What are Credit Information Companies (CICs)?

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What are Credit Information Companies (CICs)? Blog Image

Overview:

The Reserve Bank of India (RBI) recently directed credit information companies (CICs) to set out a common data quality index (DQI) for commercial and microfinance segments.

About Credit Information Companies (CICs)

  • CICs collect public data, credit transactions and payment histories of individuals and companies regarding loans and credit cards, among others.  
  • Their primary function is to gather data from various sources, such as banks, financial institutions, lenders, and other credit-granting entities, and then compile this data into credit reports.
  • Banks, non-banking financial institutions refer to the CIC's report and score to decide borrowers' creditworthiness before granting a loan or issuing a credit card.
  • CICs in India are licensed by the RBI and governed by the Credit Information Companies Regulation Act, 2005 (CICRA) and various other rules and regulations issued by the RBI. 
    • As per Section 15 of the CICRA, every Credit Institution (like banks) should be a member of at least one CIC. 
    • CICRA also stipulates that a CIC may seek and obtain information from its members only.
  • Thus, if a bank seeks information from a CIC, it will get the information given by other institutions (to CIC) only.
  • At present, four credit information companies are given certificates of registration by the RBI. These companies are Credit Information Bureau (India) Limited (CIBIL)Equifax Credit Information Services Private Limited, Experian Credit Information Company of India Private Limited and CRIF High Mark Credit Information Services Private Limited.

 

Key Facts about Credit Information Bureau (India) Limited (CIBIL):

  • It is the leading credit bureau and CIC licensed by RBI.
  • Primary Function: To collect and maintain financial data as provided by the lenders to further generate and provide credit reports and credit scores for its customers.
  • It maintains credit files on 600 million individuals and 32 million businesses.
  • CIBIL India is part of TransUnion, an American multinational group. Hence, credit scores are known in India as the CIBIL Transunion score.
  • CIBIL score:
    • It is a three-digit numeric summary of your credit history.
    • Calculation:
      • It is derived using the credit history found in the CIBIL Report. 
      • It takes into account borrowers’ credit profile over the last 36 months.
    • Value: The value of Credit Score may range between 300 to 900. 
    • Lenders can check the CIBIL report and CIBIL Score/CIBIL Rank to evaluate the risk of lending to applicants and accordingly approve or reject new loan/credit card applications.
    • The closer a CIBIL Score is to 900, the higher the chances of the consumer's credit card or loan application getting approved.

 


Q1) What are non-banking financial companies?

A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property. A non-banking institution which is a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner, is also a non-banking financial company (Residuary non-banking company).

Source: RBI directs credit information companies to prepare index for commercial, microfinance segments