New RBI Reporting Guidelines: What Borrowers and Lenders Need to Know
The RBI has introduced a significant change in the way lenders report credit data to bureaus. This change is expected to influence lenders’ risk-grading practices, alter borrowers’ credit behaviors, and affect how often borrowers check their scores.
Governor Shaktikanta Das highlighted the advantages of timely credit information disclosure for borrowers. He stated, “The fortnightly reporting frequency will ensure that the credit information reports provided by CICs reflect more up-to-date information. This will be beneficial for both borrowers and lenders (CIs).”
“The availability of precise credit information is crucial for both lenders and borrowers. Currently, lenders are required to report credit information to credit information companies (CICs) on a monthly basis or at shorter intervals if mutually agreed upon by the lenders and the CICs. It is now proposed to increase the frequency of credit information reporting to a fortnightly basis or even more frequently. As a result, borrowers will benefit from quicker updates to their credit information, particularly when they repay their loans. Lenders, in turn, will be able to perform more accurate risk assessments of borrowers,” stated the Governor in his speech.
Let’s delve into the details to understand the impact on consumers and how they should adjust to this new development.
How reporting functions
When you obtain a loan or a credit card, your lender is required to report your credit history to credit bureaus like CIBIL and Experian. This history begins when your credit line is opened, tracks your credit usage and payment punctuality, and concludes when the credit line is closed. The bureau then utilizes these data points to calculate your credit score.
Change in reporting frequency
Until now, it was sufficient to check your credit score once a month, as this was the frequency at which the RBI required lenders to share credit data with bureaus. However, starting January 1, 2025, the RBI mandates that lenders report this data at least twice a month, specifically on the 15th and the last day of each month. Lenders must submit this data within seven days after the end of the respective fortnight, and the bureau is required to process the data within five days of receiving it. Additionally, lenders have the option to share data with the bureau more frequently—such as weekly or even daily—if they choose to do so.
Your score may now change within the month
Previously, your credit history—and consequently your credit score—was only updated once a month. Regardless of how you used your credit card or managed your loan during that time, the effects of your credit behavior wouldn’t be reflected until the monthly updates were sent to the bureau. Now, however, your score has the potential to change within the same month. In fact, it could undergo multiple changes if the lender and bureau agree to more frequent update intervals.
What this means for borrowers
Faster updates bring significant benefits. Borrowers now have a strong incentive to maintain excellent credit behavior throughout the month. This involves keeping their credit utilization in check and ensuring all payments are made on time. If they’ve recently paid off a loan and plan to borrow again, their improved creditworthiness will be reflected in their credit reports within a fortnight, eliminating the need to wait until the end of the cycle to show that the loan was fully repaid on time. As a result, their credit scores could rise during the month. Conversely, the effects of late payments and rising credit utilization may also appear more quickly in their reports, meaning any slip in credit behavior could cause their scores to drop within the same month.
What this means for lenders
In its recent statement, the RBI noted that lenders “will be able to make better risk assessments of borrowers and also reduce the risk of over-leveraging by borrowers.” With access to short-term data on a borrower’s credit history, lenders can quickly identify and eliminate credit-hungry or high-risk borrowers. The central bank has expressed significant concern about the risks associated with retail lending, and more frequent data updates will aid lenders in meeting the RBI’s expectations for effective risk management.
For consumers, the key takeaway is that they must keep their credit utilization under control, make timely payments, and check their credit reports more frequently. The advantages of maintaining good credit habits—and the drawbacks of neglecting them—will now become apparent more rapidly.
Conclusion
The RBI’s new reporting requirements, effective January 1, 2025, represent a significant shift in how credit data is shared and utilized. With the move to more frequent updates, both borrowers and lenders will experience faster and more accurate reflections of credit behavior. For borrowers, this means a heightened need to manage credit responsibly, as their actions will be more promptly visible in their credit scores. Conversely, lenders will benefit from improved risk assessment capabilities, enabling better management of credit risk. This enhanced transparency aims to foster more responsible borrowing and lending practices, ultimately contributing to a healthier financial ecosystem.
