CIBIL Score Not Mandatory for First-Time Loan Applicants: Finance Ministry

New Delhi, Aug 25 (KNN) The Ministry of Finance has clarified that banks cannot reject a loan application from a first-time borrower solely because of a low or non-existent CIBIL score.

Minister of State for Finance Pankaj Chaudhary, responding in the Lok Sabha, stated that the Reserve Bank of India (RBI) has not prescribed any minimum credit score requirement for granting loans to individuals applying for the first time.

This clarification follows an RBI “Master Direction” issued on January 6, 2025, which instructs banks and financial institutions not to deny loans merely on the grounds that an applicant has no prior credit history.

While the absence of a credit score should not be a reason for rejection, banks are still required to perform thorough assessments to evaluate repayment capacity and financial reliability.

Banks may rely on other factors such as the applicant’s Credit Information Report (CIR), past repayment behaviour, loan settlements, restructuring, or any default history before deciding on approval. This ensures that even without a CIBIL score, lenders can assess the risk involved in granting credit.

The Ministry also highlighted that RBI regulations cap the fee for obtaining a credit report at Rs 100. Additionally, every individual is entitled to receive one free full credit report, including their credit score, every year in electronic format, provided they have a credit history.

On concerns about CIBIL’s future role, the government confirmed that the credit bureau will continue functioning and has not been replaced by any government body.

Alongside CIBIL, other credit information companies will also continue operations under RBI oversight.

This move is expected to make the credit system more inclusive by allowing first-time borrowers better access to loans without being disadvantaged by a lack of prior credit records.

(KNN Bureau)