#CIBIL #CreditScore #Loans #RBI #FinanceMinistry #FirstTimeBorrowers #FinancialInclusion #Banking #NBFC #CreditAccess #DigitalIndia #MudraYojana #SVANidhi #JanDhan
New Delhi: In a significant clarification for millions of aspiring borrowers, the government has confirmed that the Reserve Bank of India (RBI) has not made it mandatory for first-time loan applicants to have a minimum CIBIL score or any other credit score in order to secure credit from banks and financial institutions.
The clarification came from Minister of State for Finance, Pankaj Chaudhary, during the ongoing Monsoon Session of Parliament, where he addressed questions regarding access to formal credit for new borrowers. Chaudhary stated that RBI has not prescribed any minimum credit score requirement for sanctioning loans, leaving the decision to banks and non-banking financial companies (NBFCs) based on their internal credit policies.
Credit Score and Borrower Access
A credit score, commonly referred to as a CIBIL score in India, is a three-digit numeric representation of a borrower’s creditworthiness, ranging from 300 to 900. It is derived from an individual’s repayment history, outstanding loans, credit card usage, and other financial behavior.
While credit scores serve as an important tool for lenders to evaluate risk, first-time borrowers—such as young professionals, students, or small entrepreneurs—often lack any prior credit history. This has raised concerns that they may face difficulties in accessing loans despite having repayment capacity.
Chaudhary’s statement reassures that absence of a credit score cannot automatically disqualify borrowers. “RBI has not mandated any specific minimum credit score. Loan approvals depend on the lending institution’s internal risk assessment framework,” he clarified.
Bank Practices and RBI’s Regulatory Approach
Although the RBI does not enforce a universal minimum, banks and NBFCs are free to frame their own credit appraisal mechanisms. In practice, many lenders rely heavily on credit bureau scores, often considering a score of 750 or above as “good” for unsecured loans such as personal loans and credit cards.
However, for secured loans like home loans, gold loans, or vehicle loans, banks may be more flexible. Several institutions also offer products tailored for new-to-credit (NTC) borrowers, where instead of credit history, income, job stability, and collateral are considered as primary indicators.
By clarifying its position, the government has signaled that first-time borrowers cannot be denied loans solely due to the absence of a credit score. This move is expected to increase transparency and reduce apprehension among young borrowers entering the financial system.
Rising Importance of Credit Scores
India’s financial ecosystem has seen a sharp rise in the use of credit bureau data since the early 2000s, when CIBIL (Credit Information Bureau (India) Limited) began operations. Today, multiple credit bureaus including CIBIL, Experian, Equifax, and CRIF High Mark operate in the country, maintaining records of millions of borrowers.
For lenders, these scores reduce information asymmetry and allow faster loan approvals. For borrowers, however, the reliance on credit scores often creates a barrier, especially for those with no prior borrowing record.
Industry experts believe that while credit scores remain an important metric, they should not be the sole criteria. Instead, combining them with alternative data such as digital payments, utility bill records, and GST filings can ensure more inclusive lending.
Impact on First-Time Borrowers
The government’s clarification is particularly significant for:
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Young professionals and students entering the workforce, who may require education loans, vehicle loans, or small-ticket credit for consumption.
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Small entrepreneurs and self-employed individuals, especially in semi-urban and rural areas, who often do not have a borrowing history but need working capital.
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Women borrowers, who form a large share of first-time credit seekers through microfinance, self-help groups (SHGs), and government-backed schemes.
By removing the misconception of a “mandatory” CIBIL score, the move could encourage more individuals to approach banks confidently for their first loan.
Financial Inclusion and Policy Measures
The clarification also aligns with India’s broader push toward financial inclusion. Over the past decade, initiatives like Pradhan Mantri Jan Dhan Yojana (PMJDY), Mudra Yojana, and PM SVANidhi have significantly expanded access to formal credit.
For instance, under Mudra Yojana, more than 68% of loans have been availed by women, many of whom were first-time borrowers without credit histories. Similarly, street vendors under PM SVANidhi were able to secure working capital loans despite being new entrants into the formal credit system.
RBI has also introduced frameworks like the Account Aggregator (AA) system to enable alternative credit assessments, empowering lenders to evaluate new borrowers based on verified digital financial data rather than just traditional credit scores.
Industry Reactions
Experts in the banking sector have welcomed the government’s clarification. According to a senior banker, “The statement clears confusion among first-time borrowers. While credit scores are useful, they are not the only factor. For new borrowers, lenders can use salary slips, tax returns, or collateral as substitutes for credit history.”
Fintech players also view this as an opportunity. Digital lending platforms have been advocating for alternative credit scoring models using AI, transaction history, and mobile payment behavior to assess risk. This opens the door for innovation in lending while widening financial access.
Borrower Awareness is Key
While the clarification is good news, financial advisors caution borrowers not to ignore credit discipline. For those entering the system for the first time, timely repayment of initial loans and responsible use of credit cards will help build a strong credit history. Over time, maintaining a high credit score (above 750) ensures access to larger loans at lower interest rates.
Conclusion
The government’s statement that CIBIL scores are not mandatory for first-time borrowers is a major reassurance for individuals looking to avail loans without an established credit history. It reinforces the principle that access to finance should not be restricted by the absence of past borrowing.
As India moves toward becoming a financially inclusive economy, the focus is shifting from rigid score-based lending to a holistic credit assessment framework that balances risk with opportunity. This is expected to benefit millions of new borrowers and further deepen the country’s credit market.
#CIBIL #CreditScore #Loans #RBI #FinanceMinistry #FirstTimeBorrowers #FinancialInclusion #Banking #NBFC #CreditAccess #DigitalIndia #MudraYojana #SVANidhi #JanDhan #Fintech #IndianEconomy
