The formulation of a foreign direct investment policy on credit information bureaus has hit a roadblock due to differences of opinion concerning the permissible holding of an individual entity.
The ministry of finance does not want a single entity to own more than five per cent in a CIB. This view is backed by the Reserve Bank of India.
However, the Planning Commission has told the Foreign Investment Board that the single entity holding should be capped at 10 per cent since this is a new activity.
Meanwhile, the central bank has suggested that since CIBs deal with sensitive information, the investments should not be viewed from a commercial angle and thus foreign institutional investment should not be allowed within the overall FDI limit.
Moreover, the investments need to be qualitatively good and long term in nature.
The foreign investment norms for CIBs are being viewed in line with those for financial services infrastructure such as stock exchanges and commodity exchanges.
While the government has imposed a five per cent cap on the investments of singe entities in stock exchanges, the draft note for FDI in commodity exchanges favours a cap of 10 per cent for a single entitity of foreign origin and no such cap for domestic entities.
The finance ministry is of the view that a credit information bureau is an information storehouse that needs little infrastructure, unlike a commodity exchange.
Moreover, since a CIB deals with sensitive customer-specific information, any holding above five per cent will have implications on management control. Therefore, the FDI proposal has been deferred for the time being. The draft proposal, on the other hand, had suggested 49 per cent cap on foreign direct investment.
The Credit Information Act, passed in May 2005, laid down the legal framework for the operations of credit information bureau.
The CIBs were assigned with the task of collection, processing and sharing of credit information about borrowers. Credit Information Bureau of India was the first company to operate in the credit information bureau space in the country.
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