RBI To Introduce New Guidelines For Improved Credit Bureau Data

The Reserve Bank of India (RBI) is developing a new framework of guidelines for enhancing the quality of information furnished to credit bureaus. The development is expected to introduce greater uniformity and precision in the available credit information with credit bureaus.

At present, various financial institutions and banks do not follow a single uniform practice while reporting information to credit bureaus. This can result in mismatches and discrepancies in credit reports, which can impact a borrower’s credit score as well as access to loans. The RBI aims to rectify this by ensuring that all lenders use similar data reporting principles.

Draft Framework Under Development

The RBI has requested credit information bureaus to provide inputs for a new draft framework. This draft will be employed to develop a common reporting framework for all lenders, namely banks, non-banking financial companies (NBFCs) and fintech firms.

The RBI is also considering how disputes in credit reports will be dealt with. At present, customers often face delays while attempting to rectify errors in their credit reports. Part of the plan includes having a centralised system to resolve these disputes more effectively.

Why Uniform Data Matters

Credit bureaus such as Cibil, Equifax, and Experian play a dominant role in India's lending economy. They gather information from various lenders and prepare credit reports of individuals and companies. The lenders rely on these reports to determine a borrower's payment history and creditworthiness.

If the information provided by lenders is inaccurate or inconsistent, it leads to incorrect credit scores. A small mistake in a report can make it difficult for a person to obtain a loan or credit card. That's why RBI is keen that all institutions adopt one uniform format and schedule when reporting information to credit bureaus.

More Transparency

The new regulations will benefit not only the consumers but also assist lenders in making improved credit decisions. Standardised data will eliminate confusion and enhance faith in the credit system. It will assist RBI in monitoring the overall health of the lending market more effectively.

According to a report in the Economic Times, the RBI might also consider imposing penalties for repeated infractions in reporting, thus putting the onus on lenders to be more cautious when posting updates.

What's Next

Although the final regulations have not been announced yet, the RBI will likely hold further consultations with stakeholders, such as credit bureaus, lenders, and consumer associations. 

Upon completion, it could be rolled out in phases to provide institutions with sufficient time to adapt to the changes.