CIBIL Score: RBI issued a big order regarding CIBIL score, loan takers should know important things..
RBI has taken a big relief decision for home, personal, and auto loan borrowers. In its recent order, the Reserve Bank of India has said that from now on, all lending institutions will have to update the CIBIL score information in real-time.
Earlier, this information was updated only once in 15 days. This move by the RBI will greatly help borrowers to know their credit status immediately and make financial decisions accordingly, which is expected to benefit them greatly.
Reserve Bank of India Deputy Governor M Rajeshwar Rao has asked credit information companies (CICs) like TransUnion CIBIL to provide data in real time instead of fortnightly (15 days). Rao said at a CIBIL event on Tuesday that faster sending of data by CIC will help in increasing trust, efficiency, and transparency in the system for all. RBI released this address of Rao on its website on Wednesday. It is expected to help the loan takers.
Continuous credit information is necessary-
Rao said that we should expect to get credit information continuously and almost in real time. This will make risk assessment accurate, loan account activities can be understood better, and the consumer experience will also improve. On this occasion, Rao also admitted that investing in technology, changing processes, and change management will cost money, but the benefits will be far greater.
More dependence on credit institutions-
The Deputy Governor said that another major challenge in this matter is identity standardization. CIC is dependent on credit institutions to provide an accurate and valid identity. Without this, there is a risk of duplication and incorrect reporting. The RBI Deputy Governor expressed concern about the model-related risk due to the use of complex artificial intelligence and machine learning models and said that the problem arises due to not fully testing, validating, or monitoring them for biases and fluctuations in performance.
Necessary to deal with default-
The Deputy Governor has advised banks to make strong preparations to deal with defaults. He emphasized that rigorous verification, continuous monitoring and strong governance are necessary to keep the existing model fair, transparent and in line with ethical standards. Without this, it will be difficult for banks to reduce the risk on their loans, especially at a time when both loan expansion and its demand are increasing.
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