The credit score system, designed to evaluate an individual’s creditworthiness, is drawing criticism for its lack of transparency and potential to disproportionately harm middle-class families and farmers. The spotlight on this issue was recently intensified when Karti P. Chidambaram, an AICC member, raised concerns about the operations of CIBIL and EXPERIAN, two private entities controlling India’s credit scoring mechanism, during a parliamentary session.
Chidambaram highlighted the opaque nature of these companies, which hold detailed transaction histories of millions of individuals but fail to provide clear explanations for their scoring processes. He pointed out personal grievances, citing that despite repaying debts on time, his credit score remained low, leaving no avenue for appeal or clarification.
The flaws in the system, he argued, are especially detrimental to farmers and middle-class individuals. For farmers, loan repayments often rely on government subsidies or partial payments from schemes that don’t adequately reflect on credit scores. This misrepresentation reduces their chances of securing future loans, potentially pushing them into financial distress.
The middle class also faces similar challenges. A single missed or delayed payment—often due to circumstances beyond their control—can drastically lower scores, impacting their ability to access affordable credit for essential needs like education, healthcare, or housing.
Many are calling for the government to intervene, demanding a transparent and accountable credit scoring system. Suggestions include introducing government oversight, establishing clear criteria for credit scoring, and creating a robust appeals mechanism for consumers to challenge inaccuracies.
The Finance Ministry’s response to these concerns could reshape how creditworthiness is evaluated in India and determine whether this system serves as a tool for financial inclusion or exclusion.
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