A Credit Information Company popularly known as credit bureau collects the credit information from banks and other lenders, prepares a credit history, compiles credit scores and thereafter provides the information on a particular proponent to the lender for a fee. Credit Information companies provide credit report to banks and institutions on the creditworthiness of customers. Based on that information the bank or the institution can easily take a decision, whether they should lend money to that individual or not. Banks, RRBs, Co-operative banks, NBFC, Public Financial Institution, Housing Finance Institution etc. are usually the customers of Credit Information Companies. This credit report plays a very important role as it helps banks and other financial institutions determine the creditworthiness of an individual applying for a loan or credit card.
Credit Information Companies are governed by the Credit Information Companies (Regulation) Act, 2005 and various other rules and regulations issued by the Reserve Bank of India. The Reserve Bank of India has given approval to four entities to set up credit information companies. The four entities that received approval were
- Credit Information Bureau (India) Limited: Credit Information Bureau (India) Limited is the first Credit Information Company in India. CIBIL was incorporated in August 2000 based on the recommendations made by the Siddiqui Committee. It prepares credit information reports for individuals as well as corporate entities. CIBIL is owned by TransUnion International Inc. CIBIL has more than 500 members including more than 200 cooperative banks. The CIBIL credit score varies from 300 to 900. A CIBIL score of 900 is the least risky while a score of 300 is extremely risky.
- Experian Credit Information Company (India) Private Limited: It is a joint venture with seven leading financial institutions viz. Axis Bank, Union Bank of India, Punjab National Bank, Federal Bank, Indian Bank, Sunderam Finance and Magma Fin Corp. It received the certificate of registration in August 2010. Experian has emerged as the second bureau in India after several years of monopoly of CIBIL. Experian helps the financial institutions in managing the credit risk, prevent fraud, and also automate the decision making. Recently it has launched a fraud prevention tool called as ‘Hunter’. This tool enables the bank and other member lending institutions for early detection of fraudulent applications.
- Equifax Credit Information Services Private Limited: It is a joint venture between Equifax, a global player in the information solution and six leading financial institutions viz Bank of India, Bank of Baroda, Union Bank of India, Religare Finvest, Sunderam Finance and Kotak Mahindra Prime. The RBI granted the license to Equifax in March 2010 and it started the operation in Sept 2010. It has more than 150 member banks. Equifax has worked with Microfinance Institutions network, through this a micro finance bureau has been set up in June 2011. Commercial banks can manage their risk in micro finance business through Equifax solutions.
- High Mark Credit Information Services Private Limited: It is a joint venture between State Bank of India, Punjab National Bank, Citi Bank, SIDBI, Edelweiss and Shriram City. It received the certification of registration in November 2010. High Mark has data base of credit information of individuals belonging to tier three and tier four cities/towns. This data base is of immense use to bankers and other lending institutions as the data pertains to a vast untapped market.
According to RBI instruction, every lending institution have to be member of at least one credit information company and they should submit data pertaining to all individuals and entities availing loan/credit card regularly to the concerned credit information company.