I. INTRODUCTION

The availability of quality credit information has been a longstanding concern in India. The asymmetry of information among financial institutions hinders credit flow, particularly to disadvantaged sections of society, thereby disrupting financial inclusion and inclusive growth. Over the past decade, while credit growth has been robust and NPAs have remained within tolerance limits, banks and other financial institutions have faced several challenges. These include inordinate delays in the submission of credit information about borrowers, issues with data quality due to differing formats followed by various Credit Information Companies (CICs), legitimate rejections of data by CICs, and data asymmetry among CICs, as not all financial institutions are members of every CIC.

To streamline credit information in the system and to bring about changes in the data collation and reporting process, the Reserve Bank of India (‘RBI’) constituted a committee in March 2013 under the chairmanship of Mr. Aditya Puri, former Managing Director of HDFC Bank, to recommend the data format of credit information to be submitted by financial institutions to CICs. The Committee submitted  the report in January 2014, RBI through various circulars have been implementing the various  recommendations made under the report.

Now, RBI has recently released the master direction on reporting of credit information by merging all the circulars in a single document. In this Article, we have discussed the key changes made in the existing framework. Accordingly, the notable changes are explained and discussed hereinbelow:

1. Periodicity of submission of Credit Information The Master Direction has retained the current periodicity as provided by the RBI through an erstwhile circular dated August 8, 2024 (effective from January 1, 2025) wherein credit information maintained by CICs and financial institutions be updated regularly on a fortnightly basis or at shorter intervals, as mutually agreed between them.
2. Uniform Credit Reporting Format” (UCRF)The reporting of credit information by financial institutions to CICs must follow standardized data formats known as the Uniform Credit Reporting Format (UCRF).  RBI has prescribed different reporting formats for each reporting segment: Consumer, Commercial, and Microfinance. Below are the UCRFs and changes made from earlier formats:

   Form 1: Uniform Credit Reporting Format (Consumer)

   • Catalogue values prescribed under Credit Facility Status include: “Restructured due to COVID-19,” “Post Write-off Closed,” “Restructured and Closed,” “Auctioned and Settled,” “Repossessed and Settled,” and “Guarantee Invoked.”
   • Additional ID types now recognise NREGA card numbers and CKYC besides existing IDs such as PAN, AADHAR, Voter ID, etc.

   Form 2: Uniform Credit Reporting Format (Commercial)

   • New catalogue values under Credit Types include Mudra Term Loan, Mudra Working Capital, and Temporary Overdraft. CICs must consider accounts closed if not reported in subsequent months by CIs, given a credit balance.
   • “Other ID” has been replaced with “Udhyam Registration Number.”
   • “Fax number(s)” and “Other ID” have been replaced by “E-mail ID” and “CKYC,” respectively.

   Form 3: Uniform Credit Reporting Format (Microfinance)

   • The format prescribes file structures for CIs financing SHGs to report Microfinance data to CICs. It includes Group, Consumer, and Account segments. Each file should separately include SHG accounts, JLG accounts, and individual accounts, covering all live, closed, and newly opened loan accounts during the reporting period.
   • Significant changes under the ‘Members Segment’ include narrowing relationship categories by excluding “Brother” and “In-laws” and introducing MNREGA-ID and Central KYC-ID as identification options.

II. INCLUSION OF SHG UNDER THE MICROFINANCE SEGMENT

As per the recommendation of the Committee, the Master Direction provides that credit information of the members of Self-Help Groups (SHGs) to be included within the scope of MFIs as a part of Form 3. The information requires group name, group loan account number, number of instalments, repayment frequency group bank account- Bank name, First linkage date, Branch name, Account number, First created date, monthly family income, membership and details of other SHG including exposure, etc.

The structure of credit information of SHG members to be collected and reported in the following manner:

1. Information for SHG members with loan amounts exceeding Rs. 30,000,
2. Information for SHG members with loan amounts up to Rs. 30,000,
3. General information on all individual SHG members, and
4. Information to be collected while opening new Savings Bank Accounts of SHGs.

