Monday, 17 September 2012

CIBIL- Credit report - A growing monster or saviour? - Part 2

the part 1 of this post could be accessed here 

Brief history
CIBIL was set up in 2001 to reduce the number of NPA's the banks were facing by providing apriori information of the prospective borrower's payment pattern by studying his previous loan track records.  Earlier these records were not available centrally but with the formation of a central bureau and the directives of RBI to all banking institutions to report credit related data to this bureau, the bureau became a central repository.
the brief history could also be accessed here

CIBIL was setup with honourable intentions - no doubt. But the problem was in its execution.  Though the bureau was setup in 2001, many people were not aware it even after a decade.  Even after a decade of its existence, the bureau was not willing to acknowledge the individual customer (it does now in 2012) and the banks were equally uncooperative.  The problems that arose were the following:-

1.  Many times a customer may have defaulted on payment on the due date but the banks always charged the customer penal interest on the default(which in some cases like credit cards goes upto 42%)!!! So if a customer had paid the defaulted amount along with interest, why should the delayed payment be held against him, as the bank only made a profit in this case.

2.  Next,  who authorised them to charge upto 42% penal interest? Are they modern day money lenders of yore? They first inflate the penal interest amount by charging an exorbitant rate of interest and secondly caluculate compound interest (i.e interest on interest unpaid).  Thereafter, their representatives get in touch with the customers and offer them a settlement by reducing a large amount of interest, as if they are doing a favour (whereas the bank actually gets more than the normal 16-18% interest).  And as a final kick to the customer, they also report this reduction as 'written off' to CIBIL.

3. In many cases, even after the payments were made, they were never reported or reported incorrectly.

4. Isnt it the responsibility of the bank to inform the customer that they would report the matter to CIBIL despite them giving a 'No Dues Certificate' to the customer, when going in for a settlement!!!

In My opinion the following are the important issues that must be addressed by RBI before CIBIL is given a free reign in our country.....

1.     CIBIL must maintain only verified database.  If CIBIL cannot have all the database verified then they must have two levels of weightage i.e the unverified scores should have lesser weightage than the verified ones.

2.     The ownership pattern of CIBIL may be relooked into. If all that we want is a Credit bureau, then why should we have a foreign institution carrying out the same for us (even though in conjunction with other indian banks). The security of all the data involving crores of indians could be at stake.  Indians, I am sure are sufficiently competent at a simple job of record keeping and we surely dont need foreign support for the same!!!!

3.   Accountability of banks - Unless banks are held accountable for the errors in reporting or not informing the customer of CIBIL reporting prior initiating settlements, the customer would be put to a tremendous amount of hardship.  As in our story, Ramesh gained 25,000 rupees but lost more than 55,000 rupees plus the oppurtunity to buy the flat of his dreams.  A well informed Ramesh would not have gone in for the reduction of 25,000 rupees from his personal loan settlement.  Shouldn't the onus of informing the customer rest on the lending bank?

4.   After initiating a settlement and issuing a 'No Dues Certificate' to the customer - how can a bank report him to CIBIL as a defaulter?

5.   When the credit card company (owned by banks in most cases) had charged a penal interest upto 42% on the defaulted amount and made the customer pay for it, how can they report the customer to CIBIL as a defaulter? Hadn't the bank made a killing in the deal? How can they actually 'kill' the customer in two ways i.e once by charging 42% penal interest and the again by reporting him to CIBIL?

5.   The scene gets even more scary when one reads the reported ideas of Mr Thukral who is the MD of CIBIL.  He apparently wants to rope in Telecom and insurance sectors into the CIBIL reporting.  Have a good look at him here-
Mr Thukral wants to make more money for his company as any right thinking MD should.  But he does not seem to be worried about how his expansion plans are going to hurt the common man!!! Any common man would know that the Telecom companies fleece the consumers in many ways!!! Inflated bills, incorrect bills, unexplained call drops (forcing you to repeatedly call and pay more), excess data charges -- all these cases require protracted fighting with the Telco and finally they reduce a part of the charges without accepting their guilt.  I am sure most of us have come across atleast one such situation.  Now what if all the Telco's start reporting all this incorrect data to CIBIL? 

Coming to insurance, if you dont pay insurance premium, you lose the No claim bonus. Why should CIBIL be interested in that data and brand you as a irresponsible borrower or the like? Again it is a double blow because - on one hand you lose the NCB and on the other CIBIL would brand you bad!!!

