The Reserve Bank of India (RBI) has issued directives to credit information companies (CICs) to create a standardized Data Quality Index (DQI) for both commercial and microfinance sectors. CICs play a vital role in collecting and managing public data, credit transactions, and payment histories of individuals and companies, forming the basis for credit reports and scores used by banks and financial institutions to assess creditworthiness. Currently, India has four licensed CICs, with Credit Information Bureau (India) Limited (CIBIL) being the largest. CIBIL’s credit scores, known as CIBIL Transunion scores, are widely used by lenders to evaluate loan and credit card applications.
Facts/Terms for UPSC Prelims
- Credit Information Companies (CICs): CICs are entities licensed by the RBI to collect and compile credit-related data from various sources, aiding banks and financial institutions in assessing the creditworthiness of borrowers.
- Credit Information Companies Regulation Act, 2005 (CICRA): CICRA is the legislative framework governing the operations of CICs in India, with regulations set by the RBI.
- Credit Score: A credit score is a three-digit numeric summary of an individual’s credit history, with higher scores indicating better creditworthiness. In India, CIBIL Transunion scores are commonly used.
- TransUnion: TransUnion is a multinational group that CIBIL India is a part of. It operates credit bureaus and provides credit information services worldwide.
- Data Quality Index (DQI): The DQI is a standardized measure aimed at assessing and improving the quality of data maintained by CICs, ensuring accuracy and reliability in credit reports and scores.
