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Sunday, December 1, 2013

RBI may allow up to 74% FDI in credit information cos

The RBI may allow up to 74 per cent foreign direct investment in credit information companies.

“The Reserve Bank may consider allowing higher FDI (foreign direct investment) limits to entities which have an established track record of running a credit information bureau in a well-regulated environment,” RBI said in a notification.

The limit can be allowed to be increased up to 49 per cent if their ownership is not well-diversified, which means if one or more shareholders each hold more than 10 per cent voting rights in the company. And the limit can be raised to 74 per cent if the ownership is well-diversified, RBI said.

If the ownership is not well-diversified, at least half of directors of the investee credit information company (CIC) in India should be Indian nationals or non-resident Indians or persons of Indian origin, subject to the condition that one-third of the directors are Indian nationals resident in India, it added.

“The investor company should preferably be a listed company on a recognised stock exchange,” RBI said. In case investor in a CIC is a wholly-owned subsidiary (directly or indirectly) of an investment holding company, these conditions will 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 regulator said.

A credit information company collects and maintains records of an individual’s payments pertaining to loans and credit cards. These records are submitted to the CIC by banks and other credit institutions, on a monthly basis.

This information is then used to create credit information reports (or credit report) which are provided to credit institutions in order to help evaluate and approve loan applications or any other credit applications.

Source: thehindubusinessline

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