What can I do if a bank wrongly reports my loan as defaulted to CIBIL?

Question

My bank reported my loan account as a defaulter to CIBIL even though I paid on time, and this has damaged my credit score and blocked a new loan application. I want to know how to get this corrected. What I am unsure about is the procedure — where the application goes, what it costs, and how long wrongful cibil report matters usually take. A plain explanation of the steps, in order, would help more than a general answer.

MyVakeel Legal Desk · Accepted Answer

The law that applies to wrongful cibil report here is Credit Information Companies (Regulation) Act 2005, Section 21, RBI Master Direction on Credit Information Reporting 2016, Consumer Protection Act 2019, Section 2(11) and Information Technology Act 2000, Section 43A. The detail below matters, because Credit Information Companies (Regulation) Act 2005, Section 21 draws the line differently depending on what your documents show.

Section 21 of the Credit Information Companies (Regulation) Act 2005 gives a borrower the right to have any inaccuracy in their credit information corrected, and both the credit institution that furnished the wrong data and the credit information company must act on a dispute raised.

The RBI's Master Direction on credit information reporting requires banks to update the credit bureau within 30 days of any correction and to inform the borrower of the outcome of the dispute within 21 days of it being raised.

Reporting inaccurate default status without verifying payment records is a deficiency in service under Section 2(11) of the Consumer Protection Act 2019, and the affected borrower can claim compensation for the loss caused, such as a rejected loan application or a higher interest rate offered elsewhere.

The bank must furnish the borrower proof of the alleged default, such as the ledger and payment history, and failure to do so while continuing to report the negative entry strengthens the borrower's case for correction and compensation.

Under Section 43A of the Information Technology Act 2000, entities handling sensitive financial data must maintain reasonable security practices, and negligent mismatch in data furnished to a credit bureau can also attract liability for the resulting harm.

In practice, in this order: 1) Obtain your credit report from the bureau and identify the exact inaccurate entry reported by the bank; 2) Raise a dispute directly with the credit information company and simultaneously with the bank's grievance cell; 3) Ask the bank for documentary proof of the default and object in writing if none is furnished; 4) File a consumer complaint for correction of the record and compensation if the error is not fixed within the RBI timeline.

Timing matters here: Credit Information Companies (Regulation) Act 2005, Section 21 works on limitation periods, so a wrongful cibil report claim that is right on the merits can still fail if it is brought late. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in consumer law.