Should Indians get a free Credit Report every year??

                A credit report is essential for prospective borrowers to obtain credit quickly. 

                Reserve Bank of India vide its Notification No:-RBI/2014-2015/405 DBR.No.CID.BC.60/20.16.056/2014-15 dt.January 15, 2015, has advised all:

• All Scheduled Commercial Banks (including RRBs & LABs),
• All India Notified Financial Institutions, and
• All Credit Information Companies

i.e  all Credit Institutions (CIs) to  become members of all CICs and submit data (including historical data) to them.

At present there are  four CICs, viz. Credit Information Bureau (India) Limited, Equifax Credit Information Services Private Limited, Experian Credit Information Company of India Private Limited and CRIF High Mark Credit Information Services Private Limited have been granted Certificate of Registration by RBI.

In terms of Section 15 of the Credit Information Companies (Regulation) Act, 2005 (CICRA), every Credit Institution shall become member of at least one CIC. Further, Section 17 of CICRA stipulates that a CIC may seek and obtain credit information from its members (Credit Institution / CIC) only.

As a result, when a Specified User, as defined in CICRA and Credit Information Companies Regulations, 2006, obtains credit information on a particular borrower/client from a CIC, it gets only such information that has been provided to the CIC by its members.

This does not include credit history related to those non-member Credit Institutions with which the borrower/client has/had a current or a past exposure.

To overcome this problem of incomplete/inaccurate credit information, pros and cons of certain possible alternatives have been discussed in the Report. These alternatives along with suggestions/comments obtained from IBA and the CICs have been examined by RBI.

 It has been decided that the best option would be to mandate all Credit Institutions to become members of all CICs and moderate the membership and annual fees suitably.

                Hence, RBI has advised that  All Credit Institutions (CIs) shall become members of all CICs and submit data (including historical data) to them.

Further, CICs and CIs shall keep the credit information collected/maintained by them, updated regularly on a monthly basis or at such shorter intervals as may be mutually agreed upon between the CI and the CIC.

                RBI has also fixed the upper cap of membership fees that the CICs can charge CIS to become their members and the annual fees. Accordingly, the one-time membership fee charged by the CICs, for CIs to become their members, shall not exceed Rs.10,000 each. The annual fees charged by the CICs to CIs shall not exceed Rs.5000 each.

                The ground reality for the prospective borrowers will drastically change. Each CIC has its own format for scoring and reporting. In case of any aberration in any one CIC report, the prospective buyer has to satisfactorily reply to the Credit Institution queries. This will increase the TAT to obtain credit.

                One option to reduce such aberrations is to mandate by law to provide   consumers to  one free comprehensive disclosure of all of the information in their credit file from each of the four national credit reporting companies once every 12 months through a Central Source.

                Trust RBI will shortly issue guidelines in this regard. This can be similar to USAs Fair Credit Reporting Act