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Individuals won’t be in the dark when banks or financial institutions are seeking their credit reports from credit information companies. The Reserve Bank of India has instructed credit information companies to routinely alert customers through messages or emails whenever institutions are obtaining their credit reports.

In what can be described as a leap in customer-centric transparency, lenders would have to send alerts through SMS and/or email to customers whenever they furnish information to the credit information entities on default in paying loans/EMIs as well as information on the delay past the due date for paying up.

The new instructions by the central bank follow what the RBI said in this regard after announcing the monetary policy statement in April this year. It alerted the public about new developmental and regulatory policies that would follow later in the year.

The RBI has also stipulated that lenders must designate an official dedicated for interacting with credit information companies to redress customer grievances. The entire objective is to minimise customer grievances and, towards this end, RBI said that a root cause analysis of customer grievances must be undertaken at least once every six months. The top management of the banks/FIs should review the entire exercise at least once a year.

The central bank has also issued instructions that lending institutions cannot be opaque and must inform customers reasons for rejecting their request for data correction, if any such a situation arises. It would not only settle many customer grievances but would also over time lead to a better understanding of credit information system by the customers.

The reasons for rejection of requests have to be circulated by credit information companies to all lenders.
In another major boost for transparency the RBI has said that credit information companies must reveal details of complaints registered against them as well as lenders on their websites.

Moreover, they would need to provide access to one free full credit report and credit score once a calendar year to individuals whose credit history is available. This report should be accessible on a link that has to be prominently featured on the home page of the company’s website.

There are four credit information companies in India right now. These are TransUnion Cibil, Equifax, Experian and CRIF High Mark.