- Banks use credit report to check credit worthiness of an individual
- CIBIL will provide free credit report by the end of the year
- This new step will help individuals check their credit rating, he said
The credit report is used by financial institutions to check the credit worthiness of an individual before dispensing a loan.
Individuals have to currently pay around Rs 500 to CIBIL to get their credit report. CIBIL, which was founded in 2000, is among the leading providers of credit reports on individuals.
"By the end of the year, the Credit Information Bureau of India will start providing individuals with one free credit report a year, so that they can check their credit rating and petition if they see possible discrepancies," Dr Rajan said at a seminar on 'Transforming Rural India through Financial Inclusion'.
"When an individual knows that a default will spoil their credit rating and cut off future access to credit, they have strong incentives to make timely payments," Dr Rajan said.
Dr Rajan's three-year term ends on September 4.
The RBI chief also said that credit information bureaus have helped tremendously in solving both the information problem in retail credit.
Dr Rajan said that there is a need to expand the reach of credit bureaus in rural areas by bringing borrowing under self-help groups into their ambit.