Soon Individuals would be able to access their creditworthiness – the credit score used by banking and financial institutions for evaluating the risk factors before disbursing the loans to individuals and entities – from credit bureaus which is still restricted to only banks and financial institutions.
Besides customers, the telecom companies and insurance firm will also be able to access the credit score of the individuals.
Giving its ‘in-principle-approval’ for Certificate of Registration under provisions of the Credit Information Companies Act (CICA), 2005 - that regulates the flow of credit information in the country - to four credit bureaus comprising one oldest and three new, the Reserve Bank of India (RBI) Friday asked these firms to submit all documents within three months to get permanent licence.
Among the four, the Credit Information Bureau of India Ltd (CIBIL) is the biggest and oldest one operating in India for over five years in partnership with TransUnion, and has a collected database of credit records of 13.5-crore commercial and individual borrowers from over 160 banks and financial institutions.
The three new applicants are: Equifax Credit Information Services backed by Crisil and Tata Capital, US based Experian Credit Information Company of India and local player Highmark Credit Information Services.
If all the four applicants will be able to get the permanent licence, India will become the first country in the world to have four credit bureaus. At present, United States of America that is considered the largest credit information market has three bureaus while most of the nations have only one or two.
The credit bureaus those collect information from several sources have asked the apex bank [RBI] to add more sources like telephone, electricity and water bills, and insurance premium to access more details of individuals and entities which would help the bureaus further in determining the credit scores and ratings.
CIBIL, the only government recognised firm rates individual from 300 to 999 credit score where 300 is the lowest score and considered as very bad creditworthiness.
According to CIBIL official, RBI has raised a significant step, and soon the individuals would be able to evaluate their credit scores and negotiate better interest deals for loans from banks.
This move of RBI would create a greater awareness on credit procedures and higher credit penetration that will raise a healthy credit life cycle, credit granters and the economy, official added.
Giving the estimate time line for providing the credit records to individuals, the CIBIL official said that the company expected to provide personal credit records to individuals by April 2010.
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