Additional Guidelines:

1. Data Formats and Reporting:
   1. Must collect and report data on SHG members per the specified formats.
   2. Credit reporting covers SHG members with loans exceeding ₹1,00,000, while non-credit data is collected from all SHGs.
   3. Data supports informed credit decisions, regulatory evaluation, and socio-economic profiling.
   4. Must establish necessary systems and may outsource data collection but remain accountable for accuracy.
   5. Monitoring NPAs in SHG loans is required, with stricter data collection for loans over ₹20,000 if SHG NPAs exceed specific thresholds.
   6. Non-compliance with instructions can exclude SHG loans from PSL targets.
2. Operational Instructions:
   1. Inter-loaning among SHG members not to be included.
   2. Banks are encouraged to offer Small Accounts to SHG members to facilitate KYC-compliant credit linking.
   3. Data collection must not be a pre-condition for loans.
   4. Financial institutions should encourage SHGs to maintain written or digital loan records.
   5. Policies should ensure fair evaluation of SHG/individual member credit applications, even for those with defaults, focusing on viability and repayment capacity.

III. DATA VALIDATION

CICs must:

1. Provide financial institutions with validation logic and processes to minimize data rejections such as identification of widely accepted ID Proof of borrower, either release FAQs on rejection of data or adopt standard norms or SOP.
2. Ensure rejection reports are clear for easy resolution. Rejected data must be corrected and resubmitted within seven days.
3. Conduct periodic checks, at least quarterly, to identify inconsistencies and share findings with financial institutions. Non-responsive institutions must be reported to the Department of Supervision semi-annually.

IV. DATA QUALITY INDEX

CICs must provide monthly Data Quality Indexes (DQIs) for consumer, commercial, and microfinance segments. Industry-level DQIs will be computed as a weighted average of institutional-level DQIs within each category (e.g., Public-Sector Banks, Private Sector Banks, NBFCs, HFCs, etc).

• Financial Institutions must conduct a half-yearly review of their DQI for all segments, identify issues, and submit corrective action reports to top management within two months of the review.
• Separate formats for DQIs are prescribed for each segment (i.e. consumer, commercial, and microfinance). Earlier DQI for consumer segment was not prescribed. For the consumer segment, data must include attributes under Demographics (Name, DOB, Identifier, PIN Code, Phone) and Trade Data (DPD/Asset Classification, High Credit/Sanctioned Amount, Date Opened, Balance Amount, Account Type).

V. CREDIT INFORMATION REPORT (CIR)

The Master Direction has not prescribed a specific CIR format, allowing CICs to retain unique features in their CIRs to foster competition amongst CICs. However, the RBI requires certain minimum details, including the following which shall be there in each CIR:

• Name of co-borrower or guarantor.
• Information on mortgaged property.
• Reflection of multiple borrowings, both current and past, in a single report using unique IDs like PAN or Aadhaar.

As against the current advisory norm, RBI has now directed all financial institutions to include obtaining CIR in their credit appraisal process.

CICs must provide one free full credit report (FFCR), including the credit score, annually (January–December) upon request and authentication to the borrower . FFCRs should display the latest credit of borrower’s exposure as per CIC records. CICs must also ensure convenient access through prominently displayed homepage links and board-approved policies for FFCR provision.

As a part of customer protection, if a borrower finds any discrepancies in the CIR, he/ she/ may approache theCIC or lender to carry out the correction in the report within the strict timeline as discussed hereinbelow.  CIC or lender  shall share the corrected report with the borrower without any cost and other financial institutions with whom he/ she has exposure.

