What changed
Earlier, banks had to include a consent clause in loan documents to report credit information to CICs. With the CIC Act, 2005 coming into force from December 14, 2006, this consent is no longer legally required. RBI has now explicitly advised banks to stop insisting on the consent clause prescribed in earlier circulars.
What it means for you
Banks can now share credit data with CICs without needing explicit borrower consent, streamlining reporting processes. This reduces documentation burden and ensures more comprehensive credit histories, aiding better risk assessment. However, banks must still comply with the CIC Act's conditions for data sharing.
What you must do
- Remove the consent clause from all new loan/credit documents immediately.
- Update internal policies and reporting procedures to align with the CIC Act, 2005.
- Train staff on the revised process for submitting credit information to CICs.
- Review existing loan agreements to ensure no outdated consent clauses remain in use.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), All India Financial Institutions, Credit Information Companies (CICs), Borrowers (no longer need to provide separate consent)
Does this circular apply to Regional Rural Banks (RRBs)?
No, the circular explicitly excludes RRBs from its scope.
What happens to existing loan documents that already have a consent clause?
The circular advises that banks need not insist on the consent clause going forward, but existing documents are not invalidated. Banks should focus on new agreements.
Is there any condition under the CIC Act for sharing credit information?
Yes, the CIC Act provides statutory backing for sharing credit information subject to conditions stipulated in the Act and its rules. Banks must comply with those conditions.