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Central bank’s concern over Credit Information Companies (CICs)

Context:

  • Recently, Reserve Bank of India (RBI) Deputy Governor Swaminathan J flagged the concern over Credit Information Companies (CICs) which provide credit scores to individuals for availing loans.
  • The CICs were asked to focus on six key areas to improve services.
  • It is been pointed by the RRBI officials that there was a rise in customer complaints related to credit information and some concerns had also emerged during RBI’s supervisory assessment.

He asked the CICs to focus on six key areas, which are:

  1. need to improve the data quality;
  2. timely redressal of complaints;
  3. strengthening of internal ombudsman framework;
  4. streamlining the process for handling data correction requests in a good manner;
  5. strengthening of cyber security and data privacy through robust information security governance framework; and
  6. concerns arising out of usage of data for consulting and analytics.

What are Credit Information Companies (CICs)?

  • CIC or Credit Information Companyis an independent third party institution which collects financial data regarding loans, credit cards and more about individuals and shares it with the required members.
  • They collect the financial information about all the individuals and forms a credit report based on their financial history.
  • This credit report plays a very important role because it helps banks and other financial institutions in determining the credit worthiness of an individual who is applying for a loan or credit card with them.
  • Banks, Non-Banking Financial institutions are generally the customers of Credit Information Companies.
  • In India, CICs are licensed by the Reserve Bank of India and governed by the Credit Information Companies Regulation Act, 2005 and various other rules and regulations issued by the Reserve Bank of India.
  • The CIC Act, 2005 is a legislation which is enacted by the Government of India to regulate the actions of the Credit Card Companies in India.

The post Central bank’s concern over Credit Information Companies (CICs) appeared first on Vajirao IAS.

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