In terms of Section 15 of the Credit Information Companies (Regulation) Act, 2005(CICRA), every credit institution shall become the member of at least one Credit Information Company. Normally to adhere the above regulation most of the Banks and Financial institutions become the member of CIBIL to seek CIR of borrower entity, all the partners, promoters, directors, and guarantor to the loan for the purpose of making the credit decision.
(In my earlier post with the title “How to read a CIBIL’s credit information report?” I have explained on the topics of ‘how the three digits numeric score in the CIBIL report arrived’, ‘how to interpret that 3 digits numeric score’ and ‘how the report becomes the useful tool for making credit decision by the lenders’.)
The problems of credit institutions in the existing system of CIR:
At present in India, there are 4 domestic Credit Information Companies (CICs) who have been granted the certificate of registration by RBI viz.
- Credit Information Bureau (India) Limited (CIBIL).
- Equifax Credit Information Services Private Limited
- Experian Credit Information Company of India Private Ltd.
- CRIF High Mark Credit Information Services Private Ltd.
Under the provisions of Section 17 of CICRA, every CIC seeks and obtains credit information only from its member banks and financial institutions. Such information contributed by members will be shared in the form of Credit Information Report (CIR) to its membership as and when they call for it. The problem of credit institutions is that they get a credit information report which does not include credit history related to those non-member Credit Institutions with which the borrower/client might have/had a current or a past exposure.
RBI source said that the bank has examined the pros and cons of the certain possible alternative to overcome this problem of incomplete/inaccurate information along with suggestions/comments obtained from IBA and CIC. It is learned, the regulator has come to the conclusion that the best option would be to mandate all banks and financial institutions to become members of all the CICs and moderate the membership and annual fees suitably. RBI further said that the instruction in this respect would be reviewed soon. In addition to scheduled banks, all Co-Operative banks are advised to comply with its directives of January 15, 2015, and become members of all CICs and submit data (including historical data) to them.
Please click below to know