The Ministry of Finance has clarified that first-time borrowers will not be denied loans solely for lacking a CIBIL score. Responding in the Lok Sabha during the monsoon session, Minister of State for Finance Pankaj Chaudhary said the Reserve Bank of India (RBI) has instructed banks and credit institutions that applications from new borrowers cannot be rejected simply because they have no prior credit history.
“As part of best practices for credit institutions, RBI has advised that first-time borrowers’ loan applications should not be rejected just because they have no credit history,” Chaudhary said.
RBI has not set minimum credit score requirement
The minister further clarified that RBI has not prescribed any minimum credit score for borrowers. In a deregulated credit environment, lenders take decisions based on commercial considerations, board-approved policies, and regulatory guidelines. A Credit Information Report (CIR) is only one among several inputs considered during loan sanctioning.
What is a CIBIL score and why it matters
A CIBIL score is a three-digit number ranging from 300 to 900 that indicates an individual’s creditworthiness. It is calculated based on repayment history, active loans, and overall financial discipline. Issued by the Credit Information Bureau (India) Limited (CIBIL), this score is widely used by banks to assess loan eligibility.
While it is an important tool, the Finance Ministry emphasized that a low or non-existent score cannot automatically disqualify a first-time borrower from obtaining a loan.
Due diligence and credit report access rules
Even though no minimum CIBIL score is required, banks must still conduct thorough due diligence before sanctioning loans. This includes verifying repayment patterns, examining settled or restructured loans, and identifying defaults or write-offs.
Chaudhary also reminded that Credit Information Companies (CICs) can charge a maximum of ₹100 for providing credit reports to individuals. Moreover, as per RBI’s 2016 circular, every CIC must provide one free credit report annually in electronic format to individuals with a credit history.
FAQ on First-Time Borrowers and CIBIL Score
Q1. Can first-time borrowers get loans without a CIBIL score?
Yes. The Finance Ministry clarified that banks cannot reject loan applications from first-time borrowers solely for not having a CIBIL score.
Q2. Has the RBI set a minimum CIBIL score for loan approval?
No. The RBI has not prescribed any minimum credit score for borrowers. Loan approvals depend on banks’ commercial policies and regulatory guidelines.
Q3. What is a CIBIL score?
A CIBIL score is a three-digit number between 300 and 900 that reflects an individual’s creditworthiness based on repayment history, active loans, and financial discipline.
Q4. Is due diligence still required if there is no CIBIL score?
Yes. Banks are required to conduct due diligence, including verifying repayment capacity, checking past loans, and identifying defaults, before approving any loan.
Q5. How much do credit reports cost in India?
Credit Information Companies (CICs) can charge up to ₹100 for providing a credit report. Additionally, each CIC must provide one free credit report per year in electronic format to individuals with a credit history.
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