Last week, the Ministry of Finance in two written answers to Parliament, which highlighted the requirement and compulsory nature of Cibil scores for loan applications, and also set out whether he intended to replace the organization in its role, with a government body. In response to inquiries raised on “abuse of Cibil score by banks” and “the status and recognition of the Cibil score”, on August 18, the Union Minister (MOS) informed parliament that as a credit information business or CIC, Cibil, was enabled to give a creditworthiness to its members. ” The answer noted that the RBI granted four CICs with a Certificate of Registration (COR) to perform such functions, namely Transunion Cibil, Equifax Credit Information Services, Experian Credit Information Company of India and Crif High Mark Credit Information Services. Why is Cibil score important? According to the minister, RBI has ordered banks to undertake the necessary caution from different sources, and that includes cics like Cibil. The answer further noted that “information on the history of repayment of the previous repayment, including information on delayed repayments, resolved loans, restructured, written off, etc., it is essential for assessing the creditworthiness of a borrower and enabling borrowers to make informed credit decisions”. The minister made clear that the creditworthiness enabled a CIC or credit institution (CI) to assess the creditworthiness of the borrower and the ability to repay a loan and apply other obligations. Can you take a loan without Cibil score? The RBI did not require a minimum creditworthiness for the sanction of loan applications, and borrowers make decisions based on their commercial considerations, board policies and regulatory guidelines. The answer added that the CIR ‘would be one of the inputs’ and not the only consideration before a credit facility was granted to a prospective borrower. In fact, for the first time, lenders advise an RBI-Richtlijn of January 2025 that CICS is advised that loan applications of first lenders “should not be rejected just because they have no credit history”. How much fee should you be charged for your Cibil score? According to the minister, the fee is payable for obtaining creditworthiness by RBI and should not be more than £ 100 for an individual’s own credit information. Furthermore, in 2016, in a circular, the RBI advised all CICs to provide one free complete credit report, including creditworthiness in electronic format, once a year to individuals whose credit history is available from them. What is Cibil’s function? TransUnion Cibil, the Credit Information Bureau (India), ie Cibil, is a CIC controlled by the Credit Information Information Act (Regulation), 2005 (CICRA) and CIC regulations, 2006; and regulated by the Reserve Bank of India (RBI). The central bank is empowered to determine the policy of the functioning of all CICs, and such businesses are bound by these decisions. According to the provisions of the CICRA Act, the functions of a CIC include: to gather, process and collect information on trade, credit and financial status of the borrowers; To give credit information and creditworthiness to its specified users. Furthermore, all CICs and GI’s credit information collected by them must be maintained and distributed for a minimum period of seven years. Will the government replace Cibil with its own agency? The MOS noted that although Budget has announced the establishment of a National Register for Financial Information (NFIR), as a central repository of financial information, it is “intended to serve as repair of credit and additional information, thereby enabling comprehensive credit assessment of borrowers.” However, there is currently no proposal to replace Cibil with an alternative mechanism. What measures have taken RBI to protect customers? On complaints about possible abuse of data collected by Cibil, the minister said RBI had taken ‘proactive measures’ to strengthen and improve the grievance mechanism with regard to CICS and GIs. According to the directions of the RBI, CICS: access to one free complete credit report, including creditworthiness, in an electronic format, to individuals whose creditworthiness is available from them. This must make a review of customer complaints possible before rejecting an internal ombudsman, which is appointed to act as an independent peak authority within the CIC. Complainants can also approach the RBI Ombudsman – under the Reserve Bank – Integrated Ombudsman scheme, 2021 (RBIOS) – in the event of wrongful compensation. They must notify clients via SMS or email when accessing their credit report and should reflect such queries in the borrower’s CIR. Customers must receive SMS PR -Post regarding default or days owed in existing credit facilities. They must undertake a semi-annual basis of cause of analysis (RCA) of customer grievances.
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