The Credit Information Companies (Regulation) Act, 2005 (CICRA), establishes that only Credit Institutions (CIs) are authorized to furnish credit information to Credit Information Companies (CICs). According to Section 17(1) of CICRA, CICs are permitted to collect credit information solely from their member CIs or other member CICs. Therefore, only entities defined as Credit Institutions under Section 2(f) of CICRA can submit such information to CICs.
When the Reserve Bank of India (RBI) cancels the licence or Certificate of Registration (CoR) of a financial entity, that entity is no longer recognized as a CI under CICRA. As a result, the CICs are prohibited from accepting credit information from these institutions. This creates an issue where the repayment history of borrowers from these institutions is not updated, even if the borrowers continue to repay or clear their dues. This can negatively impact the credit standing of such borrowers, despite their continued efforts to settle their debts.
To address this issue and alleviate the difficulties faced by borrowers, the RBI has exercised its powers under sub-section (vii) of Section 2(f) and sub-section (1) of Section 11 of CICRA to implement a new credit information reporting mechanism. This mechanism applies to banks and Non-Banking Financial Companies (NBFCs) whose licences or CoRs have been cancelled. These institutions are still governed by CICRA, along with its accompanying rules and regulations, and are subject to RBI’s directives.
Under the new provisions, institutions with cancelled licences or CoRs will be classified as “Credit Institutions” under Section 2(f)(vii) of CICRA. They are required to continue reporting credit information to CICs for borrowers who were onboarded prior to the cancellation. This reporting must continue until the loan lifecycle is complete or the institution is wound up, whichever comes first. However, these institutions are only allowed access to Credit Information Reports (CIRs) for borrowers who were onboarded before the cancellation.
Additionally, the CICs are instructed not to charge membership or annual fees from these cancelled-licence entities. CICs must also tag such entities as “Licence Cancelled Entities” in the CIR, based on information from the RBI or the official cancellation order.
These provisions apply retroactively to entities whose licences were cancelled prior to the issuance of the circular. All other regulations regarding credit information reporting by CIs to CICs remain unchanged.
