CIBIL score not mandatory: Govt tells banks not to reject first-time loans

New borrowers can seek loans without a credit score hurdle, with RBI directing banks to decide based on wider due diligence, not just CIBIL reports

In a key clarification for retail borrowers, the Ministry of Finance has said that banks cannot reject loan applications from first-time applicants merely because they do not have a credit score.

 

Speaking in the Lok Sabha during the monsoon session, Minister of State for Finance Pankaj Chaudhary reiterated that the Reserve Bank of India (RBI) has not prescribed any minimum credit score requirement for loans.

 

No minimum Credit score needed for loan

 

Referring to the RBI’s Master Direction issued on January 6, 2025, Chaudhary said, “First-time borrowers’ loan applications should not be rejected just because they have no credit history.” The minister further noted that in India’s deregulated credit environment, lenders are free to take commercial decisions based on board-approved policies and broad regulatory guidelines.

 

Importantly, information from a Credit Information Report, including the CIBIL score, is only one of several factors that banks may consider before granting a loan.

 

Due diligence still required

 

Even though a CIBIL score is not mandatory for new borrowers, banks are still expected to perform due diligence. This involves background checks such as:

 

·  Examining repayment history, if available

 

·  Identifying delayed or defaulted payments

 

·  Checking for restructured or settled loans

 

·  Reviewing any accounts written off

 

These assessments help lenders gauge repayment capacity before extending credit.

 

Cost of obtaining a credit report

 

Chaudhary also pointed out that the fee charged for accessing a credit report is capped by the RBI. Credit Information Companies (CICs) can charge up to Rs 100 for providing an individual’s own credit information. Any charge beyond this would be considered invalid.

 

Additionally, under a RBI circular issued in September 2016, every CIC is required to provide one free full credit report, including the credit score, once every year in electronic format to individuals whose credit history exists with the company.

 

What is a CIBIL score?

 

A CIBIL score is a three-digit number ranging from 300 to 900 that reflects an individual’s creditworthiness. Generated by the Credit Information Bureau (India) Limited (CIBIL), it is widely used by banks and financial institutions to assess loan eligibility across products such as personal, gold, home and vehicle loans.