First-time loan applicants no longer have to worry about being denied credit just because they don’t have a CIBIL score. The Ministry of Finance confirmed that banks cannot reject loan applications solely on the grounds of having no or low credit scores. This clarification was shared in the Lok Sabha during the recent monsoon session, where Minister of State for Finance Pankaj Chaudhary emphasized that the Reserve Bank of India (RBI) has not set any minimum credit score requirement for such borrowers.
The RBI’s guidelines clearly state that banks and financial institutions should not turn away first-time applicants simply due to the absence of past credit history. Instead, lending decisions must be based on broader evaluations, keeping in line with the commercial policies of each bank and the regulatory framework in place.
What Exactly is a CIBIL Score?
A CIBIL score is a three-digit number, ranging from 300 to 900, that represents a person’s creditworthiness. The closer the score is to 900, the stronger the individual’s financial track record appears to lenders. This score is generated by the Credit Information Bureau (India) Limited and is widely used by banks and financial institutions to assess eligibility for loans such as home loans, personal loans, car loans, and more.
Due Diligence Still Essential for Banks
While a CIBIL score may not be a mandatory requirement for newcomers to the credit system, the finance ministry has made it clear that banks must still conduct proper background checks before approving loans. These checks typically involve verifying repayment history (if any), outstanding debts, restructured loans, or any cases of defaults and settlements.
Additionally, the RBI has regulated charges for accessing credit reports. Credit Information Companies (CICs) are permitted to charge up to ₹100 for providing individuals with their credit reports. Beyond this, CICs are also mandated to provide one free full credit report, including the credit score, once every year in digital format to individuals whose data is available with them.
This move aims to ensure fairness for first-time borrowers while still maintaining responsibility and accountability in the lending system.
