The Finance Ministry has clarified that banks cannot reject loan applications from first-time borrowers simply because they do not have a CIBIL score or credit history. While lenders may still perform their own due diligence, no minimum CIBIL score is required. Every individual is also entitled to one free credit report each year, with additional reports available for a maximum of ₹100.
Government’s Clarification
During the Monsoon Session of Parliament, Minister of State for Finance Pankaj Chaudhary confirmed that banks are not permitted to deny loans merely on the basis of an applicant having no credit history or low credit score. The announcement is expected to help expand access to formal credit for first-time borrowers, particularly students, young professionals, and small entrepreneurs.
RBI’s Guidelines
The Reserve Bank of India (RBI), in its January 6, 2025, Master Direction, directed banks and NBFCs that the absence of a credit score should not become a reason to reject a loan application. Although banks can assess applicants using other parameters, the central bank has not imposed any minimum CIBIL requirement for sanctioning loans.
How Banks Will Decide
India follows a deregulated credit system, meaning banks make lending decisions based on their internal risk assessments and board-approved policies. Credit Information Reports (CIRs), including CIBIL scores, remain useful tools but are not the sole criteria. Banks may still check income patterns, employment details, and repayment capacity before granting loans.
Consumer Rights & Credit Report Fees
According to RBI rules, Credit Information Companies (CICs) are allowed to charge up to ₹100 for providing a credit report. However, every individual is entitled to one free full credit report, including credit score, each year from CICs if they have a credit history.
Key Highlights at a Glance
| Aspect | Details |
|---|---|
| CIBIL Requirement | Not mandatory for first-time borrowers |
| RBI Directive | No rejections due to lack of credit history |
| Bank Authority | Lending decisions based on internal policies |
| Credit Report Fee | One free annually; ₹100 maximum thereafter |
| Impact | Expands financial access for new borrowers |
Conclusion
The clarification from the Finance Ministry is a major relief for first-time loan applicants, who often struggle due to the lack of a credit footprint. While banks will still run their own risk checks, the absence of a CIBIL score will no longer act as a barrier. This step is seen as a move toward greater financial inclusion, opening doors for millions of Indians entering the credit system for the very first time.
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