companies (Regulation) Act, 2005. Through it, the concerned authority allowed any “entity engaged in the processing of information, for the support or benefit of credit institutions, and satisfying the criteria laid down by the Reserve Bank” to access individual credit histories of people. This opened the doors for Fintech companies to pull up credit information of an individual to assess their creditworthiness too.

Conclusion

Credit information is sensitive in nature and can only be accessed by a handful of very specific organisations (Banks, Stock Brokers, Telecom and Fintech companies) for very specific purposes. More information regarding credit score, its uses and how it can be improved can be found on Bajaj MARKETS. Additionally, Bajaj MARKETS is home to a wealth of information concerning personal finances and other related subjects. One can also avail a personal loan, a business loan or a home loan through the portal.

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