What changed
Previously, cancelled entities could not report to CICs, leaving borrower repayment history unupdated. Now, such entities are treated as 'Credit Institutions' under CICRA Section 2(f)(vii) and must continue reporting. CICs cannot charge them annual or membership fees and must tag them as 'Licence Cancelled Entities'.
What it means for you
Borrowers of cancelled lenders will no longer suffer from incomplete credit histories, aiding their access to new credit. Lenders must ensure their systems can continue reporting post-cancellation, and CICs must update tagging and fee waivers within six months.
What you must do
- Update internal systems to continue reporting credit data to all four CICs after licence cancellation until loan lifecycle ends or entity is wound up.
- Ensure access to Credit Information Reports is limited only to borrowers onboarded before cancellation.
- Coordinate with CICs to implement the tagging as 'Licence Cancelled Entities' based on RBI's public orders.
- Review existing cancelled entities and apply this mechanism retroactively as per the circular.
Who it affects
Commercial banks (including SFBs, LABs, RRBs, excluding Payments Banks), Primary Urban Co-operative Banks, State Co-operative Banks, Central Co-operative Banks, Non-Banking Financial Companies (including Housing Finance Companies), Asset Reconstruction Companies, Credit Information Companies
Will borrowers of a cancelled NBFC still have their repayment history updated?
Yes, the cancelled entity must continue reporting to CICs until the loan is fully repaid or the entity is wound up, so borrower repayment history will be updated.
Do cancelled entities have to pay fees to CICs under this new mechanism?
No, CICs shall not charge annual or membership fees from these entities.
Does this apply to entities whose licence was cancelled before this circular?
Yes, the provisions apply retroactively to all entities whose licence or CoR was cancelled prior to the circular's issuance.