One borrower, one ID: RBI pushes for greater clarity in loan tracking

The RBI plans to introduce a Unique Borrower ID for all loan accounts to reduce credit report errors, improve credit score accuracy, and enhance transparency in the credit system.

Unique Borrower ID

In a major move to improve credit score accuracy and reduce reporting discrepancies, the Reserve Bank of India (RBI) has proposed mandating a unique borrower identification number for all loan accounts. According to a Times of India report, this initiative is expected to bring greater transparency and consistency to the country's credit information ecosystem.

"Credit information companies rely on lending institutions to supply accurate and verifiable IDs. Without this, duplication and misreporting remain risks. We need to move towards a unique borrower identifier which is safe, verifiable, and consistent across the system," said M. Rajeshwar Rao, Deputy Governor of the RBI, in his keynote address at TransUnion CIBIL's 25th-anniversary celebration.

Why a unique borrower ID can improve your credit score accuracy

This initiative by the RBI comes as there are frequent complaints from individual borrowers regarding disputes and errors in their credit reports. This is often due to a mismatch in personal details or duplication of records.

Therefore, by introducing a new borrower ID, the central bank wants to ensure that each loan account is accurately linked to the correct person, thereby reducing the risk of errors, disputes, and inaccuracies that can negatively impact a person's creditworthiness and credit report.

How banks and NBFCs will use the new Borrower ID system

This unique identifier will be used by all banks and non-banking financial companies (NBFCs) when reporting loan data to credit bureaus. According to the RBI, this move will help streamline the entire credit assessment process.

It will make it easier for lenders to verify borrower information and for consumers to maintain a clean credit history. This initiative is also expected to reduce the number of disputes related to credit report errors, a constant problem for borrowers in the country.

Unique Borrower ID

Industry experts believe that this particular reform will be seen as a positive development that will boost confidence in the entire financial sector. It will empower consumers. Now with more reliable and accurate credit data, lenders will be in a better position to make decisions on loan applications. On the other hand, borrowers will have more control over their financial profiles.

Keep in mind that this RBI proposal is currently open for public comment. Once implemented, it has the potential to set a new benchmark for credit reporting standards in the country. This initiative details the central bank's commitment to protecting consumer interests and fostering a strong, clean, and transparent credit infrastructure.

Disclaimer: The information in this article is for general awareness and is based on publicly available sources. The RBI's proposal is currently under review and subject to change. Readers should refer to official RBI communications or consult financial experts for the latest updates and personalized advice.