1. Guidelines for Sharing  information with Third partiesGuidelines have been prescribed when a CIC shares the personal credit information of a borrower with a third party that is not a ‘Specified User’ under CIC regulations. The guidelines are mainly like precautions to be taken by CICs, and includes:
   1. Written Consent: Prior written consent shall be obtained from the individual borrower whose data is being shared with the third part and such consent must be stored and maintained in such a manner which can be verified at any point in time. Such an individual shall have the power to withdraw his consent at any time and that stored information must be deleted.
   2. Due Diligence: CICs must evaluate entities seeking access based on management integrity, business reputation, governance, financial soundness, technological resources, and information security.
   3. Entity Obligations: Entities must:
      • Use credit information solely for the consented purpose and not resell or misuse it.
      • Retain information for a maximum of six months or until the purpose is fulfilled, after which it must be deleted unless fresh consent is obtained.
      • Prevent unauthorized use, ensure confidentiality, and restrict access to employees or agents on a “need-to-know” basis.
   4. Data Protection: Credit information must be securely stored, processed, and remain within India.
   5. Information System (IS) Audit Annually: The provisions of IS Audit as applicable to CIC and Specified Users shall be equally applicable to third party and IS Audit report shall be shared with CIC which shall be placed before its Board of Directors and be shared with the RBI.These measures aim to safeguard sensitive credit data and prevent misuse.
2. Eligibility criteria of Specified UserThere has been no change in the eligibility norms of becoming a Specified User to obtain membership of CIC; however, operational guidelines have been laid down which amongst other things few of the notable requirements are (a) information obtained can be stored only for a limited time subject to a maximum of 6 months and thereafter such data needs to be deleted from the system of the specified user, (b)  to carry out IS Audit on a yearly basis.
3. Customer Service and Grievance RedressalAs per existing norms, a borrower in case of any compliant (generally related to correction of details provided either in CIBIL Report, Credit Score, details of mortgaged property) may approach CIC under CIC Regulation Act, 2005 however there is no detailed mechanism to address such complaints as CICs generally rely on financial institutions to correct the information as it cannot unilaterally change the information basis upon a compliant. Further, there has been no punitive action prescribed for non-redressal of complaints in a timebound manner. In this master direction, RBI has now framed a detailed customer redressal mechanism and laid down the penal provisions for defaulting entity either CIC or financial institution. Besides the grievance mechanism, RBI has also prescribed minimum customer level services. The following are material features of the mechanism:
   1. Customer Notifications:CICs must notify customers via SMS or email when:
      • Their Credit Information Report (CIR) is accessed by Specified Users (SUs).
      • Defaults in credit facilities are reported.
   2. Encouraging Communication:
      • Financial institutions should conduct awareness campaigns to encourage customers to share mobile numbers and email IDs for effective communication.
   3. Grievance Redressal Mechanism:
      • Financial institutions must establish a dedicated nodal contact point for CICs.
      • Customers should receive standardized reasons for data correction rejections during grievance redressal, as per the RBI Ombudsman Scheme.
   4. Root Cause Analysis (RCA):
      • Financial institutions must conduct a half-yearly RCA of customer grievances.
      • RCA should include:
        • Rejected data.
        • Data Quality Index (DQI).
      • Findings should be reviewed annually by top management to identify improvements.
   5. Data Upload Timelines:Credit information from financial institutions must be uploaded by CICs within five calendar days.
   6. Transparency:CICs must disclose complaint details against themselves and financial institutions on their websites.
   7. Compensation for Delayed Complaints:
      • For complaints unresolved for over 30 days: CICs and financial institutions must compensate complainants at ₹100 per day.
      • CICs must share detailed actions, correspondences, and follow-ups with complainants upon request to enhance tracking and transparency.
4. Formation of Technical Working Group (TWG) and Sub-Group Credit information reporting is very dynamic and due to continuous evolution in the process, data reporting practices do require changes from time to time to strengthen the quality of the information available in the system. For this purpose, the RBI will constitute a TWG, which will review the system of reporting and suggest changes to the RBI in the reporting formats in all segments, i.e., consumer, commercial, and microfinance. This group will have representatives from all financial institutions including SROs such as IBA, Sa-Dhan, MFIN, etc.

   Besides TWG, a sub-group will also be formed which will provide support and advice on the technical aspects of the reporting and suggest changes in the IT systems of CICs and financial institutions. This sub-group will discuss the challenges faced by CICs and financial institutions related to credit information reporting to ensure a holistic approach to strengthen the reporting ecosystem.

Conclusion

Besides consolidating all circulars, the Master Direction aims to eliminate asymmetry in the credit information system by standardizing data formats, enhancing data quality, and expanding its accessibility to the disadvantaged sections of society, particularly the members of Self-Help Groups (SHGs). Additionally, consumers have been empowered to request corrections to any inaccuracies in their credit reports or histories. The grievance redressal system has also been strengthened by mandating financial institutions and CICs to respond to the complaints within strict timelines.