First-time borrowers can get bank loans without minimum CIBIL score, clarifies Finance Ministry

The minister also clarified that RBI has not set any minimum credit score for borrowers.

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 loan 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.

No minimum score prescribed

The minister also clarified that RBI has not set any minimum credit score for borrowers.

“In a deregulated credit environment, lenders take decisions as per their commercial considerations based on board-approved policies and broad regulatory guidelines. A Credit Information Report is only one of the inputs among several factors,” Chaudhary explained.

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. It is issued by Credit Information Bureau (India) Limited (CIBIL) and is widely used by banks for evaluating loan eligibility.

While it remains an important tool, the ministry stressed that a low or non-existent score cannot automatically disqualify a first-time borrower.

Due diligence still mandatory

Even without a CIBIL requirement, the Finance Ministry has directed banks to conduct thorough due diligence before sanctioning loans. Checks would include verifying repayment patterns, examining settled or restructured loans, and identifying defaults or write-offs.

Credit report charges capped

Chaudhary also reminded that Credit Information Companies (CICs) can charge only up to Rs 100 for providing individuals with their credit report.

Additionally, as per an RBI circular issued in 2016, every CIC must provide one free credit report annually in electronic format to individuals with a credit history.