The Finance Ministry has in two written replies to the Parliament last week, clarified on the requirement for and mandatory nature of CIBIL scores for loan applications, and also outlined whether it plans to replace the organisation in its role, with a government body.
Responding to queries raised on “misuse of CIBIL score by banks” and “the status and recognition of CIBIL score”, Union Minister of State (MoS) for Finance Pankaj Choudhary on August 18 informed the Parliament that as a credit information company or CIC, CIBIL is enabled 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”.
The reply noted that the RBI has granted four CICs with Certificate of Registration (CoR) to carry out 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 directed banks to undertake due diligence from various sources, and this includes CICs such as CIBIL. The reply further noted that “information on past repayment history, including information on delayed repayments, loans settled, restructured, written-off, etc., is essential for assessing the creditworthiness of a borrower and to enable lenders to make informed credit decisions”.
The minister clarified that the credit score enables a CIC or credit institution (CI) to assess the borrower’s credit worthiness, and capacity to repay a loan, and discharge other obligations.
Can you take a loan without CIBIL score?
The RBI has not mandated a minimum credit score for sanction of loan applications and lenders take decisions based on their commercial considerations, board policies and regulatory guidelines. The response added that the CIR would be “one of the inputs” and not the sole consideration before granting any credit facility to a prospective borrower.
In fact, for first time borrowers, an RBI directive dated January 2025, advises CICs that loan applications of first-time borrowers “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, fee chargeable for obtaining credit score is regulated by RBI and should not exceed ₹100 for an individual’s own credit information.
Further, in 2016, the RBI has in a circular advised all CICs to provide one free full credit report including credit score in electronic format, once in a year to individuals whose credit history is available with the them.
What is CIBIL’s function?
TransUnion CIBIL, the Credit Information Bureau (India) i.e. CIBIL, is a CIC governed by the Credit Information Companies (Regulation) Act, 2005 (CICRA) and CIC Regulations, 2006; and regulated by the Reserve Bank of India (RBI).
The central bank is empowered to determine policy in relation to functioning of all CICs and such companies are bound to these decisions.
As per provisions of the CICRA law, functions of a CIC include:
- To collect, process and collate information on trade, credit and financial standing of the borrowers;
- To provide credit information and credit scoring to its specified users.
- Further, all CICs and CIs are required to retain credit information collected, maintained and disseminated by them for a minimum period of seven years.
Will the government replace with CIBIL with its own agency?
The MoS noted that while Budget 2024 announced the set up of a National Financial Information Registry (NFIR), as a central repository of financial information, this is “envisaged to serve as a repository of both credit and ancillary information, thus enabling comprehensive credit assessment of borrowers”.
However, there is at present, no proposal to replace CIBIL with an alternate mechanism.
What measures has RBI taken to safeguard customers?
On complaints regarding potential misuse of data collected by CIBIL, the minister said that RBI has taken “proactive measures” to “strengthen and improve” the grievance redressal mechanism with regards to CICs and CIs.
As per the RBI’s directions, CICs have to:
- Provide access to one free full credit report, including credit score, in an electronic format, to individuals whose credit score is available with them.
- They must enable a review of customer complaints before rejection with an Internal Ombudsman, appointed to act as an independent apex level authority within the CIC.
- Complainants can also approach the RBI Ombudsman — under the Reserve Bank – Integrated Ombudsman Scheme, 2021 (RBIOS) — in case of wrongful compensation denial.
- They must notify customers by SMS or email when their credit report is accessed and such enquiries must reflect in the borrower’s CIR.
- Customers must receive SMS pr email regarding default or days past due in existing credit facilities.
- They must undertake Root Cause Analysis (RCA) of customer grievances at least on a half-yearly basis.
CIBIL scores, loan applications, credit information company, creditworthiness, RBI, RBI regulations, Reserve Bank of India
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