In a significant move, the Reserve Bank of India (RBI) has mandated that all lenders must update credit bureau records every 15 days, effective January 1, 2025. This new regulation aims to provide a more accurate and timely picture of borrowers’ financial activities, ultimately changing how credit scores are calculated and reported.
Previously, credit bureaus only received updates from lenders once a month. This delay often meant that borrowers’ good financial behavior, such as timely payments or loan settlements, would not be reflected in their credit scores immediately. Consequently, borrowers with responsible payment habits sometimes struggled to access new loans or get favorable interest rates due to outdated credit reports.
With the RBI’s new rule, lenders will update credit information more frequently, meaning borrowers’ credit scores will reflect their financial behavior much more promptly. This change is expected to lead to a clearer, more current picture of an individual’s creditworthiness.
Under the old system, missed payments or defaults could take up to 40 days to show up on a borrower’s credit report, leaving lenders with outdated information. With the new 15-day update cycle, positive actions like timely payments will be reflected quickly in credit reports. This will help lenders make decisions based on up-to-date financial behavior. Lenders will also be in a better position to assess credit risk and offer rewards to borrowers with good repayment habits, encouraging responsible borrowing.
The move to bi-monthly updates will allow borrowers to improve their credit scores faster. If they manage their payments well, their credit reports will show improvements sooner, making it easier to access credit when needed. Borrowers will also gain more transparency about their credit status as changes in their credit scores will be reflected more quickly. This gives them the opportunity to stay on top of their financial health and make informed decisions.
Frequent updates will help lenders make better-informed decisions about who they lend to. With more accurate and timely credit information, lenders will have a clearer view of borrowers’ financial behaviors, allowing them to assess credit risk more effectively. This approach can improve risk management and may help reduce the likelihood of defaults.
The RBI’s new rule on bi-monthly credit updates marks a significant shift in how credit information is reported and used. This change will benefit both borrowers and lenders by providing quicker access to updated credit information, improving financial transparency, and supporting more responsible borrowing and lending. Effective January 2025, this reform is set to bring lasting positive changes to the credit system in India.
