FinTech Firms Barred by RBI from Accessing Consumer Credit Score, History: ET

Moneylife Digital Team 19 September 2019

Economy & Nation

The Reserve Bank of India (RBI) has barred unregulated financial technology (fintech) firms from accessing credit history of consumers, and had asked commercial banks and non-banking finance companies (NBFC) to stop providing unregulated entities access to consumer data held by credit bureaus, says a report from the Economic Times.

Quoting a letter sent by RBI, the report says, "…the central bank said it noticed that they had appointed agents and permitted them to access the database of credit information companies. Such actions are against the Credit Information Companies (Regulation) Act, 2005 (CICRA), it said and warned of penalties if any of the regulated entities violated its order."

The RBI also asked all lenders to inform it within 15 days of the measures they had taken to curb this practice.

As per the credit information companies regulation act (CICRA), banks and NBFCs are mandated to report every retail loan to all the four credit bureaus, TransUnion CIBIL, Equifax, Experian and CRIF High Mark and keep them updated on the repayment behaviour of the consumer. This allows other lenders to use this data and evaluate the customers before issuing any loans. Banks and NBFCs are expected to keep the data in confidence, according to RBI’s outsourcing policies for them.

Industry insiders told the newspaper that this move could radically affect the business models of fintech companies, since many of them were relying on the data to evaluate customers while they applied for loans through them. Online marketplaces, such as SIDBI’s PSB Loans in 59 Minutes platform, could be impacted due to the restriction, they said.

“This will be a major blow to the sector. Though we rely a lot on nonfinancial data sources, we do take bureau data as one of the information points. Now we will not have any visibility on the past credit behaviour of the customer,” one founder of a lending marketplace, who did not wish to be named, told ET.

Comments

User

Ramesh Poapt

7 years ago

good step!

s ramji

7 years ago

we receive emails from various banks/finance companies sharing with us the CIBIL report - Are they all permitted to access and show the reports to the public.