“Whether termed “loan jumpers,” “debt churners,” “credit hoppers,” or “loan dodgers,” there’s growing concern over the rising trend of serial borrowers who continuously cycle between loans, over-leveraging themselves. The Reserve Bank of India (RBI) has recognized the dangers posed by this debt trap, particularly for retail borrowers taking on excessive personal loans.
The rise of new-age fintech platforms, which make credit easily accessible with just a few taps on a mobile phone, has exacerbated the issue. This ease of access has fueled a vicious cycle of borrowing, leaving many individuals in a precarious financial position. In response, the RBI has implemented a significant change in how credit data is shared: lenders are now required to update credit bureau records every 15 days, instead of the previous monthly schedule.
This shift aims to break the cycle of over-borrowing by ensuring that credit histories are more up-to-date, making it harder for borrowers to qualify for multiple loans at once. With more frequent updates, the chances of borrowers accumulating debt beyond their capacity to repay are reduced. The new norm also curtails practices like “evergreening,” where borrowers use new loans to pay off older defaults, creating a false sense of creditworthiness.
By enforcing bi-weekly updates to credit information, India’s credit bureaus—such as CIBIL, Equifax, and Experian—will provide a clearer, more accurate picture of a borrower’s financial health. This change fosters a healthier lending ecosystem, encouraging responsible borrowing and lending practices.”
#RBI #Regulatory update #Lending #NBFCs #Fintechs
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