RBI DG Rao asks credit info firms to switch to real-time data reporting

RBI Deputy Governor M Rajeshwar Rao has asked credit information companies like TransUnion Cibil to switch to real-time data reporting from fortnightly at present.

Speaking at a conference organised by Cibil here on Tuesday, Rao said quicker relaying of data from the CICs will help in deepening trust, efficiency and transparency in the system for everybody.

The speech was posted by the RBI on Wednesday.

"We must aspire to more frequent updates. Real-time or near-real-time credit reporting will improve underwriting precision, enable timely reflection of borrower actions like loan closures or repayments and deliver a superior consumer experience," Rao said.

Admitting that this entails costs because of investments in technology, process reengineering, and change management, Rao underlined that the benefits will far outweigh the costs.

He also asked the CICs and other companies competing with Cibil, including Experian and CRIF High Mark, to move towards having a "unique borrower identifier", which is uniform across the system.

"Another key challenge is identity standardisation. CICs rely on credit institutions to provide accurate and validated IDs. Without this, duplication and misreporting remain risks," he said, explaining the rationale for having such a system.

Rao also exhorted the industry to ensure that innovation is "responsible and accountable", and not at the cost of an individual's rights to data privacy. 

The use of complex artificial intelligence and machine learning models introduces concerns around model risk, especially when these models are not thoroughly tested, validated, or monitored for biases and performance drifts, Rao highlighted.

"Rigorous validation protocols, continuous monitoring, and robust governance frameworks are essential to ensure that these models remain fair, transparent, and aligned with regulatory and ethical standards," the DG said.

Core values of integrity, transparency, and commitment to public service should drive innovation, he said.

With the rapid use of AI and machine learning in credit delivery, Rao said that it is not far when what is called "alternate data" to extend credit to individuals considered "ineligible", becomes mainstream.

Microfinance will be one of the biggest beneficiaries of the adoption of AI and ML, he added.

The unified lending interface will be able to harness data from e-commerce platforms, and gig economy apps could open new doors for credit inclusion for small sellers, delivery workers, and freelancers, he noted.

Rao also pitched for tokenisation, which involves generating and recording a digital representation of financial or real assets on a programmable platform, on the credit delivery front.

"It (Tokenisation) could favour small and medium enterprises'(SMEs') access to credit by narrowing the information gap. Further, SMEs could improve their collateral offering by tokenising real assets or trade receivables, thus improving their standing in the credit markets," he said.

There is a "promising scope" for deeper integration between OCEN (Open Credit Enablement Network) and the Open Network for Digital Commerce (ONDC), Rao said, adding that such interoperability could democratise credit access further and open new avenues for MSMEs to participate in digital commerce.

He said CICs will play an important role in ensuring that the micro, small and medium enterprises, which are called the backbone of the economy, get adequate and timely credit from the formal finance system.