RBI Implements 15-Day Credit Reporting Rule: How Will It Impact Borrowers & Lenders

Consumers will receive a single report regardless of multiple accounts or addresses, and be able to add comments directly to the report

Bureaus must notify consumers when their credit history is updated or accessed, and lenders must address customer grievances quickly

Source : ABPLIVE AI

Credit score updates are crucial in the process of borrowing and make or break your access to credit. To facilitate a timely and accurate representation of a borrower’s credit consumption activity, the Reserve Bank of India (RBI) has implemented a key regulation mandating lenders to update credit bureau records every 15 days. This mandate for this regulation was issued in August 2024 and implemented on Jan 1, 2025. 

Key Highlights Of The New Ruling

Standard Scoring 

For ease of comparing reports, credit bureaus must standardize terminology and report scores in the 300-900 range. Consumers will receive a single report regardless of multiple accounts or addresses, and be able to add comments directly to the report. Moreover, guarantor or co-borrower details will be included in the reports to facilitate better risk assessment and promote fair lending.

Penalty Of Rs 100/day 

Bureaus must notify consumers when their credit history is updated or accessed, and lenders must address customer grievances quickly. If issues are not resolved within 30 days, consumers will be entitled to a compensation of ₹100 per day after the 30-day period is over, encouraging timely resolution of grievances.

Data Quality Index (DQI)

The DQI will score the accuracy of data submitted by lenders on consumer details like name, date of birth, and contact info. Lenders will receive monthly scores, helping them improve data accuracy and ensure accurate credit evaluations.

How This Regulation Will Benefit Borrowers

Prior to this regulation, credit score updates were done once a month, which may have led to delayed credit score updates. As a result, borrowers’ positive repayment behaviours did not reflect promptly, hindering their ability to secure new loans or favourable interest rates. The revised rule can potentially transform how credit scores are calculated, bringing greater accuracy and reducing delays in the borrowing process. 

Quicker Updating Of Credit Score

Under the previous monthly reporting system, it could take up to 40 days for defaults or missed payments to appear, resulting in lenders making decisions on borrowers’ creditworthiness based on outdated information. The new reporting system will facilitate quicker credit score updates, allowing borrowers to manage their payments more efficiently to improve their credit scores quicker. 

Improved Management Of Multiple Loan Applications

Borrowers with multiple loan applications can find it challenging to keep track of loan payments. The new rule will change that, allowing lenders to monitor the borrower's behaviour more closely and provide a more accurate assessment of their repayment capacity. 

Better Credit Access

The faster update cycle will enhance the accuracy of credit score information that is accessed by lenders. This can facilitate quicker access to loans for borrowers with good repayment habits, making it easier for them to secure credit when needed.

Empower The consumer 

With credit score changes reflecting more swiftly, borrowers can form a better understanding of their financial health and take informed financial decisions.

Benefits For Lenders

• Prevent 'evergreening' of loans: The term ‘evergreening’ refers to the practice of borrowers taking out new loans to pay off an old one, creating a cycle of debt. The shorter update process will allow lenders to identify such borrowers better, to protect them as well as the financial institution.
• Enhanced credit risk assessment: Access to a borrower’s current credit information will allow lenders to carry out better risk assessment, be it detecting and steering clear of risky borrowers or rewarding borrowers with better creditworthiness.

The shift to a 15-day credit reporting system is a step in the right direction with long-term benefits, such as faster recognition of improved credit behaviour, better lending decisions and bring about efficiency in the lending market.

(The author is the CEO of BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar)