Credit Information Companies Act,2005

2.  In 1962, Credit Information Division was established in
Reserve Bank of India.
 The Reserve Bank of India Act,1934 was amended in
the year 1962 incorporating amendments to the effect
that RBI was given powers to collect information.
 The Banking Commission (1972) under the
Chairmanship of Shri R.G.Saraiya, recommended
setting up of a Credit Intelligence Bureau as a
statutory body which would furnish adequate and
reliable credit information to banks and other financial
institutions.
Shri R.G.Saraiya

3.  Credit Information Scheme thus evolved by the
RBI in 1962 was discontinued in 1995.
 Later as a result of the economic reforms, number of
banks increased rapidly. In this context Credit
Information Bureau (India) Ltd., (CIBIL) was set up
in January 2000.
 Recognizing the need for putting in place an
institutional mechanism Credit information company
bill was introduced in the parliament in 2004.
 In 2005 Credit information Company Bill was
passed. The CIC Act came into force in 2006.
 The Reserve Bank of India and the Government of
India have enacted the Credit Information
Companies Regulations, 2006 ("Regulations") and
the Credit Information Companies Rules, 2006
("Rules") issued under the Act.

4.  The lender before extending the loan checks the
information of the borrower in the form of the credit
information report to find out the credit worthiness of
the borrower.
 On the basis of the individual credit information report
of each borrower, a score is given to the borrower
which indicates his/her reputation in the credit market.
 Credit information company is evolving a credit-rating
model that will reward borrowers with a good credit
history and penalise those with a poor record.

5.  To make effective credit decisions
 To deter concurrent borrowers and serial defaulters.
 To keep adverse selection of customers to the
minimum.
 To review and evaluate risk of its customers.
 To effectively discharge their statutory and
regulatory functions.
 To effectively discharge the functions as a credit
rating agency.
 Generally in relation to and for purposes of taking
credit decisions, or for judging credit worthiness of a
borrower in a client, as the case may be.

6.  To take a credit decision on a person who accepts
liability for payment on a bill of exchange, drawn by
another person.
 To take credit decision in relation to a person who
draws a promissory note in favour of another
person.
 To take credit decision in relation to a person who
proposes to act as a guarantor for another person.
 To enable a person to know his own credit
information.

7.  To regulate credit information companies.
 To facilitate efficient distribution of credit and for
matters connected therewith or incidental thereto.

8.  Application for Registration must be presented to
RBI (Sec 4).
 The Reserve Bank after being satisfied, grant a
certificate of registration to the applicant company
(Sec 5,6,7).
 Minimum capital—The authorised capital of every
credit information company shall be a minimum of
thirty crores (Sec 8).

9.  RBI has the powers to determine the policy of the
credit information companies with regard to their
functioning.
 RBI shall give directions to the credit information
companies, wherever it thinks it is in public interest,
or in the interest of credit institutions, specified
users, banking policy and proper management.
 The management of a credit information company
has been entrusted to a whole time chairperson and
a part-time chairperson who can be of a non-
executive nature.

10.  A CIC or any person so authorised, may by a notice,
requisition credit information from its members
being Credit Institutions and other CICs.
 The member of Credit Institutions and CICs must
furnish the requisitioned information within the time
specified in the notice.

11.  To collect, process and collate information on trade,
credit and financial standing of the borrowers of the
credit institution which is a member of the credit
information company.
 To provide credit information to its specified users or
to the specified users of any other credit information
company or to any other credit information company
being its member.
 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.
 To undertake research project.
 To undertake any other form of business which the
Reserve Bank may, specify by regulations as a form
of business in which it is lawful for a credit
information company to engage.

12.  As far as dispute settlement, when there is no
remedy available under the Act, the matter shall be
resolved by using the Arbitration and Conciliation
Act, 1996.
 The arbitrator should be appointed by RBI and the
matter has to be resolved by the arbitrator within
three months.

13.  The privacy of the borrower has been taken care by
providing the availability of a credit information
report by the borrower on payment of the requisite
charges.
 The borrower himself can approach the relevant
authority for the purposes of correction in the
report.
 The Act give powers to RBI for determining the fees
for providing information to the relevant persons
authorised under the Act.

14.  The employees and other officers of the credit
information company would be required to maintain
fidelity and secrecy with respect to the information
in their hands and for this, reliance has been placed
in the Act upon the practices and usages as shall be
prevalent amongst the credit information
companies.
 For violation of the privacy of the consumer or the
borrower with regard to the credit information heavy
penalty of Rs 1 crore may be imposed on the credit
information company, credit institution or any
specified user (Sec 23(2)).

15.  Who ever moving to the bank/financial institution
must know that credit information Companies are
carefully watching us.
 Therefore ‘Awareness’ about this law is must for
all.