Last Updated:
Minister of State for Finance Pankaj Chaudhary told the Lok Sabha that RBI has issued no directive mandating a minimum credit score for loan eligibility
Banks must consider other factors for first-time loan applicants.
For years, borrowers have been told that a strong CIBIL score is the gateway to easy loans, while a weak one can either block access to credit or attract punishingly high interest rates. But a longstanding question has troubled first-time borrowers: what happens if you have no CIBIL score at all?
The government has now offered a clear answer. In a recent statement in Parliament, the Ministry of Finance clarified that banks and financial institutions cannot reject a loan application solely because an applicant does not have a credit history.
Minister of State for Finance Pankaj Chaudhary told the Lok Sabha that the Reserve Bank of India (RBI) has issued no directive mandating a minimum credit score for loan eligibility. Instead, RBI has advised lenders to consider other factors when dealing with those who are seeking credit for the first time.
This clarification means that whether it is a student applying for an education loan, a family looking for a home loan, or an entrepreneur seeking funds for business, the absence of a CIBIL score cannot be the sole reason for denial. In such cases, banks will have to assess the application on the basis of income, employment history, and other financial records.
In India, credit scores usually range between 300 and 900, with higher scores reflecting consistent repayment of past borrowings. For most lenders, it is a primary filter in loan processing. However, the government has stressed that it should be treated as one of several tools, not an absolute barrier.
Currently, four licensed credit bureaus operate in the country: TransUnion CIBIL, Equifax, CRIF High Mark, and Experian. These agencies track individuals’ financial activity and repayment patterns to generate credit reports.
For first-time borrowers, this announcement comes as a relief. It removes the fear of being locked out of the lending system simply because they have never taken a loan before. However, experts caution that once a person does enter the credit cycle, their repayment behaviour will shape their credit score—affecting the ease and terms of borrowing in the future.
Read More
