RBI calls for real-time reporting, alternate data for credit access

Business Standard

02-07-2025

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.