so far, we only had Credit Information Bureau (India) Limited (CIBIL) doing personal credit rating and it was often unfairly blamed when lending agencies reported or mis-reported delinquent borrowers. On 19th April, the RBI granted long-pending clearance to three more credit bureaus out of 13 applicants. CIBIL’s licence was also confirmed. The new ones would be Highmark, Experian and Equifax. While Highmark is a start-up, the other two are big global names. Last year, Moneylife subscribers raised a pertinent issue at our workshop on individual credit bureaus (Moneylife 19 June 2008). They said that consumers have a harrowing time when banks wrongly report them to credit bureaus. Will more credit bureaus multiply their harassment? The RBI is now very proactive about consumer protection in almost every segment of retail financing. The two latest initiatives include a diktat that customers cannot be charged for using other banks’ ATMs and more transparent housing finance rates. Competition among the rating agencies will lead to better services and more disclosures regarding rating scores.
This does not mean that consumers would have a say on what their credit score should be but they can probably take steps to improve the score through prudent borrowing and timely repayments. Some credit bureaus also allow customers to access their ratings and post information about a short-term job loss or illness that may have temporarily affected their score.
Given that CIBIL has a big lead, the new agencies can catch up by offering better services to the lender as well as the consumer. Hopefully, this will lead to a concerted attempt to increase financial literacy and extend access to new market segments (informal sector workers, traders, etc) that are creditworthy but forced to borrow at usurious rates because they are ignored by the formal banking system.