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10% cap for foreign investors in credit info cos
THE government is planning to make it mandatory for foreign investors to report to RBI whenever they acquire more than 1% in a credit information company. Also, no single entity would be allowed to hold (directly or indirectly) more than 10% in such a company. Besides imposing these conditions on credit information companies, the government may also cap FDI limit in the companies at 49%, bringing it down from existing 100%. The policy on investments in credit information companies would not be scrutinised every year as opposed to earlier view of reviewing it annually. The Cabinet is likely to consider the policy as part of the yearly FDI review soon. The government is adopting a cautious approach with regard to these companies as they would be handling highly-sensitive credit data. Companies wishing to undertake this business will have to take prior approval of RBI. According to this view these companies were covered under the 19 specified activities in which 100% FDI was allowed on automatic route. The 19 activities include credit card business and credit reference agencies, and the initial view was that the credit information companies would also get covered under this norm. However, it has now been that this activity could not be clubbed under the 19 activities and a new guideline was needed. The Credit Information Act, which was passed in May 2005, came into force last year, has defined the legal framework, within which credit information bureaux can collect, process and share credit information on borrowers of banks and FIs. Under the act, consumer data cannot be shared across sectors such as In India, Credit Information Bureau (India) or CIBIL, which was incorporated in 2000, was the first to enter the credit information market. With growing consumerism, credit information market has grown tremendously and more players, including credit rating agencies, are eyeing the market