RBI Mandates 15-Day Credit Bureau Updates Starting January 2025, Ensuring Faster and More Accurate Credit Scores

Starting January 1, 2025, a major regulation from the Reserve Bank of India (RBI) will mandate lenders to update credit bureau records every 15 days. This change promises to transform how credit scores are calculated and reported, offering a more timely and accurate representation of borrowers’ financial activities. Previously, credit scores were updated monthly, which often caused delays in reflecting the impact of loan repayments.

The RBI’s directive, announced in August 2024, gave lenders and credit bureaus until January 1 to enhance their systems.

Credit scores, ranging from 300 to 900, help assess a borrower’s ability to repay loans. The shift to bi-weekly reporting is expected to offer significant long-term benefits, though it requires substantial investment in technology by both lenders and credit bureaus. This change will allow lenders to make more precise decisions, reducing risks and increasing market efficiency, while borrowers will see quicker recognition of improvements in their credit behavior.

How the 15-day Reporting Rule Will Impact Borrowers and Lenders:

1. Faster Updates of Credit Scores: The previous monthly reporting system sometimes resulted in delays of up to 40 days for missed payments or defaults to be reflected. This lag could cause lenders to rely on outdated information, risking inaccurate assessments of creditworthiness. With the new 15-day cycle, borrower actions like timely payments or defaults will be updated much sooner.
2. Better Credit Risk Assessment: Real-time updates will allow financial institutions to evaluate borrowers’ credit behavior more accurately, making it easier to spot risks early. Borrowers who demonstrate good repayment habits will benefit faster from an improved credit score.
3. Closer Monitoring of Borrowers: First-time borrowers often apply for multiple loans at once, which can complicate repayment. Frequent updates will help lenders monitor borrower behavior in real time, ensuring better evaluations of repayment capabilities.
4. Eliminating Unsustainable Debt Cycles: The new reporting system will help reduce ‘evergreening,’ where borrowers take out new loans to repay old ones, leading to a cycle of debt. With frequent updates, lenders will be able to identify such situations quickly and take appropriate actions.
5. Minimized Delays in Capturing Defaults or Payments: Since EMIs can fall on different dates, the old monthly reporting cycle sometimes resulted in delays in recording missed payments or defaults. A 15-day reporting cycle will help avoid these delays, allowing lenders to make more accurate assessments of borrowers’ financial situations.