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CIBIL Score: RBI’s 5 Key Rules Every Borrower Must Know

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The RBI has recently updated its CIBIL score rules for banks and credit institutions, which are important for borrowers.

Following numerous complaints, the Reserve Bank of India (RBI) issued an important update regarding the CIBIL score. The central bank has tightened the rules. These new regulations have been effective since April 2024. If you plan to take a loan, you should know these 5 new RBI rules.

CIBIL Score For Loan: The RBI instructed credit information companies to notify customers whenever a bank or NBFC checks their credit report. Such information should be sent via SMS or email.

After several complaints, the Reserve Bank of India (RBI) issued an important update regarding the CIBIL score. The central bank has tightened the rules. These new regulations are effective from April 2024. If you plan to take a loan, you should know these 5 new RBI rules.

CIBIL Score
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CIBIL Score For Loan: The RBI instructed credit information companies to notify customers whenever a bank or NBFC checks their credit report. Such information should be sent via SMS or email.

If Loan Or Other Request Rejected: RBI also stated that it is necessary to inform the customer of the reason for their request’s rejection. This helps customers understand why their request was rejected. A list of rejection reasons should be made and sent to all credit institutions.

Credit Report: The RBI also said that Credit Information Companies (CICs) must provide a “Free Full Credit Report (FFCR)” once every calendar year. The credit company should send a link to its website where customers can easily check their full credit report.

If Customer Is In Default: The central bank instructed credit companies to notify customers before reporting a default. This information should be shared via SMS or email.

Addressing Complaints: The central bank also mandated that banks and lending institutions appoint a nodal officer to resolve credit score issues. If the credit information company doesn’t resolve a complaint within 30 days, it must pay a fine of Rs 100 per day.

The lender will have 21 days, and the credit bureau will have 9 days. If the bank fails to inform the credit bureau within 21 days, the bank will face a penalty. If the complaint is unresolved 9 days after the bank shares the information, the credit bureau will be penalized.

Customer Notification for Credit Report Checks

One of the significant changes introduced by the RBI is the mandatory notification to customers whenever their credit report is checked by a bank or a Non-Banking Financial Company (NBFC). This move aims to enhance transparency and keep borrowers informed about their financial inquiries.

Previously, many customers were unaware of when and how often their credit reports were being accessed, potentially leading to unauthorized checks. Now, credit information companies are required to notify customers via SMS or email whenever their credit report is accessed. This ensures that borrowers are always in the loop about their credit status and can quickly address any discrepancies or unauthorized checks.

Reasons for Loan or Credit Request Rejection

Understanding why a loan or credit request has been rejected can be frustrating for many borrowers. To address this issue, the RBI has mandated that banks and NBFCs must provide a clear and detailed explanation for any rejections.

This new rule helps borrowers understand the specific reasons behind their rejection, whether it’s due to a low credit score, insufficient income, or other factors. By receiving this information, borrowers can take corrective actions, such as improving their credit score or addressing other issues, to enhance their chances of approval in the future.

 Free Full Credit Report Annually

In a bid to empower borrowers with better financial awareness, the RBI has instructed Credit Information Companies (CICs) to provide a “Free Full Credit Report” (FFCR) once every calendar year.

This initiative ensures that every borrower has access to their complete credit report without any charges, allowing them to monitor their credit health regularly. The credit company must send a link to their website where customers can easily access their full credit report. This not only promotes financial literacy but also helps in early detection of any discrepancies or fraudulent activities on their credit report.

Pre-Default Notification to Customers

Another borrower-friendly rule introduced by the RBI is the pre-default notification. The central bank has directed credit companies to inform customers when they are about to default before it is reported to the credit bureau.

This proactive measure is designed to give borrowers a heads-up and an opportunity to address their financial issues before they impact their credit score. Such notifications should be sent via SMS or email, ensuring that customers are promptly informed and can take necessary actions to avoid defaulting on their loans.

Streamlined Complaint Resolution Process

The RBI has also focused on improving the complaint resolution process related to credit scores. Banks and lending institutions are now required to appoint a nodal officer who will be responsible for resolving credit score-related issues.

If a customer’s complaint is not resolved by the credit information company within 30 days, the company will face a fine of Rs 100 per day. The complaint resolution process has been further streamlined with specific timelines: the lender has 21 days to address the issue, and the credit bureau has an additional 9 days to resolve it after receiving information from the bank. Failure to adhere to these timelines will result in penalties for the respective institutions, ensuring a more efficient and borrower-friendly resolution process.

You might also be interested in – RBI transfers 1 lakh kg of gold from UK to India, marking the first move of this scale since 1991.

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