RBI increases FDI limits in credit information companies

The Reserve Bank of India (RBI) has issued revised guidelines allowing higher foreign direct investment (FDI) limits in credit information companies (CIC) which have an established track record of running a credit information bureau in a well regulated environment.

As per the RBI’s guidelines, up to 49% FDI would be allowed if ownership of the investor company is not well diversified. It stated that foreign direct investment of up to 100% would be allowed if ownership of investor company is well diversified. In case, the ownership is not well diversified, at least 50% of the directors of the investee CIC in India should be Indian nationals or non-resident Indians/persons of Indian origin subject to the condition that one third of the directors are Indian nationals resident in India. In case the investor entity is a wholly owned subsidiary of an investment holding company, the norms for FDI, FII and FPI shall be applied to the operating group company that is engaged in credit information business and has undertaken to provide technical know-how to the CIC in India.

The RBI further added that investment of foreign institutional investors/foreign portfolio investors should directly or indirectly hold below 10% equity. At present, investments, directly or indirectly by any person, whether resident or otherwise are limited to 10 per cent of the equity capital of a Credit Information Company (CIC). However, investments under FDI were permitted up to 74 per cent subject to the conditions stipulated in the Reserve Bank's directive. The Reserve Bank of India, revised the foreign investment limits in CICs from 74per cent to 100 per cent under automatic route, subject to certain conditions.

Currently, India has four credit information companies - CIBIL, Experian, Equifax and CRIF High Mark. A credit information company aggregates and analyses data of individuals and businesses and puts out a credit score which is an indicator of creditworthiness of that individual or business.