RBI raises data updation bar for banks, credit info firms

  • October 27, 2023
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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RBI raises data updation bar for banks, credit info firms

Subject: Economy

Section: Monetary Policy

Context: RBI comes out with Framework for compensation to customers for delayed updating/ rectification of credit information.

Key Points:

  • Credit institutions (CIs) and credit information companies (CICs) will have to compensate complainants at the rate of ₹100 per day in case their complaint regarding delayed updating or rectification of credit information is not resolved within 30 days from the date of the initializing of the complaint, according to the RBI.
  • RBI released a circular on “Framework for compensation to customers for delayed updating/ rectification of credit information”.
  • Provisions:
    • Compensation to be provided by the CIs (such as banks) or CICs to the complainant for delayed resolution beyond 30 days of filing the complaint should be apportioned proportionately among the CIs or CICs concerned.
    • The compensation amount shall be credited to the bank account of the complainant within five working days of the resolution of the complaint.
    • The complainant can approach the RBI Ombudsman under the Reserve Bank Integrated Ombudsman Scheme, 2021, in case of wrongful denial of compensation by CIs or CICs.
    • In cases of wrongful denial of compensation which are yet to be covered under the Reserve Bank Integrated Ombudsman Scheme, 2021, the complainant can approach the Consumer Education and Protection Cell (CEPC)
  • The Credit Information Companies (Regulation) Act, 2005 (CICRA, 2005) and  Credit Information Companies Rules, 2006 provide the CI and the CIC, collectively, with an overall limit of 30 days to resolve or dispose of the Complaint.
  • CI would get 21 days, and CICs would effectively get the remainder of nine days for complete resolution of the complaint.
Credit institutions (CIs) and credit information companies(CICs)

  • Credit Institutions are the banks and other finance/non finance companies that are in the business of lending credit.
  • The Credit Information Company collects financial information about all the individuals and forms a credit report based on their financial history.
  • 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 with them

Reserve Bank Integrated Ombudsman Scheme, 2021

  • Reserve Bank of India (RBI) integrated its three erstwhile Ombudsman Schemes viz. (i) the Banking Ombudsman Scheme, 2006, (ii) the Ombudsman Scheme for Non-Banking Financial Companies, 2018, and (iii) the Ombudsman Scheme for Digital Transactions, 2019, into one Scheme – ‘The Reserve Bank – Integrated Ombudsman Scheme, 2021 (the Scheme / RB-IOS, 2021)’ with effect from November 12, 2021.
  • The Scheme simplifies the grievance redress process at RBI by enabling the customers of Regulated Entities (REs) like banks, Non-Banking Financial Companies (NBFCs), Payment System Participants (PSPs) and Credit Information Companies to register their complaints at one centralised reference point.
  •  The objective of the Scheme is to resolve the customer grievances involving ‘deficiency in service’ on part of REs in a speedy, cost-effective and satisfactory manner.
  • RB-IOS, 2021 covers all commercial banks, Non-Banking Financial Companies (NBFCs), Payment System Participants, most Primary (Urban) Cooperative Banks, and Credit Information Companies.

Alternate Grievance Redress (AGR) Framework

  • The AGR Framework of RBI comprises RBI Ombudsman (RBIOs), Consumer Education and Protection Cells (CEPCs) and CEPD.
  • The RBIOs function under the framework of RB-IOS, 2021.
  • The CEPCs take up complaints against REs not falling under the ambit of RB-IOS, 2021.
  • CEPD provides assistance to the Appellate Authority (AA) under the RB-IOS and processes the appeal cases.

Consumer Education and Protection Cell (CEPC)

  • Customer protection, one of the developmental roles of RBI, is undertaken through the Consumer Education and Protection Department (CEPD).
  • It functions from Regional Offices of the RBI.
economy RBI raises data updation bar for banks