Regulatory Guidelines Governing Credit Information Companies (CIC)

The Credit Information Companies (Regulation) Act, 2005 is an Act to provide for regulation of credit information companies and to facilitate the efficient distribution of credit and for matters connected therewith or incidental thereto. The Reserve Bank of India and the Government of India have enacted the Credit Information Companies Regulations, 2006 (“Regulations”) and the Credit Information Companies Rules, 2006 (“Rules”) issued under the Act, respectively.

(The CIC Act, the Regulations, and the Rules are collectively referred to as the “CIC Laws”).

Under section 37 of the CIC Act, the Reserve Bank of India is empowered to make CIC regulations.

Section 37 provides as follows;

(1) The Reserve Bank may make regulations consistent with the provisions of this Act and the rules made thereunder to carry out the purposes of this Act.

(2) In particular, and without prejudice to the generality of the foregoing powers, such regulations may provide for all or any of the following matters, namely:–

(a) the persons or institutions which may be specified as specified users under clause (l) of section 2; (To know the meaning of Credit institutions, Credit Information Companies, and specified user Click (membership to CIC)

(b) the form in which application may be made under sub-section (1) of section 4 and the manner of filing such application under that sub-section;

(c) any other form of business in which a credit information company may engage under clause (e) of sub-section (1) of section 14;

(d) the form of notice for collection and furnishing of information procedure relating thereto and purposes for which credit information may be provided under sub-section (1) and (2) of section 17;

(e) the principles and procedures relating to credit information which may be specified under clause (f) of section 20;

(f) the amount which may be required to be paid for obtaining a copy of credit information under sub-section (2) of section 21;

(g) the maximum amount of charges payable under section 27.

(3) Every regulation, as soon as may be after it is made by the Reserve Bank, shall be forwarded to the Central Government and that Government shall cause a copy of the same to be laid before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the regulation, or both Houses agree that the regulation should not be made, the regulation shall, thereafter, have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that regulation.

Section 10: Power of RBI to determine policy

Where the Reserve Bank is satisfied that it is necessary or expedient in the public interest or in the interest of specified users or in the interest of credit information companies or credit institutions or clients or borrowers so to do, it may determine the policy in relation to functioning of credit information companies or credit institutions or specified users generally or in particular and when the policy has been so determined all credit information companies, credit institutions and specified users, as the case may be, shall be bound to follow the policy as so determined.

Section 11: Power of RBI to give directions

(1) where the Reserve Bank is satisfied that,–

(a) in the public interest; or

(b) in the interest of credit institutions; or

(c) in the interest of specified users; or

(d) in the interest of banking policy; or

(e) to prevent the affairs of any credit information company from being conducted in a manner detrimental to the interests of its specified users or in a manner prejudicial to the interests of credit institutions borrowers or clients; or

(f) to secure the proper management of credit information companies generally,

it is necessary to issue directions to credit information companies or credit institutions or specified users generally or to any credit information company or credit institution or specified user in particular, it may, from time to time, issue such directions as it deems fit, and such credit information companies, credit institutions and specified users or credit information company, credit institution, and specified user, as the case may be, shall be bound to comply with such directions.

(2) The Reserve Bank may, on representation made to it or on its own motion, modify or cancel any direction issued under sub-section (1), and the Reserve Bank, in so modifying or canceling any direction, may impose such conditions as it thinks fit, subject to which the modification or cancellation shall have an effect.

(3) The Reserve Bank may, at any time, if it is satisfied that in the public interest or the interest of a credit information company or its members, it is necessary to do, by order in writing and on such terms and conditions as may be specified therein,–

(a) require such credit information company to call a meeting of its directors for the purpose of considering any matter relating to or arising out of the affairs of the credit information company;

(b) depute one or more of its officers to watch the proceedings at any meeting of the board of the credit information company or any committee or any other body constituted by it and require the credit information company to give an opportunity to the officers so deputed to be heard at such meetings and also require such officers to send a report of such proceedings to the Reserve Bank;

(c) require the board of the credit information company or any committee or any other body constituted by it to give in writing to any officer deputed by the Reserve Bank on this behalf at his usual address all notices of, and other communications relating to, any meeting of the board, committee or other body constituted by it;

(d) appoint one or more of its officers to observe the manner in which the affairs of the credit information company or of its offices or branches are being conducted and make a report thereon;

(e) require the credit information company to make, within such time as may be specified in the order, such changes in the management as the Reserve Bank may consider necessary.

