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Time of India
2 days ago
- Business
- Time of India
RBI looks to ensure uniformity in credit bureau data quality
New Delhi: The banking regulator is examining suggestions to further streamline credit bureau processes and reduce information asymmetry with lenders, a move aimed at addressing data inconsistency and transparency for customers, said people familiar with the development. "A technical working group has been formed by the RBI (Reserve Bank of India) to address concerns raised by financial institutions related to credit information companies (CICs)," said an executive, who did not wish to be identified. A senior public sector bank executive said the four CICs - TransUnion Credit Information Bureau (India) Limited (TransUnion CIBIL), Equifax, Experian and CRIF High Mark - have given some suggestions to the RBI to ensure data uniformity and also to set up a common grievance redressal portal. "There is a need for some more common standards among CICs so that there is a uniformity relating to data quality index (DQI), and also for looking into the records of inactive or written-off customers," the executive said, adding that a single-window platform for data submission can also be explored. Queries emailed to the RBI did not elicit a response till press time. The RBI has extended the alternative grievance redressal mechanism under the Reserve Bank-Integrated Ombudsman Scheme, 2021 to cover grievances against CICs. Earlier this week, RBI deputy governor M Rajeshwar Rao said a key challenge is identity standardisation and that CICs rely on credit institutions to provide accurate and validated IDs. "There is a need to move towards a unique borrower identifier , which is secure, verifiable and consistent across the system," he said, addressing the TransUnion CIBIL's Credit Conference in Mumbai. The RBI has been taking up with CICs the issue of quick disposal of complaints raised against them. In 2023 it had mandated that complainants are entitled to compensation of ₹100 per day if their complaint is unresolved within 30 days from the initial filing. The RBI deputy governor, in his speech, also said that CICs must aspire to more frequent updates of credit data, as against the current fortnightly interval. Economic Times WhatsApp channel )
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Business Standard
4 days ago
- Business
- Business Standard
RBI calls for real-time reporting, alternate data for credit access
There is a need for real-time or near real-time credit reporting—rather than the current fortnightly system—to improve underwriting precision, enable timely reflection of borrower actions such as loan closures or repayments, and deliver a superior consumer experience, said M Rajeshwar Rao, Deputy Governor of the Reserve Bank of India (RBI). 'Currently, credit data is refreshed on a fortnightly basis. We must aspire to more frequent updates. Real-time or near real-time credit reporting will improve underwriting precision, enable timely reflection of borrower actions like loan closures or repayments, and deliver a superior consumer experience,' Rao said in a keynote address delivered at TransUnion CIBIL's Credit Conference on July 1. According to Rao, the shift from fortnightly to real-time credit reporting requires investments in technology, process re-engineering and change management. 'But the rewards—transparency, efficiency, and trust—far outweigh the costs,' he said. CICs are independent third-party institutions that collect and compile financial data on individuals, including loan details, credit card history, and other credit-related information. This data is shared with member institutions, typically banks and non-banking financial companies (NBFCs), who use it to make informed loan decisions. Rao highlighted that since data quality is the bedrock of responsible lending, the RBI has mandated that CICs must provide a data quality index score to credit institutions (CIs) on a monthly basis to help improve the quality of submissions. He also flagged 'identity standardisation' as a key challenge, as CICs rely on CIs to provide accurate and validated identity details. 'We must move towards a unique borrower identifier—secure, verifiable, and consistent across the system,' he said. Rao noted that while CICs play a critical role in reducing information asymmetry and improving credit decisions, the digitisation of financial services and electronification of records has created a vast repository of data. 'This, coupled with the growth of fintechs and innovation in financial services, has created business opportunities to harness alternate data sets in order to better understand financial behaviour and creditworthiness. These insights can provide a richer perspective than conventional analysis and bolster financial inclusion,' he said. He added that CICs also have a significant role in enabling credit to the MSME sector. 'When commercial credit reporting is efficient, creditors need to rely less on relationship lending and soft information, and more on facts and fact-based analysis via credit reports and related products,' he said. Speaking on the Unified Lending Interface (ULI)—the latest addition to India's Digital Public Infrastructure to simplify and democratise credit access—Rao said one of ULI's standout features is its ability to tap into alternative digital data, enabling access to credit even for those without formal financial histories. 