NEW RBI GUIDELINE: Now delayed payment of EMI won’t have negative impact on borrowers’ CIBIL score

STC NEWS DESK
MUMBAI, APRIL 17 (STC): Reserve Bank of India (RBI) in a landmark move has come in support of borrowers by ensuring fair credit reporting. The RBI has issued a new guideline that protects consumers from immediate negative impact on their credit score due to a bounced EMI payment.
This new rule is going to offer major relief to middle-class borrowers, especially those managing tight finances or facing temporary payment hurdles. The RBI’s new directive aims to bring more transparency and accountability in credit reporting mechanisms used by financial institutions.
Prior to this directive, even a single bounced EMI or delayed payment could immediately impact a borrowers’ CIBIL score, reducing their creditworthiness. Now, under new norms, lenders are required to conduct proper due diligence and wait before reporting such defaults to credit bureaus.
Key Highlights of the New RBI Directive:
•⁠ ⁠CIBIL score won’t be impacted instantly on EMI bounce.
•⁠ ⁠⁠Lenders must notify borrowers before reporting to credit bureaus.
•⁠ ⁠⁠A mandatory 30-day notice period is now applicable.
•⁠ ⁠⁠Gives time to rectify minor or unintentional payment issues.
•⁠ ⁠⁠Borrowers get a fair chance to maintain their credit profile.
The new rule applies to all loans – personal, auto, home, and credit cards.
It’s worth mentioning that the RBI observed several cases where borrowers were unfairly penalized for short-term liquidity issues or technical failures in EMI payments. Credit bureaus were receiving negative reports without prior verification or borrower notification. This not only affected the individual’s credit score but also made it harder for them to get loans or credit cards in the future

What steps banks/lenders are required to follow before reporting a missed or bounced EMI?
•⁠ ⁠Identify the missed or bounced EMI.
•⁠ ⁠⁠Inform the borrower via SMS/email/letter about the missed payment.
•⁠ ⁠⁠Provide a 30-day window for repayment or clarification.
•⁠ ⁠⁠Allow the borrower to rectify the issue within the notice period.
•⁠ ⁠⁠Only report to the credit bureau if the issue remains unresolved.
•⁠ ⁠⁠Maintain a record of all communication and repayment attempts.
This approach will prevent honest borrowers from facing instant credit score damage due to minor lapses.

What the new RBI guideline means for borrowers?
This new rule brings a significant sense of relief and security to the millions of borrowers in the country.
•⁠ ⁠First-time borrowers: Get more flexibility in the repayment cycle without fear of immediate CIBIL score drop.
•⁠ ⁠⁠Middle-income households: A buffer period allows them to adjust finances and avoid long-term credit damage.
•⁠ ⁠⁠Freelancers & gig workers: Often face irregular cash flows; now they have time to fix temporary issues.
•⁠ ⁠⁠Senior citizens: May miss payments unintentionally; this rule ensures they’re not unfairly penalized. (STC)