(4) The Reserve Bank may, at any time, direct any credit information company to furnish it within such time as may be specified by the Reserve Bank, such statements and information relating to the business or affairs of the credit information company as the Reserve Bank may consider necessary or expedient to obtain for the purpose of this Act.

Section 12-Inspection of credit information company, credit institution, and specified user:

(1) Notwithstanding anything to the contrary contained in section 235 of the Companies Act, 1956 (1 of 1956), the Reserve Bank, at any time, may and on being directed so to do by the Central Government shall, cause an inspection to be made, by one or more of its officers or through such other persons or agency as the Reserve Bank may determine, of any credit information company or credit institution or specified user and their books and accounts; and the Reserve Bank shall supply to the credit information company or credit institution or specified user, as the case may be, a copy of its report on such inspection.

(2) It shall be the duty of every director or other officer or employee of the credit information company, credit institution, and specified user to produce to any officer or person or agency, as the case may be, making an inspection under sub-section (1) all such books, accounts and other documents in his custody or power and to furnish him with any statement and information relating to the affairs of such credit information company, credit institution and specified user, as the said officer or person or agency may require of him within such time as the said officer or person or agency may specify.

(3) Any officer of the Reserve Bank or person or an agency making an inspection under sub-section (1) may examine on oath any director or other officer or employee of the credit information company, credit institution, and specified user, in relation to their business, and may administer an oath accordingly.

Section 14 of CIC Act provides the details regarding the functions of a credit information company:

(1) A credit information company may engage in any one or more of the following forms of business, namely:–

(a) to collect, process, and collate information on trade, credit, and financial standing of the borrowers of the credit institution which is a member of the credit information company;

(b) to provide credit information to its specified users or the specified users of any other credit information company or to any other credit information company being its member;

(c) to provide credit scoring to its specified users or specified users of any other credit information company or to other credit information companies being its members;

(d) to undertake a research project;

(e) to undertake any other form of business which the Reserve Bank may, specify by regulations as a form of business in which it is lawful for a credit information company to engage.

(2) No credit information company shall engage in any form of business other than those referred to in sub-section (1).

(3) Any credit information company for the purposes of carrying on the business of credit information may–

(a) register credit institutions and other credit information companies, at their option as its members, subject to such terms and conditions as may be pre-determined and disclosed by such credit information company;

(b) charge such reasonable amount of fees, as it may deem appropriate not exceeding the maximum fee, as may be specified under section 27, for furnishing credit information to a specified user;

(c) generally to do all such other acts and perform such other functions as are necessary to facilitate proper conduct of its affairs, business, and functions in accordance with the provisions of this Act.

Section 17-Collection and furnishing of credit information:

(1) A credit information company or any person authorised in that behalf by the company may, by notice in writing, in such form, as may be specified by regulations made by the Reserve Bank or as near thereto, require its members being credit institution or credit information company, to furnish such credit information as it may deem necessary in accordance with the provisions of this Act.

(2) Every credit institution that is a member of the credit information company and every credit information company which is a member of another credit information company shall, on receipt of notice under sub-section (1), provide credit information to the credit information company of which it is a member, within such period as may be specified in the notice.

(3) Every credit information company shall provide for such purpose, as may be specified by regulations, the credit information received under sub-section (2), to its specified user on receipt of request from him in accordance with the provisions of this Act and directions issued thereunder by the Reserve Bank from time to time in this behalf.

(4) No credit information received under this Act,–

(a) by the credit information company, shall be disclosed to any person other than its specified user; or

(b) by the specified user, shall be disclosed to any other person;

(c) by the credit information company or specified user shall be disclosed for any other purpose than as permitted or required by any other law for the time being in force.

Section 19-Accuracy and security of credit information:

A credit information company or credit institution or specified user, as the case may be, in possession or control of credit information, shall take such steps (including security safeguards) as may be prescribed, to ensure that the data relating to the credit information maintained by them is accurate, complete, duly protected against any loss or unauthorised access or use or unauthorised disclosure thereof.

