How The Credit Information Companies (Regulation) Act, 2005 was formed?

To reform NPA under Credit Risk Management in banking sector, it is essential to collect Credit Information of borrowers as a first step and In this context the requirement of an adequate, comprehensive and reliable information system on the borrowers through an efficient database has been felt by Reserve Bank of India, the Central Government, Credit Institutions and other players in banking and financial sector. Thus, the Reserve Bank of India has constituted a Working Group to explore the possibility of setting up a Credit Information Bureau. The Working Group submitted its report in October, 1999 and recommended amongst other things.   The Working Group observed that it would not be possible to set up a world class Credit Information Company within the existing legal framework.  
  • Enactment of legislation for facilitating collection and sharing of information by the proposed bureau.
  • To amend certain Acts relating to banking to permit sharing of information with the said bureau.
  Thus, A Credit Information Bureau (India) Ltd being a company formed and registered under the Companies Act, 1956 has already been set up in January, 2001. With a view to provide necessary legislative support to the business of credit information, it is proposed to enact legislation, namely, the Credit Information Companies (Regulations) Bill, 2004 for regulation of Credit Information Companies and to facilitate efficient distribution of credit. The Bill, contains provisions for –  
  • Prohibition to commence or carry on business of credit information without obtaining a certificate of registration from the Reserve Bank of India;
  • Procedure for making application for grant of certificate of registration, grant of certificate of registration, cancellation of certificate of registration and appeal against order of rejection of an application for grant of certificate of registration and cancellation of certificate of registration;
  • Requirement of minimum capital;
  • Management of credit information companies;
  • Conferring power upon the Reserve Bank of India to determine policy in relation to functioning of credit information companies and also giving directions to credit information companies and other players in the business of credit information;
  • Functions of credit information by credit information companies;
  • Collection and furnishing of credit information companies;
  • Powers and duties of auditors;
  • Obtaining of membership by credit institutions of credit information companies;
  • Information privacy principles;
  • Alterations of credit information files and credit reports;
  • Regulation of unauthorized access to credit information;
  • Offences and penalties;
  • Obligations as to fidelity and secrecy;
  • Resolution of disputes between credit institutions and credit information companies or between credit institutions and their borrowers;
  • Exemption from any or all the provisions of the proposed legislation to any credit information company or credit institutions;
  • Amending certain enactments specified in the Schedule to the Bill so as to permit disclosure of credit information under the proposed legislation.
At last, The Credit Information Companies (Regulation) Bill having been passed by both the Houses of Parliament on 23rd June, 2005. It came on the Statute Book as THE CREDIT INFORMATION COMPANIES (REGULATION) ACT, 2005. In 2011 the act was amended and launched again as a CIC Act 2011.

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