RBI Explores Real-Time Credit Reporting as Next Step After Weekly System
Nagpur: The Reserve Bank of India (RBI) is actively considering a significant leap towards real-time or near-real-time credit reporting, building upon its recent draft rules that mandate a weekly credit reporting system. According to sources familiar with the matter, this future reduction in the reporting gap is under serious contemplation, although the final implementation remains a distant prospect as the central bank has yet to finalize the rules for weekly reporting itself.
Current Credit Reporting Framework and Its Evolution
Credit information companies in India maintain credit scores for borrowers based on repayment patterns reported by lending agencies such as banks and non-banking financial companies. A higher credit score enhances a borrower's prospects of securing loans, while also serving as a protective measure for lenders by identifying defaulters or justifying higher interest rates for risky profiles. Historically, even after a repayment is completed, there has been a notable time lag in updating credit scores, which adversely affects borrowing opportunities.
In a recent move, the reporting frequency was reduced to a fortnightly basis. The RBI's draft guidelines now propose further tightening this to a weekly reporting system. However, insiders reveal that the central bank is open to exploring additional reductions as a subsequent step, potentially bringing reporting closer to real-time. "It can be on a real-time basis, or close to it," said sources, emphasizing that this ambitious goal hinges on the successful implementation of the weekly reporting mandate first.
Implementation Timeline and Industry Perspectives
The weekly reporting system is planned to be operational by July 2026. Chartered accountant Julfesh Shah highlighted inefficiencies in the current mechanism, noting that banks often take months to transmit updates to credit information agencies. "Even in the current mechanism, the banks need to send updates to credit information agencies earlier. At times, it takes months to pass on the information," he stated. Shah advocates for a quicker reporting system, asserting that it would significantly benefit borrowers by ensuring timely updates to their credit scores.
Conversely, Tejinder Singh Rawal, another chartered accountant, expressed concerns about the potential pitfalls of reducing the reporting gap too drastically. He warned against penalizing minor defaults that occur inadvertently. "There are apprehensions that it should not catch minor defaults that often happen inadvertently. For example, if the gap is reduced, even one day delay in repayment due to any reason should not affect the credit score," Rawal explained. He added that while a faster system could help borrowers improve their scores more rapidly after clearing old dues, it must be designed to avoid underlying risks from trivial delays.
Broader Implications for Borrowers and Lenders
The proposed shift towards more frequent credit reporting aims to create a more dynamic and accurate financial ecosystem. For borrowers, timely updates mean quicker improvements in credit scores upon repayment, facilitating better access to credit. For lenders, enhanced reporting frequency reduces the risk of lending to individuals with outdated or inaccurate credit histories, thereby strengthening the overall stability of the financial system.
As the RBI moves forward with its draft rules, stakeholders across the banking and financial sectors will closely monitor developments. The transition to weekly reporting by 2026 is seen as a critical milestone, paving the way for potential real-time updates that could revolutionize credit assessment in India.
