RBI modifies Data Format for Furnishing Credit Information to Credit Information Companies

Ashish M. Shaji

17 Mar, 2021

The Reserve Bank of India has modified the data format for furnishing credit information to credit information companies. The uniform credit reporting format, which had two annexes, contained formats for credit reporting. Now, these have been modified by the Reserve Bank of India. In this article, we shall take a look at these modifications.

What are Credit Information Companies?

Credit Information Company is an independent third-party institution that is formed and registered under the Companies Act. This company collects and collates financial information with regards to loans, credit cards, etc., and communicate this to its members.

It also has the power to prepare credit reports based on the borrower’s credit information and their financial history. These credit reports play a crucial role in determining the credit worthiness of an individual applying for a loan. A Credit Information Company is licensed by the government of India and is governed by the Credit Information Companies Act, 2005^[1].  

An overview of the notification (modification to data format for furnishing credit information to CICs) released by the RBI

On June 27, 2014, the Reserve Bank had set out a Uniform Credit reporting Format for reporting credit information to CICs. The uniform credit reporting format has two annexes. In Annex-I, there are two formats for credit reporting, i.e., consumer bureau and Commercial Bureau. In Annex-II, there is a credit reporting format for Micro-Finance Institution segment. The Reserve Bank modified the three formats.

Modification of Formats

The reserve bank decided to modify the aforesaid formats as provided below:

• Consumer Bureau-

Under the Consumer Bureau, the label of the field written off and settled status is modified as Credit facility Status, and it would also have a new catalogue value- ‘restructuring due to Covid-19’.

• Commercial Bureau-

Under the commercial bureau, the existing field major reason for restructuring shall have a new catalogue value – ‘restructured due to Covid-19’.

• MFI (Micro Finance Institution) Bureau-

Under the MFI (Micro Finance Institution) Bureau, the existing field ‘Account Status’ shall have a new catalogue value – ‘restructured due to Covid-19’.

Lenders have already been reporting restructured accounts to Credit Information Companies, and the modified format requires them to precisely identify the loans that are being restructured under the Covid relief scheme.

The restructuring scheme has been used sparingly as most lenders said that they received only a few requests for availing the scheme. In December, Icra revised its estimate for loan restructuring volume to 2.5% to 4.5% from initial estimates of 5% to 8% of advances.

To whom this RBI notification (data format for furnishing credit information to CICs) is issued?

The RBI notification- data format for furnishing credit information to CICs, has been issued to the following:

• All commercial banks, including the small finance banks, local area banks and regional rural banks excluding payment banks;
• All primary  (urban) Co-operative banks/State Co-operative banks/ District Central Co-operative banks;
• All India Financial Institutions (Exim Bank, NABARD, NHB, and SIDBI);
• All CICs.

Deadline to make necessary modifications

The Reserve Bank has asked banks/All India financial institutions/Non-Banking Financial Companies to make these necessary modifications to their systems and commence reporting the above mentioned information to the CICs within two months time from the issuance of this circular.

The RBI has further asked CICs to make necessary modifications to their system in order to reflect the above changes.

What is the purpose behind these modifications made by the RBI?

As stated by RBI, these modifications are made to allow banks/all India financial institutions/Non-Banking Financial Companies to report the information relating to the unstructured loans to CICs as envisaged in the TBI notification released on 6^th August 2020 on Resolution Framework for Covid-19 related stress.

Conclusion

As stated above, Banks/All India financial institutions/Non-Banking Financial Companies should make these changes (modification to data format for furnishing credit information to CICs) within two months and also begin reporting the above information to Credit Information Companies.

Read our article: What are SEBI Norms for Credit Rating Agencies?