Section 20: Privacy principles:

 Every credit information company, credit institution, and specified user, shall adopt the following privacy principles in relation to collection, processing, collating, recording, preservation, secrecy, sharing, and usage of credit information, namely:–

(a) the principles–

(i) which may be followed by every credit institution for the collection of information from its borrowers and clients and by every credit information company, for the collection of information from its member credit institutions or credit information companies, for processing, recording, protecting the data relating to credit information furnished by, or obtained from, their member credit institutions or credit information companies, as the case may be, and sharing of such data with specified users;

(ii) which may be adopted by every specified user for processing, recording, preserving, and protecting the data relating to credit information furnished, or received, as the case may be, by it;

(iii) which may be adopted by every credit information company for allowing access to records containing credit information of borrowers and clients and alteration of such records in case of need to do so;

(b) the purpose for which the credit information may be used, restriction on such use and disclosure thereof;

(c) the extent of obligation to check the accuracy of credit information before furnishing such information to credit information companies credit institutions or specified users, as the case may be;

(d) preservation of credit information maintained by every credit information company, credit institution, and specified user as the case may be (including the period for which such information may be maintained, manner of deletion of such information, and maintenance of records of credit information);

(e) networking of credit information companies, credit institutions, and specified users through electronic mode;

(f) any other principles and procedures relating to credit information that the Reserve Bank may consider necessary and appropriate and may be specified by regulations.

Section 21: Alteration of credit information files and credit reports:

(1) Any person, who applies for grant or sanction of credit facility, from any credit institution, may request to such institution to furnish him a copy of the credit information obtained by such institution from the credit information company.

(2) Every credit institution shall, on receipt of a request under sub-section (1), furnish to the person referred to in that sub-section a copy of the credit information subject to payment of such charges, as may be specified by regulations, by the Reserve Bank in this regard.

(3) If a credit information company or specified user or credit institution in possession or control of the credit information, has not updated the information maintained by it, a borrower or client may request all or any of them to update the information; whether by making an appropriate correction, or addition or otherwise, and on such request the credit information company or the specified user or the credit institution, as the case may be, shall take appropriate steps to update the credit information within thirty days after being requested to do so:

Provided that the credit information company and the specified user shall make the correction, deletion or addition in the credit information only after such correction, deletion or addition has been certified as correct by the concerned credit institution:

Provided further that no such correction, deletion or addition shall be made in the credit information if any dispute relating to such correction, deletion or addition is pending before any arbitrator or tribunal or court and in cases where such dispute is pending, the entries in the books of the concerned credit institution shall be taken into account for the purpose of credit information.

Section 22: Unauthorised access to credit information:

(1) No person shall have access to credit information in the possession or control of a credit information company or a credit institution or a specified user unless the access is authorised by this Act or any other law for the time being in force or directed to do so by any court or tribunal and any such access to credit information without such authorisation or direction shall be considered as an unauthorised access to credit information.

(2) Any person who obtains unauthorised access to credit information as referred to in sub-section (1) shall be punishable with a fine which may extend to one lakh rupees in respect of each offence and if he continues to have such unauthorised access, with a further fine which may extend to ten thousand rupees for every day on which the default continues and such unauthorised credit information shall not be taken into account for any purpose.

Section 23(2)& 23(3): Offence and penalties:

(2) Every credit information company or a credit institution or any specified user, wilfully, performing any act or engaging in any practice, in breach of any of the principles referred to in section 20, shall be punishable with a fine not exceeding one crore rupees.

(3) Any credit information company or credit institution or specified user wilfully providing to any other credit information company or credit institution or specified user or borrower or client, as the case may be, credit information which is false in any material particular, knowing it to be false, or wilfully omits to make a material statement, shall be punishable with fine which may extend to one crore rupees.

