The Reserve Bank of India has allowed higher limits for foreign direct investment (FDI) in credit information companies.
In a notification, the RBI said investors whose ownership is well diversified (shareholding not concentrated in the hands of a select few) may pick up to 100% stake in a credit information company. Such investors should have an established track record of running a credit information bureau in a well regulated environment.
Investors not well diversified in terms of ownership get to own a maximum of 49% in a credit information company.
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.
Higher the credit score, lower is the chance of default by that individual or business.
Currently, India has four credit information companies — CIBIL, Experian, Equifax and CRIF High Mark.
Investment by foreign portfolio investors has been limited to a maximum of 10%.
Currently, investments by a person in a credit bureau are limited to 10% of its equity capital.
However, investments under FDI are permitted up to 100% under automatic route, subject to certain conditions.