RBI shortens frequency of bank reports to credit information companies

The Reserve Bank of India (RBI) said on Thursday it is shortening the frequency of reporting by banks to Credit Information Companies (CICs) from once a month to once a fortnight. The move aims to improve timeliness and accuracy of credit information available to lenders.

 

“The fortnightly reporting frequency would ensure that credit information reports provided by CICs reflect more recent information. This will be beneficial to both borrowers and lenders (CIs). Borrowers will have the benefit of faster updation of information, especially when they have repaid the loans. Lenders will be able to make better risk assessments of borrowers and also reduce the risk of over-leveraging by borrowers,” said RBI Governor Shaktikanta Das.

 

“The RBI's proposal to increase the frequency of credit information reporting to a fortnightly basis is a progressive step and will bring in more transparency and promote a healthy credit culture,” said Vishal Sharma, co-founder and chief executive officer of AdvaRisk, a fintech backed by ICICI Bank and NABARD.

 

“Given the ease of credit availability through digital processes, the leveraging and the credit profile of the borrowers can change quickly and faster reporting by lenders to credit bureaus will help in improved decision making by the lenders," said Anil Gupta, senior vice-president co-group head - financial sector ratings at ICRA Ltd.

 

How will this change impact CIBIL score

 

The RBI's decision to increase the frequency of credit reporting from monthly to fortnightly will have a significant impact on your CIBIL score. Here’s how:

 

Faster updates

 

With lenders reporting information every two weeks, any changes to your credit status, such as loan repayments or new credit inquiries, will be reflected in your CIBIL score more quickly. This means that if you pay off a loan or reduce your credit utilisation, the positive effect on your score will be seen sooner than before.

 

Enhanced accuracy

 

The more frequent reporting will help ensure that your credit report has updated information. This is beneficial for borrowers, as it allows for a more precise assessment of creditworthiness by lenders. Consequently, if your financial situation improves, your score can recover faster and potentially make it easier to secure loans or credit at favourable terms.

 

Better risk assessment

 

For lenders, having access to up-to-date credit information enables better risk assessment. They can make more informed decisions regarding lending, which may lead to more competitive interest rates for borrowers with good credit behaviour.