Synopsis: The Finance Ministry has clarified in Parliament that RBI has not prescribed any minimum CIBIL score for loan sanctioning. First-time borrowers cannot be denied loans solely for lacking credit history.
The Finance Ministry has issued a crucial clarification on the role of CIBIL scores in sanctioning loans such as home, gold, and farm loans. This comes after Congress MP Sudha Ramakrishnan raised a question in the Lok Sabha on whether public sector banks assign weightage to CIBIL scores while extending credit.
Minister of State for Finance Pankaj Chaudhary informed the House that the RBI has not prescribed any minimum credit score requirement for loan approval. Instead, banks and financial institutions take lending decisions based on their Board-approved policies, regulatory guidelines, and multiple factors—including but not limited to credit information reports (CIRs).
First-Time Borrowers Protected
Importantly, Chaudhary emphasized that under RBI’s Master Direction dated January 6, 2025, credit institutions have been advised not to reject loan applications of first-time borrowers solely on the grounds of having no prior credit history. This move is seen as a safeguard to ensure greater access to credit for young professionals, fresh graduates, and new-to-credit individuals.
CIBIL Score Still Matters
Responding to questions about whether the government plans to scrap the CIBIL score as a requirement altogether, Chaudhary clarified that CIBIL scores remain a vital input during credit appraisals. Lenders are expected to conduct comprehensive due diligence, examining past repayment history—including delayed payments, restructured loans, or defaults—before granting credit facilities.
Credit assessment, Chaudhary added, remains largely deregulated, governed by the policies of individual regulated entities (REs), and shaped by the terms of loan agreements between banks and borrowers.
What This Means for Borrowers
- First-time applicants: Cannot be denied a loan solely for not having a CIBIL score.
- Existing borrowers: Credit history and repayment behavior still play a critical role in loan approvals.
- Banks: Continue to use CIRs as part of broader decision-making but have the flexibility to weigh other factors too.
This clarification is expected to provide relief and transparency for new borrowers while maintaining prudence in credit appraisal for seasoned applicants.
Disclaimer: This article is intended for informational purposes only and does not constitute financial advice. Loan approvals remain subject to lender discretion, regulatory norms, and individual borrower profiles.
