Under the existing legal framework, the disclosure of information on (a) suit-filed accounts and b) such transactions where the constituent has given consent for disclosure is permissible. Disclosure of credit information other than the aforesaid two categories would not be permissible unless legislation for the purpose is brought into force.

Publication of credit information by CIBIL or disclosure thereof to CIBIL, in absence of special legislation, or without obtaining requisite consent of the respective constituent, would not be permissible as per the existing laws.

• The Working Group recommends that under the existing legal framework, CIBIL or any other CIB may collect, process and disseminate credit information relating to;

• suit-filed accounts regardless of amount claimed in the suit or amount of credit granted by a banking company or a credit institution; and

• such transactions where the constituent has given consent for disclosure for such purpose.

The Group suggests that the Reserve Bank of India may direct all banks to render necessary assistance to CIBIL.

It is necessary and desirable that the existing legal framework is considered by the Reserve Bank of India and based thereon an appropriate direction to all the banks is issued with a view to;

• reiterate the position that disclosure of credit information in respect of suit filed accounts could not be construed as breach of bankers' obligation to maintain secrecy with respect to affairs of their constituents; and

• that on receipt of requisition from the CIBIL or any other CIB for furnishing credit information relating to suit filed accounts or accounts in respect whereof the constituent has given consent, banks should comply with such requisition.

The Group recommends that Reserve Bank of India may also consider issuing appropriate directions in terms of Section 35A of Banking Regulation Act,1949, to all the banking companies governed by said provision, to take steps to impress upon their borrowers/guarantors to give consent for disclosure of credit information relating to their loan accounts to CIBs.

While it would be open to CIBIL or any other CIB to undertake functions relating to credit information as above, till enactment of an appropriate legislation in respect of their establishment, functioning and regulation, it would be necessary for them to also evolve and adopt a code of conduct relating to;

• functions of a CIB ;

• information Privacy Principles; and

• other aspects incidental to their such functions.

The Working Group, therefore, recommends that such code of conduct may be framed and adopted by CIBIL or any other CIB (to undertake functions relating to credit information as referred to above) on the lines of broader aspects as included in the proposed draft legislation i.e. "The Credit Information Bureaus Regulation Bill"

There is a likelihood of suit, prosecution or other legal proceedings being filed against a CIB, or the staff and officers of the CIB or its members (banks, credit institutions and other credit granters), or the staff and officers of the members of a CIB, for any damage alleged to have been caused or likely to be caused, in respect of anything done in good faith or intended to be done by the CIB or its members, in discharge of their functions, in relation to collection, furnishing or dissemination of credit information. In such eventualities, CIB and its members would be required to defend the same as per the general law as there would be no statutory protection for them till the same is provided by way of including a substantive provision in the legislation to be enacted in respect of establishment, functioning and regulation of CIBs.

The Group observed that while some modalities could be adopted as a base to begin with, for limited operations of a CIB, such modalities cannot be a substitute for a special legislation. It is imperative to put in place an enactment containing substantive provision relating to other aspects viz., resolution of disputes between credit institutions and credit information bureaus or between credit institutions and their borrowers, licensing/supervision and regulation of credit information bureaus, vesting of powers in designated authorities under the Act for adjudication and redressal of grievances of any party and various other aspects because existing legislations in force in India do not cover such aspects relating to credit information bureaus. The Working Group, therefore, recommends the enactment of an appropriate legislation by Government of India expeditiously, in consultation with RBI

The Working Group is of the view that the immediate objective for CIBIL, at this stage, is to obtain essential information based on the existing data base system on suit-filed accounts with the Reserve Bank and to provide a comprehensive and refined delivery process to banks/FIs. Effective and efficient dispensation of credit information makes it imperative for CIBIL to be equipped with 'state-of-the-art' IT systems.

However, customisation of software of banks for compatibility with the application systems of Credit Information Bureau would be essential as it would facilitate on-line supply of information to the members of the Bureau. The Group recommends that Reserve Bank should issue necessary instructions to the banks to keep data ready in the formats as devised by CIBIL for operationalisation of data collection in respect of all suit-filed accounts of Rs. 10 lakhs and above in the said formats by September 2002.

The Group agrees with the present levels of information as a starting point and recommends that the software should also be flexible to provide for enhanced and additional search options pertaining to bank branch address, line of business, company address, suit filed details, shareholding information, names of directors, guarantors, etc.