Section 25: Power of RBI to impose a penalty

(1) Notwithstanding anything contained in section 23, if a contravention or default of the nature referred to in sub-section (2) of section 22 or sub-section (2) or sub-section (3) or sub-section (4) of section 23, as the case may be, is made by a credit information company or a credit institution then, the Reserve Bank may impose on such credit information company or credit institution–

(i) where the contravention is of the nature referred to in sub-section (2) of section 22, a penalty not exceeding one lakh rupees;

(ii) where the contravention is of the nature referred to in subsection (2) or sub-section (3) of section 23, a penalty not exceeding one crore rupees;

(iii) where the contravention is of the nature referred to in sub-section (4) of section 23, a penalty not exceeding one lakh rupees and where such contravention or default is continuing one, a further penalty which may extend to five thousand rupees for every day, after the first, during which the contravention or default continues.

(2) to adjudge the penalty under sub-section (1), the Reserve Bank shall serve notice on the credit information company or credit institution or specified user, as the case may be, requiring it to show cause as to why the amount mentioned in the notice should not be imposed as penalty and a reasonable opportunity of being heard shall also be given to such credit information company or credit institution or specified user, as the case may be.

(3) No complaint shall be filed against credit Information Company or credit institution or specified user, as the case may be, in any court of law in respect of any contravention or default in respect of which any penalty has been imposed by the Reserve Bank under this section.

(4) Any penalty imposed by the Reserve Bank under this Act shall be payable within fourteen days from the date on which notice issued by the Reserve Bank demanding payment of the sum is served on the credit information company or credit institution or specified user, as the case may be, and in the event of failure of such credit information company or credit institution or specified user to pay the sum within such period, may be levied on a direction made by the principal civil court having jurisdiction in the area where the registered office of the credit information company or credit institution or specified user, being a company, is situated and in case of credit institution incorporated outside India, where its principal place of business in India is situated:

Provided that such direction under this subsection shall be made only upon an application made on this behalf to the court by the Reserve Bank.

(5) The court which makes a direction under sub-section (4) shall issue a certificate mentioning therein the sum payable by a credit information company or credit institution or specified user, as the case may be, and every such certificate shall be enforceable in the same manner as if it were a decree made by the court in a civil suit.

(6) Where any complaint has been filed against credit information company or credit institution or specified user, as the case may be, in any court in respect of the contravention or default of the nature referred to in sub-section (2) of section 22 or sub-section (2) or sub-section (3) or sub-section (4) of section 23, then, no proceedings for the imposition of any penalty on the credit information company or credit institution or specified user shall be taken under this section.

Section 27:   Power of Reserve Bank to specify maximum amount of fees.

The Reserve Bank may specify, by regulations the maximum amount of fees leviable under sub-section (3) of section 14 for providing information to the specified users and for admissions of credit institutions or credit information companies as a member of a credit information company.

Section 29: Obligations as to fidelity and secrecy:

1) Every credit information company shall observe, except as otherwise required by law, the practices and usages customary among credit information companies and it shall not divulge any information relating to, or to the affairs of, its members or specified users.

(2) Every chairperson, director, member, auditor, adviser, officer, or other employee of a credit information company shall, before entering upon his duties, make a declaration of fidelity and secrecy in the form, as may be prescribed in this regard.

Explanation.–For this section and section 30, the terms “practices and usages customary” means such practices and usages which, are generally followed by credit information companies or may develop in due course about their functions, in pursuance of the provisions of this Act, rules, and regulations made and directions issued thereunder from time to time in pursuance thereof.

Section30 Protection of action taken in good faith:

1) Every credit information company shall observe, except as otherwise required by law, the practices and usages customary among credit information companies and it shall not divulge any information relating to, or to the affairs of, its members or specified users.

(2) Every chairperson, director, member, auditor, adviser, officer, or other employee of a credit information company shall, before entering upon his duties, make a declaration of fidelity and secrecy in the form, as may be prescribed in this regard.

Explanation.–For this section and section 30, the terms “practices and usages customary” means such practices and usages that, are generally followed by credit information companies or may develop in due course about their functions, in pursuance of the provisions of this Act, rules, and regulations made and directions issued thereunder from time to time in pursuance thereof.

 Section 31: Bar of jurisdiction:

No court or authority shall have, or be entitled to exercise, any jurisdiction, powers, or authority, except the Supreme Court and a High Court exercising jurisdiction under articles 32, 226, and 227 of the Constitution, about the matters referred to in sections 4, 5, 6, 7 and 18.

Source: INDIA CODE

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