CIBIL to provide 1 free credit report a year – Says RBI Governor

CIBIL will soon be providing 1 free credit report a year to every person starting Jan 1, 2017 as per RBI directions . This was said by RBI governor Raghuram rajan at a seminar on ‘Transforming Rural India through Financial Inclusion’.

This is great news for investors because right now one has to pay Rs 550 for getting a onetime credit score and report from CIBIL. While Rs 550 is not a very big amount for many people, for a majority it’s quite a good amount and most of the people are not in agreement to pay for a PDF report, as they think that it should be freely available.


How the FREE credit report will help investors?

A lot of investors have till date not checked their credit report and hence they are not aware of any issues which might be present in their report. Not everyone is ready to pay Rs 550 for their report and even that’s the reason why many people are not aware of their credit score.

With this free credit report, I think a lot of people will start looking at their report and start working on improving their score and take measures to remove the bad remarks from their report. Investors will also be able to find out if there are any fraud loans on their name taken by others if any.

Seems like RBI has really pushed on this matter of free credit report. The reason why I say this is because around a month back in June, 2016 , there news channels had reported that RBI has suggested CIBIL and other credit bureau to provide a one free report. You can check out this youtube video.

What is Credit Report?

In case you are not aware, Credit report is a comprehensive report which is prepared by CIBIL or other credit bureau from the data they get from various banks and lending institutions. The report contains your credit history and all the details about our past loan payments (including credit card). Every lender uses this report to understand how trustworthy you are and if you should be given a loan or not.

In a lot countries consumers are entitled for one free credit report a year and now it’s going to be a reality in India too. I went to to understand how it works in US and found out that Americans are entitled to get 1 free credit report from all the three credit bureau there. See the snapshot mentioning that below


In India apart from CIBIL, we have Experian and Equifax as other two credit bureau, but at this moment RBI governor has only announced that one will get a free report from CIBIL. He has not mentioned about the other two.

However, I think over time even they will start providing a free credit report to catch up with the rules.

What you think about this news? Do you think it’s fair for CIBIL to charge people for providing the credit report or it should always be FREE?

Closing your PPF after 5 yrs is possible now [NEW RULES]

Recently the PPF closure rules got changed and now a PPF account can be closed prematurely after 5 yrs itself, but only in some conditions which we will see in this article.

Till now, as per the old rules, the PPF account had a lock-in period of 15 yrs, and in no case, it was possible to close the account other than the death of the subscriber itself.

So death was the only valid reason to close the PPF account before 15 yrs maturity period.

PPF premature closure rules

As per the recent rule change by the govt, PPF closure before 15 years is now possible. You can close a PPF account if it’s at least 5 yrs old, in following 3 cases

Case #1 – Death

If the PPF holder dies, then the account can be closed anytime (even before 5 yrs) and the nominee/legal heirs can claim the amount from Govt.

Case #2 – Life-Threatening illness

The PPF account can also be closed in case, the money is required for curing the serious ailment or life-threatening disease of the following people

  • PPF subscriber himself/herself
  • Spouse
  • Dependent Children
  • Dependent Parents

Note that one has to provide the documentary evidence from a competent medical authority. So you will need to share the proof that you need to undergo some big treatment/surgery etc and you will need money for that.

Case #3 – Higher Education

If money is required for the higher education for the PPF subscriber or the minor on whose name the account is opened, then one can pre-close the PPF account. However one has to produce the fee bills and the proof of admission or any other documentary evidence.

Here are the exact notification wordings

PPF pre-closure notification

Penalty of 1% when you close PPF account before maturity

This pre-close feature comes with a penalty of 1% of interest for each year. What it means is that for all the years since your PPF account is opened, you will get 1% less interest for each year. So if you earned 8.7% for a particular year, your calculation will be done @7.7% and this way for each period 1% will be reduced.

Govt has issued an example calculation for penalty of 1% . But the question now is does 1% penalty mean 1% less amount in final corpus after pre-closure?

No, the answer is 4.88 %!

Yes, You get 4.88% less corpus due to this pre-closure penalty of 1 %. But this is true for that example only which is given by govt in their notification. I went deeper and did the exact calculation and here are the results.

ppf pre-closure example

The reason why there is a good amount of difference is that there is the compounding of penalty in this example. If you check the balances in 3rd year, you will see there is difference of 2.1 %. And it keeps on increasing as the number of years increases.

Which means, Older the PPF account, the higher is the final penalty for you.

It does not make a lot of sense to close the PPF account before maturity once 10 yrs is passed, as the penalty will be higher than 4-5% if most of the cases.

PPF pre-closure rule will help investors

PPF is one of the widely popular financial products in India. Majority of families have at least one PPF account and given it’s a long term product, there is a good amount of money lying in it. Now with this new pre-closure rule, an investor gets the benefit of closing the PPF account if they want to do it.

But the only issue is that it’s not an emergency solution to the problem as the documentation requirement is there and being a govt product, you can expect a slow response while closing down the PPF account and using the money.

Please share what do you feel about this new change in PPF closure rules?