The Group agrees that the application software provided by Dun & Bradstreet, technical partner of CIBIL, would allot a unique D-U-N-S (Data Universal Numbering System) number for each commercial borrower and for individual borrowers, CIBIL in consultation with its partner, Trans Union will examine the scope for allotting a unique number, if it is found that accurate segregation of borrowers' identification is not possible on the basis of combination of various identification numbers

The Group is of the view, that in future, the system should be able to provide the necessary links to other sites which would give additional information on the borrowers. The software could also be customised to have the capability to retain historical data.

The Group recommends that the modalities for operationalisation of CIBIL could be phased in three stages. The first stage should be as under:

1. Suit-filed Accounts

   1. The existing data base system on suit-filed accounts with the RBI has to be taken over by CIBIL which may disseminate the same to banks/FIs through a comprehensive and refined delivery process with effect from 31 March 2002. Thus, RBI will not publish or publicise on internet any list thereafter.

   2. The first phase would cover credit information of suit-filed accounts of Rs.1 crore and above and suit-filed accounts of willful defaults of Rs.25 lakh and above (presently dealt with in RBI).

   3. In the second phase, the cut-off point of suit-filed accounts should be lowered to Rs.10 lakh as in the case of limits fixed for arbitration by DRT. This may be brought in force with effect from September 2002. Banks already have detailed information in this regard and compilation of data in prescribed form should pose no difficulty.

   4. Simultaneously, CIBIL could also collect data in respect of all borrowers whose accounts are NPAs and who have given consent to the banks for disclosure, with effect from September 2002.

   5. With a view to increasing the CIBIL's access to borrowers' information, RBI should make it mandatory for all banks to incorporate the consent clause for disclosure of full credit information in the case of all credit limits of Rs.10 lakh and above by September 2002. As the number of accounts in this category is manageable, the process should be expedited. The Group recommends that this should ideally be completed by September 2002. CIBIL could thereafter enlarge its coverage appropriately in the third and last phase.

   6. CIBIL's delivery capability would be significantly enhanced, once progress is made by banks/notified FIs to obtain consent of borrowers to the maximum extent possible in a sustained manner. The coverage would be extended to borrowers of the financial system even below Rs.10 lakh and the enactment of the CIB legislation would complete the process of establishing CIBIL as a full-fledged Bureau.

   The Working Group endorses the above road map and recommends appropriate follow-up action by banks/notified FIs/RBI.

2. Format

   1. The Group observed that there is a need to enlarge the present format. The Group recommends that in case of suit-filed accounts and accounts where consent of the borrowers has been obtained for divulging information, particulars regarding directors can also be included. Banks can indicate independent/nominee directors separately in the suit-filed accounts as per the RBI instructions issued in December 2001.

   2. An additional column should be provided in the formats for including the names of guarantors to the credit facilities including corporate guarantors and their directors, while reporting the particulars of the defaulting borrowing companies/borrowers in the list of suit filed accounts. Name/s of the Central/State Governments which have guaranteed the credit facilities to their undertakings should also be reported in the above column

3. Periodicity

   Under the new dispensation, the Group recommends that the complete up-dated list of suit-filed accounts may also be made on a quarterly basis in the initial stage by CIBIL in arrangement with banks and notified FIs. This may be displayed on the internet instead of regular publication. In any case, CIBIL is expected to go on line at the appropriate stage and should devise procedures for continuous updation of data.

The Group observes that presently, the coverage of list published by RBI is confined to banks and notified FIs. The Group recommends that CIBIL can extend this coverage to non-banking financial companies as defined under Section 45 I (f) of the Reserve Bank of India Act, 1934, State Financial Corporations constituted under the State Financial Corporation Act, 1951, companies engaged in the business of housing finance, credit card, debit card and other similar cards and any other institution that the Reserve Bank may specify from time to time.

The Group decided that as the concept of Group companies posed a problem due to lack of clear definition of the concept, CIBIL may not classify Groups on its own, but leave it to the banks themselves in this regard.

The Group examined whether the information on default in debt servicing of loans/bonds guaranteed by the State Governments could be mutually exchanged amongst banks and Financial Institutions through the Credit Information Bureau so as to alert them on the possible risks of further financing on the basis of the guarantees of such State Governments.

The Group felt that the ground rules of level playing field, require no distinction between State Government guarantees and other forms of corporate guarantees after default. In cases where consent has been obtained from the borrowers for sharing of information in the event of default and in cases where suit has been filed against the concerned Government undertaking there should be no reservation on disclosure to others of such default.

The Group recommends that the banks/Financial Institutions which are considering fresh proposals from State Government undertakings backed by Government guarantees could ask for the track record of such States in the honouring of guarantees and obtain their consent to share such information with other banks/Financial Institutions through CIB.