6. CIBIL already had companies in its list (Company credit report) We all know how faulty the credit reporting..The recent S&P downgrade of US debt is a good example and the full story can be accessed here

Therefore We know Credit rating agencies are not cleansed in milk (to borrow an indian saying) and they are susceptible to all kinds of back door manoeuvring.  

But, our contention is to let the ordinary common man survive!!! Dont show all your might on this simple Guy!!! Get after the banks to make them more responsible while lending and also while reporting upon individuals so that only the genuine facts are reported. Banks must be made to take responsibility for incorrect reporting.  CIBIL also cannot wash off their hands.

Lastly, why should i pay for my credit report? Firstly, you are collecting information about me (isnt it violation of privacy - any lawyer please tell me) and thereafter selling the information to me for four hundred and seventy rupees!!! Isnt this a joke? And there are many guys on the net advising that everyone should check their credit score. considering that there are about 16 crore individual credit records with CIBIL, IS THIS ANOTHER SCAM IN THE MAKING? because the total amount even if all of them apply once amounts to 7500 crores. India having a population of over 100 crores (and considering everyone takes a vehicle/house/personal loan in their life) you can see how much money is going to flow into the coffers of CIBIL in the years to come!!!

THAT BRINGS US TO THE OLD POINT. if its such a crucial and profitable venture why isnt the government taking it on?

(......To be concluded)


  1. I think this is the best blog I have been through all this day.

  2. thank U David. Its appreciation like this that keeps us going and the strong will to highlight everyday issues which are affecting each one of us common people.

  3. a bank will do this when you apply for a credit card If you have too many inquiries then you should hold off on applying until some time has passed. visit my website

  4. How Do I Check My Credit Score Over the last few decades your credit report has taken on a larger significance in your life

  5. Your blogs and information attracts me to come back again n again.

  6. I wonder after read this article because it's provide us very good information about cibil report thanks for share it dude.

  7. Ultimately, the choice is ours. We can be slave to big banks and corporations or live with dignity.
    What is needed is a lifestyle change. We can:
    1. Stop borrowing unless you absolutely need it - Say no to Credit Cards for Shopping - Forget the little perks, in the end you lose more.
    2. No Impulse Buying
    3. Buy More Gold (Don't listen to Governments, they lobby for big banks)
    4. Buy National Savings Certificates and save in PPFs
    Everybody at one point in their lives can forget an EMI, or make late payment. Then you fall in the CIBIL trap and rue why you had taken the card in the first place. They get an unnecessary control over their lives.
    5. Have yourself thoroughly insured
    Why let anybody judge you for credit worthiness or any damn worthiness? Anybody judging you should earn the right to judge you. CIBIL hasn't earned it. Nor have the banks. In fat, the banks have cheated you by selling information about your financials without informing you. Unfortunately, the banks control the government and nobody gives a damn about your civil rights.
    And what when banks fail. Governments bail them out with our money. No one talks about worthiness then.

  8. My loan was rejected. Credit Sudhaar was my choice. Initially they were slow. But their counsellors were able to handle all my queries. I will give Credit Sudhaar a positive review

  9. Hi,

    I am a defaulter in CIBIL. I had used few credit cards and dint pay them for years due to my personal reasons. Now I am very much worried about clearing it. I do not want any loan or credit card at all, but I want to get my cibil score up. Currently it is 575 as i have bought cibil score recently. I tried with few credit score agencies, but I am really not comfortable with the reviews I see from people who have already tried them. Is there anyone or any contact who can help me clear it. I am ready to pay and clear everything off.

    Please suggest

    Name: Pradeep
    Phone: +91 8105313333
    Location; Bangalore
    Email ID:

  10. Credit Sudhaar one of the best credit health improvement company in India, so you can get our services at affordable price. To read more about credit repair click here

  11. Dear Pradeep,

    575 is a bad score and its little difficult for you to get any unsecured credit card at this moment. Your credit report will show your past credit history. As of now stop applying for credit card as there will be too many rejection and enquiries seen.

    I would rather advise you to apply for a secured credit card and use it in a proper manner. Create a new repayment history. secured credit card is given to you against a fixed deposit for a particular tenure. Once the tenure is finished the fixed deposit gets mature and you also earn a interest on it and your credit card gets cancelled.

    Secondly, would advise you to consolidate your credit card debt and then apply for a personal loan to clear the outstanding balances.

    You also have an option of Gold loan. You can apply for a Gold loan to repay your debts. I am sure that your loan would not get rejected.

    To know moew about improvising your credit score you can visit

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