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Finance Ministry clarifies banks cannot reject first-time borrowers solely for low CIBIL scores, citing Reserve Bank of India guidelines.
A credit score is a three-digit number ranging from 300 to 900 that reflects a person’s creditworthiness based on their repayment history.
Banks can’t reject loan applications of first-time borrowers on the basis of a low CIBIL score, clarified by the Finance Ministry, citing the Reserve Bank of India’s guidelines. MoS Pankaj Chaudhary, during the monsoon session in the Lok Sabha, said that a CIBIL score isn’t mandatory for bank loans for first-time borrowers.
A CIBIL score is a three-digit number (between 300 and 900) that shows how good your credit history is. Lenders often use a CIBIL score to grant a loan to customers. A low CIBIL score would often lead to rejection of loan applications and vice-versa. One can improve a CIBIL score by paying EMIs and credit card bills on time, keeping credit card usage below 30–40% of the limit, and maintaining a healthy mix of secured and unsecured loans.
There are four credit bureau in the country: TransUnion CIBIL Ltd, Equifax Credit Information Services Pvt Ltd, CRIF High Mark Credit Information Services Pvt Ltd and Experian Credit Information Company of India Pvt Ltd. They are authorized to give credit ratings to borrowers.
“RBI has not set any minimum credit score requirement for sanctioning loans. In a deregulated credit environment, banks and lenders take their own credit decisions based on commercial judgment, board-approved policies, and regulatory guidelines. A borrower’s Credit Information Report is only one of the factors considered before extending any loan or credit facility,” clarified MoS Pankaj Chaudhary.
The Minister of State further highlighted that the Reserve Bank has directed lenders not to reject loan applications from first-time borrowers solely due to the absence of a credit history.
A study by TransUnion CIBIL revealed that 41 per cent of first-time borrowers are Gen Z in India.
Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst…Read More
Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst… Read More
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