Key Points

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