Complaints about credit score not addressed? Here’s what RBI has told banks and credit information firms to do

Earlier in June 2023, RBI had slapped a total penalty of more than Rs 1 crore on four CICs for failing to update the credit information of borrowers.

What redressal measures has the RBI directed?

In its Master Direction on Credit Information Reporting, the RBI has specified a penalty for the non-resolution of a complaint by a customer within a certain timeframe.

• It has asked CICs, banks, and NBFCs that complainants should be given a compensation of Rs 100 per calendar day if their complaint is not resolved within a period of 30 calendar days from the date of the initial filing of the complaint by the customer.
• This compensation is payable if banks/ NBFCs have failed to send updated credit information to CICs by making appropriate corrections/ additions within 21 calendar days of being informed by the complainant or a CIC.
• CICs and credit institutions (CIs) are required to keep the credit information collected/ maintained by them updated fortnightly (on the 15th and last day of the month) or at shorter intervals as mutually agreed between the CI and CIC.
• The CI/ CIC must inform the complainant of the action taken in all cases, including those in which the complaint has been rejected. The CI/ CIC must provide the reasons for the rejection of the request for data correction, in order to enable customers to better understand the issues.

Does the communication with the customer start only in case of a complaint?

The RBI has said that CICs should send alerts by SMS/ email, wherever available, to customers when their credit information report (CIR) is accessed by specified users (SUs).

Also, CIs should send alerts through SMS/ email to customers while submitting information to CICs regarding default/ days past due (DPD) in existing credit facilities.

Why did the RBI decide to step in on this issue?

The RBI’s supervisory assessment had earlier raised concerns about the functioning of CICs, prompting the central bank to take steps to address these issues.

Delays in reporting updated credit information have become an issue in the country’s credit reporting system, with CICs relying solely on data fed by banks without verifying its accuracy.

This has led to numerous instances of incorrect information being reported, causing undue hardship to individuals. Despite requests from customers, these errors have not been reviewed or corrected, which shows a clear bias towards banks.
Also, the lack of transparency in the credit scoring system has left individuals in the dark about how their ratings are calculated. They are forced to periodically check their scores, verify transactions, and appeal against errors.

However, this process is often cumbersome and frustrating. Most customers are unaware of the significant role played by credit bureaus like CIBIL, which seems to be more focused on serving the interests of banks rather than individuals.

What is a credit score, and who are the major CICs in India?

Four credit bureaus, or CICs, are authorised by the RBI: TransUnion CIBIL, CRIF High Mark, Equifax and Experian, all of which are majority-owned by foreign entities.

CIBIL, which is the market leader, has access to the credit information of 60 crore people, and has 2,400 members that include all types of lenders.

CIs include banks and NBFCs regulated by the RBI. They inform CICs about the credit status, including loan defaults, of customers.

A customer’s credit score is an indicator of how consistent she is with repaying debts. When a customer borrows from lenders like banks, the repayment information is sent to credit information companies that compute a credit score.

The higher your credit score, the better your chances of securing loans with favourable terms. Credit score is usually expressed as a number.

The CIBIL credit score has three digits, ranging from 300 to 900. 900 is the best score, and 750 or higher is considered to be a good credit score.