'Going forward, the potential for ULI to harness data from e-commerce platforms and gig economy apps could open new doors for credit inclusion for small sellers, delivery workers, and freelancers,' he said. Rao also highlighted that the rise in India's household debt as a percentage of GDP—43 per cent in 2024—has been fuelled more by an increase in the number of borrowers than by a rise in average indebtedness. He cautioned that the use of complex artificial intelligence (AI) and machine learning (ML) models in credit processes brings model risk, particularly when these models are not thoroughly tested, validated, or monitored for bias and performance drifts. 'Rigorous validation protocols, continuous monitoring, and robust governance frameworks are essential to ensure that these models remain fair, transparent, and aligned with regulatory and ethical standards. Innovation must be guided by the core values of integrity, transparency, and public service,' he said. With the rapid integration of AI and ML into credit delivery, Rao said it may not be long before what is now called 'alternate data' becomes mainstream for extending credit to those previously deemed 'ineligible'. He noted that microfinance will be one of the biggest beneficiaries of AI and ML adoption. Rao also pitched for tokenisation—the digital representation of financial or real assets on a programmable platform—as a tool to improve credit delivery. 'It could favour small and medium enterprises' (SMEs') access to credit by narrowing the information gap. Further, SMEs could improve their collateral offering by tokenising real assets or trade receivables, thus improving their standing in the credit markets,' he said.
India Gazette
4 days ago
- Business
- India Gazette
RBI Dy Governor Rao calls for frequent credit information updates, data quality
Mumbai (Maharashtra) [India], July 2 (ANI): RBI Deputy Governor M Rajeshwar Rao has called for frequent data updates by Credit Information Companies (CICs), asserting that it will improve loan underwriting precision, among others. Addressing TransUnion CIBIL's Credit Conference in Mumbai on Tuesday, the RBI deputy governor outlined two critical enablers -- data freshness and data quality-- for the betterment of India's credit ecosystem. Currently, credit data is refreshed on a fortnightly basis. 'We must aspire to more frequent updates,' M Rajeshwar Rao said, as per the excerpts of his speech published by the RBI on its website today. 'Real-time or near-real-time credit reporting will improve underwriting precision, enable timely reflection of borrower actions like loan closures or repayments and deliver a superior consumer experience,' he added. Rao suggested that the shift will require investments in technology, process reengineering, and change management. 'But the rewards - transparency, efficiency, and trust, far outweigh the costs,' he supplemented. Elaborating on data quality, Rao said it is the bedrock of responsible lending, and added that the RBI has always emphasised the importance of accuracy in regulatory submissions. 'It has been prescribed that CICs shall provide a data quality index score to the Credit Institutions (CIs) on a monthly basis to facilitate improvement in the quality of data submitted by CIs,' he added. In his concluding remark, Rao further said India stands on the cusp of a transformative financial era where technology, policy, and innovation converge to democratise credit access. 'Various initiatives, collaborative partnerships and sustained regulatory support are laying the foundation for a more inclusive, resilient, and sustainable economy. But at the heart of a sustainable credit landscape lies an empowered consumer, which is enabled when we have a financially aware and literate customer. While regulations mandate transparency and awareness, the responsibility needs to be fulfilled by all of us. Financial literacy cannot be achieved through a one-time campaign; it has to be a sustained commitment for all the institutions and entities involved,' Rao added. 'The setting up of Credit Information Companies was in one sense the starting point of this journey of financial inclusion and democratisation of credit. Even as the journey continues, the role of the CICs remains integral and important in realising the vision of Total Financial Inclusion,' his speech concluded. The Reserve Bank had recognised the need for establishing a Credit Information Bureau for the collection of credit information from lending institutions and for the provision of such information to the financial system and had set up a Working Group in 1999 for the purpose. Credit Information Bureau (India) Ltd. (CIBIL) was thereafter incorporated in 2000, and over the years, three other Credit Information Companies (CICs) have also started their operations in India. Back in the day, lack of information and high cost of access to information hindered access to credit to a large segment of the populace. Apart from greater access to secured lending, the creditors gain confidence to underwrite unsecured loans, facilitated by access to credit information provided by the CICs as this reduces the information gap that existed earlier, the RBI deputy governor had stated as part of his speech. (ANI)
