Government Issues Clarification on Banks’ Misuse of CIBIL and Credit Scores

The Government of India has responded to rising concerns over the misuse of CIBIL scores and credit information by banks and NBFCs, as per news reports. New guidelines issued by the RBI focus on improved transparency and robust grievance redressal systems to safeguard consumers’ interests.

RBI Reinforces Regulations on Credit Agencies and Banks

TransUnion CIBIL and other credit information companies (CICs) are regulated under the Credit Information Companies (Regulation) Act, 2005. The Reserve Bank of India (RBI) oversees the functioning of these agencies, enabling policy formation around data collection, processing and sharing of borrower information.

 All CICs must retain credit data for at least 7 years as per the Credit Information Companies Regulations, 2006. Banks and financial institutions are also required to comply with these norms strictly.

Consumer Protection Measures Strengthened

Amid increasing complaints of score misuse, the RBI has included CICs under the Reserve Bank – Integrated Ombudsman Scheme (RBIOS). This allows consumers to file complaints in cases of service deficiencies. Additionally, every CIC must now provide 1 free detailed credit report with a credit score each year to individuals.

Read More: RBI Guidelines Ensure Multilingual Communication And Faster Grievance Redressal By Banks!

Mandatory Alerts and Internal Review Systems

As per the Master Direction on Credit Information Reporting, 2025, institutions must alert customers through SMS or email whenever their credit report is accessed or updated with default data. CICs have been instructed to appoint an Internal Ombudsman and provide compensation for delays in rectifications. CICs and credit institutions are also expected to conduct Root Cause Analysis of grievances biannually to ensure service improvements.

Government Responds to Parliament Queries

In response to Lok Sabha Question No. 3456 on August 11, 2025, the Ministry of Finance reiterated the legal authority of the RBI under CICRA. The statement confirmed receipt of multiple complaints relating to misreporting and called attention to the strengthened oversight mechanisms introduced through the 2025 directive.

Conclusion

The Government’s clarification and RBI's reinforced regulations aim to restore public trust in the credit reporting system. Mandatory alerts, grievance mechanisms, and regulatory oversight are steps towards ensuring credit score transparency and data security for individuals.

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