Are you considering taking out a loan? If so, there’s some important news you should know. Customers who repeatedly take out multiple personal loans may face increased challenges. The Reserve Bank of India (RBI) has revised its regulations. Now, banks and financial institutions are required to update the credit bureau records of these customers within 15 days, a change from the previous one-month timeframe. The RBI believes this will enhance the assessment of borrower risk.
Experts point out that since loan EMIs are paid on different dates throughout the month, updating credit records monthly could lead to delays in reflecting payment information, sometimes by as much as 40 days. This can hinder timely credit evaluations, impacting financial institutions. With the new 15-day update requirement, these delays will be significantly minimized, allowing lenders to receive accurate information about defaults more promptly.
Managing debt will become easier
Finance companies indicate that this adjustment will also help curb the issue of ‘evergreening,’ where borrowers take out new loans to cover old ones, thereby increasing their overall debt. While this may provide short-term relief to borrowers, it raises risks for banks and financial institutions, as it prevents borrowers from fully repaying their existing debts, leading to a growing debt burden.
The directive was issued in August
The RBI announced this directive in August, allowing lenders and credit bureaus until January 1 to implement the necessary updates. Experts note that new borrowers often take out several loans simultaneously, complicating their repayment efforts. With more frequent data updates, this situation should improve, enabling a better understanding of borrower behavior.
