Now it will be difficult to take multiple personal loans due to new RBI norms
Jan 3, 2025
Synopsis
The RBI now requires lenders to update their credit records every 15 days instead of monthly, making it harder for borrowers to take multiple personal loans. The move is aimed at improving credit risk assessment and curbing over-borrowing.
Individuals seeking to take multiple personal loans may find it increasingly challenging in the new year due to tighter norms introduced by the Reserve Bank of India (RBI).
Under the updated regulation, lenders are now required to report borrower activity to credit bureaus every 15 days instead of the earlier one-month interval, TOI reported. With records being updated more frequently, borrowers will face greater scrutiny, hence reducing the likelihood of taking multiple loans simultaneously.
Shorter reporting cycle to improve assessment of borrower risk
The new directive, issued in August, gave lenders and credit bureaus until January 1 to implement the changes. The RBI said that a shorter reporting cycle would improve lenders' ability to assess borrower risk.
“Equated monthly instalments (EMIs) fall on various dates throughout the month. Reporting data once a month could delay updates on defaults or repayments for up to 40 days, leading to outdated information for credit evaluations. By switching to a 15-day reporting cycle, these delays will be significantly minimized. Lenders will now have access to more accurate and timely data,” said Sachin Seth, chairman of credit information company CRIF High Mark.
In an interview to TOI, SBI Chairman C.S. Setty spoke about the issue of new-to-credit borrowers taking out loans from multiple lenders, often beyond their repayment capacity. He said SBI had suggested more frequent updates to provide a clearer picture of borrower behaviour. “This step should help curb excessive borrowing by individuals,” he added.
Seth also said that borrowers with multiple loans on varying due dates would now see their financial activity reflected in the system within two weeks. This shortens the “blind spot” where critical credit data might not be visible, enabling lenders to make more informed decisions.
Frequent updates also help prevent risky practices such as “evergreening,” where borrowers take new loans to repay old ones without the system identifying the associated risks. By halving the reporting interval, credit bureaus and lenders would be able to get a more accurate and up-to-date understanding of borrower behaviour, which can promote better decision-making and foster a healthier lending ecosystem.
[The Economic Times]
