Bad news for fintech firms: RBI restricts consumer data

Bad news for fintech firms: RBI restricts consumer data

Reserve Bank of India (Photo by Reuters)

Reserve Bank of India has asked commercial banks and non-banking lenders to restrict the provision of access to consumer data to unregulated entities, held by credit bureaus, according to a report by The Economic Times.

Presently, the Fintech firms have authorised access to the data directly from credit information companies, without seeking the consent of the customers, the report said.

Many Fintech companies and start-ups rely on these data to evaluate customers while they applied for loans through them and even have based their business models on it, ET reported.

Online marketplaces, such as SIDBI’s PSB Loans in 59 Minutes platform, could be impacted due to the restriction, industry sources told ET.

RBI issued a letter to NBFCs and other banks, mentioning that they had come across that many banks had appointed agents who were permitted to access the credit information companies database.

This is against the Credit Information Companies (Regulation) Act, 2005 (CICRA), it said and warned of penalties if any of the regulated entities violated its order, as the credit information is to be kept in confidence.

According to the CICRA, every retail loan should be reported to all four credit bureaus by the banks and NBFCs. The consumer's repayment behaviour need to be updated to the bureaus as well.

RBI has given 15 days to inform them regarding the steps taken to put a cork on this issue. 

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