RBI Mandates 15-Day Credit Score Updates

January 7, 2025

As of January 1, 2025, the Reserve Bank of India (RBI) has implemented regulation requiring lenders to update credit bureau records every 15 days. This change aims to enhance the accuracy and timeliness of credit score calculations, reflecting borrowers’ financial activities more promptly. Previously, updates occurred monthly, which often delayed the representation of loan repayments and defaults. The RBI issued this mandate in August 2024, allowing lenders and credit bureaus time to adjust their systems accordingly.

About Credit Scores

A credit score is a numerical representation of a borrower’s creditworthiness, ranging from 300 to 900. Higher scores indicate a better likelihood of repaying loans. Credit bureaus calculate these scores based on data from lenders, including banks and credit card companies. Key factors influencing credit scores include: – Payment History – Timely payment of credit card and loan bills. – Credit Utilisation – Ratio of credit used to available credit. – Credit Mix – Variety of credit types, such as mortgages and personal loans. – Recent Credit Enquiries – Applications for new credit products.

Impact of the 15-Day Rule on Borrowers

The new 15-day reporting cycle allows for quicker updates to credit scores. Previously, missed payments could take up to 40 days to reflect. With real-time updates, lenders will receive more accurate information, enabling better assessments of borrowers’ creditworthiness. This change rewards responsible borrowers sooner and improves the overall credit evaluation process.

Benefits for Lenders

Lenders will benefit from accessing current credit information more frequently. This enables them to make informed decisions regarding personal loans. Enhanced data allows for early detection of potential risks and encourages lenders to offer better terms to borrowers with good repayment habits.

Addressing Credit Market Issues

The new regulation addresses several challenges in the credit market: 1. Multiple Loan Applications – First-time borrowers often apply for multiple loans, leading to potential repayment issues. Frequent updates will help lenders monitor borrower behaviour more closely. 2. Preventing ‘Evergreening’ – The practice of taking new loans to pay off old ones can create a cycle of debt. Regular updates will enable lenders to identify and manage such situations effectively. 3. Improving EMI Management – With various EMIs due on different dates, the previous monthly reporting system could lead to outdated data. A 15-day cycle reduces this delay, allowing for accurate credit evaluations.

Challenges of Implementation

While the shift to a 15-day reporting system offers long-term benefits, it also presents challenges. Lenders and credit bureaus must invest in technology upgrades to accommodate the new requirements. Despite these challenges, the potential for improved market efficiency and risk reduction is .

CRIF High Mark – A leading credit information company in India.
Evergreening – A cycle of debt caused by taking new loans to repay old ones.
EMI – Equated Monthly Instalment, a fixed payment amount made by borrowers.
Credit Utilisation – The ratio of credit used versus total available credit.
RBI – Reserve Bank of India, the central banking institution of India.

Future of Credit Reporting

The transition to 15-day updates is poised to enhance the credibility and transparency of credit information. This change is expected to yield better loan deals for borrowers who demonstrate disciplined repayment habits, encouraging a healthier credit market overall.

« Previous Post Next Post »