RBI's new credit reporting rule makes it tough to get multiple personal loans

Retail borrowers may now find it challenging to secure multiple personal loans as new Reserve Bank of India (RBI) norms mandate that lenders update credit bureau records every 15 days, down from the earlier monthly reporting cycle. The new regulations reporting frequency, announced in August 2024, kicked in on January 1, 2024.

The tighter reporting frequency will provide lenders with near-real-time credit data, enabling better risk assessment and reducing instances of borrowers over-leveraging by taking loans from multiple lenders.

"It is directed that CICs(credit information companies) and CIs (credit institutions) shall keep the credit information collected/maintained by them updated regularly on a fortnightly basis (i.e., as on 15th and last day of the respective month) or at such shorter intervals as mutually agreed upon between the CI and the CIC," the RBI said in a notification dated August 8, 2024.

Then RBI governor Shaktikanta Das, in his monetary policy statement, had underlined the importance of accurate credit information for both lenders and borrowers. With the new system, a borrower’s financial activity—including repayments and defaults—will be visible to lenders within two weeks.

"Borrowers will benefit from faster updation of their credit information, especially when they repay their loans. The lenders, on their part, will be able to make better risk assessment of borrowers," Das had said.

"Switching to a 15-day reporting cycle would significantly reduce these delays. More frequent updates allow lenders to capture defaults or payments more accurately and closer to real-time," TOI quoted Seth as saying.

The new measure is also expected to curb practices like "evergreening," where borrowers use fresh loans to cover old defaults.